As filed with the Securities and Exchange Commission on January 13, 2012

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

CERTUSHOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

6021

80-0536552

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number)

1170 Peachtree Street, NW / Suite 2300

Atlanta, Georgia 30309

Telephone: (678) 293-1045

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

Milton H. Jones Jr., Chief Executive Officer and President

CertusHoldings, Inc.

1170 Peachtree Street, NW / Suite 2300

Atlanta, Georgia 30309

Telephone: (678) 293-1045

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

Copies to:

J. Brennan Ryan

Neil E. Grayson

Nelson Mullins Riley & Scarborough LLP

Atlantic Station

201 17th Street NW / Suite 1700

Atlanta, Georgia 30363

Telephone: (404) 322-6218

Facsimile: (404) 322-6050

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

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

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

CALCULATION OF REGISTRATION FEE


Title of each class of securities to be registered	Proposed maximum aggregate offering price(1)		Amount of registration fee
Class A Common Stock, par value $0.001 per share	$	109,358,900	$	25,622.00
Class B Common Stock, par value $0.001 per share	$	114,218,280

(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(h) under the Securities Act of 1933, as amended. The registrant’s common stock is not listed on an exchange or quoted on any over-the-counter service. Thus, there is currently no public trading market of the registrant’s common stock, and private trading of the registrant’s common stock has been limited. Therefore, the proposed maximum aggregate offering price is based on the sales price of the registrant’s common stock in private placement transactions that were consummated with the selling stockholders hereunder on May 27, 2010 and May 10, 2011.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a), may determine.

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The information in this prospectus is not complete and may change. This prospectus is included in a registration statement that we filed with the Securities and Exchange Commission. The selling stockholders cannot sell these securities under that registration statement until that registration statement becomes effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated January 13, 2012

PROSPECTUS

CERTUSHOLDINGS, INC.

5,467,945 Shares of Class A Common Stock

5,710,914 Shares of Class B Common Stock

This prospectus covers the offer and resale of up to 5,467,945 shares of our Class A Common Stock and up to 5,710,914 shares of our Class B Common Stock by the selling stockholders identified in this prospectus. All shares are being offered by those stockholders who received shares of our common stock in connection with private placement transactions that were consummated on May 27, 2010 and May 20, 2011. We are registering the offer and sale of the shares of common stock to satisfy registration rights we have granted.

We are not selling any shares of common stock under this prospectus and will not receive any proceeds from the sale of common stock by the selling stockholders. The shares of our Class A Common Stock and Class B Common Stock to which this prospectus relates may be offered and sold from time to time directly from the selling stockholders or alternatively through underwriters or broker dealers or agents. The shares of our Class A Common Stock and Class B Common Stock may be sold in one or more transactions, at fixed prices, at prevailing market prices at the time of sale or at negotiated prices. Please read “Plan of Distribution.”

The shares of our Class A Common Stock and Class B Common Stock are not listed on an exchange or quoted on any over-the-counter service. Thus, there is currently no public trading market of our Class A Common Stock and Class B Common Stock, and private trading of our stock has been limited.

Investing in our Class A Common Stock and Class B Common Stock involves risks. You should read the section entitled “Risk Factors” beginning on page 10 for a discussion of certain risk factors that you should consider before investing in our Class A Common Stock and Class B Common Stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Shares of our Class A Common Stock and Class B Common Stock are not savings accounts or deposits and are not insured by the Federal Deposit Insurance Corporation or any other government agency.

The date of this prospectus is , 2012

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TABLE OF CONTENTS

PROSPECTUS SUMMARY	1

RISK FACTORS	10

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS	25

USE OF PROCEEDS	26

MARKET FOR OUR COMMON STOCK	27

DIVIDEND POLICY	27

CAPITALIZATION	28

SELECTED FINANCAL DATA	29

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	32

BUSINESS	53

SUPERVISION AND REGULATION	66

MANAGEMENT	81

COMPENSATION DISCUSSION AND ANALYSIS	85

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	100

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS	101

SELLING STOCKHOLDERS	103

DESCRIPTION OF CAPITAL STOCK	104

PLAN OF DISTRIBUTION	109

SHARES ELIGIBLE FOR FUTURE SALE	111

LEGAL MATTERS	112

EXPERTS	112

WHERE YOU CAN FIND MORE INFORMATION	112

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ABOUT THIS PROSPECTUS

You should rely only on the information contained in this prospectus. We and the selling stockholders have not authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our Class A Common Stock and Class B Common Stock. Our business, financial condition, results of operations and prospects may have changed since that date.

No action is being taken in any jurisdiction outside the United States to permit a public offering of our common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about, and to observe, any restrictions as to the offering and the distribution of this prospectus applicable to those jurisdictions.

INDUSTRY AND MARKET DATA

The market data and other statistical information used throughout this prospectus are based on independent industry publications. Some data is also based on our good faith estimates, which are derived from our review of internal surveys, as well as independent industry publications, government publications, reports by market research firms or other published independent sources. None of the independent industry publications referred to in this prospectus was prepared on our or our affiliates’ behalf or at our expense.

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PROSPECTUS SUMMARY

This summary provides an overview of selected information contained elsewhere in this prospectus. This is only a summary and does not contain all of the information that you should consider before investing in our Class A Common Stock and Class B Common Stock. You should read this entire prospectus, including the “Risk Factors” section beginning on page [Ÿ] and our financial statements and related notes appearing elsewhere in this prospectus, before deciding to invest in our Class A Common Stock and Class B Common Stock.

In this prospectus, unless the context suggests otherwise, references to “CertusHoldings, Inc.,” “the Company,” “we,” “us,” and “our” mean the combined business of CertusHoldings, Inc. and its subsidiary bank, CertusBank, N.A. (the “Bank”).

References to our “Class A Common Stock” refer to our Class A voting common stock, par value $0.001 per share; references to our “Class B Common Stock” refer to our Class B non-voting common stock, par value $0.001 per share; and references to our “common stock” include our Class A Common Stock and our Class B Common Stock.

Background

We are a bank holding company headquartered in Atlanta, Georgia that is led by a management team of seasoned bankers with extensive experience managing commercial financial institutions. We were formed in November 2009 with the goal of creating a leading regional retail and commercial banking franchise in the southeastern United States, initially through the acquisition of multiple failed bank asset and liability pools from the Federal Deposit Insurance Corporation (the “FDIC”), as receiver. In 2010, our investors committed to invest up to $500 million in the Company for the purpose of supporting acquisitions, including failed banks. In May 2010, we exercised our first commitment with our investors, and we were capitalized with approximately $50.1 million. On January 21, 2011, our subsidiary bank, CertusBank, N.A., was granted a charter to form a new national bank and the newly formed bank acquired the assets and assumed the liabilities, including substantially all of the deposits, of CommunitySouth Bank and Trust (“CommunitySouth Bank”) from the FDIC, as receiver. Since receiving its charter in January 2011, the Bank, headquartered in Greenville, South Carolina, has bid on, and acquired, three different failed bank asset and liability pools, including CommunitySouth Bank. To support our second and third acquisitions, we drew down an additional $168.0 million in capital from our investors.

As a result of our three successful FDIC-assisted acquisitions, we have built a consumer and commercial bank with $1.8 billion in assets as of September 30, 2011, with 30 branches located in key markets in upstate South Carolina, Georgia and northern Florida. We are the largest bank headquartered in the Greenville and Spartanburg, South Carolina metropolitan statistical area and the 14th largest bank in the State of Georgia by deposit share as of June 30, 2011. Through our branches, we offer our customers a broad array of products including: consumer and business checking and savings accounts, on-line banking and bill pay, telephone banking, electronic statements, consumer and business debit and credit card services, ATMs, retirement planning and investment services. In addition, we offer mortgage loans, home equity loans and lines of credit, consumer and construction loans, property management loans, commercial loans, business term loans and lines of credit, small business loans, mergers and acquisitions advisory services, loan syndications, risk management (hedging) treasury management and securitizations.

Our FDIC-Assisted Acquisitions

Our banking operations commenced on January 21, 2011, when we assumed approximately $319.5 million of deposits and acquired approximately $358.6 million of the assets of the failed CommunitySouth Bank, Easley, South Carolina, including $219.3 million in loans, net of unearned income, and $11.2 million of other real estate with a discount of $35.1 million and $1.7 million of fair value adjustments, respectively, from the FDIC, as receiver. In connection with the acquisition, we entered into a commercial loss share agreement with the FDIC that covers approximately $211.0 million of the acquired assets and 91% of all acquired loans, including 100% of the acquired construction, commercial real estate and commercial and industrial loans, other commercial asset loans and other real estate owned. With the acquisition of CommunitySouth Bank, we acquired six branch locations located in upstate South Carolina.

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Subsequently, on May 20, 2011, we assumed approximately $572.4 million of deposits and acquired approximately $646.4 million of the assets of the failed Atlantic Southern Bank, Macon, Georgia, including $482.4 million in loans, net of unearned income, and $77.2 million of other real estate with a discount of $140.3 million and $28.1 million of fair value adjustments, respectively, from the FDIC, as receiver. In connection with the acquisition, we entered into two loss share agreements with the FDIC on approximately $585.1 million of Atlantic Southern Bank’s assets, including 100% of the acquired loans (except consumer loans) and other real estate owned. With the acquisition of Atlantic Southern Bank, we acquired 16 branch locations located in central, southern and coastal Georgia, and one branch located in Jacksonville, Florida.

Also on May 20, 2011, we assumed approximately $654.6 million of deposits and acquired approximately $606.5 million of the assets of the failed First Georgia Banking Company, Franklin, Georgia, including $405.5 million in loans, net of unearned income, and $39.7 million of other real estate with a discount of $72.5 million and $12.5 million of fair value adjustments, respectively, from the FDIC, as receiver. In connection with the acquisition, we entered into two loss share agreements with the FDIC on approximately $452.1 million of First Georgia Banking Company’s assets, including 100% of the acquired loans (except consumer loans) and other real estate owned. With the acquisition of First Georgia Banking Company, we acquired 12 branch locations located in the Atlanta, Sandy Springs and Marietta, Georgia metropolitan statistical area.

In this prospectus, we refer to our three completed FDIC-assisted acquisitions collectively as the “acquisitions” and refer to CommunitySouth Bank, Atlantic Southern Bank and First Georgia Banking Company collectively as the “Acquired Banks.” In addition, we refer to loans subject to loss share agreements with the FDIC as “covered loans” and loans that are not subject to loss share agreements with the FDIC as “non-covered loans.” All of the loans and other real estate covered under the loss share agreements with the FDIC are referred to as “covered assets.”

Acquisition of Sage Southeastern Securities, Inc.

On September 25, 2011, we closed on the acquisition of Sage Southeastern Securities, Inc. (“Sage”), an Atlanta, Georgia based registered broker-dealer. Sage provides financial advisory services and products, including investment advice, to private accounts of individual and institutional investors. Our new business focus for Sage will be directed towards providing wealth management services to our high-net worth/premier customers.

Pending Transaction

On November 1, 2011, we agreed to purchase more than $200 million in assets and assume more than $200 million of deposits from First Guaranty Bank and Trust Company of Jacksonville, Florida, including seven branch locations and the trust division. The transaction includes approximately $96 million in loans that were reviewed and selected by our Special Assets Group. We did not acquire any of First Guaranty Bank and Trust Company’s non-performing or other criticized loans and the average loan-to-value ratio on the acquired loans is approximately 46%. The acquisition is subject to regulatory approval and other customary closing conditions. This transaction will expand our market presence in the Jacksonville, Florida market.

Executive Management Team

We have assembled a deeply talented and experienced executive management team with substantial experience in our market areas with a passion for providing superior customer service and innovative solutions to our customers. Each member of our management team has spent a considerable amount of time heading up risk management and revenue generating businesses and also has a significant amount of experience in the acquisition and integration of banks. Our executive management team, which consists of the following individuals, has over 100 years of combined experience at the highest levels of both large and small financial institutions:

Milton H. Jones Jr., our Chairman, Chief Executive Officer and President, is a 32-year veteran of Bank of America and its predecessor companies, most recently serving as the Georgia Market President of Bank of America, which had more than $12 billion in retail deposits, 155 branches and 7,000 associates. Prior to that, Mr. Jones was the Global Quality and Productivity Executive for Bank of America and President of the Mid-South Region of Bank

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of America. Mr. Jones was also the former Global Finance Services Group Executive at Bank of America, President of Dealer Financial Services, Chief Technology Infrastructure Officer and held senior executive roles in the finance organization, supporting the services company and general bank.

Walter L. Davis, our Vice Chairman and Chief Credit Officer, has over 23 years of experience in loan originations, syndications and default management and is the former Executive Vice President of Retail Credit and Direct Lending of Wachovia Corporation, where he was responsible for leading Wachovia’s nationwide originations, servicing, settlement services and default management organizations for the bank’s $70 billion consumer credit portfolio. Prior to his tenure at Wachovia, Mr. Davis was at Bank of America where he was a Principal in the Real Estate Syndicated Capital Markets Group.

Charles M. Williams, our Vice Chairman and Chief Operating Officer, has over 29 years of consumer, commercial and investment banking experience, most recently as the Managing Director and Chief Administrative Officer of the Global Corporate and Investment Bank of Bank of America. In this role, he managed the investment bank’s global infrastructure, including strategic investments, central funding, operational risk, capital management and reporting, information research, operations, off-shoring, financial reporting and business risk controls. Mr. Williams was a member of the Board of Managers of Banc of America Securities, LLC and a senior member of the Global Market Risk Committee and also the former Chairman and President of Bank of America Overseas Corporation and Bank of America International Finance Corporation.

K. Angela Webb, our Senior Executive Vice President and Chief Administrative Officer, served more than 20 years at Wachovia Bank and its predecessors and is the former Human Resources Executive and Senior Manager of Wachovia Bank’s General Bank’s Mortgage and Retail Credit Division. Ms. Webb was responsible for managing a team of human resource professionals that provided strategic and consultative leadership and tactical execution to a client group of more than 15,000 employees in 40 states. Ms. Webb also served as a business consultant and collaborated with the General Bank senior managers to build and/or expand centralized underwriting centers across the east coast to support its branch network.

R. Hampton Painter III, our Senior Executive Vice President and Chief Financial Officer, has over 29 years of experience in financial management and reporting and is the former Chief Financial Officer, Treasurer and Secondary Marketing Manager of Plantation Financial Corporation where his duties ranged from accounting and treasury operations to secondary marketing, pricing and interest rate risk management. Prior to that, Mr. Painter co-founded First Trust Mortgage Corporation of the South, a multi-state mortgage banking company headquartered in Greenville, South Carolina and served as its Chief Financial Officer and Secretary/Treasurer from 1996 until its sale in 2002.

Corporate Governance

Our Board of Directors is tasked with ensuring that we have adequate policies and controls and comply with all rules and regulatory requirements. All but one of our independent board members also serve on the board of directors of major companies, such as Aflac, Southwest Airlines and AutoNation.

Market Areas

We view our market as the southeastern region of the United States (i.e. Virginia, North Carolina, South Carolina, Georgia, Tennessee and northern Florida), with a particular emphasis on the Carolinas, Georgia and northern Florida. We believe that these markets have highly attractive demographic, economic and competitive dynamics that are consistent with our objectives and favorable to executing our acquisition and organic growth strategy.

Our three acquisitions have established an initial footprint in upstate South Carolina, Georgia and northern Florida. We established the Bank’s headquarters in Greenville, South Carolina, which is located along the I-85 corridor between Charlotte, North Carolina and Atlanta, Georgia, because we believe it offers both a favorable centralized location within our market area as well as a strong economic base with a wide diversity of economic activity. Greenville County serves as the U.S. headquarters for Bausch and Lomb, Michelin Tires and BMW. In

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addition, there are more than 100 suppliers that support these companies located throughout Anderson, Greenville, Greer and Spartanburg, South Carolina.

The following table shows key demographic information about our current market areas:

(dollars in thousands, except for Household Income, which is in actual dollars)

CertusBank			Total Market Area
Market	June 30, 2011		Total Deposits in Market		Four- Year Deposit		2010	2010-2015 Projected Population		2010 Median Household		2010-2015 Projected Growth in Household
Area	Deposits		Area(1)		CAGR(2)		Population(3)	Growth(3)		Income(3)		Income(3)

South Carolina
Greenville-Mauldin- Easley	$	227,948	$	12,908,126	2.6	%	644,096	7.4	%	$	50,114	11.4	%
Spartanburg	48,077		4,211,351		5.2	%	289,999	7.7	%	48,476		10.1	%
Anderson	21,405		2,321,671		0.3	%	188,227	7.0	%	45,807		12.7	%

Georgia
Macon	254,365		3,234,706		(3.2	)%	233,606	1.2	%	45,757		14.5	%
Atlanta-Sandy Springs-Marietta	215,348		115,537,726		1.0	%	5,611,180	10.1	%	68,106		14.9	%
Columbus	117,861		7,314,600		8.8	%	294,464	1.9	%	42,819		16.0	%
Warner Robbins	87,951		1,279,679		(2.2	)%	139,553	8.4	%	55,574		11.8	%
Savannah	65,413		5,224,363		(0.3	)%	346,746	7.6	%	49,609		16.3	%
Brunswick	61,153		1,959,026		0.1	%	106,631	5.7	%	44,291		17.6	%
Dalton	57,639		1,937,593		0.1	%	137,874	2.5	%	46,179		14.3	%
Cornelia	56,080		817,341		(4.1	)%	44,830	7.0	%	42,733		12.3	%
Athens-Clarke	35,250		2,977,921		1.7	%	196,366	7.2	%	41,946		20.1	%
Valdosta	21,334		2,134,794		2.0	%	135,484	5.2	%	39,110		16.2	%
Fort Valley	21,063		161,936		(6.9	)%	26,953	5.6	%	40,488		13.0	%

Florida
Jacksonville(4)	$	44,158	$	46,808,280	12.4	%	1,389,042	7.1	%	$	54,392	11.9	%
Total	$	1,335,045

Source: SNL Financial, except where otherwise noted.

(1) Deposit data is for banks and thrifts only and does not include credit unions.

(2) Compound Annual Growth Rate from June 30, 2007 through June 30, 2011.

(3) Source: ESRI, as provided by SNL Financial. Demographic data is provided by ESRI based primarily on US Census data. For non-census year data, ESRI uses samples and projections to estimate the demographic data.

(4) Deposit data is not provided on a pro forma basis to reflect the pending acquisition of First Guaranty Bank and Trust Company.

Our Business Strategy

Our business strategy is to build a leading regional retail and commercial bank in the southeastern United States, and we believe our current capital base, geographic footprint and infrastructure provide us with a strong platform to build from. We have created a robust integration process, a brand name that is growing in recognition and have assembled a highly talented team capable of managing our growth.

Based on our analysis and in-market experience, we believe that a number of banks in the Carolinas and Georgia will be taken into receivership by the FDIC. We also expect that a number of banks in our target markets will continue as operating banks, but with deficient capital levels and little or no ability to grow. We believe this distress in our markets provides us with an opportunity to increase our market share in what we believe are very attractive markets in the southeastern United States. We expect that our acquisition activity will be the primary

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driver of our growth over the next few years, including additional FDIC-assisted acquisitions and conservatively structured open bank transactions located in our target markets.

We believe that our focus on our target markets will also provide long-term opportunities for organic growth. Our key organic growth strategies are:

· Expand Our Target Customer Base. We believe our geographic footprint provides us with a rich opportunity to increase our “share of wallet” by improving service levels and product offerings for our existing and new mass market, mass affluent, affluent, micro-business, community development, small business and commercial customers.

· Offer an Array of Products. We offer a product set that is comprehensive which will allow us to broaden overall customer relationships profitably, is complementary to core products and services, is sticky (i.e. has high switching costs) and supports our expanded target customer base.

· Innovation. We have and will continue to invest in cost-effective innovation technologies that provide our customers with electronic access to our products and services.

· Product Cross-Sell. We have developed unique product bundles that are attractively priced to promote adoption of use.

· Customer Education. Customer education enhances overall satisfaction and generates opportunities to promote adoption of new products/services, enhances cross-selling opportunities, and is a welcomed reinvestment in the communities we serve.

· Customer Service. Unparalleled customer service is a critical component of our culture. We place a great amount of emphasis on providing customers with distinctive, unparalleled service. Teammates are rewarded for demonstrating exemplary customer service, identifying customer needs, services and sales effectiveness.

· Optimize Use of Channels. We have established a continuous process for rationalizing customer delivery channels (e.g. branch, ATM, on-line, telephone, mobile). Our analytical approach includes a combination of historical trends and customer behavioral data to optimize our delivery channels.

Risk Management

Our risk management framework and culture starts with the tone at the top that has been established by the Board of Directors. We have developed comprehensive risk management policies and procedures, and every member of the executive management team is responsible for monitoring activities across the Bank through risk assessments, training programs, exception reports, incentive score cards, and emphasizing the importance of risk and compliance in regular periodic team meetings. Various risk and control committees independently assess the day-to-day risks impacting the Bank. We believe that our core competency is balancing risks and rewards in order to grow a well-controlled and consistently profitable financial institution. Our culture recognizes teammates that demonstrate strong risk management and compliance performance. Ultimately, it is our view that the risk management commitment, culture and programs that we established serve as the foundation for our current and long term success.

Our Competitive Strengths

· Disciplined Management Team with Execution Capabilities. We have a disciplined, thorough and patient management team with a proven track record of acquiring failed or failing financial institutions, and integrating them into a strong and profitable franchise. We believe our disciplined and balanced approach coupled with strong analytics will allow us to grow properly and profitably.

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products that customers truly want and not what is simply available. We value “customer listening” and have designed processes to capture customer feedback in order to continuously improve products, pricing and delivery channels.

We have designed a broad set of product and service offerings that better meets the needs of customers’ financial goals because it is targeted to specific customer segments. Our mass market customer products and services include, among other things, self-directed brokerage, mutual funds, personal trust, credit life and disability insurance, online and mobile banking in addition to basic banking services. Our mass affluent and affluent customer products and services are typically more sophisticated, such as asset management, foreign exchange, full service brokerage, tax planning and retirement planning. Our small business and commercial banking teams work together with our advisory services and process improvement teams to develop unique and innovative solutions to companies of every size and in every industry in our geographic footprint.

· Talent Acquisition. Our approach to business development and relationship management emphasizes a team approach in order to deliver comprehensive solutions and expanded services to our entire customer base regardless of size or complexity. We have invested in, and have been successful in attracting, a talented team with years of experience and significant relationships in our target markets.

Risk Factors

For a discussion of certain risk factors you should consider before making an investment, see “Risk Factors” beginning on page [Ÿ].

Company Information

Our principal executive offices are located at 1170 Peachtree Street, NW, Suite 2300, Atlanta, Georgia 30309, and our telephone number is (678) 293-1045. Our website address is www.bhc.us.com.com. The information and other content contained on our website are not part of this prospectus.

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The Offering

We issued and sold 5,420,470 shares of our Class A Common Stock, 5,484,525 shares of our Class B Common Stock, and warrants to purchase 273,864 shares of Class B Common Stock in private placement transactions to the selling stockholders that closed on May 27, 2010 and May 20, 2011. Prior to the May 2011 closing, certain lead investors converted 47,475 shares of Class B common stock to Class A common stock to comply with regulatory requirements. This prospectus covers the resale by the selling stockholders of such shares of Class A Common Stock and Class B Common Stock, as described below:

Common stock offered by selling stockholders(1)		5,467,945 shares of Class A Common Stock and 5,710,914 shares of Class B Common Stock.

Common stock outstanding		5,941,620 shares of Class A Common Stock and 5,437,050 shares of Class B Common Stock as of December 31, 2011.

Dividend policy		We have never paid cash dividends to holders of our common stock. We do not anticipate paying cash dividends on shares of our common stock for the foreseeable future. Our ability to pay dividends is limited by minimum capital and other requirements prescribed by law and regulation. In addition, our operating agreement with the Office of the Comptroller of the Currency, or the OCC (the “OCC Agreement”) (which was entered into in connection with the acquisition of CommunitySouth Bank), prohibits the Bank from paying a dividend to us prior to January 21, 2014, without prior written approval of the OCC and assuming certain other conditions are met. See “Dividend Policy” and “Supervision and Regulation—Dividends.”

Use of proceeds		All proceeds of this offering will be received by the selling stockholders for their own accounts. See “Use of Proceeds” on page [Ÿ].

Market for our common stock		Our common stock is not listed on an exchange or any over-the-counter service. Thus, there is currently no public trading market of our common stock, and private trading of our common stock has been limited.

Risk Factors		You should read the “Risk Factors” beginning on page [Ÿ], as well as other cautionary statements throughout this prospectus, before investing in shares of our common stock.

(1) See “Selling Stockholders” for more information on the selling stockholders.

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Summary Consolidated Financial Data

The following table sets forth our summary consolidated financial data. You should read this information in conjunction with “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto included elsewhere in this prospectus. The summary historical consolidated financial information set forth below as of and for the nine months ended September 30, 2011 is derived from our unaudited financial statements included elsewhere in this prospectus. Our historical results shown below and elsewhere in this prospectus are not necessarily indicative of our future performance. The notes to this table are on the following page.

(dollars in thousands, except per share data)	Nine Months Ended September 30, 2011
	(unaudited)
Summary Results of Operations Data
Interest income	$	32,764
Interest expense	5,382
Net interest income	27,382
Provision for loan losses	2,118
Net interest income after provision for loan losses	25,264
Non-interest income	110,093
Non-interest expenses	37,240
Income before income tax expense	98,117
Income tax expense	34,336
Net income	$	63,781
Per Share Data
Earnings
Basic and diluted, Class A	$	9.08
Basic and diluted, Class B	$	9.08
Tangible book value	$	22.32
Weighted average shares outstanding
Basic and diluted, Class A	3,573
Basic and diluted, Class B	3,025
Performance Ratios
Return on average assets(1)	7.99		%
Return on average equity(2)	58.82		%
Net interest margin	4.03		%
Interest rate spread	3.99		%
Efficiency ratio(3)	27.09		%
Average interest-earning assets to average interest-bearing liabilities	94.71		%
Average loans receivable to average deposits	63.26		%
Cost of interest-bearing liabilities	0.84		%
Asset Quality
Non-performing loans to loans receivable (4)	2.12		%
Covered under loss sharing agreements with the FDIC	2.08		%
Not covered under loss sharing agreements with the FDIC	0.04		%
Non-performing assets to total assets	5.67		%
Covered under loss sharing agreements with the FDIC	5.65		%
Not covered under loss sharing agreements with the FDIC	0.02		%
Allowance for loan and lease losses (ALLL) to non-performing loans	12.69		%
Capital Ratios
Average equity to average total assets	13.59		%
Tier 1 leverage ratio	13.87		%
Tier 1 risk-based capital ratio	43.70		%
Total risk-based capital ratio	44.07		%

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(1) Annualized net income divided by average total assets.

(2) Annualized net income divided by average equity.

(3) Noninterest expenses divided by sum of net interest income and noninterest income.

(4) Non-performing loans include nonaccrual loans and loans excluded from ASC Topic 310-30 which are past due 90 days or more and still accruing interest.


(dollars in thousands)	September 30, 2011
	(unaudited)
Summary Balance Sheet Data
Cash and cash equivalents	$	528,052
Investment securities	230,390
Loans receivable
Not covered under FDIC loss sharing agreements	31,194
Covered under FDIC loss sharing agreements	755,893
Allowance for loan and lease losses	(2,118		)
Net loans	784,969
Loans held for sale	736
Other real estate owned
Not covered under FDIC loss sharing agreements	63
Covered under FDIC loss sharing agreements	86,554
FDIC indemnification asset	178,244
Goodwill and other intangible assets, net	6,342
Other assets	6,574
Total assets	$	1,821,924
Deposits	1,481,032
Advances from Federal Home Loan Bank (FHLB)	16,034
Other liabilities	64,787
Total liabilities	1,561,853
Stockholders’ equity	260,071
Total liabilities and stockholders’ equity	$	1,821,924

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information in this prospectus including our consolidated financial statements and the related notes thereto, before deciding whether to invest in our common stock. If any of the following risks actually occurs, our business, prospects, financial condition, results of operations and cash flow could be materially adversely affected. In such an event, the value of our common stock could decline and you could lose all or part of your investment.

You should not place undue reliance on any forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no duty to update any forward-looking statement.

Risks Related to Our Business

We have recently completed three FDIC-assisted acquisitions and have a limited operating history from which investors can evaluate our profitability and prospects.

The Company was organized in November 2009 and acquired certain of the assets and assumed certain of the liabilities of three failed banks from the FDIC, as receiver, in 2011. We have completed the process of integrating one of the acquired banking platforms and we are in the process of integrating the remaining acquired banking platforms. Because our banking operations began in 2011, we do not have a meaningful operating history upon which investors can evaluate our operational performance or compare our recent performance to historical performance. Although we acquired certain assets and assumed certain liabilities of three failed financial institutions which had operated for longer periods of time than we have, their business models and experiences are not reflective of our plans. Moreover, given that most of the loans and other real estate owned we acquired in our acquisitions are covered by loss sharing agreements with the FDIC, the historical financial results of the acquired failed banks are immaterial to an understanding of our future operations. In addition, our business since January 21, 2011 and for the immediate future relies heavily on our acquisition activities, on our loss share resolution business and on the remediation and disposal of assets we acquired from the FDIC and is fundamentally different from the business of the acquired failed banks. Certain other factors may also make it difficult to predict our future financial and operating performance including, among others:

· our current asset mix (which is comprised primarily of cash, investment securities and the legacy loan portfolios that were acquired from the FDIC), loan quality and allowance for loan and lease losses are not representative of our anticipated future asset mix, loan quality and allowance for loan and lease losses, which may change materially as we commence meaningful organic loan origination and banking activities and grow through future acquisitions;

· our significant cash reserves and short term investment portfolio, which result in large part from the proceeds of our 2010 and 2011 private placement financings and cash payments from the FDIC in connection with our FDIC-assisted failed bank acquisitions are not necessarily representative of our future cash position; and

· our cost structure and capital expenditure requirements during the transitional periods for which financial information is available are not reflective of our anticipated cost structure and capital spending as we integrate future acquisitions and continue to grow our organic banking platform.

