1. babc.com ALABAMA I DISTRICT OF COLUMBIA I MISSISSIPPI I NORTH CAROLINA I TENNESSEE Community Bankers Association of Alabama 24 th Annual Convention & Trade Show May 23 – 26, 2010 Disney’s Yacht & Beach Club 1

2. babc.com ALABAMA I DISTRICT OF COLUMBIA I MISSISSIPPI I NORTH CAROLINA I TENNESSEE FDIC Receivership Transactions May 24, 2010 Presented by Paul Compton 2

3.  Education He received his B.S. in Commerce and Business Administration, summa cum laude, in 1985 from The University of Alabama, studied at the London School of Economics and Political Science, and received his J.D. from the University of Virginia School of Law in 1989. He is a 1983 Truman Scholar. He is listed in Chambers USA: America’s Leading Lawyers for Business in the Banking and Finance category, and in The Best Lawyers in America for Banking Law, Corporate Law, Insurance Law and Securities Law. He is a native of Georgiana, Alabama.  Experience –Over 60 acquisitions and sales of depository institutions –Over 200 transactions involving low income housing tax credits –Over 15 de novo formations of banks, bank holding companies and insurance companies © 2010 Bradley Arant Boult Cummings LLP 3

4. “History does not repeat itself, but it sure does rhyme”. – Mark Twain 4

5. Bank Failures 1980-2010 5

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8. Failed Bank Impact 8

9. Regulatory Analysis Ratio of Borrowed Money + Brokered Deposits to Deposits Loans Past Due Percentage Allowance for Loan Losses Tier 1 Leverage Capital Acquisition, Construction and Development Total Commercial Real Estate Percentage Nonowner Occupied CREAsset Rating Adversely Classified Assets to Capital Average of CAMELS Ratings 1 & 211.12%4.00%1.40%11.21%74.10%238%160.81% 26.93% CAMELS Rating 312.0%5.60%1.83%8.81%125%320%215%373% CAMELS Rating 424.0%12.0%1.93%7.14% 168% (1)387%278%4 or 5 147% (2) (1) 150% is a 4 rating indicator. (2) This is the indicator for a 5 rating. 9

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11. Failed Bank vs. Live Bank Deals General Considerations  Advantage of Failed Bank Deals –Loss sharing agreements provide significant downside protection –Possibly some selection of assets –Generally little, if any, premium for assets/liabilities –In 2009 Virtually zero average deposit premium Approximately 10% average asset discount  Advantage of Live Bank Deal –One-on-one selection of target – no bidding process –Targeted growth strategy –Can be strong infrastructure/management 11

12. Kabuki 12

13. FDIC Resolution Process-Alabama Source: FDIC 13

14. Failed Bank Timing  Generally the process takes about 90 days from the commencement of involvement of DRR to receivership but can be shorter or longer  The bidding window is about 30 days out from planned closure (the date of which is never disclosed)  Historically, bidders notified 3 to 5 days after the bid deadline and 7 – 10 days before closing  If an investor wishes to propose a new deal structure, generally the investor posts the terms on the website and/or discusses with FDIC  New structures posted for other bidders  Closing occurs over a weekend 14

15. Failed Bank Market  Over 165 bank failures this cycle through 2009  41 failures through Q1 in 2010 -Expected to surpass 2009 failures  As of March 31, 2010, the FDIC “problem list” contains 775 banks – assets of $431B  Market has evolved from deposit-only transactions to whole bank transactions with loss sharing agreement  Various private investor structures: –Shelf Charters –Inflatable Charters –Blind Pools 15

16. Bid List Criteria Supervisory Criteria -Total Risk Based Capital ratio of 10% or higher -Tier 1 Risk Based Capital ratio of 6% or higher -Tier 1 Leverage Capital ratio of 4% or higher -CAMELS composite rating of 1 or 2 -CAMELS Management component rating 1 or 2 -Compliance rating of 1 or 2 -RFI/C rating of 1 or 2 -CRA rating of Satisfactory or Outstanding -Satisfactory Anti-Money Laundering Record Total Asset Size & Geographic Criteria -Total asset size threshold established for invitation is roughly double core deposits of failing bank when bidder is in geographic proximity to failing bank -Larger total asset size requirements when bidder is located in other states -Bidders may express preferences for invitation by state 16

17. DRR Regional Manager Contact Info Atlanta Region Pebble Connelly 678 – 916 – 2246 cconnelly@fdic.gov Mike Sewicki 678-916-2378 Chicago Region Gregory Watson 312 382 7594 gwatson@fdic.gov Dallas Region Mike Houston 972 761 8204 mhouston@fdic.gov West Virginia Virginia North Carolina South Carolina Georgia Alabama Florida Wisconsin Michigan Illinois Indiana Ohio Kentucky Colorado Oklahoma New Mexico Texas Arkansas Louisiana Mississippi Tennessee 17

18. Bidder Contacts  Banks can use FDICconnect to provide M&A contact information for invitations to bid. –FDICconnect can be accessed through www.fdic.gov or at https://www2.fdicconnect.gov/.www.fdic.gov https://www2.fdicconnect.gov/  Banks may complete a survey to record their areas of geographic interest.  Submitting geographic preferences does not imply that an institution will be notified of all potential failing institutions in that state.  Banks may also send an email to provide contact information institutionsales@fdic.gov.institutionsales@fdic.gov 18