Recent negative developments in the financial industry and the current economic environment pose significant challenges for our industry and us and could adversely affect our business, financial condition and results of operations.

We are operating in a challenging and uncertain economic environment, including generally uncertain national and local conditions. Recent negative developments in the global credit and securitization markets have resulted in uncertainty in the financial markets in general, and the economy has continued to be weak in 2011, both nationally and in our Georgia, upstate South Carolina and north Florida markets. As a result of this “credit crunch,” commercial as well as consumer loan portfolio performances have deteriorated at many institutions, and the competition for deposits and quality loans has increased significantly. Global securities markets, and bank and bank

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holding company stock prices in particular, have been negatively affected, as has the ability of banks and bank holding companies to raise capital or borrow in the debt markets.

Financial institutions like us have been, and may continue to be, affected by sharp declines in the real estate market, including falling home prices and increasing delinquencies, foreclosures and increased unemployment. Concerns over the stability of the financial markets and the economy have resulted in decreased lending by financial institutions to their customers and to each other. Those concerns have lead to increased commercial and consumer deficiencies, lack of customer confidence, increased market volatility and widespread reduction in general business activity. We do not expect these difficult conditions to improve in the near future. A worsening of these conditions would likely exacerbate the adverse effects on us.

As a result, we may face the following risks:

· economic conditions that negatively affect housing prices and the job market may cause the credit quality of our loan portfolios to deteriorate;

· market developments that affect consumer confidence may cause adverse changes in payment patterns by our customers, causing increases in delinquencies and default rates on loans and other credit facilities;

· the processes that we use to estimate our allowance for loan and lease losses and reserves may no longer be reliable because they rely on judgments, such as forecasts of economic conditions, that may no longer be capable of accurate estimation;

· the value of our securities portfolio may decline; and

· we face increased regulation of our industry, and the costs of compliance with such regulation may increase.

These conditions or similar ones may continue to persist or worsen, causing us to experience continuing or increased adverse effects on our business, financial condition, results of operations and the price of our common stock.

If, over the next two to three years, we are unable to replace the revenue we expect to derive from the continued realization of accretable discounts on our acquired loans and the FDIC indemnification asset with new loans and other earning assets, our financial condition and earnings may be adversely affected.

As a result of the three FDIC-assisted acquisitions we have made over the past 12 months and the negative purchase price associated with each acquisition, we anticipate that a significant portion of our income over the next two to three years will be derived from the continued realization of accretable discounts on the loans that we purchased in our FDIC-assisted acquisitions and from the FDIC indemnification asset. For the period ended September 30, 2011, we recognized $25.0 million of income, or 76.3% of our total interest income for the period, from the realization of accretable discounts on our acquired loans. The accretable discount on the acquired loans will be recognized into interest income over the estimated life of the covered loan portfolio. Furthermore, the discount recorded on the FDIC indemnification asset will be accreted into non-interest income using the level yield method over the estimated life of the FDIC indemnification asset. During the period, if we are unable to replace our acquired loans and the related accretion with new performing loans and other earning assets due to a decline in loan demand, competition from other financial institutions in our markets or if current economic conditions continue or further deteriorate, our financial condition and earnings may be adversely affected.

We may decide to make future acquisitions, which could expose us to additional risks.

We periodically evaluate opportunities to acquire additional financial institutions, including additional purchases from the FDIC. As a result, we may engage in negotiations or discussions that, if they were to result in a transaction, could have a material effect on our operating results and financial condition, including short and long-term liquidity.

Our acquisition activities could be material and could require us to use a substantial amount of cash, other liquid assets, and/or incur debt. In addition, if goodwill recorded in connection with our potential future acquisitions

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were determined to be impaired, then we would be required to recognize a charge against our earnings, which could materially and adversely affect our results of operations during the period in which the impairment was recognized.

Our acquisition activities could involve a number of additional risks, including the risks of:

· incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating potential transactions, resulting in management’s attention being diverted from the operation of our existing business;

· using inaccurate estimates and judgments to evaluate credit, operations, management and market risks with respect to the target institution or assets;

· incurring time and expense required to integrate the operations and personnel of the combined businesses, creating an adverse short-term effect on results of operations; and

· losing key employees and customers as a result of an acquisition that is poorly received.

We may be exposed to difficulties in combining the operations of acquired institutions, including the three banks we acquired from the FDIC, into our own operations, which may prevent us from achieving the expected benefits from our acquisition activities.

We may not be able to fully achieve the strategic objectives and operating efficiencies that we anticipate in our acquisition activities, including our recent acquisition of the three separate banks we acquired from the FDIC, as receiver. Inherent uncertainties exist in integrating the operations of an acquired institution. In addition, the markets in which we and our potential acquisition targets operate are highly competitive. We may lose customers or the customers of an acquired institution as a result of an acquisition. We also may lose key personnel from the acquired institution as a result of an acquisition. We may not discover all known and unknown factors when examining an institution for acquisition during the due diligence period. These factors could produce unintended and unexpected consequences. Undiscovered factors as a result of an acquisition could bring civil, criminal and financial liabilities against us, our management and the management of the institutions we acquire. These factors could contribute to our not achieving the expected benefits from our acquisitions within desired time frames, if at all.

Our business is subject to interest rate risk, and fluctuations in interest rates may adversely affect our earnings and capital levels and overall results.

The majority of our assets are monetary in nature and, as a result, we are subject to significant risk from changes in interest rates. Changes in interest rates may affect our net interest income as well as the valuation of our assets and liabilities. Our earnings depend significantly on our net interest income, which is the difference between interest income on interest-earning assets, such as loans and securities, and interest expense on interest-bearing liabilities, such as deposits and borrowings. We expect to periodically experience “gaps” in the interest rate sensitivities of our assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest-earning assets, or vice versa. In either event, if market interest rates move contrary to our position, this “gap” may work against us, and our earnings may be adversely affected.

An increase in the general level of interest rates may also, among other things, adversely affect the demand for loans and our ability to originate loans. Conversely, a decrease in the general level of interest rates, among other things, may lead to prepayments on our loan and mortgage-backed securities portfolios and increased competition for deposits. Accordingly, changes in the general level of market interest rates may adversely affect our net yield on interest-earning assets, loan origination volume and our overall results.

Although our asset-liability management strategy is designed to control and mitigate exposure to the risks related to changes in the general level of market interest rates, those rates are affected by many factors outside of our control, including inflation, recession, unemployment, money supply, international disorder and instability in domestic and foreign financial markets. We may not be able to accurately predict the likelihood, nature and magnitude of those changes or how and to what extent they may affect our business. We also may not be able to adequately prepare for or compensate for the consequences of such changes. Any failure to predict and prepare for changes in interest rates or adjust for the consequences of these changes may adversely affect our earnings and capital levels and overall results.

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We depend on our management team, and the loss of our senior executive officers or other key employees could impair our relationship with customers and adversely affect our business and financial results.

Our success largely depends on the continued service and skills of our existing management team, including Milton H. Jones Jr., our Chairman, Chief Executive Officer and President, Charles M. Williams, our Vice Chairman and Chief Operating Officer, Walter L. Davis, our Vice Chairman and Chief Credit Officer, K. Angela Webb, our Chief Administrative Officer and Senior Executive Vice President and R. Hampton Painter III, our Senior Executive Vice President and Chief Financial Officer, as well as other key employees with long-term customer relationships. Our growth strategy is built primarily on our ability to retain employees with experience and business relationships within their respective segments. The loss of one or more of these key personnel could have an adverse effect on our business because of their skills, knowledge of the market, years of industry experience and the difficulty of finding qualified replacement personnel.

FDIC-assisted acquisition opportunities may not become available to us, and increased competition may make it more difficult for us to bid on failed bank transactions on terms we consider to be acceptable.

Our near-term business strategy includes consideration of potential acquisitions of failing banks that the FDIC plans to place in receivership. The FDIC may not place banks that meet our strategic objectives into receivership. Failed bank transactions are attractive opportunities in part because of loss-sharing arrangements with the FDIC that limit the acquirer’s downside risk on the purchased loan portfolio and, apart from our assumption of deposit liabilities, we have significant discretion as to the non-deposit liabilities that we assume. In addition, assets purchased from the FDIC are marked to their fair value and in many cases there is little or no addition to goodwill arising from an FDIC-assisted transaction. The bidding process for failing banks could become very competitive, and the increased competition may make it more difficult for us to bid on terms we consider to be acceptable.

If we fail to effectively manage credit risk, our business and financial condition will suffer.

We must effectively manage credit risk. There are risks inherent in making any loan, including risks with respect to the period of time over which the loan may be repaid, risks relating to proper loan underwriting and guidelines, risks resulting from changes in economic and industry conditions, risks inherent in dealing with individual borrowers and risks resulting from uncertainties as to the future value of collateral. The substantial majority of our loans were acquired in our three FDIC-assisted transactions and are covered by loss share agreements with the FDIC. In addition, a primary component of our strategy is to grow our small business and retail lending activity. There is no assurance that our credit risk monitoring and loan approval procedures are or will be adequate or will reduce the inherent risks associated with lending. Our credit administration personnel, policies and procedures may not adequately adapt to changes in economic or any other conditions affecting customers and the quality of our loan portfolio. Any failure to manage such credit risks may materially adversely affect our business and our consolidated results of operations and financial condition.

We may not be able to retain or develop a strong core deposit base or other low-cost funding sources.

We expect to depend on checking, savings and money market deposit account balances and other forms of customer deposits as our primary source of funding for our lending activities. Our future growth will largely depend on our ability to retain and grow a strong deposit base. Because a majority of our existing deposit base consists of higher than average cost time deposits that were acquired from failed banks, it may prove harder to maintain and grow our deposit base than would otherwise be the case. We are also working to transition certain of our customers to lower cost traditional banking deposit services as higher cost funding sources, such as high interest certificates of deposit, mature. Many banks in our markets are struggling to maintain depositors in light of the recent financial crisis, and there may be competitive pressures to pay higher interest rates on deposits, which could increase funding costs and compress net interest margins. There is no assurance customers will transition to lower yielding savings and investment products or continue their business with the Bank, which could adversely affect our operations. Further, even if we are able to grow and maintain our deposit base, the account and deposit balances can decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return tradeoff. If customers move money out of bank deposits and into investments (or similar deposit products at other institutions that may provide a higher rate of return), we could lose a relatively low cost source of funds, increasing our funding

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costs and reducing our net interest income and net income. Additionally, any such loss of funds could result in lower loan originations, which could materially negatively impact our growth strategy.

We are subject to extensive regulation that could limit or restrict our activities and adversely affect our earnings.

We operate in a highly regulated industry and are subject to examination, supervision and comprehensive regulation by various federal agencies, including the OCC, the Federal Reserve and the FDIC. Our compliance with these regulations is costly and restricts our activities, including payment of dividends, mergers and acquisitions, investments, loans and interest rates charged, interest rates paid on deposits and locations of offices. Our failure to comply with these requirements can lead to, among other remedies, administrative enforcement actions, termination or suspension of our licenses, rights of rescission for borrowers, and class action lawsuits. Many of these regulations are intended to protect depositors, the public and the FDIC rather than our stockholders. The laws and regulations applicable to the banking industry are changing rapidly to reflect the government’s concerns about the economy and the banking system, and these changes may adversely affect our business and profitability. Changes to statutes, regulations or regulatory policies, and the interpretation and implementation of new statutes, regulations or policies could affect us in substantial and unpredictable ways, including limiting the types of financial services and products we may offer and/or increasing the ability of nonbanks to offer competing financial services and products.

In addition, following the effective date of our registration statement, we will become subject to the requirements of the Sarbanes-Oxley Act of 2002. Failure to have in place adequate programs and procedures could cause us to have weakness in our internal control environment, putting us and our stockholders at risk of loss.

These and other potential changes in government regulation or policies could increase our costs of doing business and could adversely affect our operations and the manner in which we conduct our business.

We are subject to substantial regulatory limitations that limit the way in which we may operate our business.

The Bank is subject to specific requirements pursuant to the OCC Agreement it entered into with the OCC in connection with our acquisition of CommunitySouth Bank. The OCC Agreement requires, among other things, that the Bank maintain various financial and capital ratios and provide notice to, and obtain consent from, the OCC with respect to any additional failed bank acquisitions from the FDIC or the appointment of any new director or senior executive officer of the Bank.

The Bank (and, with respect to certain provisions, the Company) is also subject to a separate Order of the FDIC, dated January 21, 2011 (the “FDIC Order”) issued in connection with the FDIC’s approval of the Bank’s application for deposit insurance. The FDIC Order requires, among other things, that during the first three years following our acquisition of CommunitySouth Bank, the Bank must obtain the FDIC’s approval before implementing certain compensation plans, submit updated business plans and reports of material deviations from those plans to the FDIC and comply with the applicable requirements of the FDIC Statement of Policy on Qualifications for Failed Bank Acquisitions. Additionally, the FDIC Order requires the Bank to maintain a ratio of tier 1 common equity to total assets equal to at least 10% during such three-year period and to remain “well capitalized” thereafter.

A failure by us or the Bank to comply with the requirements of the OCC Agreement or the FDIC Order, or the objection by the OCC or the FDIC to any materials or information submitted pursuant to the OCC Agreement or the FDIC Order, could prevent us from executing our business strategy and materially and adversely affect us.

Regulatory reform of the U.S. banking system may adversely affect us.

On July 21, 2010, President Obama signed into law The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) which, among other things, changes the oversight and supervision of financial institutions, introduces minimum capital requirements, creates a new federal agency to regulate consumer financial products and services and implements changes to corporate governance and compensation practices.

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Other recent developments include:

· the Federal Reserve’s proposed guidance on incentive compensation policies at banking organizations; and

· proposals to limit a lender’s ability to foreclose on mortgages or make those foreclosures less economically viable, including by allowing Chapter 13 bankruptcy plans to “cram down” the value of certain mortgages on a consumer’s principal residence to its market value and/or reset interest rates and monthly payments to permit defaulting debtors to remain in their home.

These initiatives may increase our expenses or decrease our income. Further, the overall effects of these and other legislative and regulatory efforts on the financial markets remain uncertain, and they may not have the intended results. These efforts may even have unintended harmful consequences on the U.S. financial system and our business. Should these or other legislative or regulatory initiatives have unintended effects, our business, financial condition, results of operations and prospects could be materially and adversely affected.

In addition, we may need to modify our strategies and business operations in response to these changes. We may also incur increased capital requirements and constraints or additional costs to satisfy new regulatory requirements. Given the volatile nature of the current market and the uncertainties underlying efforts to mitigate or reverse disruptions, we may not timely anticipate or manage existing, new or additional risks, contingencies or developments in the current or future environment. Our failure to do so could materially and adversely affect our business, financial condition, results of operations and prospects.

The recent downgrade of the U.S. government’s sovereign credit rating by Standard & Poor’s Ratings Services, and any future rating agency action with respect to the U.S. government’s sovereign credit rating, could have a material adverse effect on us. Further, the current debt crisis in Europe, and the risk that certain countries may default on their sovereign debt, and the resulting impact on the financial markets, could have a material adverse effect on our business, results of operations and financial condition.

On August 2, 2011, Moody’s confirmed the U.S. government’s existing sovereign rating, but stated that the rating outlook is negative, and also on August 2, 2011, Fitch affirmed its existing sovereign rating of the U.S. government, but stated that the U.S. government’s rating is under review. On August 5, 2011, Standard & Poor’s downgraded the United States long-term debt rating from its AAA rating to AA+. On August 8, 2011, Standard & Poor’s downgraded the credit ratings of certain long-term debt instruments issued by Fannie Mae and Freddie Mac and other U.S. government agencies linked to long-term U.S. debt. These downgrades, any future downgrades, as well as the perceived creditworthiness of U.S. government-related obligations, could impact our ability to obtain, and the pricing with respect to, funding that is collateralized by affected instruments and obtained through the secured and unsecured markets. We cannot predict how this or any further downgrades to the U.S. government’s sovereign credit rating, or its perceived creditworthiness, will impact economic or capital markets conditions generally. It is possible that any such impact could have a material adverse effect on our business, results of operation, and financial position.

In addition, the current crisis in Europe has created uncertainty with respect to the ability of certain European Union countries to continue to service their sovereign debt obligations. These conditions have adversely impacted financial markets and have created substantial volatility and uncertainty, and will likely continue to do so. Risks related to this have had, and are likely to continue to have, a negative impact on global economic activity and the financial markets. As these conditions persist, our business, results of operation, and financial condition could be materially adversely affected.

We will incur increased costs as a result of being a public company.

As a privately held company, we were not responsible for the corporate governance and financial reporting practices and policies required of a publicly traded company. Following the effective date of this registration statement, we will be a public company. As a public company, we will incur significant legal, accounting and other expenses that we did not incur in the past and are not reflected in our historical financial statements. In addition, the Sarbanes-Oxley Act, as well as new rules implemented by the SEC under the Dodd-Frank Act, will require changes

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in corporate governance practices. We expect that these rules and regulations will increase our legal and financial compliance costs.

If our allowance for loan and lease losses is not sufficient to cover actual loan losses, our earnings will be adversely affected.

Like other financial institutions, we are exposed to the risk that our loan customers may not repay their loans according to their terms, and the collateral securing the payment of these loans may be insufficient to fully compensate us for the outstanding balance of the loan plus the costs to dispose of the collateral. As a result, we may experience significant loan losses that may have a material adverse effect on our operating results and financial condition.

We maintain an allowance for loan and lease losses in an attempt to cover loan losses inherent in our loan portfolio. In addition, as we increase our loan origination, the percentage of our loan portfolio not covered by FDIC loss share agreements will increase. As such, the long-term success of our business will be largely attributable to the quality of our assets, particularly newly-originated loans. In determining the size of the allowance, we rely on an analysis of our loan portfolio, our experience and our evaluation of general economic conditions. We also make various assumptions and judgments about the collectibility of our loan portfolio, including the diversification in our loan portfolio, the effect of changes in the economy on real estate and other collateral values, the results of recent regulatory examinations, the effects on the loan portfolio of current economic indicators and their probable impact on borrowers, the amount of charge-offs for the period and the amount of non-performing loans and related collateral security. If our assumptions prove to be incorrect, our current allowance may not be sufficient, and adjustments may be necessary to allow for different economic conditions or adverse developments in our loan portfolio. Material additions to the allowance for loan and lease losses would materially decrease our net income and adversely affect our financial condition generally.

In addition, federal regulators periodically review our allowance for loan and lease losses and may require us to increase our allowance for loan and lease losses or recognize further loan charge-offs, based on judgments different than our management. Any increase in our allowance for loan and lease losses or loan charge-offs required by these regulatory agencies could have a material adverse effect on our operating results and financial condition.

We are exposed to higher credit risk by construction and development, commercial real estate, and commercial and industrial lending.

Construction and development, commercial real estate, and commercial and industrial lending usually involve higher credit risks than single-family residential lending. As of September 30, 2011, the following loan types accounted for the stated percentages of our total loan portfolio: real estate construction and development and land — 26.8%, commercial real estate — 32.3%, and commercial and industrial — 7.0%. As of September 30, 2011, of these loans, 98.9% are covered by loss share agreements with the FDIC. However, over time, we expect that the number of non-covered loans in these categories will increase. These types of loans involve larger loan balances to a single borrower or groups of related borrowers.

Commercial real estate loans may be affected to a greater extent than residential loans by adverse conditions in real estate markets or the economy because commercial real estate borrowers’ ability to repay their loans depends on successful development of their properties, in addition to the factors affecting residential real estate borrowers. These loans also involve greater risk because they generally are not fully amortizing over the loan period, but have a balloon payment due at maturity. A borrower’s ability to make a balloon payment typically will depend on being able to either refinance the loan or sell the underlying property in a timely manner.

Risk of loss on a construction and development loan depends largely upon whether our initial estimate of the property’s value at completion of construction equals or exceeds the cost of the property construction (including interest), the availability of permanent take-out financing and the builder’s ability to ultimately sell the property. During the construction phase, a number of factors can result in delays and cost overruns. If estimates of value are inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed through a permanent loan or by seizure of collateral.

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Commercial and industrial loans are typically based on the borrowers’ ability to repay the loans from the cash flow of their businesses. These loans may involve greater risk because the availability of funds to repay each loan depends substantially on the success of the business itself. In addition, the assets securing the loans have the following characteristics: (a) they depreciate over time, (b) they are difficult to appraise and liquidate, and (c) they fluctuate in value based on the success of the business.

Construction and development loans, commercial real estate loans, and commercial and industrial loans are more susceptible to a risk of loss during a downturn in the business cycle. Our underwriting, review and monitoring cannot eliminate all of the risks related to these loans.

As of September 30, 2011, our outstanding commercial real estate loans were equal to 97.8% of our total capital. The banking regulators are giving commercial real estate lending greater scrutiny, and may require banks with higher levels of commercial real estate loans to implement improved underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for losses and capital levels as a result of commercial real estate lending growth and exposures.

Changes in local economic conditions where we operate could have a negative effect.

Our success depends significantly on growth in population, income levels, deposits and housing starts in our markets in Georgia, South Carolina and north Florida. The local economic conditions in these areas have a significant effect on our loans, the ability of borrowers to repay our loans, and the value of the collateral securing our loans. Adverse changes in, and further deterioration of, the economic conditions of the Southeastern United States in general or any one or more of our local markets could negatively affect our financial condition, results of operations and our profitability. A continuing deterioration in economic conditions could result in the following consequences, any of which could have a material adverse effect on our business:

· loan delinquencies may increase;

· problem assets and foreclosures may increase;

· demand for our products and services may decline; and

· collateral for loans that we make, especially real estate, may decline in value, in turn reducing a customer’s borrowing power, and reducing the value of assets and collateral associated with our loans.

We face strong competition for customers, which could prevent us from obtaining customers or may cause us to pay higher interest rates to attract customer deposits.

The banking business is highly competitive, and we experience competition in our markets from many other financial institutions. Customer loyalty can be easily influenced by a competitor’s new products, especially offerings that could provide cost savings or a higher return to the customer. Moreover, this competitive industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. We compete with commercial banks, credit unions, savings and loan associations, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market funds and other mutual funds, as well as super-regional, national and international financial institutions that operate offices in our primary market areas and elsewhere.

We compete with these institutions both in attracting deposits and in making loans. In addition, we have to attract our customer base from other existing financial institutions and from new residents. Many of our competitors are well-established, larger financial institutions. We also compete with local community banks in our market. We may not be able to compete successfully with other financial institutions in our market, and we may have to pay higher interest rates to attract deposits, accept lower yields on loans to attract loans and pay higher wages for new employees, resulting in reduced profitability. In addition, competitors that are not depository institutions are generally not subject to the extensive regulations that apply to us.

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Future growth or operating results may require us to raise additional capital, but that capital may not be available or may be dilutive.

We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations. We may at some point need to raise additional capital to support our operations and any future growth.

Our ability to raise capital will depend on conditions in the capital markets, which are outside of our control and largely do not depend on our financial performance. Accordingly, we may be unable to raise capital when needed or on favorable terms. If we cannot raise additional capital when needed, we will be subject to increased regulatory supervision and the imposition of restrictions on our growth and business. These restrictions could negatively affect our ability to operate or further expand our operations through loan growth, acquisitions or the establishment of additional branches. These restrictions may also result in increases in operating expenses and reductions in revenues that could have a material adverse effect on our financial condition, results of operations and the price of our common stock.

Our deposit insurance premiums could be substantially higher in the future, which could have a material adverse effect on our future earnings.

The FDIC insures deposits at FDIC-insured depository institutions, such as the Bank, up to applicable limits. The amount of a particular institution’s deposit insurance assessment is based on that institution’s risk classification under an FDIC risk-based assessment system. An institution’s risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to its regulators. Recent market developments and bank failures significantly depleted the FDIC’s Deposit Insurance Fund, and reduced the ratio of reserves to insured deposits. As a result of recent economic conditions and the enactment of the Dodd-Frank Act, banks are now assessed deposit insurance premiums based on the bank’s average consolidated total assets, and the FDIC has modified certain risk-based adjustments which increase or decrease a bank’s overall assessment rate. This has resulted in increases to the deposit insurance assessment rates and thus raised deposit premiums for insured depository institutions. If these increases are insufficient for the Deposit Insurance Fund to meet its funding requirements, further special assessments or increases in deposit insurance premiums may be required. We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. If there are additional bank or financial institution failures, we may be required to pay even higher FDIC premiums than the recently increased levels. Any future additional assessments, increases or required prepayments in FDIC insurance premiums could reduce our profitability, may limit our ability to pursue certain business opportunities, or otherwise negatively impact our operations.

The accuracy of our financial statements and related disclosures could be affected if the judgments, assumptions or estimates used in our critical accounting policies are inaccurate.

The preparation of financial statements and related disclosure in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. Our critical accounting policies, which are included in this registration statement, describe those significant accounting policies and methods used in the preparation of our consolidated financial statements that we consider “critical” because they require judgments, assumptions and estimates that materially affect our consolidated financial statements and related disclosures. As a result, if future events differ significantly from the judgments, assumptions and estimates in our critical accounting policies, those events or assumptions could have a material impact on our consolidated financial statements and related disclosures.

Any requested or required changes in how we determine the impact of loss share accounting on our financial information could have a material adverse effect on our reported results.

Our financial results are significantly based on loss share accounting, which is subject to assumptions and judgments made by us, our accountants and the regulatory agencies to whom we report such information. Loss share accounting is a complex accounting methodology. Many of the decisions management makes regarding the application of this accounting methodology are subject to question or revision by our accountants and the various regulatory agencies to whom we report. As such, any financial information generated through the use of loss share

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accounting is subject to modification or change. Any significant modification or change in such information could have a material adverse effect on our results of operations and our previously reported results.

Our financial information reflects the application of purchase accounting. Any change in the assumptions used in such methodology could have a material adverse effect on our results of operations.

We have acquired a significant majority of our assets and assumed a significant majority of our liabilities in our three FDIC-assisted acquisitions and our financial results are heavily influenced by the application of purchase accounting. Purchase accounting requires management to make assumptions regarding the assets purchased and liabilities assumed to determine their fair market value. If these assumptions are incorrect or our accountants or the regulatory agencies to whom we report require that we change or modify our assumptions, such change or modification could have a material adverse effect on our financial condition or results of operations or our previously reported results.

We must respond to rapid technological changes, and these changes may be more difficult or expensive than anticipated.

We will have to respond to future technological changes. Specifically, if our competitors introduce new banking products and services embodying new technologies, or if new banking industry standards and practices emerge, then our existing product and service offerings, technology and systems may be impaired or become obsolete. Further, if we fail to adopt or develop new technologies or to adapt our products and services to emerging industry standards, then we may lose current and future customers, which could have a material adverse effect on our business, financial condition and results of operations. The financial services industry is changing rapidly, and to remain competitive, we must continue to enhance and improve the functionality and features of our products, services and technologies. These changes may be more difficult or expensive than we anticipate.

Risks Related to the Acquisition of the Acquired Banks

We are subject to risks related to FDIC-assisted transactions.

The ultimate success of our past FDIC-assisted transactions, and any FDIC-assisted transactions in which we may participate in the future, will depend on a number of factors, including our ability:

· to fully integrate, and to integrate successfully, the branches acquired into the Bank’s operations;

· to limit the outflow of deposits held by our new customers in the acquired branches and to successfully retain and manage interest-earning assets (loans) acquired in FDIC-assisted transactions;

· to retain existing deposits and to generate new interest-earning assets in the geographic areas previously served by the acquired banks;

· to effectively compete in new markets in which we did not previously have a presence;

· to deploy the cash received in the FDIC-assisted transactions into assets bearing sufficiently high yields without incurring unacceptable credit or interest rate risk;

· to control the incremental non-interest expense from the acquired branches in a manner that enables us to maintain a favorable overall efficiency ratio;

· to retain and attract the appropriate personnel to staff the acquired branches;

· to earn acceptable levels of interest and non-interest income, including fee income, from the acquired branches; and

· to reasonably estimate cash flows for acquired loans to mitigate exposure greater than estimated losses at the time of acquisition.

As with any acquisition involving a financial institution, particularly one involving the transfer of a large number of bank branches as is often the case with FDIC-assisted transactions, there may be higher than average levels of service disruptions that would cause inconveniences to our new customers or potentially increase the effectiveness of competing financial institutions in attracting our customers. We anticipate challenges and opportunities because of the unique nature of each acquisition. Integration efforts will also likely divert our management’s attention and resources. We may be unable to integrate acquired branches successfully, and the

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integration process could result in the loss of key employees, the disruption of ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits of the FDIC-assisted transactions. We may also encounter unexpected difficulties or costs during the integration that could adversely affect our earnings and financial condition, perhaps materially. Additionally, we may be unable to achieve results in the future similar to those achieved by our existing banking business, to compete effectively in the market areas previously served by the acquired branches or to manage effectively any growth resulting from FDIC-assisted transactions.

Our willingness and ability to grow acquired branches following FDIC-assisted transactions depend on several factors, most importantly the ability to retain the key personnel whom we hire or transfer in connection with FDIC-assisted transactions. Our failure to retain these employees could adversely affect the success of FDIC-assisted transactions and our future growth.

Our ability to continue to receive the benefits of our loss share arrangements with the FDIC is conditioned upon our compliance with certain requirements under the agreements.

We are the beneficiary of loss share agreements with the FDIC that call for the FDIC to fund a portion of our losses on a majority of the assets we acquired in connection with our recent FDIC-assisted transactions. To recover a portion of our losses and retain the loss share protection, we must comply with certain requirements imposed by the agreements. The requirements of the agreements relate primarily to our administration of the assets covered by the agreements, as well as our obtaining the consent of the FDIC to engage in certain corporate transactions that may be deemed under the agreements to constitute a transfer of the loss share benefits. For example, any merger or consolidation of the Company or the Bank with or into another company, if the stockholders of the Company or the Bank will own less than 66 2/3% of the consolidated entity, requires the consent of the FDIC.

When the consent of the FDIC is required under the loss share agreements, the FDIC may withhold its consent or may condition its consent on terms that we do not find acceptable. If the FDIC does not grant its consent to a transaction we would like to pursue, or conditions its consent on terms that we do not find acceptable, we may be unable to engage in a corporate transaction that might otherwise benefit our stockholders or we may elect to pursue such a transaction without obtaining the FDIC’s consent, which could result in termination of our loss share agreements with the FDIC which could have a material adverse effect on our financial condition, results of operations and cash flows.

Changes in national and local economic conditions could lead to higher loan charge-offs in connection with the acquisition of the Acquired Banks and the loss sharing agreement with the FDIC may not cover all of those charge-offs.

In connection with the acquisition of the Acquired Banks, we acquired a significant portfolio of loans. Although we have marked down the loan portfolios we have acquired, the non-impaired loans we acquired may become impaired or may further deteriorate in value, resulting in additional charge-offs to the loan portfolio. The fluctuations in national, regional and local economic conditions, including those related to local residential, commercial real estate and construction markets, may increase the level of charge-offs that we make to our loan portfolio and consequently reduce our capital. These fluctuations are not predictable, cannot be controlled and may have a material adverse impact on our operations and financial condition even if other favorable events occur.

Our loss sharing arrangements with the FDIC will not cover all of our losses on loans we acquired through the acquisition of the Acquired Banks.

Although we have entered into loss share agreements with the FDIC that provide that the FDIC will bear a significant portion of losses related to specified loan portfolios that we acquired through the Acquired Banks, we are not protected for all losses resulting from charge-offs with respect to those specified loan portfolios. Additionally, the loss sharing agreements have limited terms (ten years for losses on single-family residential real estate loans, five years for losses on non-residential real estate loans and eight years with respect to recoveries on non-residential real estate loans). Therefore, the FDIC will not reimburse us for any charge-off or related losses that we experience after the term of the loss share agreements, and any such charge-offs would negatively impact our net income.

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Moreover, the loss share provisions in the loss share agreement may be administered improperly, or the FDIC may interpret those provisions in a way different than we do. In any of those events, our losses could increase.

The FDIC requires that we make a “true-up” payment to the FDIC if our realized losses are less than expected.

The loss share agreements between the Bank and the FDIC with respect to the acquisition of the Acquired Banks each contain a provision that obligates us to make a “true-up” payment to the FDIC if the realized losses of each of these acquired banks are less than expected. The “true-up” calculation is scheduled to be made as of the 45th day following the last day of the calendar month of the eighth anniversary of the closing of the acquisition of CommunitySouth Bank and the tenth anniversary of the closing of the acquisitions of Atlantic Southern Bank and First Georgia Banking Company. Any such “true-up” payment could have a negative effect on our business, financial condition and results of operations.

Risks Related to our Common Stock

Shares of our common stock are subject to dilution.

As of December 31, 2011, we had approximately 5,941,620 shares of Class A Common Stock issued and outstanding, 5,437,050 shares of Class B Common Stock issued and outstanding, warrants outstanding to purchase 273,864 shares of our Class B Common Stock, and options to purchase 1,100,030 shares of Class A Common Stock. Our outstanding shares of Class A Common Stock include 473,675 shares of restricted stock. If we issue additional shares of common stock in the future and do not issue those shares to all then-existing common stockholders proportionately to their interests, then the issuance will result in dilution to each stockholder by reducing the stockholder’s percentage ownership of the total outstanding shares of our common stock.

Our board of directors may issue shares of preferred stock that would adversely affect the rights of our common stockholders.

Our authorized capital stock includes 50,000,000 shares of preferred stock of which no preferred shares are issued and outstanding. Our board of directors, in its sole discretion, may designate and issue one or more series of preferred stock from the authorized and unissued shares of preferred stock. Subject to limitations imposed by law or our articles of incorporation, our board of directors is empowered to determine:

· the designation of, and the number of, shares constituting each series of preferred stock;

· the dividend rate for each series;

· the terms and conditions of any voting, conversion and exchange rights for each series;

· the amounts payable on each series on redemption or our liquidation, dissolution or winding-up;

· the provisions of any sinking fund for the redemption or purchase of shares of any series; and

· the preferences and the relative rights among the series of preferred stock.

We could issue preferred stock with voting and conversion rights that could adversely affect the voting power of the shares of our common stock and with preferences over the common stock with respect to dividends and in liquidation.

Because there is no public trading market for our common stock, investors that purchase our common stock may not be able to resell their shares at or above the purchase price paid by them.

Our common stock is not listed on any exchange or quoted on any over-the-counter service. Thus, there is currently no public trading market of our common stock and the market price of our common stock may be difficult to ascertain. As a result, investors in our common stock may not be able to resell their shares at or above the purchase price paid by them or may not be able to resell them at all.

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Certain provisions of our loss sharing agreements may have anti-takeover effects and could limit our ability and the ability of our stockholders to engage in certain transactions.

The loss share agreements we entered into with the FDIC in connection with our three FDIC-assisted acquisitions require that we receive prior FDIC consent, which may be withheld by the FDIC in its sole discretion, prior to us or our stockholders engaging in certain transactions, including those that would otherwise be in their best interests. If any such transaction is completed without prior FDIC consent, the FDIC would have the right to discontinue the loss sharing arrangement with us.

Among other things, prior FDIC consent is required for (1) a merger or consolidation of us with or into another company if our stockholders will own less than 66.66% of the combined company, or of our bank subsidiary with or into another company, if we will own less than 66.66% of the combined company, (2) the sale of all or substantially all of the assets of our bank subsidiary and (3) a sale of shares by a stockholder, or a group of related stockholders, that will effect a change in control of our bank subsidiary, as determined by the FDIC with reference to the standards set forth in the Change in Bank Control Act of 1978, as amended (generally, the acquisition of between 10% and 25% of our voting securities where the presumption of control is not rebutted, or the acquisition by any person, acting directly or indirectly or through or in concert with one or more persons, of more than 25% of our voting securities). If we or any stockholder desired to enter into any such transaction, the FDIC may not grant its consent in a timely manner, without conditions, or at all. If one of these transactions were to occur without prior FDIC consent and the FDIC withdrew its loss share arrangement with us, we could be materially and adversely affected.

Stockholders may be deemed to be acting in concert or otherwise in control of us and our bank subsidiary, which could impose prior approval requirements and result in adverse regulatory consequences for such holders.

We are a bank holding company regulated by the Federal Reserve. Any entity (including a “group” composed of natural persons) owning 25% or more of a class of our outstanding shares of voting stock, or a lesser percentage if such holder or group otherwise exercises a “controlling influence” over us, may be subject to regulation as a “bank holding company” in accordance with the Bank Holding Company Act of 1956, as amended. In addition, (1) any bank holding company or foreign bank with a U.S. presence is required to obtain the approval of the Federal Reserve under the Bank Holding Company Act to acquire or retain 5% or more of a class of our outstanding shares of voting stock, and (2) any person other than a bank holding company may be required to obtain prior regulatory approval under the Change in Bank Control Act to acquire or retain 10% or more of our outstanding shares of voting stock. Any stockholder that is deemed to “control” the Company for bank regulatory purposes would become subject to prior approval requirements and ongoing regulation and supervision. Such a holder may be required to divest amounts equal to or exceeding 5% of the voting shares of investments that may be deemed incompatible with bank holding company status, such as an investment in a company engaged in non-financial activities. Regulatory determination of “control” of a depository institution or holding company is based on all of the relevant facts and circumstances. Potential investors are advised to consult with their legal counsel regarding the applicable regulations and requirements.

Our common stock owned by holders determined by a bank regulatory agency to be acting in concert would be aggregated for purposes of determining whether those holders have control of a bank or bank holding company. Each stockholder obtaining control that is a “company” would be required to register as a bank holding company. “Acting in concert” generally means knowing participation in a joint activity or parallel action towards the common goal of acquiring control of a bank or a parent company, whether or not pursuant to an express agreement. The manner in which this definition is applied in individual circumstances can vary and cannot always be predicted with certainty. Many factors can lead to a finding of acting in concert, including where: (i) the stockholders are commonly controlled or managed; (ii) the stockholders are parties to an oral or written agreement or understanding regarding the acquisition, voting or transfer of control of voting securities of a bank or bank holding company; (iii) the stockholders each own stock in a bank and are also management officials, controlling stockholders, partners or trustees of another company; or (iv) both a stockholder and a controlling stockholder, partner, trustee or management official of such stockholder own equity in the bank or bank holding company.

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We and certain of our stockholders are required to comply with the applicable provisions of the FDIC Policy Statement on Qualifications for Failed Bank Acquisitions, including a prohibition on sales or transfers of our securities by each such stockholder until three years from such stockholder’s acquisition of shares of common stock (except in the case of certain mutual fund holders) without prior FDIC approval.

As the agency responsible for resolving the failure of banks, the FDIC has discretion to determine whether a party is qualified to bid on a failed institution. The FDIC adopted the FDIC Policy Statement on Qualifications for Failed Bank Acquisitions in August 2009 and issued related guidance in January and April 2010. The FDIC Policy Statement imposes restrictions and requirements on certain institutions—including us and our bank subsidiary—and their investors. Unless we, together with a group of investors holding an aggregate of at least 30% of our common stock, along with all investors holding more than 5% of our total voting power, are then in compliance with the FDIC Policy Statement, the FDIC may not permit us to bid on failed institutions.

The FDIC Policy Statement imposes the following restrictions and requirements, among others. First, our bank subsidiary is required to maintain a ratio of tier 1 common equity to total assets of at least 10% for a period of three years, and thereafter maintain a capital level sufficient to be well capitalized under regulatory standards during the remaining period of ownership of the investors covered by the FDIC Policy Statement (“covered investors”). This amount of capital exceeds that required under otherwise applicable regulatory requirements. Second, covered investors that collectively own 80% or more of two or more depository institutions are required to pledge to the FDIC their proportionate interests in each institution to indemnify the FDIC against any losses it incurs in connection with the failure of one of the institutions. Third, our bank subsidiary is prohibited from extending credit to our covered investors and to affiliates of our covered investors. Fourth, covered investors may not employ ownership structures that use entities domiciled in bank secrecy jurisdictions (which the FDIC has interpreted to apply to a wide range of non-U.S. jurisdictions). Fifth, covered investors are prohibited from selling or otherwise transferring shares of our common stock that they own for a three-year period following the time of certain acquisitions of failed institutions by us without FDIC approval. The transfer restrictions in the FDIC Policy Statement do not apply to open-ended investment companies that are registered under the Investment Company Act of 1940, as amended, issue redeemable securities and allow investors to redeem on demand. Sixth, covered investors may not employ complex and functionally opaque ownership structures to own a beneficial interest in our bank subsidiary. Seventh, covered investors may be required to provide information to the FDIC, such as with respect to the size of the capital fund or funds, their diversification, their return profiles, their marketing documents, their management teams, and their business models.

The FDIC Policy Statement applies to any of our stockholders who hold more than 5% of our total voting power.

Our ability to pay dividends is subject to regulatory limitations and the Bank’s ability to pay dividends to us is also subject to regulatory limitations and we do not anticipate declaring dividends in the foreseeable future.

Prior to this offering, we have never paid cash dividends to holders of our common stock and we do not intend to pay dividends in the foreseeable future. Our ability to declare and pay dividends depends both on the ability of the Bank to pay dividends to us and on certain federal regulatory considerations, including the guidelines of the Federal Reserve regarding capital adequacy and dividends. Because we are a separate legal entity from the Bank and we do not have significant operations of our own, any dividends paid by us to our common stockholders would have to be paid from funds at the holding company level that are legally available therefor. However, as a bank holding company, we are subject to general regulatory restrictions on the payment of cash dividends. Federal bank regulatory agencies have the authority to prohibit bank holding companies from engaging in unsafe or unsound practices in conducting their business, which depending on the financial condition and liquidity of the holding company at the time, could include the payment of dividends.

Additionally, various federal and state statutory provisions limit the amount of dividends that the Bank can pay to us as its holding company without regulatory approval. The Bank is currently prohibited by the OCC Agreement from paying dividends to us until January 2014. Finally, holders of our common stock are only entitled to receive such dividends as our board of directors may, in its unilateral discretion, declare out of funds legally available for such purpose based on a variety of considerations, including, without limitation, our historical and projected financial condition, liquidity and results of operations, capital levels, tax considerations, statutory and

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regulatory prohibitions and other limitations, general economic conditions and other factors deemed relevant by our board of directors.

Our securities are not FDIC insured.

Our securities, including our common stock, are not savings or deposit accounts or other obligations of the Bank, are not insured by the Deposit Insurance Fund, the FDIC or any other governmental agency and are subject to investment risk, including the possible loss of principal.

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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

Statements included in this prospectus that are not historical in nature are intended to be, and are hereby identified as, forward-looking statements for purposes of the safe harbor provided by Section 21E of the Securities and Exchange Act of 1934. The words “may,” “will,” “anticipate,” “should,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “may,” and “intend,” as well as other similar words and expressions of the future, are intended to identify forward-looking statements. These forward-looking statements include statements related to our projected growth, anticipated future financial performance, and management’s long-term performance goals, as well as statements relating to the anticipated effects on results of operations and financial condition from expected developments or events, or business and growth strategies, including anticipated internal growth and plans to establish or acquire banks or the assets of failed banks.

These forward-looking statements involve significant risks and uncertainties that could cause our actual results to differ materially from those anticipated in such statements. Potential risks and uncertainties include those described under “Risk Factors” and the following:

· general economic conditions (both generally and in our markets) may be less favorable than expected, which could result in, among other things, a continued deterioration in credit quality, a further reduction in demand for credit and a further decline in real estate values;

· the general decline in the real estate and lending markets, particularly in our market areas, may continue to negatively affect our financial results;

· our ability to raise additional capital may be impaired if current levels of market disruption and volatility continue or worsen;

· we may be unable to collect reimbursements on losses that we incur on our assets covered under loss share agreements with the FDIC as we anticipate;

· costs or difficulties related to the integration of the banks we acquired from the FDIC as receiver may be greater than expected;

· restrictions or conditions imposed by our regulators on our operations may make it more difficult for us to achieve our goals;

· legislative or regulatory changes, including changes in accounting standards and compliance requirements, may adversely affect us;

· competitive pressures among depository and other financial institutions may increase significantly;

· changes in the interest rate environment may reduce margins or the volumes or values of the loans we make or have acquired;

· other financial institutions have greater financial resources and may be able to develop or acquire products that enable them to compete more successfully than we can;

· our ability to attract and retain key personnel can be affected by the increased competition for experienced employees in the banking industry;

· adverse changes may occur in the bond and equity markets;

· war or terrorist activities may cause further deterioration in the economy or cause instability in credit markets; and

· economic, governmental or other factors may prevent the projected population, residential and commercial growth in the markets in which we operate.

You are therefore cautioned not to place undue reliance on the forward-looking statements which should be read in conjunction with the other cautionary statements that are included elsewhere in this prospectus. In particular, you should consider the numerous risks described in the “Risk Factors” section of this prospectus. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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USE OF PROCEEDS

All of the shares of Class A Common Stock and Class B Common Stock covered by this prospectus are being sold by the selling stockholders. See “Selling Stockholders” on page [Ÿ]. We will not receive any proceeds from these sales of shares of our Class A Common Stock or Class B Common Stock.

The selling stockholders will pay any transfer taxes, brokers’ or underwriting discounts and commissions incurred by the selling stockholders in disposing of the shares. We will bear all other costs, fees, and expenses incurred in effecting the registration of the shares covered by this prospectus, including, without limitation, all registration and filing fees, and fees and expenses of our accountants, our counsel and a single counsel selected by a majority of the registrable shares held by the selling stockholders and acceptable to us.

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MARKET FOR OUR COMMON STOCK

As of December 31, 2011, we had 5,941,620 shares of Class A Common Stock issued and outstanding and held by approximately 98 stockholders of record and 5,437,050 shares of Class B Common Stock issued and outstanding and held by approximately 28 stockholders of record. Our outstanding shares of Class A Common Stock includes 473,675 shares of restricted stock. In addition, we have issued warrants to purchase 273,864 shares of our Class B common stock and options to purchase 1,100,030 shares of Class A Common Stock. No established public market exists for our common stock. We cannot predict the effect, if any, that market sales of shares or the availability of shares for sale will have on the market price prevailing from time to time.

DIVIDEND POLICY

We have never paid a cash dividend on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future. We intend to retain any earnings to help fund our growth. We anticipate continuing the policy of retaining earnings to fund growth for the foreseeable future.

We are a bank holding company and accordingly, any dividends paid by us are subject to various federal and state regulatory limitations and also may be subject to the ability of our subsidiary depository institution to make distributions or pay dividends to us. Our ability to pay dividends is limited by minimum capital and other requirements prescribed by law and regulation. Currently, CertusBank, our bank subsidiary, is prohibited by the OCC Agreement from paying dividends to us until January 2014 and, therefore, any dividends to our common stockholders would have to be paid from funds legally available thereof at the holding company level. Banking regulators have authority to impose additional limits on dividends and distributions by us and our subsidiaries. Certain restrictive covenants in future debt instruments, if any, may also limit our ability to pay dividends or our subsidiary depository institution ability to make distributions or pay dividends to us. Any determination to pay cash dividends in the future will be at the unilateral discretion of our board of directors and will depend on a variety of considerations, including, without limitation, our historical and projected financial condition, liquidity and results of operations, capital levels, tax considerations, statutory and regulatory prohibitions and other limitations, general economic conditions and other factors deemed relevant by our board of directors. See “Supervision and Regulation.”

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2011 on an actual basis. You should read this table in conjunction with our historical financial statements and the related notes included elsewhere in this prospectus.

(dollars in thousands)	As of September 30, 2011
	(unaudited)

Cash and cash equivalents	$	528,052
Total borrowings	16,034
Stockholders’ equity:
Preferred Stock, par value $0.001 per share; 50,000,000 shares of Preferred Stock authorized, 0 shares issued and outstanding	—
Common stock, par value $0.001 per share; 200,000,000 shares of Class A Common Stock authorized and 200,000,000 shares of Class B Common Stock authorized; 5,932,500 shares of Class A Common Stock issued and outstanding and 5,437,050 shares of Class B Common Stock issued and outstanding	11
Additional paid-in capital	199,290
Retained earnings	58,479
Accumulated other comprehensive income, net of tax	2,291

Total stockholders’ equity	260,071

Total capitalization	$	804,157

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SELECTED FINANCAL DATA

The following table sets forth our selected historical consolidated financial data. You should read this information in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto included elsewhere in this prospectus. The selected historical consolidated financial information set forth below as of and for the nine months ended September 30, 2011 is derived from our unaudited financial statements included elsewhere in this prospectus. Our historical results shown below and elsewhere in this prospectus are not necessarily indicative of our future performance.

On January 21, 2011, we purchased certain assets and assumed certain liabilities, including substantially all of the deposits of CommunitySouth Bank from the FDIC, as receiver. On May 20, 2011, we consummated the acquisition of certain assets and assumed certain liabilities, including substantially all of the deposits of Atlantic Southern Bank and First Georgia Banking Company from the FDIC, as receiver. Although we were formed on November 3, 2009, before our initial acquisition on January 21, 2011, our principal activities related solely to organizational, capital raising and related activities, including identifying and analyzing potential acquisition candidates. We did not engage in any substantive operations (including banking operations) prior to our initial acquisition and, therefore, we have not presented below any financial data for such period.

The summary selected historical consolidated financial information in the following tables as of and for the nine months ended September 30, 2011, includes the results of the Company, including CommunitySouth Bank subsequent to January 21, 2011 and Atlantic Southern Bank and First Georgia Banking Company subsequent to May 20, 2011.

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(dollars in thousands, except per share data)	Nine Months Ended September 30, 2011
	(unaudited)
Summary Results of Operations Data
Interest income	$	32,764
Interest expense	5,382
Net interest income	27,382
Provision for loan losses	2,118
Net interest income after provision for loan losses	25,264
Non-interest income	110,093
Non-interest expenses	37,240
Income before income tax expense	98,117
Income tax expense	34,336
Net income	$	63,781
Per Share Data
Earnings
Basic and diluted, Class A	$	9.08
Basic and diluted, Class B	$	9.08
Tangible book value	$	22.32
Weighted average shares outstanding
Basic and diluted, Class A	3,573
Basic and diluted, Class B	3,025
Performance Ratios
Return on average assets (1)	7.99		%
Return on average equity(2)	58.82		%
Net interest margin	4.03		%
Interest rate spread	3.99		%
Efficiency ratio(3)	27.09		%
Average interest-earning assets to average interest-bearing liabilities	94.71		%
Average loans receivable to average deposits	63.26		%
Cost of interest-bearing liabilities	0.84		%
Asset Quality
Non-performing loans to loans receivable (4)	2.12		%
Covered under loss sharing agreements with the FDIC	2.08		%
Not covered under loss sharing agreements with the FDIC	0.04		%
Non-performing assets to total assets	5.67		%
Covered under loss sharing agreements with the FDIC	5.65		%
Not covered under loss sharing agreements with the FDIC	0.02		%
Allowance for loan and lease losses (ALLL) to non-performing loans	12.69		%
Capital Ratios
Average equity to average total assets	13.59		%
Tier 1 leverage ratio	13.87		%
Tier 1 risk-based capital ratio	43.70		%
Total risk-based capital ratio	44.07		%

(1) Annualized net income divided by average total assets.

(2) Annualized net income divided by average equity.

(3) Noninterest expenses divided by sum of net interest income and noninterest income.

(4) Non-performing loans include nonaccrual loans and loans excluded from ASC Topic 310-30 which are past due 90 days or more and still accruing interest.

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(dollars in thousands)	September 30, 2011
	(unaudited)

Summary Balance Sheet Data
Cash and cash equivalents	$	528,052
Investment securities	230,390
Loans receivable
Not covered under FDIC loss sharing agreements	31,194
Covered under FDIC loss sharing agreements	755,893
Allowance for loan and lease losses	(2,118		)
Net loans	784,969
Loans held for sale	736
Other real estate owned
Not covered under FDIC loss sharing agreements	63
Covered under FDIC loss sharing agreements	86,554
FDIC indemnification asset	178,244
Goodwill and other intangible assets, net	6,342
Other assets	6,574
Total assets	$	1,821,924
Deposits	$	1,481,032
Advances from Federal Home Loan Bank (FHLB)	16,034
Other liabilities	64,787
Total liabilities	1,561,853
Stockholders’ equity	260,071
Total liabilities and stockholders’ equity	$	1,821,924

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with the “Selected Consolidated Financial Information” and our financial statements and related notes thereto included elsewhere in this prospectus. Historical results of operations and the percentage relationships among any amounts included, and any trends that may appear, may not indicate trends in operations or results of operations for any future periods.

We have made, and will continue to make, various forward-looking statements with respect to financial and business matters. Comments regarding our business that are not historical facts are considered forward-looking statements that involve inherent risks and uncertainties. Actual results may differ materially from those contained in these forward-looking statements. For additional information regarding our cautionary disclosures, see the “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this prospectus.

Overview

We are a bank holding company incorporated in late 2009 with the goal of creating a regional banking franchise in the southeastern United States, initially through the acquisition of multiple failed bank asset and liability pools from the FDIC, as receiver. In May 2010 and May 2011, we raised approximately $218.1 million in gross proceeds from investors through private placements of our common stock to make acquisitions. Since receiving its national bank charter in January 2011, the Bank has acquired certain of the assets and assumed certain of the liabilities of three failed banks from the FDIC. As of September 30, 2011, we operated 30 branches throughout Georgia, as well as upstate South Carolina and northern Florida. Through our branches we offer a competitive set of financial services that includes commercial and consumer banking products.

Before our initial acquisition on January 21, 2011, our principal activities related to the organization of the Company and the Bank, including the filing of an application with the OCC to obtain a shelf charter and contemporaneous applications with the FDIC for deposit insurance and the Federal Reserve for bank holding company approval, performing due diligence on potential failed bank acquisition targets and conducting our initial private placement. We did not engage in any operational activities during the period from our inception in November 2009 through December 31, 2009. As such, we have not presented any financial statements for this period. In addition, the organizational costs incurred during the period from January 1, 2010 through December 31, 2010 related primarily to legal and consulting fees and totaled $3.3 million. During 2010, neither the Company nor the Bank had any other substantive operations. On January 21, 2011, the Bank completed its initial acquisition of certain assets and assumption of certain liabilities of CommunitySouth Bank from the FDIC, as receiver. In connection with that acquisition, the OCC granted the Bank final approval of its national bank charter, the FDIC approved the Bank’s ability to provide deposit insurance and the Federal Reserve approved our bank holding company status to complete the acquisition. Because we did not commence banking operations until after our initial acquisition in 2011, a comparison of the period from inception through the year ended December 31, 2010 with the period ended September 30, 2011 would not be meaningful and, therefore, is not presented.

As of September 30, 2011, our total assets were approximately $1.8 billion, our net loans receivable were approximately $785.7 million, our total deposits were approximately $1.5 billion and our total stockholders’ equity was approximately $260.1 million.

FDIC-Assisted Acquisitions

CommunitySouth Bank

On January 21, 2011, CommunitySouth Bank was closed by the South Carolina Board of Financial Institutions, which appointed the FDIC, as receiver. That same day, under the terms of the Bank’s purchase and assumption agreement with the FDIC, the Bank assumed approximately $319.5 million of deposits and acquired approximately $358.6 million of the assets of CommunitySouth Bank. The Bank also entered into a commercial loss-share agreement with the FDIC for CommunitySouth Bank that covers approximately $211.0 million of the acquired assets and 91.6% of all acquired loans, including 100% of the acquired construction, commercial real estate and commercial and industrial loans, other commercial asset loans and other real estate owned. Under the loss share

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agreement, the FDIC agreed to assume 69% of losses and share 69% of loss recoveries on such loans and other real estate owned. At the time of acquisition, the Bank recorded an $18.1 million indemnification asset from the FDIC as part of the loss share agreement, which represented the estimated fair value of the FDIC’s portion of the losses that we expected to be incurred and reimbursed to us as of the acquisition date.

Accounting standards prohibit carrying over an allowance for loan and lease losses for loans purchased in the acquisition of CommunitySouth Bank. On the January 21, 2011 acquisition date, the preliminary estimate on the acquisition date of the contractually required payments receivable for the loans acquired in the acquisition of CommunitySouth Bank was $268.9 million, and the estimated fair value of the loans was $184.2 million. At the acquisition date, we established a credit risk discount (nonaccretable difference) of $57.7 million on the loans, representing amounts not expected to be collected from the customer nor from liquidation of collateral. In our estimate of cash flows for the loans of CommunitySouth Bank, we also recorded an accretable discount of $23.7 million relating to the loans, which represents the undiscounted cash flows expected to be collected in excess of the estimated fair value of the acquired loans. This accretable discount is accreted into interest income on a method that approximates level yield over the estimated life of the related loans.

As a result of the loss share agreement with the FDIC, the risks associated with the covered loans and foreclosed real estate of CommunitySouth Bank have been completely altered, making historical financial information of CommunitySouth Bank immaterial to an understanding of our present and planned future operations. In addition, our business since January 21, 2011 and for the immediate future relies heavily on our loss share resolution business and on the income generated from the remediation and disposal of the assets we acquired from the FDIC and is fundamentally different from the business of CommunitySouth Bank. In light of the foregoing, we have determined that CommunitySouth Bank is not the predecessor entity of the Company because we did not succeed to substantially all of the business of CommunitySouth Bank in the acquisition, and we have therefore omitted historical financial statements of CommunitySouth Bank in this prospectus and our unaudited consolidated financial statements.

Atlantic Southern Bank

On May 20, 2011, Atlantic Southern Bank was closed by the Georgia Department of Banking and Finance, which appointed the FDIC, as receiver. That same day, under the terms of the Bank’s purchase and assumption agreement with the FDIC with respect to Atlantic Southern Bank, the Bank assumed approximately $572.4 million of deposits and acquired approximately $646.4 million of the assets of Atlantic Southern Bank. The Bank entered into two loss-share agreements with the FDIC on approximately $585.1 million of Atlantic Southern Bank’s assets, including 100% of the acquired loans (except consumer loans) and other real estate. Under the loss share agreements, the FDIC agreed to assume 78% of losses and share 78% of loss recoveries on the first $157.7 million of losses on the acquired loans and other real estate owned, to assume 30% of losses and share 30% of loss recoveries on losses exceeding $157.7 million and up to $241.2 million, and to assume 78% of losses and share 78% of loss recoveries on losses exceeding $241.2 million. At the time of acquisition, the Bank recorded a $111.3 million indemnification asset from the FDIC as part of the loss share agreements, which represented the estimated fair value of the FDIC’s portion of the losses that we expected to be incurred and reimbursed to us as of the acquisition date.

Accounting standards prohibit carrying over an allowance for loan and lease losses for loans purchased in the acquisition of Atlantic Southern Bank. On the May 20, 2011 acquisition date, the preliminary estimate on the acquisition date of the contractually required payments receivable for the loans acquired in the acquisition of Atlantic Southern Bank was $566.9 million, and the estimated fair value of the loans was $342.1 million. At the acquisition date, we established a credit risk discount (nonaccretable difference) of $141.3 million on the loans, representing amounts not expected to be collected from the customer nor from liquidation of collateral. In our estimate of cash flows for the loans of Atlantic Southern Bank, we also recorded an accretable discount of $83.5 million relating to the loans, which represents the undiscounted cash flows expected to be collected in excess of the estimated fair value of the acquired loans. This accretable discount is accreted into interest income on a method that approximates level yield over the estimated life of the related loans.