19. Marketing via IntraLinks  Marketing process starts with email to prospective bidder inviting them to IntraLinks for a specific resolution project  After executing electronic Confidentiality Agreement, bidders may read an Executive Summary & Transaction Recap  If interested, may request access to Project’s data room for information about failing bank & transaction terms  Deposit & Loan Downloads (Customer identifiable information redacted)  Premises  IT  Legal documents (bid forms, instructions, P&A documents, etc.)  Regulatory contact information  Key dates, bid instructions 19

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22. Failed Bank Process  Insured bank placed into receivership by primary federal regulator  FDIC becomes receiver of assets/liabilities  FDIC solicits bids from listed acquirors  By statute, FDIC selects winning bidder(s) based on least cost (proprietary) to the DIF  Winning bidder(s) enter into P&A, and generally loss sharing agreements with FDIC 22

23. Failed Bank Deal Documents/Terms  Loss Sharing Agreements (revised March 2010) –Generally cover a substantial majority of assets –10 years for residential assets –5 years for commercial assets –80% of losses to a defined “stated threshold” (historically, now generally) –95% of losses above threshold (historically) Although phasing out –“True-Up” calculations –“Give back” a portion of asset discount if losses less than the expected at end of 10 years  Document generally not heavily negotiated  P&A covers assets/liabilities (not necessarily all) 23

24. Typical FDIC Failed Bank Bid Construction  Determine deposit premium (as a % of deposits)  Determine asset premium/(discount) (as a % of assets)  Determine first loss tranche bid (as a percentage of loss share), can be zero or positive Cash Paid/Received Calculation:  Net book value of assets acquired minus liabilities assumed  Deposit premium (if any)  Asset premium/discount  Wired on Monday following closure 24

25. Sample Bid 25

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29. Sample Bid Numbers Assumptions Total estimated amount of capital raised $ 5,000Tier 1 leverage ratio uses total assets versus period end assets. From issuance of common stock $ 2,500Assets acquired liabilities assumed are est. FV of 12/31/09 balances From long term debt $ 2,500Acquiring bank balances are are as of 12/31/09. # # (in 000's) No Addtl Capital With Addtl Capital Acquiring Bank Assets Acquired Pro Forma Pre-Acquisition Liabilities Assumed Combined Cash and cash equivalents $ 20,000 $ 21,389 $ 41,389 $ 46,389 Securities 52,000 16,000 68,000 Loans 160,000 63,750 223,750 Allowance for loan losses (1,875) - Premises and equipment 7,500 2,168 9,668 Other assets 10,000 - Other real estate owned 250 Core deposit intangible - - - Goodwill - - Indemnification asset 10,752 Total assets $ 247,625 $ 114,308 $ 361,933 $ 366,933 Deposits $ 200,000 $ 100,000 $ 300,000 300,000 FHLB Advances 18,000 3,000 21,000 Other liabilities 7,625 Deferred tax liability 214 Total liabilities $ 225,625 $ 103,214 $ 328,839 Equity 22,000 11,094 33,094 38,094 Total liabilities and equity $ 247,625 $ 114,308 $ 361,933 $ 366,933 Tier 1 leverage ratio8.88% 9.14% 10.38% Tier 1 risk based capital11.99% 15.59% 17.94% Total risk based capital13.24% 16.67% 19.02% Capital Ratio Calculations Total AssetsWeightedTotal AssetsWeighted Risk weight - 0% $ 11,125 $ - $ 23,514 $ - Risk weight - 20% 50,000 10,000 139,500 27,900 Risk weight - 50% 22,000 11,000 25,000 12,500 Risk weight - 100% 162,500 171,919 $ 245,625 $ 183,500 $ 359,933 $ 212,319 Total equity $ 22,000 $ 33,094 $ 38,094 Net unrealized (gains) losses on AFS sec - - - Disallowed intangible assets - - Total Tier 1 Capital 22,000 33,094 38,094 Allowance for loan losses (1.25% limit) 2,294 Total Risk Based Capital $ 24,294 $ 35,387 $ 40,387 29

30. Special Considerations  Fair value accounting under FAS 157 (ASC 820) for the loss sharing agreement with the FDIC (aka Indemnification Asset)  Application of SOP 03-3 (ASC 310-30). No allowance for loan and lease losses is established initially.  The complexity of administering the loss sharing agreement with the FDIC. Many tricks and traps. Complying with it is not merely following “What Would Jesus Do”.  Rejection of ordinary course contracts.  Employment decisions. 30

31. FDIC Website Where Sample Agreement Can Be Obtained  Generally, may access the “failed bank” list on the www.fdic.gov website, select a bank and under the index for the bank resolution choose “Purchase and Assumption Agreement”www.fdic.gov  Or, for a recent specific sample, go to http://www.fdic.gov/bank/individual/failed/bonifay_p_and_a.pdf http://www.fdic.gov/bank/individual/failed/bonifay_p_and_a.pdf 30A

32. Questions? 31

33. Contact Information J. Paul Compton, Jr. Bradley Arant Boult Cummings LLP 1819 Fifth Avenue North Birmingham, Alabama 35203-2119 Direct: (205) 521-8381 Fax: (205) 488-6381 Email: pcompton@babc.compcompton@babc.com 32

34. babc.com ALABAMA I DISTRICT OF COLUMBIA I MISSISSIPPI I NORTH CAROLINA I TENNESSEE Community Bankers Association of Alabama 24 th Annual Convention & Trade Show May 23 – 26, 2010 Disney’s Yacht & Beach Club 2037510