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First Georgia Banking Company

Also on May 20, 2011, First Georgia Banking Company was closed by the Georgia Department of Banking and Finance, which appointed the FDIC, as receiver. That same day, under the terms of the Bank’s purchase and assumption agreement with the FDIC with respect to First Georgia Banking Company, the Bank assumed approximately $654.6 million of deposits and acquired approximately $606.5 million of the assets of First Georgia Banking Company. The Bank entered into two loss-share agreements with the FDIC on approximately $452.1 million of First Georgia Banking Company’s assets, including 100% of the acquired loans (except consumer loans) and other real estate. Under the loss share agreements, the FDIC agreed to assume 78% of losses and share 78% of loss recoveries on the first $99.0 million of losses on the acquired loans and other real estate owned, to assume 0% of losses and share 0% of loss recoveries on losses exceeding $99.0 million and up to $137.3 million and to assume 78% of losses and share 78% of loss recoveries on losses exceeding $137.3 million. At the time of acquisition, the Bank recorded a $54.2 million indemnification asset from the FDIC as part of the loss share agreements, which represented the estimated fair value of the FDIC’s portion of the losses that we expected to be incurred and reimbursed to us as of the acquisition date.

Accounting standards prohibit carrying over an allowance for loan and lease losses for loans purchased in the acquisition of First Georgia Banking Company. On the May 20, 2011 acquisition date, the preliminary estimate on the acquisition date of the contractually required payments receivable for the loans acquired in the acquisition of First Georgia Banking Company was $526.6 million, and the estimated fair value of the loans was $333.0 million. At the acquisition date, we established a credit risk discount (nonaccretable difference) of $102.8 million on the loans, representing amounts not expected to be collected from the customer nor from liquidation of collateral. In our estimate of cash flows for the loans of First Georgia Banking Company, we also recorded an accretable discount of $90.8 million relating to the loans, which represents the undiscounted cash flows expected to be collected in excess of the estimated fair value of the acquired loans. This accretable discount is accreted into interest income on a method that approximates level yield over the estimated life of the related loans.

We have omitted certain financial information of Atlantic Southern Bank and First Georgia Banking Company required by Rule 3-05 of Regulation S-X and the related pro forma financial information under Article 11 of Regulation S-X in accordance with the guidance provided in Staff Accounting Bulletin Topic 1:K, Financial Statements of Acquired Troubled Financial Institutions (“SAB 1:K”). SAB 1:K provides relief from the requirements of Rule 3-05 under certain circumstances, such as the acquisitions of Atlantic Southern Bank and First Georgia Banking Company, where a registrant acquires a “troubled financial institution” (as defined in SAB 1:K) for which audited financial statements are not reasonably available and in which federal assistance is so pervasive as to substantially reduce the relevance of such information to an assessment of the registrant’s future operations.

Summary of Acquisition and Loss Share Accounting

We determined current fair value accounting estimates of the acquired assets and liabilities for the acquisitions in accordance with accounting requirements for fair value measurement and acquisition transactions as promulgated in FASB Accounting Standards Codification (“ASC”) Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, (AICPA SOP 03-3), FASB ASC Topic No. 805, Business Combinations, and FASB ASC Topic 820, Fair Value Measurements and Disclosures. We recorded identifiable intangible assets, including core deposit intangible assets, at fair value. Because the fair value of assets acquired and intangible assets created as a result of each of our acquisitions exceeded the fair value of liabilities assumed in the acquisitions, we recorded a gain in our consolidated statements of operations.

We expect to have sufficient non-accretable differences (discounts representing amounts that are not expected to be collected from the customer and liquidation of collateral) to cover our estimated losses on the covered assets. Furthermore, we expect to have accretable discounts (discounts representing the excess of a loan’s cash flows expected to be collected over the initial investment in the loan) to provide for market yields on the covered loans. We recorded both the purchased assets and the liabilities assumed at their respective acquisition date fair values.

The loss share agreements and the purchase accounting impact from our failed bank acquisitions will have a material effect on our cash flows and operating results in both the short term and the long term. In the short term,

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we believe it is likely that a significant amount of the covered loans will become delinquent and the proceeds from the liquidation of collateral will be inadequate to repay the loans. Management believes that it has established sufficient non-accretable differences on covered assets representing the expected losses compared to their acquired contractual payment amounts. As a result, our operating results would only be adversely affected by losses on covered assets to the extent that those losses exceed the expected losses reflected in the fair value of the covered assets at the acquisition date.

The effects of the loss share agreements on cash flows and operating results in the long term will be similar to the short-term effects described above. The long-term effects will depend primarily on the ability of borrowers to make required payments over time. As the loss share agreements cover up to a 10-year period (five years for loans other than single family residential mortgage loans), changing economic conditions will likely affect the timing of future charge-offs and the resulting reimbursements from the FDIC. Management believes that any recapture of interest income and recognition of cash flows from borrowers or amounts received from the FDIC as part of the loss share indemnification asset may be recognized unevenly over this period, as we exhaust our collection efforts under our normal practices.

Critical Accounting Policies

We have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States and with general practices within the banking industry in the preparation of our financial statements. We describe our significant accounting policies in the notes to our unaudited consolidated financial statements as of September 30, 2011.

Some of the accounting policies involve significant judgments and assumptions by us that have a material impact on the carrying value of our assets and liabilities. The most significant of these estimates relates to the fair value determination of assets acquired and liabilities assumed in business combinations and the application of acquisition accounting, the accounting for acquired loans and the related FDIC indemnification assets and the determination of the allowance for loan and lease losses. We consider these accounting policies to be critical accounting policies. Because of the nature of the judgment and assumptions we make, actual results could differ from these judgments and estimates and could materially affect the carrying values of our assets and liabilities and our results of operations.

The following is a summary of the more judgmental estimates and complex accounting principles.

Acquisition Accounting Application and the Valuation of Assets Acquired and Liabilities Assumed

We account for business combinations under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Assets acquired and liabilities assumed are measured and recorded at fair value at the date of acquisition, including any identifiable intangible assets. The initial fair values are determined in accordance with the guidance provided in ASC Topic 820, Fair Value Measurements and Disclosures. If the fair value of net assets acquired exceeds the fair value of consideration paid, a bargain purchase gain is recognized at the date of acquisition. Conversely, if the consideration paid exceeds the fair value of the net assets acquired, goodwill is recognized at the acquisition date. The determination of fair value requires the use of estimates, and significant judgment is required. Under current accounting principles, within a given measurement period not to exceed one year, we may adjust our fair value estimates based on new information we obtain about facts and circumstances that existed as of the acquisition date that, if known, would have affected our fair values estimates. This measurement period ends on the earlier of one year after the acquisition or the date we receive the information about the facts and circumstances that existed on each acquisition date. Any change in the acquisition date fair value of assets acquired and liabilities assumed may materially affect our financial position, results of operations and liquidity.

Accounting for Acquired Loans and the Related FDIC Indemnification Asset

The loan portfolio is segregated into covered loans, which consist of loans acquired in the FDIC assisted transactions that are covered by FDIC loss share agreements, and non-covered loans, which consist of originated and acquired loans that are not covered by loss share agreements. The loan portfolio is segregated into these two categories due to their significantly different risk characteristics and due to the financial statement implications,

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which are summarized below. When necessary, we further segregate our loan portfolio into loans that are accounted for under ASC Topic 310-30, and those that are excluded from this accounting guidance.

The estimated fair values of acquired loans were based on a discounted cash flow methodology that considered various factors, including the type of loan or pool of loans with similar characteristics, and related collateral, classification status, fixed or variable interest rate, maturity and any prepayment terms of loan, whether or not the loan was amortizing, and a discount rate reflecting our assessment of risk inherent in the cash flow estimates. The determination of the fair value of loans, including covered loans, takes into account credit quality deterioration and probability of loss, and as a result, the related allowance for loan and lease losses is not carried forward.

Certain loans that were acquired with deteriorated credit quality at the time of acquisition are accounted for in accordance with ASC Topic 310-30. These loans are grouped based on purpose and/or type of loan, which takes into account the sources of repayment and collateral, and are treated as pools. When loans exhibit evidence of credit deterioration since origination and it is probable at the date of acquisition that we will not collect all principal and interest payments in accordance with the terms of the loan agreement, the expected shortfall in the expected future cash flows, as compared to the contractual amount due, is recognized as a non-accretable difference. Any excess of the expected future cash flows over the acquisition date fair value is known as the accretable discount, or accretable yield, and through accretion, is recognized as interest income over the remaining life of each pool. Loans that meet the criteria for non-accrual of interest at the time of acquisition may be considered performing upon and subsequent to acquisition, regardless of whether the customer is contractually delinquent, if the timing and expected cash flows on such loans can be reasonably estimated and if collection of the new carrying value of such loans is expected.

The expected future cash flows over the acquisition date fair value are periodically re-estimated utilizing the same cash flow methodology used at the time of acquisition and subsequent decreases to the expected future cash flows will generally result in a provision for loan losses charge to our consolidated statements of operations. Conversely, subsequent increases in the expected future cash flows result first in a recapture of any prior provision book, and then, in a transfer from the non-accretable difference to the accretable yield, which is then accreted as a yield adjustment over the remaining life of the pool. These cash flow estimations are inherently subjective as they require material estimates, all of which may be susceptible to significant change.

Certain loans which, at acquisition, did not meet the specific criteria of ASC Topic 310-30, but which had a discount attributable at least in part to credit quality and had cash flows which were estimable are accounted for under ASC Topic 310-30. Those loans that, at acquisition, did not meet the specific criteria of ASC Topic 310-30 and for which cash flows could not be reasonably estimated (primarily those with revolving privileges) are accounted for under ASC Topic 310-20, Receivables — Nonrefundable Fees and Other Credits. Discounts created when the loans were recorded at their estimated fair values at acquisition are accreted over the remaining life of the loan as an adjustment to the related loan’s yield. Similar to originated loans, the accrual of interest income on the acquired loans not accounted for under ASC Topic 310-30 is discontinued when the collection of principal or interest, in whole or in part, is doubtful. Interest is not accrued on loans 90 days or more past due unless they are well secured and in the process of collection.

The fair value of covered loans and OREO does not include the estimated fair value of the expected reimbursement of cash flows from the FDIC for the losses on the covered loans and OREO, as those cash flows are measured and recorded separately in the FDIC indemnification asset, which represents the estimated fair value of expected reimbursements from the FDIC for expected losses on covered assets, subject to the loss thresholds and any contractual limitations in the loss share agreements. Fair value is estimated using the net present value of projected cash flows related to the loss share agreements based on the expected reimbursements for losses and the applicable loss share percentages. These cash flows are discounted to reflect the uncertainty of the timing of the loss share reimbursement from the FDIC, and the discount is accreted to income in connection with the expected speed of reimbursements. This accretion is included in FDIC loss share income in the consolidated statement of operations. The expected indemnification asset cash flows are re-estimated in conjunction with the periodic re-estimation of cash flows on covered loans and covered OREO. Improvements in cash flow expectations on covered loans and covered OREO generally result in a related decline in the expected indemnification cash flows and are reflected prospectively as a yield adjustment on the indemnification asset. Declines in cash flow expectations on covered loans and covered OREO generally result in an increase in the net present value of the expected indemnification cash flows and are reflected as both FDIC loss share income and an increase to the indemnification

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asset. As indemnified assets are resolved, the indemnification asset is reduced by the amount owed by the FDIC and a corresponding claim receivable is recorded until cash is received from the FDIC.

Allowance for Loan and Lease Losses (ALLL)

The determination of ALLL, which represents management’s estimate of probable losses inherent in our loan portfolio at the balance sheet date, including acquired and covered loans to the extent necessary, involves a high degree of judgment and complexity. The determination of the ALLL takes into consideration, among other matters, the estimated fair value of the underlying collateral, economic conditions, particularly as such conditions relate to the market areas in which we operate and other factors that warrant recognition. Any change in these factors, or the rise of any other factors that we, or our regulators, may deem necessary to consider when estimating the ALLL, may materially affect the ALLL and provisions for loan losses. For further discussion of the ALLL, see “Financial Condition—Allowance for Loan and Lease Losses” sections of this analysis and Note 4 to our unaudited consolidated financial statements.

Share-based Compensation

We utilize a Black-Scholes option pricing model to measure the expense associated with stock option awards and a Monte Carlo simulation model to measure the expense associated with market-vesting portions of restricted shares. These models require inputs of highly subjective assumptions with regard to expected stock price volatility, forfeiture and dividend rates and expected term. These subjective input assumptions materially affect the fair value estimates and the associated share-based compensation expense. See Note 13 to our unaudited consolidated financial statements for more information on share-based compensation.

Results of Operations

General

We reported net income of $63.8 million for the period ended September 30, 2011. Earnings per share on a diluted basis were $9.08 for the period ended September 30, 2011. The accretion of fair value discounts on covered loans under our loss share agreements with the FDIC has significantly affected our earnings for the period ended September 30, 2011. Additionally, as of September 30, 2011, we recorded bargain purchase gains of $104.2 million related to our acquisitions.

We expect that over the next two to three years, as we manage the disposition of our covered loans and other real estate assets acquired from the FDIC, a significant portion of our earnings will result from the accretion of fair value discounts on our covered loan portfolio. We recorded the covered loans at fair value on the date of each acquisition. In our estimate of cash flows for the acquired loans, we recorded an accretable discount relating to the loans, which represents the undiscounted cash flows expected to be collected in excess of the estimated fair value of the acquired loans. This accretable discount is accreted into interest income. During this period, as we dispose of our covered loans, we also plan to grow our balance sheet by replacing our covered loans and the related accretion on the accretable discount with new performing loans and related interest income.

As part of our acquisitions, we also established an FDIC indemnification asset for loss share agreements, which represents the present value of the estimated losses on covered loans and other real estate assets to be reimbursed by the FDIC. We based the estimated losses on the same cash flow estimates we used to determine the

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fair value of the covered loans. The FDIC indemnification asset will be reduced as losses are recognized on covered loans and other real estate assets and loss share payments are received from the FDIC. We record the accretion of the discount on the FDIC indemnification asset into noninterest income.

We report covered assets under loss share agreements with the FDIC exclusive of the FDIC indemnification asset. The covered loans acquired in our acquisitions are, and will continue to be, reviewed for collectability, based on the expectations of cash flows on these loans. As a result, if there is a decrease in expected cash flows due to an increase in estimated credit losses compared to the estimate made on the acquisition date, we will record the decrease in the present value of expected cash flows as a provision for covered loan losses charged to earnings and will establish an allowance for covered loan losses. We will recognize a related credit to income and an increase in the FDIC indemnification asset at the same time, based on the applicable loss share percentage.

Net Interest Income

Our earnings depend to a large extent on net interest income, which is the excess of the interest income recognized on interest earning assets (such as loans, securities sold under agreements to resell and investment securities), as well as any accretion of fair value discounts on our acquired assets, over the interest expense incurred on interest bearing liabilities such as deposits and borrowings. Net interest income depends upon the volume of average interest-earning assets and average interest-bearing liabilities and the interest rates earned and paid on them. The significance of net interest income is a function of our balances of interest-earning assets and interest-bearing liabilities and the effect of market rates of interest as influenced by the Federal Reserve’s monetary policy. Following our acquisitions, the accretion of fair value discounts on covered loans under our loss share agreements with the FDIC has significantly affected our net interest income, and we expect that to continue for the immediate future.

Our net interest income was $27.4 million for the nine months ended September 30, 2011. Our net interest rate spread, which is the tax-equivalent yield on interest earning assets, including the accretion of the fair value discount on our covered assets, minus the cost of interest bearing liabilities, was 3.99% for the nine months ended September 30, 2011, while our net interest margin, which is net interest income divided by average interest earnings assets, was 4.03%. Excluding the accretion of the fair value discount on our covered assets, our net interest rate spread for the nine months ended September 30, 2011 would have been 0.30% and our net interest margin would have been 0.35%.

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Average Balances, Income and Expenses, and Rates

The following table presents, for the period indicated, information about (i) average balances, the total dollar amount of interest income (including accretion of fair value discounts) from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. Nonaccrual and restructured loans are included in the average balances presented in this table; however, interest income foregone on nonaccrual loans is not included. Yields have been calculated on a pre-tax basis.

	For the Nine Months Ended
	September 30, 2011
	Average						Average
(in thousands)	Balance (1)			Interest			Yield/Rate (2)
Interest-earning assets:
Loans (3)	$	527,632		$	29,513		7.48	%
Investment securities (4)	130,299			3,014			3.08	%
Interest-bearing deposits and other	249,535			243			0.13	%
Total interest-earning assets	907,466			32,770			4.83	%
Other	159,600
Total assets	$	1,067,066
Interest-bearing liabilities:
Savings deposits and interest-bearing checking	215,849			1,079			0.67	%
Time deposits	618,284			4,898			1.06	%
Borrowings (5)	25,287			(595		)	-3.15	%
Total interest-bearing liabilities	859,420			5,382			0.84	%
Other	62,659
Total liabilities	922,079
Stockholders’ equity	144,987
Total liabilities and stockholders’ equity	$	1,067,066
Net interest income				$	27,388
Interest rate spread							3.99	%
Net interest earning assets	$	48,046
Net interest margin							4.03	%
Ratio of average interest-bearing liabilities to average interest-earning assets	94.71		%

(1) During 2011, we integrated accounting records that were kept on different platforms. In the process, certain data related to average balances were not carried over. As a result, management believes that the determination of average balances on a daily basis for the nine month period ended September 30, 2011 is impractical and consequently certain average balances are presented as the simple average of the monthly balances.

(2) Annualized for the applicable period.

(3) Includes nonaccruing loans.

(4) Reflects taxable equivalent adjustments using the statutory tax rate of 35% in adjusting interest on tax-exempt securities to a fully taxable basis. The taxable equivalent adjustments included above amounts to $6,000 for the period ended September 30, 2011.

(5) Interest expense on borrowings includes accelerated amortization of premiums upon prepayment of debt.

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Rate/Volume Analysis

Net interest income can be analyzed in terms of the impact of changing interest rates and changing volume. Due to 2011 being the first year of banking operations, all interest income and expense is attributable to the volume of earning assets and interest-bearing liabilities, respectively. Therefore, we have omitted the table analyzing changes in net interest income as it would not be meaningful.

Provision for Loan Losses

The provision for loan losses represents the amount of expense that is necessary to bring the ALLL to a level that management deems appropriate to absorb probable losses inherent in the loan portfolio as of the balance sheet date. The determination of the ALLL, and the resultant provision for loan losses, is subjective and involves estimates and assumptions. Please see the discussion below under “Balance Sheet Review — Allowance for Loan and Lease Losses” for a description of the factors we consider in determining the amount of the provision we expense each period to maintain this allowance.

Losses incurred on covered loans are reimbursable at the applicable loss-share percentages in accordance with the loss share agreements with the FDIC. Accordingly, any provisions made that relate to covered loans are partially offset by a corresponding increase to the FDIC indemnification asset and FDIC loss sharing income in non-interest income. For the period ended September 30, 2011, our provision for loan losses was $2.1 million, all of which related to covered assets.

Non-interest Income

Our non-interest income totaled $110.1 million for the nine months ended September 30, 2011. The primary contributor to non-interest income was the $104.2 million in bargain purchase gains resulting from our three FDIC-assisted acquisitions. We recognize bargain purchase gains when the fair value of assets acquired in a transaction (including proceeds received from or paid to the FDIC) exceed the amount of liabilities assumed. FDIC loss sharing income was $3.6 million and comprised 3.2% of our noninterest income for the period. FDIC loss sharing income represents the income recognized in connection with the changes in the FDIC indemnification asset and the clawback liability, in addition to the actual reimbursement of costs of resolution of covered assets from the FDIC. The primary driver of the FDIC loss sharing income for the period ended September 30, 2011 was the FDIC reimbursement of the costs of resolving covered assets. Service charges and fees on deposits of $1.8 million comprised 1.6% of our noninterest income for the period.

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Non-interest Expense

The following table presents the components of our non-interest expense for the period ended September 30, 2011:

(in thousands)

Salaries and employee benefits	$	13,452
Acquisition related costs	4,514
Other real estate and loan resolution related expenses	4,164
Occupancy and equipment	3,922
Legal and professional	2,673
Data processing and telecommunications	1,628
Federal Home Loan Bank prepayment penalty	1,030
FDIC deposit insurance assessment	873
Core deposit intangible amortization	644
Other	4,340
Total noninterest expense	$	37,240

Salaries and employee benefits represent the single largest component of recurring non-interest expense. For the period ended September 30, 2011, salaries and employee benefits amounted to approximately $13.5 million.

Acquisition related costs totaled $4.5 million, or 12.1% of noninterest expense for the nine months ended September 30, 2011, and consisted of $2.7 million of consulting fees, $1.3 million of legal and accounting fees, and $0.5 million of travel and miscellaneous expenses. Legal and professional fees were $2.7 million, or 7.2% of non-interest expense for the nine months ended September 30, 2011, including consulting fees related to the implementation of purchase accounting processes and procedures. Our resolution efforts with respect to our covered assets have contributed to our legal and professional expenses. Following the effective date of this registration statement, we will be obligated to file various reports required by the Exchange Act, including current reports on Form 8-K, quarterly reports on Form 10-Q and annual reports on Form 10-K. As a result, we anticipate we will incur legal, accounting and other expenses that we did not incur in the past and, therefore, are not reflected in our historical financial statements.

Other real estate owned (OREO) and loan resolution related expenses relate to the expenses of holding and maintaining OREO properties for sale, such as real estate taxes and insurance, legal fees and other foreclosure expenses and other expenses associated with the sale or resolution of covered assets. These expenses are eligible for reimbursement under our loss share agreements with the FDIC to the extent that a loss or charge-off has occurred. As of September 30, 2011, substantially all loans and OREO properties were covered by loss share agreements with the FDIC and the loss share administration expenses are substantially offset by noninterest income related to the FDIC loss share indemnification asset.

We lease each of the acquired branch locations from our 2011 acquisitions from either the FDIC or outside parties. As a result, our occupancy and equipment expenses include very little depreciation expense but a significant amount of leasing expense. We expect the settlement with the FDIC on our 2011 acquisitions will occur in 2012, at which point we will purchase certain of the acquired branch locations and we will begin depreciating the acquired assets.

During the nine months ended September 30, 2011, we elected to prepay $25.0 million of Federal Home Loan Bank advances with a carrying value of $25.9 million. We accelerated amortization of the corresponding fair value adjustment (included in interest expense) and recognized a prepayment penalty of $1.0 million in connection with the prepayment.

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Financial Condition

Balance Sheet Review

General

At September 30, 2011, we had total assets of $1.8 billion, consisting principally of $785.7 million in loans net of deferred fees and costs and the allowance for loan and lease losses, $230.4 million in investment securities, $178.2 million in the FDIC indemnification asset, $86.6 million in other real estate owned and $528.1 million in cash and cash equivalents. Our liabilities at September 30, 2011 totaled $1.6 billion, consisting principally of $1.5 billion in deposits. At September 30, 2011, our stockholders’ equity was $260.1 million.

Loans

We acquired the vast majority of our loans in our three FDIC-assisted transactions. The current concentrations in our loan portfolio may not be indicative of concentrations in our loan portfolio in the future. We will attempt to maintain a relatively diversified loan portfolio to help reduce the risk inherent in concentration in certain types of collateral.

Our covered loans will decrease as they are collected or charged-off or the underlying collateral is foreclosed on and sold. Our covered loans may increase in the future if we acquire more failed banks from the FDIC in transactions that include loss share agreements. Our non-covered loans will increase as we originate and purchase well-underwritten loans. Due to the current economic environment, covered loans may continue to decrease faster than non-covered loans increase, thereby resulting in a net decrease in loans receivable.

The following tables summarize the composition of our loan portfolio for the period presented:

	September 30, 2011
	Covered		Non-covered
(in thousands)	Loans (1)		Loans (1)		Total loans
Residential real estate	$	180,154	$	5,134	$	185,288
HELOCs and lines of credit	28,477		9,649		38,126
Multifamily	27,688		—		27,688
Commercial real estate	251,882		2,508		254,390
Construction and land	210,289		973		211,262
Commercial and industrial	53,111		2,299		55,410
Consumer and other	4,292		10,631		14,923
Total	$	755,893	$	31,194	$	787,087

(1) Acquired loans are presented net of discounts.

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Loan Portfolio Maturities and Interest Rate Sensitivity

The following summarizes the loan maturity distribution by type and related interest rate characteristics for the period ended September 30, 2011.

			After one
	One year		but within		After five
(in thousands)	or less		five years		years		Total
Residential real estate	$	85,918	$	86,040	$	13,328	$	185,286
HELOCs and lines of credit	9,096		11,829		17,201		38,126
Multifamily	10,738		16,950		—		27,688
Commercial real estate	119,145		117,250		17,995		254,390
Construction and land	154,575		52,556		4,131		211,262
Commercial and industrial	30,458		22,489		2,465		55,412
Consumer and other	6,149		8,375		399		14,923
Total	$	416,079	$	315,489	$	55,519	$	787,087

Interest rate characteristic:
Fixed interest rates	$	174,850	$	194,656	$	24,673	$	394,179
Floating or adjustable interest rates	241,229		120,833		30,846		392,908
Total	$	416,079	$	315,489	$	55,519	$	787,087

Impaired Loans and Non-performing Assets

Non-performing assets consist of covered and non-covered non-accrual loans, accruing loans 90 days or more past due and excluded from ASC Topic 310-30, troubled debt restructurings, OREO and other repossessed assets. Loans accounted for under ASC Topic 310-30 that are modified and accounted for as part of a pool are not reported as troubled debt restructurings. Impaired loans include non-performing loans as well as loans accounted for under ASC Topic 310-30 for which expected cash flows have been revised downward since acquisition. Because the amount and timing of the cash flows associated with loans accounted for under ASC Topic 310-30 can be reasonably estimated, accretion of the discount on such loans is continued and, therefore, these loans have not been classified as nonaccrual loans and we do not consider them to be non-performing assets. Our non-performing assets include $12.3 million of covered loans are excluded from ASC Topic 310-30 and $86.6 million of covered OREO at September 30, 2011. In addition to being covered by loss share agreements, these assets were marked to fair value at the time of acquisition, mitigating much of our loss potential on these non-performing assets. As a result, the levels of our non-performing assets are not fully comparable to those of our peers or to industry benchmarks.

As of September 30, 2011, the majority of loans acquired and accounted for under ASC Topic 310-30 were covered by loss share agreements with the FDIC. These loans were recorded at a fair value based on cash flow projections that considered the deteriorated credit quality and expected losses. These loans are accounted for on a pool basis and any non-payment of contractual principal or interest is considered in our periodic re-estimation of the expected future cash flows. To the extent that we decrease our cash flow projections on a pool of loans, we record an immediate impairment expense through the provision for loan losses. We recognize any increases to our cash flow projections on a prospective basis through an increase to a pool’s yield over its remaining life. As a result of this accounting treatment, these pools may be considered to be performing, even though some or all of the individual loans within the pools may be contractually past due. Loans accounted for under ASC Topic 310-30 were classified as performing assets at September 30, 2011, as the carrying value of the respective loan or pool of loans cash flows were considered estimable and probable of collection. Therefore, interest income, through accretion of the difference between the carrying value of the loans in the pool and the pool’s expected future cash flows, is being recognized on all acquired loans being accounted for under ASC Topic 310-30.

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The following table sets forth our non-performing assets for the period ended September 30, 2011.

	Covered			Non-Covered
(in thousands)	Assets			Assets			Total
Nonaccrual loans:
Residential real estate	$	556		$	—		$	556
HELOCs and lines of credit	1,476			219			1,695
Multifamily	102			—			102
Commercial real estate	71			—			71
Construction and land	7,784			—			7,784
Commercial and industrial	2,026			—			2,026
Consumer and other	325			31			356
Total nonaccrual loans	12,340			250			12,590
Accruing loans 90 days or more past due:
Residential real estate	1,481			—			1,481
HELOCs and lines of credit	816			—			816
Multifamily	—			—			—
Commercial real estate	738			—			738
Construction and land	527			—			527
Commercial and industrial	447			—			447
Consumer and other	22			66			88
Total accruing loans 90 days or more past due	4,031			66			4,097
Total non-performing loans	16,371			316			16,687
Other real estate owned	86,554			63			86,617
Total non-performing assets	$	102,925		$	379		$	103,304
Non-performing loans to total loans	2.08		%	0.04		%	2.12		%
Non-performing assets to total assets	5.65		%	0.02		%	5.67		%

Interest income that would have been reported on the nonaccrual loans for the nine months ended September 30, 2011 was approximately $339,000. Interest income recognized on non-covered impaired loans for the nine months ended September 30, 2011 was approximately $66,000.

At September 30, 2011, we had approximately $27.3 million in potential problem loans, based on our internal rating system. Potential problem loans are those loans where management has a concern about the financial health of a borrower that causes management to have serious doubts as to the ability of the borrower to comply with the present loan terms. At September 30, 2011, substantially all of our potential problem loans were covered loans.

Past Due Loans

Past due status is monitored as an indicator of credit deterioration. Covered and non-covered loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. Loans that are 90 days or more past due and are not accounted for under ASC Topic 310-30 are put on non-accrual status unless the loan is well secured and in the process of collection. Loans accounted for under ASC Topic 310-30 that are 90 days or more past due and still accreting are included in loans 90 days or more past due and still accruing interest.

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The table below shows the past due status of covered and non-covered loans, based on contractual terms of the loans as of September 30, 2011.

(in thousands)	Covered			Non-Covered			Total
Loans 30-89 days past due and still accruing interest	$	52,963		$	673		$	53,636
Loans 90 days or more past due and still accruing interest	144,217			3,194			147,411
Nonaccrual loans	12,340			250			12,590
Total past due and nonaccrual loans	$	209,520		$	4,117		$	213,637
Total past due and nonaccrual loans to total loans	26.62		%	0.52		%	27.14		%
Total nonaccrual loans to total loans	1.57		%	0.03		%	1.60		%
% of total past due and nonaccrual loans that are covered by FDIC loss share agreements							98.07		%

Allowance for Loan and Lease Losses (ALLL)

The ALLL represents the amount that management believes is necessary to absorb probable losses inherent in the loan portfolio at the balance sheet date and involves a high degree of judgment and complexity. Determination of the ALLL is based on an evaluation of the collectability of loans, the realizable value of underlying collateral and, to the extent applicable, prior loss experience. The ALLL is critical to the portrayal and understanding of our financial condition, liquidity and results of operations. The determination and application of the ALLL accounting policy involves judgments, estimates and uncertainties that are subject to change. Changes in these assumptions, estimates or the conditions surrounding them may have a material impact on our financial condition, liquidity and results of operations.

In accordance with the applicable guidance for business combinations, acquired loans were recorded at their acquisition date fair values, which were based on expected future cash flows and included an estimate for future loan losses, therefore no loan loss reserves were recorded as of the acquisition date. Any estimated losses on acquired loans that arise after the acquisition date are reflected in a charge to the provision for loan losses. Losses incurred on covered loans are reimbursable at the applicable loss-share percentages in accordance with the loss share agreements with the FDIC. Accordingly, any provision for loan losses relating to covered loans is partially offset by a corresponding increase to the FDIC indemnification asset and FDIC loss-sharing income in non-interest income.

Loans acquired with evidence of credit quality deterioration at the acquisition date are accounted for under the accounting guidance provided in ASC Topic 310-30. In accordance with this guidance, loans have been grouped into pools based on the predominant risk characteristics of purpose and/or type of loan. The timing and receipt of expected principal, interest and any other cash flows of these loans are periodically re-estimated and the expected future cash flows of the collective pools are compared to the carrying value of the pools. To the extent that the expected future cash flows of each pool decreases, an allowance for loan and lease losses will be established through a charge to the provision for loan losses and, for loans covered by loss share agreements with the FDIC, a related adjustment to the FDIC indemnification asset for the portion of the loss that is covered by the loss share agreements. If the re-estimated expected future cash flows are greater than the book value of the pools, then the improvement in the expected future cash flows will be accreted into interest income over the remaining expected life of the loan pool. As of September 30, 2011, the expected future cash flows on two pools of loans acquired with evidence of credit quality deterioration were less than the carrying value of those pools. As such, we recorded a provision for loan losses of $1.4 million applicable to covered loans accounted for under ASC Topic 310-30 for the nine months ended September 30, 2011.

For all loans excluded from ASC Topic 310-30, the determination of the ALLL follows an established process to determine the appropriate level of ALLL that is designed to account for credit deterioration as it occurs.

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This process provides an ALLL consisting of a specific allowance component based on certain individually evaluated loans and a general allowance component based on estimates of reserves needed for all other loans, segmented based on similar risk characteristics.

Impaired loans less than $250,000 are included in the general allowance population. Impaired loans over $250,000 are subject to individual evaluation on a regular basis to determine the need, if any, to allocate a specific reserve to the impaired loan. Typically, these loans consist of commercial, commercial real estate and agriculture loans and exclude homogenous loans such as residential real estate and consumer loans. Specific allowances are determined by collectively analyzing:

· the borrower’s resources, ability, and willingness to repay in accordance with the terms of the loan agreement;

· the likelihood of receiving financial support from any guarantors;

· the adequacy and present value of future cash flows, less disposal costs, of any collateral; and

· the impact current economic conditions may have on the borrower’s financial condition and liquidity or the value of the collateral.

There were no impaired loans accounted for outside of ASC Topic 310-30 with specific reserves at September 30, 2011.

In evaluating the loan portfolio for an appropriate ALLL level, unimpaired loans are grouped into segments based on broad characteristics such as primary use and underlying collateral. Within the segments, the portfolio is further disaggregated into classes of loans with similar attributes and risk characteristics for purposes of applying loss ratios and determining applicable subjective adjustments to the ALLL. The application of subjective adjustments is based upon qualitative risk factors, including:

· the adequacy and present value of future cash flows, less disposal costs, of any collateral;

· the impact current economic conditions may have on the borrower’s financial condition and liquidity or the value of the collateral;

· economic trends and conditions;

· industry conditions;

· asset quality;

· lending management;

· portfolio growth; and

· loan review/internal audit results.

Our actual historical loss data is limited due to our relatively recent inception date. The ALLL percentage for loan classes with no relevant history was initially established through the process of evaluating the subjective factors listed above. Portions of the ALLL may be allocated for specific loans or specific loan classes; however, the entire ALLL is available for any loan that, in management’s judgment, should be charged-off. During the nine months ended September 30, 2011, we recorded a $0.7 million provision for loan losses for covered loans excluded from ASC Topic 310-30.

After considering the abovementioned factors, we believe that the ALLL of $2.1 million was adequate to cover probable losses inherent in the loan portfolio at September 30, 2011. However, it is likely that future adjustments to the ALLL will be necessary and any changes to the assumptions, circumstances or estimates used in determining the ALLL could adversely affect our results of operations, liquidity or financial condition.

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The following table summarizes the activity related to our allowance for loan and lease losses related to our covered and non-covered loans for the period ended September 30, 2011.

(in thousands)

Balance at beginning of period	$	—
Provision for loan losses on covered loans accounted for under ASC Topic 310-30	1,438
Provision for loan losses on covered loans excluded from ASC Topic 310-30	680
Balance, end of period	$	2,118

Allocation of Allowance for Loan and Lease Losses

The following tables present the allocation of the allowance for loan and lease losses and the percentage of the total amount of loans in each loan category listed as of the date indicated.

	September 30, 2011
			% of loans in
			each category
(in thousands)	Amount		to total loans
Residential real estate	$	28	23.6	%
HELOCs and lines of credit	329		4.8	%
Multifamily	822		3.5	%
Commercial real estate	55		32.3	%
Construction and land	171		26.9	%
Commercial and industrial	704		7.0	%
Consumer and other	9		1.9	%
Total allowance for covered loans	2,118
Total allowance for non-covered loans	—
Total allowance for loan and lease losses	$	2,118

FDIC Indemnification Asset

As of September 30, 2011, 96.0% of our outstanding principal balance of loans and 95.9% of our other real estate assets were covered under loss share agreements with the FDIC. We estimated the FDIC reimbursement that will result from losses incurred as we dispose of covered loans and other real estate assets, and we recorded the estimate as a receivable from the FDIC. The FDIC indemnification asset for loss share agreements was approximately $178.2 million as of September 30, 2011. Realized losses in excess of acquisition date estimates will result in an increase in the FDIC indemnification asset. Conversely, if realized losses are less than acquisition date estimates, the FDIC indemnification asset will be reduced. The discount on the FDIC indemnification asset is accreted into noninterest income using the level yield method over the estimated life of the receivable, including estimates of the timing of cash flow receipts and the disposition of non-performing assets.

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Investments

Our investment portfolio serves as a source of liquidity and earnings and is also used to manage interest rate risk. At September 30, 2011, the $223.3 million in our available-for-sale investment securities portfolio represented approximately 12.3% of our total assets. U.S. government agency mortgage-backed securities are the main components of the portfolio, comprising 93.9% of the total at September 30, 2011.

Available-for-sale securities are carried at fair value, and the balance reported at September 30, 2011 reflected unrealized gains of $4.1 million and unrealized losses of $0.5 million. The unrealized losses were related mainly to mortgage-backed securities and represented less than 2% of the total amortized cost of the underlying securities. No value impairment was evaluated as other than temporary at September 30, 2011.

Following is a summary of our available for sale investment portfolio for the period ended September 30, 2011.

	Amortized		Estimated		Percent of
(dollars in thousands)	Cost		fair value		Portfolio

U.S. Government Agencies	$	5,920	$	6,082	2.72	%
State and political subdivisions	2,336		2,445		1.09
Residential mortgage-backed securities - agency	206,324		209,710		93.91
Corporate bonds	5,088		5,067		2.27
Total	$	219,668	$	223,304	100.00	%

The following table shows contractual maturities and yields on our investments at September 30, 2011. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	U.S.								Residential
	government				State and political				mortgage-backed				Corporate
	agencies				subdivisions				securities - agency				Bonds				Total
(dollars in thousands)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
Maturity:
One year or less	$	2,510	2.55	%	$	—	—	%	$	1,510	2.00	%	$	—	—	%	$	4,020	2.34	%
After one year through five years	—		—		760		3.63		85,317		2.65		5,088		2.72		91,165		2.66
After five years through 10 years	3,410		3.61		1,083		5.02		117,253		2.97		—		—		121,746		3.01
After 10 years	—		—		493		4.21		2,244		3.97		—		—		2,737		4.01
Total	$	5,920	3.16	%	$	2,336	4.40	%	$	206,324	2.84	%	$	5,088	2.72	%	$	219,668	2.86	%

Deposits

Deposits are our primary funding source. Since our initial acquisition in January 2011, we have taken steps to optimize our deposit mix and lower our cost of deposits by reducing rate sensitive time deposits as well as re-pricing certain deposit products that were at above market rates at the date of each of our acquisitions. Excluding the impact of amortization from fair value adjustments due to acquisition accounting, the average rate paid on deposits for the period ended September 30, 2011 was 1.31%.

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The following table shows the average balance amounts and the average rates paid on deposit held by us for the period ended September 30, 2011.

(in thousands)	Amount		Rate

Noninterest bearing demand deposits	$	62,659	—	%
Interest bearing demand deposits	52,121		0.65	%
Savings and money market accounts	163,728		0.68	%
Time deposits less than $100,000	386,380		1.24	%
Time deposits greater than $100,000	231,904		0.77	%
Total deposits	$	896,792	0.89	%

The maturity distribution of our time deposits of $100,000 or more at September 30, 2011 was as follows:

(in thousands)

Three months or less	$	77,764
Over three through six months	78,025
Over six though twelve months	181,630
Over twelve months	163,415
Total	$	500,834

Capital Resources

We strive to maintain an adequate capital base to support our activities in a safe manner while at the same time maximizing stockholder returns. At September 30, 2011, our stockholders’ equity was $260.1 million, or 14.3% of total assets, which has been influenced primarily by our private offerings.

The following table shows the return on average assets (annualized net income divided by average total assets), return on equity (annualized net income divided by average equity), and average equity to average assets ratio (average equity divided by average total assets) for the period ended September 30, 2011:

Return on average assets	7.99	%
Return on equity	58.82	%
Equity to assets ratio	13.59	%

The Federal Reserve and bank regulatory agencies require bank holding companies and financial institutions to maintain capital at adequate levels based on a percentage of assets and off-balance sheet exposures, adjusted for risk weights ranging from 0% to 100%. Under the capital adequacy guidelines, regulatory capital is classified into two tiers. These guidelines require an institution to maintain a certain level of Tier 1 and Tier 2 capital to risk-weighted assets. Tier 1 capital consists of common stockholders’ equity, excluding the unrealized gain or loss on securities available for sale, minus certain intangible assets. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0% to 100% based on the risks believed to be inherent in the type of asset. Tier 2 capital consists of Tier 1 capital plus the general reserve for loan losses, subject to certain limitations. The Bank is required to maintain capital at a minimum level based on total average assets, which is known as the Tier 1 leverage ratio.

To be considered “well capitalized” under capital guidelines, we must maintain total risk-based capital of at least 10%, Tier 1 capital of at least 6%, and a leverage ratio of at least 5%. To be considered “adequately capitalized” under capital guidelines, we must maintain a minimum total risk-based capital of 8%, with at least 4% being Tier 1 capital. In addition, banking regulators have established a minimum Tier 1 leverage ratio of at least 4%. We expect banking regulators to increase these minimum levels in the future.

The following table shows the required capital ratios of the Bank under the OCC Agreement and the Bank’s actual regulatory capital ratios for the period presented.

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	Ratios Required Under OCC Agreement		Bank as of September 30, 2011

Tier 1 leverage ratio	10.0	%	13.78	%
Tier 1 risk-based capital ratio	11.0	%	43.43	%
Total risk-based capital ratio	12.0	%	43.80	%

For all periods, we had capital levels that exceeded the regulatory guidelines to be considered a “well capitalized” institution. In addition, under the FDIC’s order dated January 21, 2011, approving the Bank’s application for deposit insurance, the Bank is required to maintain a Tier 1 common equity to total assets ratio of at least 10% for the first three years of operation. At September 30, 2011, the Bank was in compliance with the FDIC order.

As of September 30, 2011, the Company’s Tier 1 leverage ratio was 13.87%, its Tier 1 risk-based capital ratio was 43.70% and its total risk-based capital ratio was 44.07%.

Liquidity

Liquidity represents the ability of a company to convert assets into cash or cash equivalents without significant loss, and the ability to raise additional funds by increasing liabilities. Liquidity management involves monitoring our sources and uses of funds to meet our day-to-day cash flow requirements while maximizing profits. Liquidity management is made more complicated because different balance sheet components are subject to varying degrees of management control. For example, the timing of maturities of our investment portfolio is fairly predictable and subject to a high degree of control when we make investment decisions. Net deposit inflows and outflows, however, are far less predictable and are not subject to the same degree of control.

At September 30, 2011, our liquid assets, which consist of cash and due from banks, interest bearing deposits and federal funds sold, amounted to $528.1 million, or 29.0% of total assets. Our available for sale securities at September 30, 2011 amounted to $223.3 million, or 12.3% of total assets. Investment securities traditionally provide a secondary source of liquidity because they can be converted into cash in a timely manner.

Our ability to maintain and expand our deposit base and borrowing capabilities serves as our primary source of liquidity. We plan to meet our future cash needs through the generation of deposits and through collection of the FDIC indemnification asset as we dispose of our covered assets. In addition, we receive cash on the maturity and sale of loans and the maturity of investment securities. At September 30, 2011, we had a repo line of credit and a federal funds line of credit with correspondent banks of $100.0 million and $35.0 million, respectively. We are also a member of the Federal Home Loan Bank of Atlanta (FHLB), from which we can borrow for leverage or liquidity purposes. The FHLB requires that securities, qualifying mortgage loans and stock of the FHLB owned by the Bank be pledged to secure any advances. At September 30, 2011, we had $16.0 million in advances from the FHLB and a remaining credit availability of $351.5 million, subject to eligible collateral being posted.

Effect of Inflation and Changing Prices

The effect of relative purchasing power over time due to inflation is not reflected in our consolidated financial statements. Rather, our financial statements have been prepared on a historical cost basis in accordance with generally accepted accounting principles.

Unlike most industrial companies, our assets and liabilities are primarily monetary in nature. Therefore, the effect of changes in interest rates will have a more significant effect on our performance than will the effect of changing prices and inflation in general. In addition, interest rates may generally increase as the rate of inflation increases, although not necessarily in the same magnitude.

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Off-Balance Sheet Arrangements

Commitments to extend credit are agreements to lend to a customer as long as the customer has not violated any material condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. At September 30, 2011, unfunded commitments to extend credit were $34.2 million. A significant portion of the unfunded commitments related to commercial real estate and land development and consumer equity lines of credit. Based on experience, we anticipate that a significant portion of these lines of credit will not be funded. We evaluate each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by us upon extension of credit, is based on our credit evaluation of the borrower. The type of collateral varies but may include accounts receivable, inventory, property, plant and equipment, and commercial and residential real estate.

At September 30, 2011, we had commitments totaling approximately $3.0 million under letters of credit. The credit risk and collateral involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Because most of the letters of credit are expected to expire without being drawn upon, they do not necessarily represent future cash requirements.

Contractual Obligations

In the normal course of business, we have various outstanding contractual obligations that will require future cash outflows. The following table presents our contractual obligations as of September 30, 2011.

	Payments Due by Period
(in thousands) Contractual Obligations	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years

FHLB Advances	$	16,034	$	16,034	$	—	$	—	$	—
Operating Lease Obligations	3,303		1,103		1,622		578		—
Clawback Liability	18,577		—		—		—		18,577
Total	$	37,914	$	17,137	$	1,622	$	578	$	18,577

Our loss share agreements with the FDIC with respect to our acquisitions include clawback provisions that obligate us to pay the FDIC a certain amount in the event that losses incurred by us with respect to the loss share agreements do not reach a threshold specified in the applicable loss share agreement upon termination of the loss share agreement.

At the date of acquisition, we recognized a clawback liability equal to the present value of the discounted future cash flows expected to be paid to the FDIC in connection with the clawback provisions of the loss share agreements. We evaluate, on a periodic basis, whether the result of our collection efforts on assets covered under loss share agreements have had an impact on the expected balance, if any, to be paid to the FDIC.

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Quantitative and Qualitative Disclosure About Market Risk

The principal element of our risk of loss from adverse changes in the fair value of financial instruments, or market risk, is interest rate risk. Our Asset Liability Committee evaluates interest rate risk with the goal of maximizing net interest income within acceptable levels of interest rate risk, while meeting liquidity and capital levels established by the Board of Directors. The Asset Liability Committee has established policies to limit interest rate risk exposure and is responsible for monitoring compliance with these policies. The Asset Liability Committee meets monthly and reviews changes in local and national economic conditions, interest rate risk, investment portfolio position and results, current and future projected liquidity, capital position, and trends in loan and deposit mix and pricing and competitive conditions.

Our interest rate risk is measured consistent with industry practices using net interest income simulations where net interest income is projected under various assumptions including the nature and timing of interest rate changes, shape of the yield curve, loan prepayments, deposit decay rates, and pricing of loans and deposits. In addition to net interest income, we look at the changes in the present value of equity (PVE) as a secondary measure of interest rate risk. This represents a longer term view of the fair or intrinsic value of the balance sheet by measuring the present value of future cash flows from assets minus the present value of cash flows from liabilities.

Instantaneous parallel shift scenarios, known as rate shocks, are modeled to evaluate risk compared to Board approved exposure limits. These models include rate changes of plus or minus 100, 200, 300 and 400 basis points. These models are continually reviewed and refined in response to changing market conditions. The Asset Liability Committee evaluates the impacts of each scenario to determine if actions are required to improve current structure or change our risk exposure.

The table below illustrates the impact of an immediate and sustained 100, 200, 300 and 400 basis point increase or decrease in interest rates on net interest income based on the interest rate risk model and the percentage change in the present value of equity (PVE) with each rate shift at September 30, 2011.

Shift in Interest Rates (in basis points)	% Change in Net Interest Income		% Change in PVE
-400	-4.44	%	7.36	%
-300	-4.29	%	3.77	%
-200	-3.04	%	0.34	%
-100	-2.64	%	-2.25	%
+100	9.83	%	1.56	%
+200	21.13	%	2.18	%
+300	35.10	%	2.70	%
+400	49.07	%	3.98	%

The significant positive change in net interest income with upward rate shifts is driven by our large overnight investment balances. In the event these modeled scenarios showed unacceptable levels of risk, management could undertake a number of actions to reduce this risk, including changes or sales in our investment portfolio and risk management activities using on and off balance sheet products, including futures, options, forward rate agreements and other interest rate derivative products.

These calculations do not take into account actions that management may take in response to rate changes and assumes the rate environment is constant and the changes are instantaneous. Changes to volumes and pricing of new business activities that can be expected are not included in the analytical modeling. Many assumptions are used to measure and calculate the impact of interest rate changes. Actual results may be significantly different from those derived by the model due to factors such as the timing and frequency of rate change, market conditions and the shape of the yield curve. Actual results may also differ due to actions taken by management in response to rate changes and other changes in our business.

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BUSINESS

Our Company

We are a bank holding company headquartered in Atlanta, Georgia that is led by a management team of seasoned bankers with extensive experience managing commercial financial institutions. We were formed in November 2009 with the goal of creating a leading regional retail and commercial banking franchise in the southeastern United States, initially through the acquisition of multiple failed bank asset and liability pools from the FDIC, as receiver. In 2010, our investors committed to invest up to $500 million in the Company for the purpose of supporting acquisitions, including failed banks. In May 2010, we exercised our first commitment with our investors, and we were capitalized with approximately $50.1 million. On January 21, 2011, our subsidiary bank, CertusBank, N.A., was granted a charter to form a new national bank and the newly formed bank acquired the assets and assumed the liabilities, including substantially all of the deposits, of CommunitySouth Bank from the FDIC, as receiver. Since receiving its charter in January 2011, the Bank, headquartered in Greenville, South Carolina, has bid on, and acquired, three different failed bank asset and liability pools, including CommunitySouth Bank. To support our second and third acquisitions, we drew down an additional $168.0 million in capital from our investors.

Our executive management team consists of a group of experienced bankers with substantial experience in our market areas and is led by our Chief Executive Officer, President and Chairman, Milton H. Jones Jr. Mr. Jones is a 32-year veteran of Bank of America, where he served in various executive management positions, most recently as the Georgia Market President. Walter L. Davis serves as our Chief Credit Officer and Vice Chairman. He has over 23 years of credit and lending experience and is the former Executive Vice President of Retail Credit and Direct Lending for Wachovia Corporation. Our Vice Chairman and Chief Operating Officer, Charles M. Williams, has over 29 years of consumer, commercial and investment banking experience, most recently as the Managing Director and Chief Administrative Officer of the Global Corporate and Investment Bank of Bank of America. K. Angela Webb serves as our Chief Administrative Officer and Senior Executive Vice President. Ms. Webb spent more than 20 years at Wachovia Bank and is the former Human Resources Executive and Senior Manager of Wachovia’s General Bank’s Mortgage and Retail Credit Division. Our Chief Financial Officer and Senior Executive Vice President, R. Hampton Painter III, has over 29 years of experience in financial management and reporting, including serving as Chief Financial Officer of First Savers Bank and First Trust Group, Incorporated and First Trust Mortgage Corporation of the South.

As of September 30, 2011, our total assets were approximately $1.8 billion, our total loans receivable were approximately $785.7 million, our total deposits were approximately $1.5 billion and our total stockholders’ equity was approximately $260.1 million.

Our Acquisitions

CommunitySouth Bank

On January 21, 2011, we assumed the deposits and acquired certain assets and assumed certain liabilities of CommunitySouth Bank from the FDIC, as receiver, under the terms of a purchase and assumption agreement between the Bank and the FDIC dated January 21, 2011 (the “CommunitySouth Agreement”). With the acquisition of CommunitySouth, we acquired six branch locations located in upstate South Carolina.

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Terms of the CommunitySouth Agreement. Under the terms of the CommunitySouth Agreement, we assumed approximately $319.5 million of deposits and acquired approximately $358.6 million of the assets of CommunitySouth Bank, including $219.3 million in loans, net of unearned income, and $11.2 million of other real estate with a discount of $35.1 million and $1.7 million of fair value adjustments, respectively. The assets acquired also included $128.1 million of cash and cash equivalents, securities, and other assets, plus $20.7 million in cash received from the FDIC to balance the assets acquired and liabilities assumed.

In connection with the acquisition, we conducted due diligence on CommunitySouth Bank’s loan portfolio with a focus on determining loss expectations on both the largest credits and the worst performing credits in CommunitySouth Bank’s loan portfolio. We also reviewed other loans in the portfolio to determine default frequency and loss severity factors for various asset classes to determine expected losses on the remainder of the portfolio. We then forecasted volume, duration and pace of resolution of non-performing assets to determine estimated carrying costs and expenses to be reflected in the bid we submitted to the FDIC. We also estimated the cost of administering the portfolio and performed an analysis of the loan portfolio using pro forma financial information. Based on this due diligence, we submitted a negative bid to the FDIC to purchase the assets of CommunitySouth Bank at a discount of $29.3 million. We expect the combination of the negative bid and the reimbursements under the loss sharing agreement (described below) to be adequate to absorb the probable losses and expenses relating to CommunitySouth Bank’s loan and other real estate portfolios, expected carrying costs for the non-performing assets and the costs to manage the portfolios. Our judgment as to the adequacy of our negative bid is based on a number of assumptions about future events that we believe to be reasonable but which may not prove to be accurate. The terms of the agreement provide for the FDIC to indemnify us against claims with respect to liabilities and assets of CommunitySouth Bank that we did not assume and with respect to certain other claims made after the acquisition based on, among other things:

· rights of stockholders of CommunitySouth Bank or stockholders of any subsidiary or affiliate of CommunitySouth Bank;

· rights of creditors of CommunitySouth Bank;

· rights of any present or former director, officer, employee or agent of CommunitySouth Bank or of any subsidiary or affiliate of CommunitySouth Bank; and

· any action or inaction of CommunitySouth Bank, its directors, employees or agents, or any subsidiary or affiliate of CommunitySouth Bank before the acquisition.

Loss Share Arrangement. In connection with the acquisition of CommunitySouth Bank, we entered into a commercial loss share agreement with the FDIC that covers approximately $211.0 million of the acquired assets and 91% of all acquired loans, including 100% of the acquired construction, commercial real estate and commercial and industrial loans, other commercial asset loans and certain other real estate owned (the “Commercial Loss Agreement”). This loss share agreement with the FDIC affords the Bank significant protection against future losses on the acquired covered loans and other real estate owned.

Under the terms of the loss share agreement for CommunitySouth Bank, the FDIC’s obligation to reimburse us for losses with respect to covered assets begins with the first dollar of loss incurred. The FDIC agreed to assume 69% of losses and share 69% of loss recoveries on the covered loans and other real estate. The Commercial Loss Agreement covered losses on loans and other real estate for five years and eight years with respect to recoveries. In addition to the $36.4 million of fair value discounts on loans and other real estate owned, we recorded an $18.1 million indemnification asset from the FDIC as part of the loss share agreement.

Atlantic Southern Bank

On May 20, 2011, we assumed the deposits and acquired certain assets and assumed certain liabilities of Atlantic Southern Bank from the FDIC, as receiver, under the terms of a purchase and assumption agreement between the Bank and the FDIC dated May 20, 2011, similar to the CommunitySouth Agreement. With the acquisition of Atlantic Southern Bank, we acquired 15 branch locations located in central, southern and coastal Georgia, and one branch located in Jacksonville, Florida.

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Under the purchase and assumption agreement for Atlantic Southern Bank, we assumed approximately $572.4 million of deposits and acquired approximately $646.4 million of the assets of Atlantic Southern Bank, including $482.4 million in loans, net of unearned income, and $77.2 million of other real estate with a discount of $140.3 million and $28.1 million of fair value adjustments, respectively. The assets acquired also included $86.8 million of cash and cash equivalents, securities, and other assets, plus $94.0 million in cash received from the FDIC to balance the assets acquired and liabilities assumed.

In connection with the acquisition, we conducted due diligence on Atlantic Southern Bank’s loan portfolio similar to the due diligence conducted in connection with the acquisition of CommunitySouth Bank. Based on this due diligence, we submitted a negative bid of $145.8 million to the FDIC for the acquired assets of Atlantic Southern Bank. We expect the combination of the negative bid and the reimbursements under the loss sharing agreements to be adequate to absorb the probable losses and expenses relating to Atlantic Southern Bank’s loan and other real estate portfolios, expected carrying costs for the non-performing assets and the costs to manage the portfolios. Our judgment as to the adequacy of our negative bid is based on a number of assumptions about future events that we believe to be reasonable but which may not prove to be accurate.

Loss Share Arrangements. In connection with the acquisition, we entered into two loss share agreements with the FDIC on approximately $585.1 million of Atlantic Southern Bank’s assets, including 100% of the acquired loans (except consumer loans) and other real estate. The first type of loss share agreement covers single-family residential mortgage loans (the “Single Family Loss Agreement”) and the second type of loss share agreement was a Commercial Loss Agreement, as described above.

Under the terms of the loss share agreements for Atlantic Southern Bank, the FDIC’s obligation to reimburse us for losses with respect to covered assets begins with the first dollar of loss incurred. The FDIC agreed to assume 78% of losses and share 78% of loss recoveries on the first $157.7 million of losses on the acquired loans and other real estate owned, to assume 30% of losses and share 30% of loss recoveries on losses exceeding $157.7 million and up to $241.2 million, and to assume 78% of losses and share 78% of loss recoveries on losses exceeding $241.2 million. In addition to the $168.4 million of fair value discounts on loans and other real estate owned, we recorded an $111.3 million indemnification asset from the FDIC as part of the loss share agreements.

First Georgia Banking Company

Also on May 20, 2011, we assumed the deposits and acquired certain assets and assumed certain liabilities of First Georgia Banking Company from the FDIC, as receiver, under the terms of a purchase and assumption agreement between the Bank and the FDIC dated May 20, 2011, similar to the CommunitySouth Agreement. With the acquisition of First Georgia Banking Company, we acquired 12 branch locations located in the Atlanta, Sandy Springs and Marietta, Georgia metropolitan statistical area.

Under the purchase and assumption agreement for First Georgia Banking Company, we assumed approximately $654.6 million of deposits and acquired approximately $606.5 million of the assets of First Georgia Banking Company, including $405.5 million in loans, net of unearned income, and $39.7 million of other real estate with a discount of $72.5 million and $12.5 million of fair value adjustments, respectively. The assets acquired also included $161.3 million of cash and cash equivalents, securities, and other assets, plus $136.0 million in cash received from the FDIC to balance the assets acquired and liabilities assumed.

In connection with the acquisition, we conducted due diligence on First Georgia Banking Company’s loan portfolio similar to the due diligence conducted in connection with the acquisition of CommunitySouth Bank. Based on this due diligence, we submitted a negative bid of $66.3 million to the FDIC for the acquired assets of First Georgia Banking Company. We expect the combination of the negative bid and the reimbursements under the loss sharing agreements to be adequate to absorb the probable losses and expenses relating to First Georgia Banking Company’s loan and other real estate portfolios, expected carrying costs for the non-performing assets and the costs to manage the portfolios. Our judgment as to the adequacy of our negative bid is based on a number of assumptions about future events that we believe to be reasonable but which may not prove to be accurate.

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Loss Share Arrangements. In connection with the acquisition, we entered a Single Family Loss Agreement and a Commercial Loss Agreement with the FDIC on approximately $452.1 million of First Georgia Banking Company’s assets, including 100% of the acquired loans (except consumer loans) and other real estate.

Under the terms of the loss share agreements for First Georgia Banking Company, the FDIC’s obligation to reimburse us for losses with respect to covered assets begins with the first dollar of loss incurred. The FDIC agreed to assume 78% of losses and share 78% of loss recoveries on the first $99.0 million of losses on the acquired loans and other real estate owned, to assume 0% of losses and share 0% of loss recoveries on losses exceeding $99.0 million and up to $137.3 million and to assume 78% of losses and share 78% of loss recoveries on losses exceeding $137.3 million. In addition to the $85.0 million of fair value discounts on loans and other real estate owned, we recorded an $54.2 million indemnification asset from the FDIC as part of the loss share agreements.

Acquisition of Sage Southeastern Securities, Inc.

Pending Transaction

Corporate Governance

Market Areas

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The following table shows key demographic information about our current market areas:

(dollars in thousands, except for Household Income, which is in actual dollars)

CertusBank			Total Market Area
Market	June 30, 2011		Total Deposits in Market		Four- Year Deposit		2010	2010-2015 Projected Population		2010 Median Household		2010-2015 Projected Growth in Household
Area	Deposits		Area(1)		CAGR(2)		Population(3)	Growth(3)		Income(3)		Income(3)

South Carolina
Greenville-Mauldin- Easley	$	227,948	$	12,908,126	2.6	%	644,096	7.4	%	$	50,114	11.4	%
Spartanburg	48,077		4,211,351		5.2	%	289,999	7.7	%	48,476		10.1	%
Anderson	21,405		2,321,671		0.3	%	188,227	7.0	%	45,807		12.7	%

Georgia
Macon	254,365		3,234,706		(3.2	)%	233,606	1.2	%	45,757		14.5	%
Atlanta-Sandy Springs-Marietta	215,348		115,537,726		1.0	%	5,611,180	10.1	%	68,106		14.9	%
Columbus	117,861		7,314,600		8.8	%	294,464	1.9	%	42,819		16.0	%
Warner Robbins	87,951		1,279,679		(2.2	)%	139,553	8.4	%	55,574		11.8	%
Savannah	65,413		5,224,363		(0.3	)%	346,746	7.6	%	49,609		16.3	%
Brunswick	61,153		1,959,026		0.1	%	106,631	5.7	%	44,291		17.6	%
Dalton	57,639		1,937,593		0.1	%	137,874	2.5	%	46,179		14.3	%
Cornelia	56,080		817,341		(4.1	)%	44,830	7.0	%	42,733		12.3	%
Athens-Clarke	35,250		2,977,921		1.7	%	196,366	7.2	%	41,946		20.1	%
Valdosta	21,334		2,134,794		2.0	%	135,484	5.2	%	39,110		16.2	%
Fort Valley	21,063		161,936		(6.9	)%	26,953	5.6	%	40,488		13.0	%

Florida
Jacksonville(4)	$	44,158	$	46,808,280	12.4	%	1,389,042	7.1	%	$	54,392	11.9	%

Total	$	1,335,045

Source: SNL Financial, except where otherwise noted.

(1) Deposit data is for banks and thrifts only and does not include credit unions.

(2) Compound Annual Growth Rate from June 30, 2007 through June 30, 2011.

(4) Deposit data is not provided on a pro forma basis to reflect the pending acquisition of First Guaranty Bank and Trust Company.

Our Business Strategy

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We believe that our focus on our target markets will also provide long-term opportunities for organic growth. Our key organic growth strategies are:

· Innovation. We have and will continue to invest in cost-effective innovation technologies that provide our customers with electronic access to our products and services.

· Product Cross-Sell. We have developed unique product bundles that are attractively priced to promote adoption of use.

Risk Management

Our Competitive Strengths

· Products and Services. Our suite of products is evolving as we tailor them to meet the needs of our customers. We intend to combine innovation with unparalleled customer service to enhance and create products that customers truly want and not what is simply available. We value “customer listening” and have designed processes to capture customer feedback in order to continuously improve products, pricing and delivery channels.

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Loss Share Resolution

As described above, we have completed three FDIC-assisted acquisitions subject to loss share agreements with the FDIC that significantly grew our asset and liability bank. As of September 30, 2011, 96.5% of the outstanding principal balance of our loans is covered by loss share agreements with the FDIC. Because of the loss protection provided by the FDIC, the risks associated with the covered loans and foreclosed real estate we acquired in the FDIC-assisted acquisitions are significantly different from the risks associated with our loans and foreclosed real estate that are not covered under the FDIC loss share agreements. As of September 30,2011, our covered loans totaled $755.9 million and our non-covered loans totaled $31.2 million. Given the FDIC loss share protection for our covered loans, our business model since January 21, 2011 and for the immediate future relies heavily on our loss share resolution business and on the income generated from the remediation and disposal of the assets we acquired from the FDIC, rather than interest earned on loans and other assets like a traditional community bank.

Both the Commercial Loss Agreement and the Single Family Loss Agreement for each of our acquisitions contain specific terms and conditions regarding the management of the covered assets that we must follow to receive reimbursement on losses from the FDIC. In general, under the loss share agreements, we must:

· manage and administer covered loans and other assets and collect and effect charge-offs and recoveries in a manner consistent with our usual and prudent business and banking practices and, with respect to single family shared-loss loans, customary servicing procedures;

· exercise our best judgment in managing, administering and collecting amounts on covered loans and other assets and effecting charge-offs with respect to covered loans and other assets;

· use commercially reasonable efforts to maximize recoveries with respect to losses on single family shared-loss loans and use our best efforts to maximize collections with respect to shared-loss assets under the Commercial Loss Agreement;

· retain sufficient staff to perform the duties under the loss share agreements;

· adopt and implement accounting, reporting, record-keeping and similar systems with respect to the Commercial Loss Agreement;

· comply with the terms of the modification guidelines approved by the FDIC or another federal agency for any single-family shared-loss loan; and

· file quarterly certificates with the FDIC specifying the amount of losses, charge-offs and recoveries.

To ensure compliance with the terms and conditions of the loss share agreements, we have created a Special Assets Group to monitor, manage and administer the different aspects of the loss share agreements.

The Special Assets Group is comprised of bankers with extensive experience working with borrowers in distressed situations to manage the part of the covered assets portfolio that consists of sub-performing loans, non-performing loans and other real estate owned. The immediate objective of the Special Assets Group is to remediate the covered problem assets to a satisfactory level of performance or, when that cannot be achieved, employ a disposition strategy for the collateral securing a loan in a manner to minimize the loss to the Bank and the FDIC.

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The Special Assets Group also coordinates a number of activities relating to the gathering of data and the process of preparing and certifying loss-share certificate submissions to the FDIC. This team is also responsible for managing the third party software system that we purchased and implemented for monitoring compliance with the loss share agreements and performing the accounting for credit impaired loans and the reporting to the FDIC on these loans. The Special Assets Group manages and tracks all expenses and losses on covered assets and reports these expenses and losses to the FDIC for reimbursement on a quarterly basis. The FDIC typically reimburses us for our reported losses and expenses within 30 to 40 days after submission.

We monitor compliance with the loss share agreements through the Special Assets Group. In addition, prior to approval, all covered loan amendments, modifications, renewal or extensions are subject to review by our Problem Asset Review Committee for criticized assets and the Credit Solutions Group for our performing assets, each of which evaluate the amendment, modification, renewal or extension to ensure it will meet the requirements set forth in the applicable loss share agreement for continued coverage.

Products and Services

Lending Activities

We offer a range of lending services, including commercial and residential real estate mortgage loans, real estate construction loans, commercial and industrial loans and consumer loans. Our primary lending focus is to serve consumers, commercial and small- to medium-sized businesses, while maintaining a strong and disciplined credit policy.

Real Estate Loans

Loans secured by real estate are the principal component of our loan portfolio. Real estate loans are subject to the same general risks as other loans and are particularly sensitive to fluctuations in the value of real estate. Fluctuations in the value of real estate, as well as other factors arising after a loan has been made, could negatively affect a borrower’s cash flow, creditworthiness and ability to repay the loan. When we make new real estate loans, we obtain a security interest in real estate whenever possible, in addition to any other available collateral, to increase the likelihood of the ultimate repayment of the loan. To control concentration risk, we monitor collateral type and industry concentrations within this portfolio.

As of September 30, 2011, loans secured by first or second mortgages on real estate comprised approximately $505.5 million, or 64.2% of our loan portfolio. These loans generally fall into one of two categories: residential real estate loans or commercial real estate loans.

· Residential Real Estate Loans. We generally originate and hold short-term first mortgages and traditional second mortgage residential real estate loans and home equity lines of credit. With respect to fixed and adjustable rate long-term residential real estate loans with terms of up to 30 years, we typically originate these loans only for third-party investors. Generally, at the inception of the loan, we limit the loan-to-value ratio on our residential real estate loans to 85%. Our underwriting criteria for, and the risks associated with, home equity loans and lines of credit are generally the same as those for first mortgage loans. Home equity lines of credit typically have terms of 35 months or less, and we generally limit the extension of credit to less than 90% of the available equity of each property.

· Commercial Real Estate Loans. These loans generally have terms of five years or less, although payments may be structured on a longer amortization basis. We evaluate each borrower on an individual basis and attempt to determine the business risks and credit profile of each borrower. We attempt to reduce credit risk in the commercial real estate portfolio by emphasizing loans on owner-occupied office buildings where the loan-to-value ratio, established by independent appraisals, does not exceed 85%. We also generally require that a borrower’s cash flow exceeds 125% of monthly debt service obligations. To ensure secondary sources of payment and liquidity to support a loan request, we typically review the personal financial statements of the principal owners and require their personal guarantees.

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Real Estate Construction and Development Loans

At September 30, 2011, real estate construction and development loans amounted to $211.3 million, or approximately 26.9% of our loan portfolio. We offer fixed and adjustable rate residential and commercial construction loans to builders and developers and to consumers who wish to build their own homes. The term of our construction and development loans generally is limited to 18 months. In some instances a commercial construction loan may have an amortization period following the completion of construction, with a balloon maturity of not more than five years. Construction and development loans generally carry a higher degree of risk than long-term financing of existing properties because repayment depends on the ultimate completion of the project and usually on the subsequent lease-up and/or sale of the property. Specific risks include:

· cost overruns;

· mismanaged construction;

· inferior or improper construction techniques;

· economic changes or downturns during construction;

· a downturn in the real estate market;

· rising interest rates which may prevent sale of the property; and

· failure to lease-up or sell completed projects in a timely manner.

We attempt to reduce the risk associated with construction and development loans by obtaining personal guarantees and by keeping the loan-to-value ratio of the completed project at or below 85%. Generally, we do not build interest reserves into loan commitments but require periodic cash payments for interest from the borrower’s cash flow.

We make residential land loans to both commercial entities and consumer borrowers for the purpose of financing land upon which to build a residential home. Residential land loans are reclassified as residential construction loans once construction of the residential home commences. These loans are further categorized as:

· pre-sold commercial, which is a loan to a commercial entity with a pre-identified buyer for the finished home;

· owner-occupied consumer, which is a loan to an individual who intends to occupy the finished home; and

· non owner-occupied commercial (speculative), which is a loan to a commercial entity intending to lease or sell the finished home.

We make commercial land loans to commercial entities for the purpose of financing land on which to build a commercial project. These loans are for projects that typically involve small-and medium-sized single and multi-use commercial buildings.

We make commercial construction loans to the borrower for the purpose of financing the construction of a commercial development. These loans are further categorized depending on whether the borrower intends (a) to occupy the finished development (owner-occupied) or (b) to lease or sell the finished development (non owner-occupied).

Commercial and Industrial Loans

At September 30, 2011, commercial and industrial loans amounted to $55.4 million, or 7.0% of our total loan portfolio. We make loans for commercial purposes in various lines of businesses, including the manufacturing industry, service industry and professional service areas. While these loans may have real estate as partial collateral, they are generally considered to have greater risk than first or second mortgages on real estate because these loans may be unsecured or, if they are secured, the value of the non-real estate collateral may be difficult to assess and more likely to decrease than real estate, and the control of the collateral is more at risk.

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Consumer and Other Loans

At September 30, 2011, consumer and other loans amounted to $14.9 million, or 1.9% of our loan portfolio. We make a variety of loans to individuals for personal and household purposes, including secured and unsecured installment loans and revolving lines of credit. We underwrite consumer loans based on the borrower’s income, current debt level, balance sheet composition, past credit history and the availability and value of collateral. Consumer rates are both fixed and variable, with negotiable terms. Our installment loans typically amortize over periods up to 60 months. Although we typically require monthly payments of interest and a portion of the principal on our loan products, we may offer consumer loans with a single maturity date when a specific source of repayment is available. Consumer loans not secured by real estate are generally considered to have greater risk than first or second mortgages on real estate because they may be unsecured, or, if they are secured, the value of the collateral may be difficult to assess and more likely to decrease in value, and is more difficult to control, than real estate.

Credit Administration and Procedures

In our loan review process, we apply a credit grading system to each loan. Each loan officer is responsible for each loan he or she makes, its performance and grade integrity, regardless of whether other individuals or committees joined in the approval. This responsibility continues until the loan is repaid or until the loan is officially assigned to another officer.

We currently use an external loan review specialist to review the loan underwriting of the portfolio and validate the assigned loan grades. The external loan review specialist also assesses the adequacy of and adherence to our loan policy, systemic risk that may be inherent in the practices and procedures of the Bank, concentration risk and portfolio trends. Essentially, the external loan review specialist monitors, tests and reviews various areas of the loan portfolio to assess and report risk to the Bank’s senior management. This external loan review is risk-based to measure areas of highest perceived risk. In 2012, we plan to use an internal loan review specialist to perform the reviews that our external loan review specialist is currently providing. Once our internal loan review specialist is in place, internal loan reviews will be performed on an ongoing basis. In addition, management plans to engage a third party loan review specialist to perform an annual external review of our loan portfolio and to validate the work performed by our internal loan review specialist.

We also manage our performing covered loans that are subject to loss share agreements with the FDIC to ensure continued coverage under the loss share agreements. Generally, under the Commercial Loss Agreement, coverage will be lost on a covered loan if we make certain advances, amendments, modifications, renewals or extensions that are not permitted under the agreement. For instance, coverage will be lost if we make any additional advance or commitment on a covered loan unless:

· the advance or commitment is made within one year of the acquisition date;

· total advances are less than 10% of the loan’s book value; and

· such advances are made in good faith and supported by documentation in the credit files and in accordance with our credit policy guidelines.

Covered loans also cannot be amended, modified, renewed or extended, or any term, right or remedy thereunder waived, unless made in good faith and otherwise in accordance with our credit policy guidelines, provided that no such amendment, modification, renewal, extension or waiver can:

· extend the term of the loan beyond the end of the final quarter in which the agreement terminates (or beyond the term of the loan as currently in effect);

· increase the amount of principal under a term loan (unless such increase is a permitted advance described above); or

· increase the maximum amount of principal authorized under a revolving line of credit.

Under both the Single Family Loss Agreement and Commercial Loss Agreement, the FDIC is not required to make any payments with respect to any charge-off or loss event that it determines we should not have effected. For instance, under the Single Family Loss Agreement, the FDIC can deny coverage if it finds we failed to undertake reasonable and customary loss mitigation efforts in accordance with the applicable modification

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guidelines or failed to follow customary servicing procedures. Under both loss share agreements, the FDIC must provide the Bank with notice and an opportunity to cure any such deficiency. Any unresolved disputes with the FDIC regarding losses or payments will be subject to binding arbitration.

Deposit Products

We offer a full range of deposit services that are typically available in most banks and savings institutions, including checking accounts, commercial accounts, savings accounts and other time deposits of various types, ranging from daily money market accounts to longer-term certificates of deposit. Transaction accounts and time deposits are tailored to and offered at rates competitive to those offered in our primary market areas. In addition, we offer certain retirement account services. We solicit accounts from individuals, businesses, associations, organizations and governmental authorities. We believe that our branch infrastructure will assist us in obtaining deposits from local customers in the future.

Wealth Management Services

Competition

The banking business is highly competitive, and we experience competition in our market areas from many other financial institutions. Competition among financial institutions is based on interest rates offered on deposit accounts, interest rates charged on loans, other credit and service charges relating to loans, the quality and scope of the services rendered, the convenience of banking facilities, and, in the case of loans to commercial borrowers, relative lending limits. We compete with commercial banks, credit unions, savings institutions, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market funds and other mutual funds, as well as super-regional, national and international financial institutions that operate offices in our market areas and elsewhere.

We compete with these institutions both in attracting deposits and in making loans. In addition, we have to attract our customer base from other existing financial institutions and from new residents. Many of our competitors are well-established, larger financial institutions. These institutions offer some services, such as extensive and established branch networks, that we do not provide. In addition, many of our non-bank competitors are not subject to the same extensive federal regulations that govern bank holding companies and federally insured banks.

Employees

As of December 31, 2011, we had 435 full-time equivalent employees.

Properties

Our principal executive offices are located at 1170 Peachtree Street, NW, Suite 2300, Atlanta, Georgia 30309 and our Bank’s main office is located at 6602 Calhoun Memorial Parkway, Easley, South Carolina 29640. In addition, we operate 29 additional branches located in updated South Carolina, Georgia and northern Florida.

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The address locations of these branches are provided below.

Address		City, State, Zip
1252 Virgil Langford Road		Bogart, Georgia 30622
135 Highway 96		Bonaire, Georgia 31005
102 Stonebridge Blvd.		Bremen, Georgia 30110
3420 Cypress Mill Road		Brunswick, Georgia 31520
202 W. White Road		Byron, Georgia 31088
100 Tom Reeve Drive		Carrollton, Georgia 30117
7320 Veterans Pkwy		Columbus, Georgia 31909
1989 Historic Homer Hwy		Commerce, Georgia 30529
920 Level Grove Road		Cornelia, Georgia 30531
1378 Dug Gap Road		Dalton, Georgia 30720
1200 Northway		Darien, Georgia 31305
8340 Eisenhower Pkwy		Lizella, Georgia 31052
101 Main Street		Franklin, Georgia 30217
1011 Park Place Blvd.		Greensboro, Georgia 30642
1465 Old Swimming Pool Road		Jefferson, Georgia 30549
1701 Bass Road		Macon, Georgia 31210
4077 Forsyth Road		Macon, Georgia 31210
501 Walnut Street		Macon, Georgia 31204
597 S. Columbia Avenue		Rincon, Georgia 31326
300 N. Dugger Avenue		Roberta, Georgia 31078
7393 Hodgson Memorial Blvd.		Savannah, Georgia 31406
464 S. Houston Lake Road		Warner Robins, Georgia 31088
460 Norman Drive		Valdosta, Georgia 31601
1510 North Main Street		Anderson, South Carolina 29621
530 W Wade Hampton Blvd.		Greer, South Carolina 29650
2415 Laurens Road		Greenville, South Carolina 29607
787 East Butler Road		Mauldin, South Carolina 29662
531 East Main Street		Spartanburg, South Carolina 29302
13474 Atlantic Blvd., Ste. 109		Jacksonville, Florida 32225

We currently own our branch located at 501 Walnut Street in Macon, Georgia. In connection with our acquisitions of CommunitySouth Bank, Atlantic Southern Bank and First Georgia Banking Company, pursuant to the terms and conditions of the respective purchase and assumption agreements, we had the option, for a period of 90 days after each transaction, to purchase and/or assume certain contracts associated with the Acquired Banks, including certain of their branch office locations, with the settlement of our purchase and/or assumption to occur on the one year anniversary date of each acquisition. We intend to acquire 29 of the branches formerly operated by the Acquired Banks. We are currently occupying these 29 branches until we acquire them from the FDIC upon final settlement in 2012.

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Legal Proceedings

From time to time we are a party to various litigation matters incidental to the conduct of our business. We are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business, prospects, financial condition, liquidity, results of operation, cash flows or capital levels.

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SUPERVISION AND REGULATION

Both CertusHoldings, Inc. and CertusBank, N.A. are subject to extensive state and federal banking laws and regulations that impose specific requirements or restrictions on and provide for general regulatory oversight of virtually all aspects of our operations. These laws and regulations are generally intended to protect depositors, not stockholders. The following summary is qualified by reference to the statutory and regulatory provisions discussed. Changes in applicable laws or regulations may have a material effect on our business and prospects. Our operations may be affected by legislative changes and the policies of various regulatory authorities. We cannot predict the effect that fiscal or monetary policies, economic control, or new federal or state legislation may have on our business and earnings in the future.

The following discussion is not intended to be a complete list of all the activities regulated by the banking laws or of the impact of such laws and regulations on our operations. It is intended only to briefly summarize some material provisions.

CertusHoldings, Inc.

Any entity that acquires direct or indirect control of a bank must obtain prior approval of the Board of Governors of the Federal Reserve System (“Federal Reserve”) to become a bank holding company pursuant to the Bank Holding Company Act of 1956 (the “Bank Holding Company Act”). We became a bank holding company upon the consummation of the acquisition of certain of the assets and assumption of certain liabilities of CommunitySouth Bank from the FDIC, as receiver, by our newly chartered bank subsidiary, CertusBank. As a bank holding company, we are subject to regulation under the Bank Holding Company Act, and to inspection, examination, supervision and enforcement by the Federal Reserve.

Permitted Activities

Under the Bank Holding Company Act, a bank holding company is generally permitted to engage in, or acquire direct or indirect control of more than 5% of the voting shares of any company engaged in, the following activities:

· banking or managing or controlling banks;

· furnishing services to or performing services for our subsidiaries; and

· any activity that the Federal Reserve determines to be so closely related to banking as to be a proper incident to the business of banking.

Activities that the Federal Reserve has found to be so closely related to banking as to be a proper incident to the business of banking include:

· factoring accounts receivable;

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

· leasing personal or real property;

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

· trust company functions;

· financial and investment advisory activities;

· conducting discount securities brokerage activities;

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

· providing specified management consulting and counseling activities;

· performing selected data processing services and support services;

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

· performing selected insurance underwriting activities.

As a bank holding company, we also can elect to be treated as a “financial holding company,” which would allow us to engage in a broader array of activities. In sum, a financial holding company can engage in activities that

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are financial in nature or incidental or complimentary to financial activities, including insurance underwriting, sales and brokerage activities, providing financial and investment advisory services, underwriting services and limited merchant banking activities. We have not sought financial holding company status, but may elect such status in the future as our business matures. If we were to elect in writing for financial holding company status, each insured depository institution we control would have to be well capitalized, well managed and have at least a satisfactory rating under the Community Reinvestment Act (“CRA”) (discussed below).

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

Change in Control

In addition, and subject to certain exceptions, the Bank Holding Company Act and the Change in Bank Control Act, together with regulations promulgated there under, require Federal Reserve approval prior to any person or company acquiring “control” of a bank holding company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of a bank holding company. Following the relaxing of these restrictions by the Federal Reserve in September 2008, control will be rebuttably presumed to exist if a person acquires more than 33% of the total equity of a bank or bank holding company, of which it may own, control or have the power to vote not more than 15% of any class of voting securities.

Source of Strength

It is a policy of the Federal Reserve that a bank holding company should serve as a source of financial and managerial strength to the banks that it controls. If a controlled bank is in financial distress, then the Federal Reserve could assert that the bank holding company must provide additional capital or financial support to the bank. If a controlled bank is undercapitalized, then the regulators could require the bank holding company to guarantee a capital restoration plan. If the Federal Reserve believes that a bank holding company’s activities, assets, or affiliates represent a significant risk to the financial safety, soundness, or stability of a controlled bank, then the Federal Reserve could require the bank holding company to terminate the activities, liquidate the assets, or divest the affiliates. The regulators may require these and other actions in support of controlled banks even if such action is not in the best interests of the bank holding company or its stockholders. Because we are a bank holding company, the Federal Reserve views us (and our consolidated assets) as a source of financial and managerial strength for our controlled depository institutions.

We control the Bank, which is a national bank. Consequently, the OCC could order an assessment of us if the Bank’s capital were to become impaired. If we failed to pay the assessment within three months, the OCC could order the sale of our equity in the Bank to cover the deficiency.

In addition, capital loans by us or the Bank to any of our future subsidiary banks will be subordinate in right of payment to deposits and certain other indebtedness of the subsidiary bank. In the event of our bankruptcy, any commitment by us to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.

Capital Requirements

The Federal Reserve Board imposes certain capital requirements on the bank holding company under the Bank Holding Company Act, including a minimum leverage ratio and a minimum ratio of “qualifying” capital to risk-weighted assets. These requirements are essentially the same as those that apply to the Bank and are described below under “CertusBank, N.A.—Prompt Corrective Action.” Subject to our capital requirements and certain other restrictions, we are able to borrow money to make a capital contribution to the bank, and these loans may be repaid from dividends paid from the bank to the company. Our ability to pay dividends depends on, among other things, the Bank’s ability to pay dividends to us, which is subject to regulatory restrictions as described below in “CertusBank, N.A.—Dividends.” We are also able to raise capital for contribution to the Bank by issuing securities without having to receive regulatory approval, subject to compliance with federal and state securities laws.

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CertusBank, N.A.

The Bank operates as a national banking association incorporated under the laws of the United States and subject to examination by the OCC. Deposits in the Bank are insured by the FDIC up to a maximum amount of $250,000, pursuant to the provisions of the Dodd-Frank Act. The FDIC insurance coverage limit applies per depositor, per insured depository institution for each account ownership category. In addition, the FDIC provides unlimited deposit insurance coverage for noninterest-bearing transaction accounts (typically business checking accounts) and certain funds swept into noninterest-bearing savings accounts. All institutions will be required to provide full deposit insurance on noninterest-bearing transaction accounts until December 31, 2012.

The OCC and the FDIC regulate or monitor virtually all areas of the Bank’s operations, including:

· security devices and procedures;

· adequacy of capitalization and loss reserves;

· loans;

· investments;

· borrowings;

· deposits;

· mergers;

· issuances of securities;

· payment of dividends;

· interest rates payable on deposits;

· interest rates or fees chargeable on loans;

· establishment of branches;

· corporate reorganizations;

· maintenance of books and records; and

· adequacy of staff training to carry on safe lending and deposit gathering practices.

The OCC requires that the Bank maintain specified capital ratios of capital to assets and imposes limitations on the Bank’s aggregate investment in real estate, bank premises, and furniture and fixtures. Two categories of regulatory capital are used in calculating these ratios—Tier 1 capital and total capital. Tier 1 capital generally includes common equity, retained earnings, a limited amount of qualifying preferred stock, and qualifying minority interests in consolidated subsidiaries, reduced by goodwill and certain other intangible assets, such as core deposit intangibles, and certain other assets. Total capital generally consists of Tier 1 capital plus Tier 2 capital, which includes the allowance for loan losses, preferred stock that did not qualify as Tier 1 capital, certain types of subordinated debt and a limited amount of other items.

The Bank is also subject to specific requirements pursuant to the OCC Agreement which was entered into in connection with the acquisition of CommunitySouth Bank. The OCC Agreement requires, among other things, that the Bank maintain various financial and capital ratios and provide notice to, and obtain consent from, the OCC with respect to any additional failed bank acquisitions from the FDIC or the appointment of any new director or senior executive officer of the Bank.

The Bank (and, with respect to certain provisions, the Company) is also subject to a separate Order of the FDIC, dated January 21, 2011 (which we refer to as the “FDIC Order”) issued in connection with the FDIC’s approval of the Bank’s application for deposit insurance for CommunitySouth Bank. The FDIC Order requires, among other things, that during the first three years following our acquisition of the CommunitySouth Bank, the Bank must obtain the FDIC’s approval before implementing certain compensation plans, submit updated business plans and reports of material deviations from those plans to the FDIC and comply with the applicable requirements of the FDIC Statement of Policy on Qualifications for Failed Bank Acquisitions. Additionally, the FDIC Order requires the Bank to maintain a ratio of tier 1 common equity to total assets equal to at least 10% during such three-year period, and to remain “well capitalized” thereafter.

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FDIC Statement of Policy on Qualifications for Failed Bank Acquisitions

The FDIC Order included a condition that the Bank, the Company, the Company’s founders and certain of our investors comply with the applicable provisions of the FDIC Statement of Policy on Qualifications for Failed Bank Acquisitions (the “FDIC Policy Statement”). The FDIC Policy Statement imposes restrictions and requirements on certain institutions and their investors, to the extent that those institutions seek to acquire a failed bank from the FDIC. Certain provisions of the FDIC Policy Statement are summarized below. They include a higher capital requirement for the Bank and a three-year restriction on the sale or transfer of our securities by those investors covered by the FDIC Policy Statement. As the agency responsible for resolving failed banks, the FDIC has discretion to determine whether a party is qualified to bid on a failed institution. The FDIC adopted the FDIC Policy Statement on August 26, 2009. The FDIC issued guidance under the FDIC Policy Statement on January 6, 2010 and April 23, 2010.

The FDIC Policy Statement imposes the following provisions, among others, on those institutions and investors to which it applies. First, the institution is required to maintain a ratio of Tier 1 common equity to total assets of at least 10% for a period of three years, and thereafter maintain a capital level sufficient to be well capitalized under regulatory standards during the remaining period of ownership of the covered investors. This amount of capital exceeds that required under otherwise applicable regulatory requirements. Second, covered investors that collectively own 80% or more of two or more depository institutions are required to pledge to the FDIC their proportionate interests in each institution to indemnify the FDIC against any losses it incurs in connection with the failure of one of the institutions. Third, the institution is prohibited from extending credit to its covered investors and to affiliates of its covered investors. Fourth, covered investors may not employ ownership structures that use entities domiciled in bank secrecy jurisdictions. The FDIC has interpreted this prohibition to apply to a wide range of non-U.S. jurisdictions. In its guidance, the FDIC has required that non-U.S. investors subject to the FDIC Policy Statement invest through a U.S. subsidiary and adhere to certain requirements related to record keeping and information sharing. Fifth, without FDIC approval, covered investors are prohibited from selling or otherwise transferring their securities in the institution for a three-year period following the time of certain acquisitions. The transfer restrictions in the FDIC Policy Statement do not apply to open-ended investment companies that are registered under the Investment Company Act, issue redeemable securities, and allow investors to redeem on demand. Sixth, covered investors may not employ complex and functionally opaque ownership structures to invest in institutions. Seventh, investors that own 10% or more of the equity of a failed institution are not eligible to bid for that failed institution in an FDIC auction. Eighth, covered investors may be required to provide information to the FDIC, such as with respect to the size of the capital fund or funds, their diversification, their return profiles, their marketing documents, their management teams, and their business models. Ninth, the FDIC Policy Statement does not replace or substitute for otherwise applicable regulations or statutes.

Prompt Corrective Action

As an insured depository institution, the Bank is required to comply with the capital requirements promulgated under the Federal Deposit Insurance Act and the regulations under it, which set forth five capital categories, each with specific regulatory consequences. Under these regulations, the categories are:

· Well Capitalized — The institution exceeds the required minimum level for each relevant capital measure. A well capitalized institution:

· has total capital ratio of 10% or greater; and

· has a tier 1 capital ratio of 6% or greater; and

· has a leverage capital ratio of 5% or greater; and

· is not subject to any order or written directive to meet and maintain a specific capital level for any capital measure.

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· Adequately Capitalized — The institution meets the required minimum level for each relevant capital measure. The institution may not make a capital distribution if it would result in the institution becoming undercapitalized. An adequately capitalized institution:

· has a total capital ratio of 8% or greater; and

· has a tier 1 capital ratio of 4% or greater; and

· has a leverage capital ratio of 4% or greater or a leverage capital ratio of 3% or greater if the institution is rated composite 1 under the CAMELS (Capital, Assets, Management, Earnings, Liquidity and Sensitivity to market risk) rating system.

· Undercapitalized — The institution fails to meet the required minimum level for any relevant capital measure. An undercapitalized institution:

· has a total capital ratio of less than 8%; or

· has a tier 1 capital ratio of less than 4%; or

· has a leverage capital ratio of less than 4%, or if the institution is rated a composite 1 under the CAMELS rating system, a leverage capital ratio of less than 3%.

· Significantly Undercapitalized — The institution is significantly below the required minimum level for any relevant capital measure. A significantly undercapitalized institution:

· has a total capital ratio of less than 6%; or

· has a tier 1 capital ratio of less than 3%; or

· has a leverage capital ratio of less than 3%.

· Critically Undercapitalized — The institution fails to meet a critical capital level set by the appropriate federal banking agency. A critically undercapitalized institution has a ratio of tangible equity to total assets that is equal to or less than 2%.

The OCC Agreement entered into between the Bank and the OCC also requires the Bank to maintain a Tier 1 leverage ratio of 10.0%, a Tier 1 risk-based capital ratio of 11.0% and a total risk-based capital ratio of 12.0%. In addition, under the FDIC Order, and pursuant to the FDIC Policy Statement to which the Bank is subject, the Bank must at all times maintain a tier 1 common equity to total assets ratio of at least 10% for the first three years of its operations.

If the FDIC determines, after notice and an opportunity for hearing, that the institution is in an unsafe or unsound condition, the regulator is authorized to reclassify the institution to the next lower capital category (other than critically undercapitalized) and require the submission of a plan to correct the unsafe or unsound condition.

Federal banking regulators are required to take various mandatory supervisory actions and are authorized to take other discretionary actions with respect to institutions in the three undercapitalized categories. The severity of the action depends upon the capital category in which the institution is placed. A banking institution that is undercapitalized is required to submit a capital restoration plan. Failure to meet capital guidelines could subject the bank to a variety of enforcement remedies by federal bank regulatory agencies, including: termination of deposit insurance by the FDIC; restrictions on certain business activities; and appointment of the FDIC as conservator or receiver. Generally, subject to a narrow exception, the banking regulator must appoint a receiver or conservator for an institution that is critically undercapitalized.

As of September 30, 2011, the Bank’s regulatory capital surpassed the levels required to be considered “well capitalized” and met the requirements of the OCC Agreement, the FDIC Order and the FDIC Policy Statement.

Standards for Safety and Soundness

The Federal Deposit Insurance Act also requires the federal banking regulatory agencies to prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions relating to: (i)

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internal controls, information systems and internal audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure; and (v) asset growth. The agencies also must prescribe standards for asset quality, earnings, and stock valuation, as well as standards for compensation, fees and benefits. The federal banking agencies have adopted regulations and Interagency Guidelines Prescribing Standards for Safety and Soundness to implement these required standards. These guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. Under the regulations, if the OCC determines that the Bank fails to meet any standards prescribed by the guidelines, the agency may require the Bank to submit to the agency an acceptable plan to achieve compliance with the standard, as required by the OCC. The final regulations establish deadlines for the submission and review of such safety and soundness compliance plans.

Regulatory Examination

The OCC also requires the Bank to prepare annual reports on the Bank’s financial condition and to conduct an annual audit of its financial affairs in compliance with its minimum standards and procedures.

All insured institutions must undergo regular on-site examinations by their appropriate banking agency. The cost of examinations of insured depository institutions and any affiliates may be assessed by the appropriate federal banking agency against each institution or affiliate as it deems necessary or appropriate. Insured institutions are required to submit annual reports to the FDIC, their federal regulatory agency, and state supervisor when applicable. The FDIC has developed a method for insured depository institutions to provide supplemental disclosure of the estimated fair market value of assets and liabilities, to the extent feasible and practicable, in any balance sheet, financial statement, report of condition or any other report of any insured depository institution. The federal banking regulatory agencies prescribe, by regulation, standards for all insured depository institutions and depository institution holding companies relating, among other things, to the following:

· internal controls;

· information systems and audit systems;

· loan documentation;

· credit underwriting;

· interest rate risk exposure; and

· asset quality.

Transactions with Affiliates and Insiders

Banks are subject to restrictions on their ability to conduct transactions with affiliates, including us, and other related parties. Section 23A of the Federal Reserve Act imposes quantitative limits, qualitative requirements, and collateral requirements on certain transactions by a bank with, or for the benefit of, its affiliates. Transactions covered by Section 23A include loans, extensions of credit, investment in securities issued by an affiliate, and purchases of assets from an affiliate. Section 23B of the Federal Reserve Act requires that most types of transactions by a bank with, or for the benefit of, an affiliate be on terms at least as favorable to the bank than if the transaction were conducted with an unaffiliated third party. The Federal Reserve’s Regulation W also defines and limits the transactions in which the Bank may engage with us or with other affiliates.

The Dodd-Frank Act generally enhances the restrictions on transactions with affiliates under Section 23A and 23B of the Federal Reserve Act, including an expansion of the definition of “covered transactions” to include credit exposures related to derivatives, repurchase agreements and securities lending arrangements, and an increase in the amount of time for which collateral requirements regarding covered credit transactions must be satisfied. The definition of “affiliate” was expanded to include any investment fund to which we or an affiliate serves as an investment adviser. The ability of the Federal Reserve to grant exemptions from these restrictions is also narrowed by the Dodd-Frank Act, including by requiring coordination with other bank regulators.

The Federal Reserve’s Regulation O imposes restrictions and procedural requirements in connection with the extension of credit by a bank to its directors, executive officers, principal equity investors, and their related interests. All extensions of credit to insiders and their related interests must be on the same terms as, and subject to

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the same loan underwriting requirements as, loans to persons who are not insiders. In addition, Regulation O imposes lending limits on loans to insiders and their related interests and imposes, in certain circumstances, requirements for prior approval of the loans by the Bank’s board of directors.

Dividends

The Company is a legal entity separate and distinct from each of its subsidiaries. The ability of a bank to pay dividends and make other distributions, and to pay any management fee to its parent holding company, is limited by federal and state law. The specific limits depend on a number of factors, including the bank’s type of charter, recent earnings, recent dividends, level of capital, and regulatory status. The regulators are authorized, and under certain circumstances are required, to determine that the payment of dividends or other distributions by a bank would be an unsafe or unsound practice and to prohibit that payment. For example, the FDI Act generally prohibits a depository institution from making any capital distributions (including payment of a dividend) or paying any management fee to its parent holding company if the depository institution would thereafter be undercapitalized.

The ability of a bank holding company to pay dividends and make other distributions can also be limited. A bank holding company is subject to leverage and minimum capital requirements as summarized above. The Federal Reserve has authority to prohibit a bank holding company from paying dividends or making other distributions. The Federal Reserve has issued a policy statement with regard to the payment of cash dividends by bank holding companies. The policy statement provides that, as a matter of prudent banking, a bank holding company should not maintain a rate of cash dividends unless its net income available to common stockholders has been sufficient to fully fund the dividends, and the prospective rate of earnings retention appears to be consistent with the holding company’s capital needs, asset quality, and overall financial condition. Accordingly, a bank holding company should not pay cash dividends that exceed its net income or can only be funded in ways that weaken the bank holding company’s financial health, such as by borrowing. In addition, the Dodd-Frank Act and Basel III impose additional restrictions on the ability of banking institutions to pay dividends.

Currently, the Bank is prohibited by the OCC Agreement from paying dividends to us until January 2014 and, therefore, any dividends to our common stockholders would have to be paid from funds legally available thereof at the holding company level. Banking regulators have authority to impose additional limits on dividends and distributions by us and our subsidiaries. Certain restrictive covenants in future debt instruments, if any, may also limit our ability to pay dividends or our subsidiary depository institution ability to make distributions or pay dividends to us.

Branching

Federal law permits an adequately capitalized and adequately managed bank holding company, with Federal Reserve approval, to acquire banking institutions located in states other than the bank holding company’s home state without regard to whether the transaction is prohibited under state law. In addition, national banks and state banks with different home states are permitted to merge across state lines, with the approval of the appropriate federal banking agency, unless the home state of a participating banking institution passed legislation prior to June 1, 1997 that expressly prohibits interstate mergers. The Dodd-Frank Act permits a national bank or a state bank, with the approval of its regulator, to open a branch in any state if the law of the state in which the branch is to be located would permit the establishment of the branch if the bank were a bank chartered in that state. National banks may provide trust services in any state to the same extent as a trust company chartered by that state.

Anti-Tying Restrictions

Under amendments to the Bank Holding Company Act and Federal Reserve regulations, a bank is prohibited from engaging in certain tying or reciprocity arrangements with its customers. In general, a bank may not extend credit, lease, sell property, or furnish any services or fix or vary the consideration for these on the condition that:

· the customer obtain or provide some additional credit, property, or services from or to the bank, the bank holding company or its subsidiaries; or

· the customer may not obtain some other credit, property, or services from a competitor, except to the

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extent reasonable conditions are imposed to assure the soundness of the credit extended.

Certain arrangements are permissible: a bank may offer combined-balance products and may otherwise offer more favorable terms if a customer obtains two or more traditional bank products; and certain foreign transactions are exempt from the general rule. A bank holding company or any bank affiliate also is subject to anti-tying requirements in connection with electronic benefit transfer services.

Community Reinvestment Act

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

Finance Subsidiaries

Under the Gramm-Leach-Bliley Act (the “GLBA”), subject to certain conditions imposed by their respective banking regulators, national and state-chartered banks are permitted to form “financial subsidiaries” that may conduct financial or incidental activities, thereby permitting bank subsidiaries to engage in certain activities that previously were impermissible. The GLBA imposes several safeguards and restrictions on financial subsidiaries, including that the parent bank’s equity investment in the financial subsidiary be deducted from the bank’s assets and tangible equity for purposes of calculating the bank’s capital adequacy. In addition, the GLBA imposes new restrictions on transactions between a bank and its financial subsidiaries similar to restrictions applicable to transactions between banks and non-bank affiliates.

Consumer Protection Regulations

Activities of the Bank are subject to a variety of statutes and regulations designed to protect consumers. Interest and other charges collected or contracted for by the bank are subject to state usury laws and federal laws concerning interest rates. The Bank’s loan operations are also subject to federal laws applicable to credit transactions, such as:

· the federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

· the Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

· the Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

· the Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies;

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

· the rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The deposit operations of the bank also are subject to:

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

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

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Many states and local jurisdictions have consumer protection laws analogous, and in addition, to those listed above. These federal, state, and local laws mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers and monitor account activity when taking deposits, making loans, or conducting other types of transactions. Failure to comply with these laws and regulations could give rise to substantial penalties, reputational damage, regulatory sanctions, customer rescission rights, action by state and local attorneys general, and civil or criminal liability. The Dodd-Frank Act creates a new independent Consumer Financial Protection Bureau (the “Bureau”) which will have broad authority to regulate consumer financial services and products provided by banks and various non-bank providers. It will have authority to promulgate regulations and issue orders, guidance, policy statements, conduct examinations and bring enforcement actions. In general, banks with assets of $10 billion or less will be examined for consumer complaints by their bank regulator. The creation of the Bureau is likely to lead to enhanced and strengthened enforcement of consumer financial protection laws.

Enforcement Powers

The Bank and its “institution-affiliated parties,” including its management, employee’s agent’s independent contractors and consultants such as attorneys and accountants and others who participate in the conduct of the financial institution’s affairs, are subject to potential civil and criminal penalties for violations of law, regulations or written orders of a government agency. These practices can include the failure of an institution to timely file required reports or the filing of false or misleading information or the submission of inaccurate reports. Civil penalties may be as high as $1,000,000 a day for such violations. Criminal penalties for some financial institution crimes have been increased to 20 years. In addition, regulators are provided with greater flexibility to commence enforcement actions against institutions and institution-affiliated parties. Possible enforcement actions include the termination of deposit insurance. Furthermore, banking agencies’ power to issue cease-and-desist orders were expanded. Such orders may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts, or take other actions as determined by the ordering agency to be appropriate.

Anti-Money Laundering Requirements

Under federal law, including the Bank Secrecy Act, the Patriot Act, and the International Money Laundering Abatement and Anti-Terrorist Financing Act, financial institutions (including insured depository institutions, broker-dealers and certain other financial institutions) must maintain anti-money laundering programs that include established internal policies, procedures, and controls; a designated compliance officer; an ongoing employee training program; and testing of the program by an independent audit function. Among other things, these laws are intended to strengthen the ability of U.S. law enforcement agencies and intelligence communities to work together to combat terrorism on a variety of fronts. Financial institutions are prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards for due diligence and customer identification in their dealings with non-U.S. financial institutions and non-U.S. customers. Financial institutions must take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any suspicious transactions, and law enforcement authorities have been granted increased access to financial information maintained by financial institutions. Bank regulators routinely examine institutions for compliance with these obligations and they must consider an institution’s compliance in connection with the regulatory review of applications, including applications for banking mergers and acquisitions. The regulatory authorities have imposed “cease and desist” orders and civil money penalty sanctions against institutions found to be violating these obligations.

The Office of Foreign Assets Control (“OFAC”) is responsible for helping to insure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and Acts of Congress. OFAC publishes lists of persons, organizations and countries suspected of aiding, harboring or engaging in terrorist acts, known as Specially Designated Nationals and Blocked Persons. If we or our subsidiaries find a name on any transaction, account or wire transfer that is on an OFAC list, we or our subsidiaries must freeze or block such account or transaction, file a suspicious activity report and notify the appropriate authorities.

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Privacy and Credit Reporting

Financial institutions are required to disclose their policies for collecting and protecting confidential information. Customers generally may prevent financial institutions from sharing nonpublic personal financial information with nonaffiliated third parties except under narrow circumstances, such as the processing of transactions requested by the consumer. Additionally, financial institutions generally may not disclose consumer account numbers to any nonaffiliated third party for use in telemarketing, direct mail marketing or other marketing to consumers. Our policy is not to disclose any personal information unless required by law. The OCC and the federal banking agencies have prescribed standards for maintaining the security and confidentiality of consumer information. The Bank is subject to such standards, as well as standards for notifying consumers in the event of a security breach.

Like other lending institutions, the Bank utilizes credit bureau data in its underwriting activities. Use of such data is regulated under the Federal Credit Reporting Act on a uniform, nationwide basis, including credit reporting, prescreening, sharing of information between affiliates, and the use of credit data. The Fair and Accurate Credit Transactions Act of 2003 (the “FACT Act”) permits states to enact identity theft laws that are not inconsistent with the conduct required by the provisions of the FACT Act.

Check 21

The Check Clearing for the 21st Century Act gives “substitute checks,” such as a digital image of a check and copies made from that image, the same legal standing as the original paper check. Some of the major provisions include:

· allowing check truncation without making it mandatory;

· demanding that every financial institution communicate to accountholders in writing a description of its substitute check processing program and their rights under the law;

· legalizing substitutions for and replacements of paper checks without agreement from consumers;

· retaining in place the previously mandated electronic collection and return of checks between financial institutions only when individual agreements are in place;

· requiring that when accountholders request verification, financial institutions produce the original check (or a copy that accurately represents the original) and demonstrate that the account debit was accurate and valid; and

· requiring the re-crediting of funds to an individual’s account on the next business day after a consumer proves that the financial institution has erred.

Effect of Governmental Monetary Policies

Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve Bank’s monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve Board have major effects upon the levels of bank loans, investments and deposits through its open market operations in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member bank deposits. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies.

Deposit Insurance Assessment

FDIC-insured depository institutions are required to pay deposit insurance premium assessments to the FDIC. The amount of a particular institution’s deposit insurance assessment is based on that institution’s risk classification under an FDIC risk-based assessment system. An institution’s risk classification is assigned based on its capital levels, the level of supervisory concern the institution poses to its regulators and other risk measures. The FDIC recently raised assessment rates to increase funding for the Deposit Insurance Fund (“DIF”), which is currently under-funded.

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The Dodd-Frank Act changes the deposit insurance assessment framework, primarily by basing assessments on an institution’s total assets less tangible equity (subject to risk-based adjustments that would further reduce the assessment base for custodial banks) rather than domestic deposits, which is expected to shift a greater portion of the aggregate assessments to large banks. The Dodd-Frank Act also eliminates the upper limit for the reserve ratio designated by the FDIC each year, increases the minimum designated reserve ratio of the DIF from 1.15% to 1.35% of the estimated amount of total insured deposits by September 30, 2020, and eliminates the requirement that the FDIC pay dividends to depository institutions when the reserve ratio exceeds certain thresholds.

The Dodd-Frank Act requires the DIF to reach a reserve ratio of 1.35% of insured deposits by September 30, 2020. On December 14, 2010, the FDIC raised the minimum designated reserve ratio of DIF to 2%. The ratio is higher than the minimum reserve ratio of 1.35% as set by the Dodd-Frank Act. Under the Dodd-Frank Act, the FDIC is required to offset the effect of the higher reserve ratio on insured depository institutions with consolidated assets of less than $10 billion.

On February 7, 2011, the FDIC approved a final rule on Assessments, Dividends, Assessment Base and Large Bank Pricing. The final rule, mandated by the Dodd-Frank Act, changes the deposit insurance assessment system from one that is based on domestic deposits to one that is based on average consolidated total assets minus average tangible equity. Because the new assessment base under the Dodd-Frank Act is larger than the current assessment base, the final rule’s assessment rates are lower than the current rates, which achieves the FDIC’s goal of not significantly altering the total amount of revenue collected from the industry. In addition, the final rule adopts a “scorecard” assessment scheme for larger banks and suspends dividend payments if the DIF reserve ratio exceeds 1.5% but provides for decreasing assessment rates when the DIF reserve ratio reaches certain thresholds. The final rule also determines how the effect of the higher reserve ratio will be offset for institutions with less than $10 billion of consolidated assets.

Continued action by the FDIC to replenish the DIF as well as the changes contained in the Dodd-Frank Act may result in higher assessment rates, which would reduce our profitability or otherwise negatively impact our operations.

In addition to its insurance assessment, each insured bank is subject in 2011 to quarterly debt service assessments in connection with bonds issued by a government corporation that financed the federal savings and loans bailout. The first quarter 2011 debt service assessment is 0.0102% of each bank’s insured deposits and the second quarter 2011 assessment is 0.01% of each bank’s insured deposits.

General Assessment Fees

The OCC currently charges assessments to all national banks based upon the asset size of the bank. In addition to the general assessment fees, the OCC imposes surcharges on national banks with a supervisory composite rating of 3, 4 or 5 in its most recent safety and soundness examination. The general assessment fee is paid to the OCC on a semi-annual basis. The Dodd-Frank Act provides various agencies with the authority to assess additional supervision fees.

Incentive Compensation

In June 2010, the Federal Reserve, the FDIC and the OCC issued a comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

The Federal Reserve will review, as part of the regular, risk-focused examination process, the incentive

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compensation arrangements of banking organizations, such as the company, that are not “large, complex banking organizations.” These reviews will be tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements. The findings of the supervisory initiatives will be included in reports of examination. Deficiencies will be incorporated into the organization’s supervisory ratings, which can affect the organization’s ability to make acquisitions and take other actions. Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.

Depositor Preference

The FDI Act provides that, in the event of the “liquidation or other resolution” of an insured depository institution, the claims of depositors of the institution (including the claims of the FDIC as subrogee of insured depositors) and certain claims for administrative expenses of the FDIC as a receiver will have priority over other general unsecured claims against the institution. If we invest in or acquire an insured depository institution that fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, nondeposit creditors, including us, with respect to any extensions of credit they have made to such insured depository institution and priority over any of the Bank’s stockholders, including us, or our investors or creditors.

Recent Legislative Developments and Regulatory Initiatives

Federal, state, and local legislators and regulators regularly introduce measures or take actions that would modify the regulatory requirements applicable to banks, thrifts, their holding companies, and other financial institutions. Changes in laws, regulations, or regulatory policies could impact us or the Bank in ways we cannot predict.

The Dodd-Frank Wall Street Reform and Consumer Protection Act

On July 21, 2010, President Obama signed the Dodd-Frank Act into law. The act will have a broad impact on the financial services industry, imposing significant regulatory and compliance changes, including the designation of certain financial companies as systemically significant, the imposition of increased capital, leverage, and liquidity requirements, and numerous other provisions designed to improve supervision and oversight of, and strengthen safety and soundness within, the financial services sector. Additionally, the act establishes a new framework of authority to conduct systemic risk oversight within the financial system to be distributed among new and existing federal regulatory agencies, including the Financial Stability Oversight Council (Council), the Federal Reserve, the OCC, and the FDIC.

The following items provide a brief description of certain provisions of the act.

· Source of Strength. The act requires all companies that directly or indirectly control an insured depository institution to serve as a source of strength for the institution. Under this requirement, in the future we could be required to provide financial assistance to the Bank should it experience financial distress.

· Payment of Interest on Demand Deposits Permitted. The act repeals the prohibition on banks and other financial institutions from paying interest on demand deposits. Financial institutions will be permitted to begin paying interest on demand deposits beginning in July 2011. This could result in increased competition for these deposits from the Bank’s competitors and increase the Bank’s overall cost of funds, which could increase our cost of operations and reduce our profitability.

· Limitation on Federal Preemption. The act significantly reduces the ability of national banks to rely upon federal preemption of state consumer financial laws. Although the OCC will have the ability to make preemption determinations where certain conditions are met, the broad rollback of federal preemption has the potential to create a patchwork of federal and state compliance obligations. This could, in turn, result in significant new regulatory requirements applicable to us, with potentially

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significant changes in our operations and increases in our compliance costs. It could also result in uncertainty concerning compliance, with attendant regulatory and litigation risks.

· Mortgage Loan Origination and Risk Retention. The act contains additional regulatory requirements that may affect our operations and result in increased compliance costs. For example, the act imposes new standards for mortgage loan originations on all lenders, including banks and thrifts, in an effort to require steps to verify a borrower’s ability to repay. In addition, the act generally requires lenders or securitizers to retain an economic interest in the credit risk relating to loans the lender sells or mortgage and other asset-backed securities that the securitizer issues. The risk retention requirement generally will be 5%, but could be increased or decreased by regulation.

· Imposition of Restrictions on Certain Activities. The act requires new regulations for the over-the-counter derivatives market, including requirements for clearing, exchange trading, capital, margin, and reporting. Additionally, the act requires that certain swaps and derivatives activities be “pushed out” of insured depository institutions and conducted in non-bank affiliates, significantly restricts the ability of a member of a depository institution holding company group to invest in or sponsor certain private funds, and broadly restricts such entities from engaging in “proprietary trading,” subject to limited exemptions. These restrictions may affect our ability to manage certain risks in our business.

· Expanded FDIC Resolution Authority. While insured depository institutions have long been subject to the FDIC’s resolution framework, the act creates a new mechanism for the FDIC to conduct the orderly liquidation of certain “covered financial companies,” including bank holding companies and systemically significant non-bank financial companies. Upon certain findings being made, the FDIC may be appointed receiver for a covered financial company, and would be tasked to conduct an orderly liquidation of the entity. The FDIC liquidation process is generally modeled on the existing Federal Deposit Insurance Act (FDI Act), bank resolution regulations, and generally gives the FDIC more discretion than in the traditional bankruptcy context.

· Creation of New Consumer Protection Bureau. The act creates a new Bureau of Consumer Financial Protection within the Federal Reserve with broad powers to supervise and enforce consumer protection laws. The Bureau of Consumer Financial Protection will have broad rule-making authority for a wide range of consumer protection laws that apply to all insured depository institutions. The Bureau of Consumer Financial Protection has examination and enforcement authority over all depository institutions with more than $10 billion in assets. Depository institutions with $10 billion or less in assets, such as the Bank, will be examined by their applicable bank regulators.

· Deposit Insurance. The act makes permanent the general $250,000 deposit insurance limit for insured deposits and provides for unlimited deposit coverage for non-interest-bearing transaction accounts until January 1, 2013. Amendments to the FDI Act also revise the assessment base against which an insured depository institution’s deposit insurance premiums paid to the DIF will be calculated. Under these amendments, the assessment base will no longer be the institution’s deposit base, but rather its average consolidated total assets less its average tangible equity. Additionally, the act makes changes to the minimum designated reserve ratio of the DIF, increasing the minimum from 1.15% to 1.35% of the estimated amount of total insured deposits, and eliminating the requirement that the FDIC pay dividends to depository institutions when the reserve ratio exceeds certain thresholds. These provisions could increase the FDIC deposit insurance premiums paid by the Bank.

· Transactions with Affiliates and Insiders. The act generally enhances the restrictions on transactions with affiliates under Section 23A and 23B of the Federal Reserve Act, including an expansion of the definition of “covered transactions” and an increase in the amount of time for which collateral requirements regarding covered credit transactions must be satisfied. Insider transaction limitations are expanded through the strengthening of loan restrictions to insiders and the expansion of the types of transactions subject to the various limits, including derivatives transactions, repurchase agreements, reverse repurchase agreements and securities lending or borrowing transactions. Restrictions are also placed on

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certain asset sales to and from an insider to an institution, including requirements that such sales be on market terms and, in certain circumstances, approved by the institution’s board of directors.

· Enhanced Lending Limits. The act strengthens the existing limits on a depository institution’s credit exposure to one borrower. Federal banking law currently limits a federal thrift’s ability to extend credit to one person (or group of related persons) in an amount exceeding certain thresholds. The act expands the scope of these restrictions to include credit exposure arising from derivative transactions, repurchase agreements, and securities lending and borrowing transactions.

· Executive Compensation and Corporate Governance Requirements. The act requires us to include, at least once every three years, a separate non-binding “say on pay” vote in our proxy statement by which stockholders may vote on the compensation of our named executive officers. In addition, the act also includes provisions that may impact our corporate governance. For instance, the act grants the SEC authority to issue rules that allow stockholders to nominate directors by using the company’s proxy solicitation materials and requires the SEC to adopt rules:

· prohibiting the listing of any equity security of a company that does not have an independent compensation committee; and

· requiring all exchange-traded companies to adopt clawback policies for incentive compensation paid to executive officers in the event of accounting restatements based on material non-compliance with financial reporting requirements.

Many of the requirements of the act will be implemented over time and most will be subject to regulations implemented over the course of several years. Given the uncertainty surrounding the manner in which many of the act’s provisions will be implemented by the various regulatory agencies and through regulations, the full extent of the impact on our operations is unclear. The changes resulting from the act may impact the profitability of our business activities, require changes to certain of our business practices, impose upon us more stringent capital, liquidity and leverage requirements or otherwise adversely affect our business. These changes may also require us to invest significant management attention and resources to evaluate and make any changes necessary to comply with new statutory and regulatory requirements. Failure to comply with the new requirements may negatively impact our results of operations and financial condition. While we cannot predict what effect any presently contemplated or future changes in the laws or regulations or their interpretations would have on us, these changes could be materially adverse to our investors.

Basel III

Internationally, both the Basel Committee on Banking Supervision (the “Basel Committee”) and the Financial Stability Board (established in April 2009 by the Group of Twenty (“G-20”) Finance Ministers and Central Bank Governors to take action to strengthen regulation and supervision of the financial system with greater international consistency, cooperation, and transparency) have committed to raise capital standards and liquidity buffers within the banking system (“Basel III”).

On September 12, 2010, the Group of Governors and Heads of Supervision agreed to the calibration and phase-in of the Basel III minimum capital requirements (raising the minimum Tier 1 common equity ratio to 4.5% and minimum Tier 1 equity ratio to 6.0%, with full implementation by January 2015) and introducing a capital conservation buffer of common equity of an additional 2.5% with full implementation by January 2019.

In December 2010, the Basel Committee released its final framework for strengthening international capital and liquidity regulation, now officially identified by the Basel Committee as “Basel III.” Basel III, when implemented by the U.S. banking agencies and fully phased-in, will require bank holding companies and their bank subsidiaries to maintain substantially more capital, with a greater emphasis on common equity.

The Basel III final capital framework, among other things, (a) introduces as a new capital measure “Common Equity Tier 1” (“CET1”), (b) specifies that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting specified requirements, (c) defines CET1 narrowly by requiring that most adjustments

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to regulatory capital measures be made to CET1 and not to the other components of capital, and (d) expands the scope of the adjustments as compared to existing regulations.

When fully phased in on January 1, 2019, Basel III requires banks to maintain (a) as a newly adopted international standard, a minimum ratio of CET1 to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% CET1 ratio as that buffer is phased in, effectively resulting in a minimum ratio of CET1 to risk-weighted assets of at least 7%), (b) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio as that buffer is phased in, effectively resulting in a minimum Tier 1 capital ratio of 8.5% upon full implementation), (c) a minimum ratio of Total (that is, Tier 1 plus Tier 2) capital to risk-weighted assets of at least 8.0%, plus the capital conservation buffer (which is added to the 8.0% total capital ratio as that buffer is phased in, effectively resulting in a minimum total capital ratio of 10.5% upon full implementation), and (d) as a newly adopted international standard, a minimum leverage ratio of 3%, calculated as the ratio of Tier 1 capital to balance sheet exposures plus certain off-balance sheet exposures (computed as the average for each quarter of the month-end ratios for the quarter).

Basel III also provides for a “countercyclical capital buffer,” generally to be imposed when national regulators determine that excess aggregate credit growth becomes associated with a buildup of systemic risk, that would be a CET1 add-on to the capital conservation buffer in the range of 0% to 2.5% when fully implemented (potentially resulting in total buffers of between 2.5% and 5%).

The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the conservation buffer (or below the combined capital conservation buffer and countercyclical capital buffer, when the latter is applied) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.

The implementation of the Basel III final framework will commence January 1, 2013. On that date, banking institutions will be required to meet the following minimum capital ratios:

· 3.5% CET1 to risk-weighted assets;

· 4.5% Tier 1 capital to risk-weighted assets; and

· 8.0% Total capital to risk-weighted assets.

The Basel III final framework provides for a number of new deductions from and adjustments to CET1. These include, for example, the requirement that mortgage servicing rights, deferred tax assets dependent upon future taxable income and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such categories in the aggregate exceed 15% of CET1.

Implementation of the deductions and other adjustments to CET1 will begin on January 1, 2014 and will be phased-in over a five-year period (20% per year). The implementation of the capital conservation buffer will begin on January 1, 2016 at 0.625% and be phased in over a four-year period (increasing by that amount on each subsequent January 1, until it reaches 2.5% on January 1, 2019).

The U.S. banking agencies have indicated informally that they expect to propose regulations implementing Basel III in mid-2011 with final adoption of implementing regulations in mid-2012. Notwithstanding its release of the Basel III framework as a final framework, the Basel Committee is considering further amendments to Basel III, including the imposition of additional capital surcharges on globally systemically important financial institutions. In addition to Basel III, Dodd-Frank requires or permits the Federal banking agencies to adopt regulations affecting banking institutions’ capital requirements in a number of respects, including potentially more stringent capital requirements for systemically important financial institutions. Further, new regulations and statutes are regularly proposed that contain wide-ranging proposals for altering the structures, regulations, and competitive relationships of the nation’s financial institutions. We cannot predict whether or in what form any proposed regulation or statute will be adopted or the extent to which our business may be affected by any new regulation or statute.

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MANAGEMENT

Directors and Executive Officers

Our directors and executive officers and their ages and positions with us as of January 13, 2012 are as follows:

Name	Age	Position
Executive Officers:

Milton H. Jones Jr.	59	Chairman, President, Chief Executive Officer and Director

Charles M. Williams	52	Vice Chairman, Chief Operating Officer and Director

Walter L. Davis	47	Vice Chairman, Chief Credit Officer and Director

K. Angela Webb	48	Senior Executive Vice President and Chief Administrative Officer

R. Hampton Painter III	54	Senior Executive Vice President and Chief Financial Officer

Non-Executive Directors:

J. Veronica Biggins	65	Director

Robert J. Brown	76	Director

Hildy J. Teegen	45	Director

Robert L. Wright	74	Director

The business experience and background of each of our directors and executive officers is provided below. Our directors are elected at each annual stockholders meeting to serve a one-year term expiring at the next annual stockholders meeting and until their successors are elected and qualified.

Executive Officers

Milton H. Jones Jr., Chairman, President, Chief Executive Officer and Director

Milton H. Jones Jr. has served as our Chairman, President and Chief Executive Officer since our founding in November 2009. Mr. Jones spent 32 years at Bank of America and its predecessor companies, most recently as the Georgia Market President of Bank of America, which had more than $12 billion in retail deposits, 155 branches and 7,000 associates. Prior to that, Mr. Jones was the Global Quality & Productivity (Q&P) Executive for Bank of America and President of the Mid-South Region of Bank of America, which had more than 200 banking centers, $15 billion in deposits and $10 billion in loans. He also served on Bank of America’s Operating Committee and Chairman of its Diversity Advisory Council. Mr. Jones was also the former Global Finance Services Group Executive, President of Dealer Financial Services, Chief Technology Infrastructure Officer and held various senior executive roles in the finance organization at Bank of America. Mr. Jones graduated from the University of Notre Dame. Currently, he serves on the Executive Committee of the YMCA of Metropolitan Atlanta, chairs the Board of Trustees of Meharry Medical College in Nashville, Tennessee, serves on the Board and chairs the Audit Committee of UNCF and is on the board of the Metro Atlanta Chamber of Commerce. Mr. Jones brings to our board of directors valuable and extensive experience from managing and overseeing a broad range of operations during his tenure at Bank of America. His experience in leadership roles and activities in the Southeast qualify him to serve as the Chairman of our board of directors.

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Charles M. Williams, Vice Chairman, Chief Operating Officer and Director

Charles M. Williams has served as our Vice Chairman and Chief Operating Officer since our founding in November 2009. From 1996 to 2009, Mr. Williams served in various executive positions with Bank of America, including Managing Director and Chief Administrative Officer of the Global Corporate and Investment Bank (GCIB). In this role, he managed investment bank’s global infrastructure, including $1 billion in strategic investments in over 40 companies, central funding, operational risk, capital management and reporting, information research, operations, off-shoring, financial reporting and business risk controls. Mr. Williams also served as a member of the board of managers of Banc of America Securities, LLC and a senior member of the Global Markets Risk Committee. He was also the former Chairman and President of Bank of America Overseas Corporation and Bank of America International Finance Corporation where he was directly responsible for overseeing offshore tax, insurance and conduit transactions. Prior to the above, Mr. Williams was the Corporate Risk Evaluation Executive for Bank of America where he led global audit, credit review, compliance, operational risk and regulatory relations. He earned a Bachelor’s Degree in Economics from Marquette University. Mr. Williams’ extensive experience at Bank of American managing strategic investments and operational risk qualifies him to serve on our board of directors.

Walter L. Davis, Vice Chairman, Chief Credit Officer and Director

Walter L. Davis has served as our Vice Chairman and Chief Credit Officer since our founding in November 2009. From 2005 to 2009, he served as Executive Vice-President of Retail Credit and Direct Lending of Wachovia Corporation where he was responsible for leading Wachovia’s nationwide originations, servicing, settlement services and default management organizations for the bank’s $70 billion consumer credit portfolio. Prior to his tenure at Wachovia, Mr. Davis over 11 years at Bank of American, most recently as a Principal in the Real Estate Syndicated Capital Markets Group. At Bank of America, he was responsible for the syndication and participation of large commercial real estate transactions, many of which included the use of tax-exempt bonds and various tax-credit instruments. Mr. Davis holds a B.S. Degree in Psychology from the University of South Carolina and is a graduate of the University of South Carolina School of Banking. He serves on the Board of Trustees of Providence Day School and on the Business Partnership Foundation Board at the University of South Carolina School of Business. Mr. Davis’ substantial experience with loan originations, syndications, and default management at Wachovia and Bank of America qualifies him to serve on our board of directors.

K. Angela Webb, Senior Executive Vice President and Chief Administrative Officer

Angela Webb has served as a Senior Executive Vice President and our Chief Administrative Officer since our founding in November 2009. Prior to joining us, Ms. Webb served more than 20 years at Wachovia Bank and its predecessors, most recently as the Human Resources Executive and Senior Manager of Wachovia Bank’s General Bank’s Mortgage and Retail Credit Division where she was responsible for managing a team of human resource professionals that provided strategic and consultative leadership and tactical execution to a client group of more than 15,000 employees in 40 states. Ms. Webb also served as a business consultant and collaborated with the General Bank senior managers to build and expand centralized underwriting centers across the east coast to support its branch network. She holds a B.A. Degree in Industrial Psychology from the University of North Carolina at Charlotte and is a member of SHRM, a certified diversity practitioner and a DDI Administrator. Ms. Webb serves on the boards of the Greenville South Carolina Community Foundation and the National Urban League for the Upstate of South Carolina.

R. Hampton Painter III, Senior Executive Vice President and Chief Financial Officer

R. Hampton Painter III has served as a Senior Executive Vice President and our Chief Financial Officer since March 2011. Mr. Painter is a veteran of the banking and financial management industry with almost 30 years of executive management experience among regional and community banks, financial consulting operations, and with a privately-owned mortgage banking company. From 2003 to 2010, Mr. Painter held various positions with Plantation Financial Corporation, including Chief Financial Officer, Treasurer and Secondary Marketing Manager. His duties ranged from accounting and treasury operations to secondary marketing, pricing and interest rate risk management. Prior to joining Plantation Financial Corporation, Mr. Painter co-founded First Trust Mortgage Corporation of the South, a multi-state mortgage banking company headquartered in Greenville, South Carolina.

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From 1996 until its sale in 2002, he served as its Chief Financial Officer and Secretary/Treasurer. Mr. Painter also operated Capital Strategies, Inc., a financial consulting company providing strategic planning, funds management, analytical, and interest rate and commodity price hedging services to clients in the banking, money management, and public utilities sectors from 1994 to 1996. Mr. Painter began his banking career in 1982 with First Savings Bank, a multi-billion asset statewide savings institution headquartered in Greenville, South Carolina. During his 12 years with the bank, he served various finance-oriented roles, including Chief Investment Officer and Treasurer. Mr. Painter holds a BS degree in applied economics from Clemson University.

Board of Directors

The board currently consists of seven members, Ms. Biggins and Ms. Teegen and Messrs. Brown, Davis, Jones, Williams, and Wright. All of the directors other than Messrs. Davis, Jones and Williams qualify as independent directors under the corporate governance standards of the New York Stock Exchange, the exchange that we selected in order to determine whether our directors and committee members meet the independence criteria of a national securities exchange, as required by Item 407(a) of Regulation S-K.

J. Veronica Biggins

Veronica Biggins has been a member of our board of directors since June 2010. Ms. Biggins has been the Managing Partner of Hodge Partners, an Atlanta-based search firm specializing in senior executive and board level searches, since 2007. Prior to joining Hodge Partners, she served as Managing Partner of the Heidrick & Struggles Diversity Services Practice from 1996 to 2007. Ms. Biggins previously served as Assistant to the President of the United States and Director of Presidential Personnel under William Jefferson Clinton and was responsible for selecting and hiring political appointees within the federal government. She also served as Vice Chairman of the U.S. Delegation to the United Nations Fourth World Conference on Women in Beijing and Chairman of the Czech Slovak American Enterprise Fund. Ms. Biggins’ background includes 20 years experience with NationsBank (now Bank of America) and its predecessor, The Citizens and Southern National Bank, where she served as Executive Vice President and Director of Human Resources for the Georgia market before becoming Executive Vice President for Corporate Community Relations. Ms. Biggins currently serves on the board of directors of Southwest Airlines, Avent and Zep, Inc. and has served on the board of directors of AirTran Airways. Ms. Biggins holds a master’s degree from Georgia State University and a bachelor’s degree from Spelman College. Ms. Biggins’ professional experience provides her with a unique perspective on compensation related issues and board governance matters and qualifies her to serve on our board.

Robert J. Brown

Robert J. Brown has been a member of our board of directors since December 2009. Mr. Brown has served as the Chairman and Chief Executive Officer of B&C Associates, Inc., a management consulting, public relations and marketing research firm in High Point, North Carolina, that has served many of the Fortune 500, since 1973. Mr. Brown established B&C in 1960 and served as President and Chief Executive Officer until 1968 when he took a leave of absence from the company to serve as Special Assistant to President Richard Nixon. He has also been the Chairman and Chief Executive Officer of B&C International, Inc. and President of International BookSmart Foundation since 1973. Mr. Brown joined the First Union board of directors in 1993 and became a member of the board of directors of Wachovia Corporation in 2001, from which he retired in 2008 when he reached the mandatory retirement age. Mr. Brown serves on the boards of High Point University, Boston University (Board of Overseers), Virginia Union University, Florida A&M University, American Cancer Society Foundation, NCAA Leadership Advisory Board, National Urban League, and Horatio Alger Association. He is a director of AutoNation, Inc. Mr. Brown attended North Carolina Agricultural and Technical State University and Virginia Union University. Mr. Brown’s extensive experience as a senior executive with several companies makes him well qualified to be a member of our board.

Hildy J. Teegen

Hildy J. Teegen has been a member of our board of directors since February 2011. Ms. Teegen has been the Dean of the Moore School of Business at the University of South Carolina since 2007. Prior to joining the University of South Carolina, she was founding director of The George Washington University’s Center for

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International Business Education and Research (CIBER) in Washington, D.C. Ms. Teegen also held a joint appointment at George Washington as Professor of International Business at the School of Business and Professor of International Affairs at the Elliott School. She has taught international business at the George Washington University, The College of William and Mary, Instituto Tecnológico Autónomo de México in Mexico City, the University of Texas at Austin, Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM) in Monterrey, Mexico, and Universidade do Porto in Oporto, Portugal. Ms. Teegen’s extensive experience in higher education provides our board valuable insight and qualifies her to serve on our board.

Robert L. Wright

Robert L. Wright has been a member of our board of directors since December 2009. Dr. Wright founded Dimensions International, Inc. (DI) in 1985 and served as Chairman and Chief Executive Officer then Chairman Emeritus and Senior Advisor until 2007 when the company was sold to Honeywell. Starting with only three employees, Dr. Wright built DI into an organization with more than 100 offices in 10 countries and over 1500 employees in 16 different time zones. DI provided leading-edge technology to the government and private sector in the fields of logistics support, systems engineering and integration, information management and technology, airspace management, and security engineering and operations. Dr. Wright also served as Chairman of Flight Explorer (FE), a global flight tracking, information technology and communications solutions provider to the business aviation and traveler community from 2003 until it was sold in September 2008 to Sabre Technologies. He currently serves as Chairman and CEO of FE Holdings, Inc., a company dedicated to the entrepreneurial spirit of investment and growth in the private and development sectors with interests in motorsports, gaming, entertainment, real estate and lighting. Dr. Wright has been a member of the AFLAC Incorporated board of directors since 1999 and is currently the Chairman of the Audit Committee of AFLAC. Mr. Wright’s expertise in financial and accounting matters as well as his extensive experience leading and growing successful business qualifies him to serve on our board.

Compensation Committee Interlocks and Insider Participation

During 2011, our compensation committee consisted of Veronica Biggins, Edward J. Brown III, Robert J. Brown, and Robert L. Wright. Edward J. Brown III resigned from our board of directors effective December 31, 2011. None of them has at any time been an officer or employee of the Company, and none has had any relationship with the Company of the type that is required to be disclosed under Item 404 of Regulation S-K. None of our executive officers serves or has served as a member of the board of directors, compensation committee or other board committee performing equivalent functions of another entity that has one or more executive officers serving as a member of the board of directors or compensation committee of the Company.

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COMPENSATION DISCUSSION AND ANALYSIS

Executive Compensation

The following Compensation Discussion and Analysis provides information regarding the objectives and elements of our compensation program with respect to the compensation of executive officers who appear in the “—Summary Compensation Table” below (who we refer to collectively throughout this section as our “named executive officers”). Our named executive officers for the fiscal year ended December 31, 2011 were:

· Milton H. Jones Jr., Chairman, Chief Executive Officer and President

· Charles M. Williams, Vice Chairman and Chief Operating Officer(1)

· Walter L. Davis, Vice Chairman and Chief Credit Officer

· K. Angela Webb, Senior Executive Vice President and Chief Administrative Officer

· R. Hampton Painter III, Senior Executive Vice President and Chief Financial Officer

(1) Mr. Williams served as our Chief Financial Officer until Mr. Painter joined us in March 2011.

Philosophy and Objectives of Our Executive Compensation Program

Our philosophy on executive compensation is to align the interests of our executive management with the interests of our stockholders and to ensure that the total compensation paid to our executive officers is reasonable and competitive. The four key objectives of our executive compensation program are:

· Align executive compensation with stockholder value. Within our overall compensation strategy, we utilize equity-based compensation to align financial interests and objectives of our named executive officers with those of our stockholders.

· Attract, retain, and motivate high-performing executive talent. We operate in a competitive employment environment and our executive talent is essential to our viability. The compensation offered to our named executive officers is designed to be competitive with regional bank holding companies and is also designed to motivate the named executive officers to maximize our performance.

· Link pay to performance. Our compensation program is designed to provide a strong correlation between the performance of the named executive officers and the compensation he or she receives. We accomplish this linkage by including compensation elements that reward our named executive officers based on overall performance and the executives’ contribution to achievement of strategic goals.

· Link to Safety and Soundness. In addition to the factors described above, we consider the contributions of each of our named executive officers to our overall safety and soundness when making compensation decisions.

Setting Executive Compensation

Process for Determining Executive Compensation

The compensation for our named executive officers is largely based on employment agreements that were negotiated at the time of our 2010 private offering. The founding members of our executive management team directly negotiated the terms of their compensation with investors at that time. Going forward, the executive compensation process will be the responsibility of the Compensation Committee with input from senior leadership as appropriate. Total compensation packages for named executive officers reflect assessments of individual responsibilities, contributions to corporate performance, and overall Company success in reaching strategic goals.

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Role of Compensation Committee

Our Compensation Committee is currently composed of Veronica Biggins, Robert J. Brown and Robert L. Wright. Our common stock is not currently listed on any national exchange, or quoted on any inter-dealer quotation service, that imposes independence requirements on our board of directors or any committee thereof. We have selected the director independence requirements of the New York Stock Exchange to evaluate whether our directors and committee members meet the independence criteria. Based upon this standard, our Board of Directors has determined that each of the members of our Compensation Committee is independent.

The Compensation Committee is responsible for administering our executive compensation program in a manner consistent with our compensation philosophy. Although the key terms of each named executive officer’s compensation were primarily determined at the time of our 2010 private offering, the Compensation Committee is responsible for setting performance goals for named executive officers and reviewing all other compensation and benefits for named executive officers on an ongoing basis. The Compensation Committee acts independently, but works closely with our Board of Directors and the senior leadership team in making many of its decisions. To support year-end 2011 decisions and to prepare a foundation for 2012 decision making, the Compensation Committee has retained the services of Semler Brossy Consulting Group, LLC (Semler Brossy).

Role of Management

Executive management and the Compensation Committee of our Board of Directors work together to establish, review, and evaluate compensation packages and policies. Executive management provides input into our strategic goals for future performance periods. However, the Compensation Committee carefully reviews recommended goals before giving its final approval. We believe this process ensures that goals will be motivating and challenging, but also attainable.

Role of Compensation Advisor

Our Compensation Committee retailed Semler Brossy as an advisor in the fourth quarter of 2011. They have begun the process of working with the Compensation Committee to develop a formal peer group, approve compensation ranges for the named executive officers, and approve a formal annual incentive plan with specific performance objectives and payout ranges.

Comparative Analysis

Our current executive compensation program is largely based on direct negotiations that took place at the time of our 2010 private offering between named executive officers and investors. For 2012, we anticipate that the Compensation Committee will develop a customized peer group of comparable financial institutions as a means of providing insight into marketplace compensation practices and pay levels as well as relative levels of organizational performance.

Compensation Risk Oversight

Although our Compensation Committee is responsible for the oversight of our compensation of employees and directors, the Audit Committee is responsible for the risk management, including risk as it relates to compensation. Our compensation practices are also subject to the review of our regulators. After reviewing our executive and broad-based compensation programs, we do not believe that our overall compensation policies and practices create risks that are reasonably likely to have a material adverse effect on our Company.

Principal Components of Compensation

The principal components of our executive compensation program applicable to our named executive officers for the fiscal year ended December 31, 2011 were as follows:

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Base Salary

Base salaries provide our named executive officers with fixed cash compensation for service during the year and are designed to compensate the executive for the scope of his or her responsibilities with consideration given to tenure, experience and other qualifications essential to his or her role. Base salaries for our named executive officers for 2011 were set in accordance with employment agreements that were negotiated at the time of our 2010 private offering and were as follows: Mr. Jones — $340,000; Mr. Williams — $325,000; Mr. Davis — $325,000; Ms. Webb — $300,000; and Mr. Painter — $200,000 (pro-rated salary of $161,411 based on hire date of March 2011). During 2011, none of our named executive officers received any increases to their base salary. Unlike traditional regional bank holding companies, our approach to base salaries for the leadership team is based on teamwork and equal contributions by each member of the leadership team.

Discretionary Annual Cash Bonus Program

Our named executive officers currently participate in a discretionary annual cash bonus program. The program is intended to provide our named executive officers with an opportunity to earn annual incentives for the achievement of performance objectives. In making its annual bonus determination for named executive officers, the Compensation Committee considers individual and company performance, but does not rely on predetermined performance goals and weightings or a formulaic calculation. Rather, the Compensation Committee engages in an overall assessment of appropriate bonus levels based on a subjective interpretation of relevant criteria. The specific factors considered by the Compensation Committee may include, among other things, overall individual performance, organizational performance, achievement of specific milestones, or individual contribution to organizational performance.

As of the date of this filing, the Compensation Committee has not finalized any decisions regarding the payment of bonuses to the named executive officers for 2011. The Compensation Committee is considering individual accomplishments as well as the overall performance of the business as it determines whether to pay our named executive officers bonuses for 2011.

In the future, the Compensation Committee may adopt a bonus plan with specific target bonus amounts for each named executive officer and specific operating milestones that would result in the payment of a bonus. The relevant factors of such a bonus program would be communicated prior to, or at the beginning of the applicable performance period, at which time achievement of such performance levels would be substantially uncertain.

Long-Term Incentive Program. Our named executive officers may be awarded equity at the discretion of the Compensation Committee under our Equity Incentive Plan. These awards are intended to further align the interests of our named executive officers with the interests of our stockholders and emphasize long-term performance. These equity awards are structured to be long-term rewards, thereby increasing the performance and retention of our named executive officers.

Mr. Painter was the only named executive officer that received an equity award in 2011. He was granted 7,500 shares of restricted stock and stock options to acquire 17,500 shares of common stock pursuant to the terms of his employment agreement and our Equity Incentive Plan. The number of shares represents the “initial grant shares” subject to each award. The award agreements evidencing the restricted stock and option grants provide that the number of shares subject to each award will be reduced (but not increased) based on the number of Relevant Outstanding Shares on the date that the award first vests or becomes exercisable. If the number of Relevant Outstanding Shares on that date is less than 25,050,000 shares, then the number of shares subject to the award will be reduced to an amount equal to the product of multiplying the number of initial grant shares by a fraction, the numerator of which is the number of Relevant Outstanding Shares and the denominator of which is 25,050,000 shares; provided that the fraction cannot exceed one. As used in the prospectus, the term “Relevant Outstanding Shares” generally means outstanding shares of our common stock and outstanding shares of preferred stock that are convertible into shares of our common stock but does not include shares issued under certain circumstances including (a) “exempt securities,” which include shares issued in connection with our Equity Incentive Plan, shares issued in connection with the exercise of lead investor warrants, shares issued as direct consideration for an acquisition, and shares issued upon the conversion of our Class A Common Stock or Class B Common Stock, (b) shares issued because a federal regulator requires us to raise additional capital and (c) any shares that (i) were not

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issued in connection with financing a bank acquisition, (ii) were issued at a price less than $20.00 and (iii) were issued after an event that a majority of our independent directors determined had a material adverse effect.

The stock option vests with respect to all of the shares on June 30, 2014, if Mr. Painter remains employed until that date and prescribed safety and soundness criteria have been satisfied. The performance-based restricted stock that vests in accordance with the following requirements: (a) 1/3 of the shares vest if the average volume-weighted stock price for 20 consecutive trading days equals or exceeds $25.00 per share; (b) an additional 1/3 of the shares vest if the average volume-weighted stock price for 20 consecutive trading days equals or exceeds $28.00 per share and (iii) an additional 1/3 of the shares vest if the average volume-weighted stock price for 20 consecutive trading days equals or exceeds $32.00 per share; provided, however, that no shares will vest before our common stock is listed on a national securities exchange and the vesting of each tranche of shares is conditioned on our satisfaction of prescribed safety and soundness criteria and his continued employment until the vesting date. The terms of the stock options and performance-based restricted stock award are further described in the table “Outstanding Equity Awards at 2011 Fiscal Year-End” in this Compensation Discussion and Analysis.

Benefits

Our named executive officers are not entitled to any perquisites. Our named executive officers are provided with benefits, including participation in our 401(k) defined contribution program and insurance benefit programs that are offered to other eligible employees.

Other Compensation-Related Items

Employment Agreements

Effective May 27, 2010 and amended and restated on February 22, 2011, we entered into employment agreements with Messrs. Jones, Williams and Davis and Ms. Webb. Effective April 12, 2011, we entered into an employment agreement with Mr. Painter. The employment agreements, which are more fully described below, provide for an annual base salary, annual bonus opportunity, an initial equity grant and severance benefits upon a termination of employment by us without “good cause” or a resignation by the executive with “good reason.”

Equity Ownership Requirements

We believe that maintaining equity ownership in the Company will help align executives’ interests with the interests of the stockholders. Accordingly, we have structured the equity grants to promote ownership by adopting a multi-year vesting schedule and other performance conditions. We do not have a stock ownership policy for our executive officers as of December 31 2011, but the Compensation Committee may consider and adopt such a policy in the future.

Tax Considerations

We generally intend structure our base salary and incentive compensation programs to maximize the deductibility of compensation under Section 162(m) of the Internal Revenue Code, from and after the time that our compensation programs become subject to Section 162(m). However, the Compensation Committee and our Board of Directors will take into consideration a multitude of factors in making executive compensation decisions and could, in certain circumstances, approve and authorize compensation that is not fully tax deductible. Transition provisions under Section 162(m) may apply for a period following the effective date of this registration statement to certain compensation arrangements that were entered into by a corporation before it was publicly held.

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Summary Compensation Table

The following table sets forth information concerning all compensation awarded to, earned by or paid to our principal executive and financial officers and our three other most highly compensated executive officers, collectively referred to as “named executive officers” in this prospectus, for all services rendered in all capacities to us and our subsidiaries for the fiscal year ended December 31, 2011.

	Year	Salary ($)			Bonus ($)(3)	Stock Awards ($)(4)		Option Awards ($)(5)		Non- Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
Milton H. Jones Jr.	2011	$	340,000		—	—		—		—	—	—	$	340,000
Chairman, Chief Executive Officer and President
Charles M. Williams (1)	2011	$	325,000		—	—		—		—	—	—	$	325,000
Vice Chairman and Chief Operating Officer
Walter L. Davis	2011	$	325,000		—	—		—		—	—	—	$	325,000
Vice Chairman and Chief Credit Officer
K. Angela Webb	2011	$	300,000		—	—		—		—	—	—	$	300,000
Senior Executive Vice President and Chief Administrative Officer
R. Hampton Painter III (1)	2011	$	161,411	(2)	—	$	144,600	$	142,275	—	—	—	$	448,286
Senior Executive Vice President and Chief Financial Officer

(1) Mr. Painter commenced employment with us on March 10. Mr. Williams acted as our Chief Financial Officer prior to Mr. Painter commencing employment.

(2) The amount in this column for Mr. Painter reflects the salary paid during his employment with us in 2011, i.e., a pro rata amount of his $200,000 annual base salary.

(3) The amount of bonus for 2011 is not calculable as of January 13, 2012. To the extent applicable, bonus information will be provided in a pre-effective amendment to this registration statement.

(4) The amount in this column for Mr. Painter reflects the aggregate grant date fair value of the restricted stock awarded to Mr. Painter in 2011 calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation - Stock Compensation (“FASB ASC Topic 718”). The amount included in this column for the restricted stock award subject to performance-based vesting conditions is calculated based on the probable satisfaction of the performance conditions for such award. If the highest level of performance is achieved for Mr. Painter’s restricted stock award, the maximum value of the award at the grant date would be $150,000. See note 13 of the unaudited consolidated financial statements as of September 30, 2011 for an explanation of the assumptions made in valuing this award.

(5) The amount in this column for Mr. Painter reflects the aggregate grant date fair value of the stock option award granted to Mr. Painter in 2011. The grant date fair value was determined in accordance with FASB ASC Topic 718. The grant date fair value of the stock option is estimated using the Black-Scholes option pricing model. See note 13 of the unaudited consolidated financial statements as of September 30, 2011 for an explanation of the assumptions made in valuing this award.

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Grants of Plan-Based Awards in Fiscal Year 2011

The following table provides a summary regarding plan-based awards granted to the named executive officers in 2011. Except for the restricted stock and stock options granted to Mr. Painter, no plan-based awards were granted to our named executive officers in 2011.

Estimated

Future

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