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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K


ý

 

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended December 31, 2010

o

 

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

For the transition period from                                  to                                 

Commission file number 001-12669

GRAPHIC

SCBT FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

South Carolina
(State or other jurisdiction of incorporation
or organization)
  57-0799315
(I.R.S. Employer Identification No.)

520 Gervais Street
Columbia, South Carolina

(Address of principal executive offices)

 


29201
(Zip Code)

(800) 277-2175

(Registrant's telephone number, including area code)

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

Title of each class   Name of each exchange on which registered
Common stock, $2.50 par value per share   The NASDAQ Global Select MarketSM

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

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

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

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

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o    No o.

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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.

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

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

         The aggregate market value of the voting stock of the registrant held by non-affiliates was $428,423,000 based on the closing sale price of $35.22 per share on June 30, 2010. For purposes of the foregoing calculation only, all directors and executive officers of the registrant have been deemed affiliates. The number of shares of common stock outstanding as of March 9, 2011 was 13,958,824.

Documents Incorporated by Reference

         Portions of the Registrant's Definitive Proxy Statement for its 2011 Annual Meeting of Shareholders are incorporated by reference into Part III, Items 10 - 14 of this form 10-K.


Table of Contents

SCBT Financial Corporation
Index to Form 10-K

 
   
  Page

PART I

       

Item 1.

 

Business

  3

Item 1A.

 

Risk Factors

  21

Item 1B.

 

Unresolved Staff Comments

  33

Item 2.

 

Properties

  33

Item 3.

 

Legal Proceedings

  34

Item 4.

 

Removed and Reserved

  34

PART II

       

Item 5.

 

Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

  35

Item 6.

 

Selected Financial Data

  37

Item 7.

 

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

  40

Item 7A.

 

Quantitative and Qualitative Disclosures about Market Risk

  75

Item 8.

 

Financial Statements and Supplementary Data

  75

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

  75

Item 9A.

 

Controls and Procedures

  75

Item 9B.

 

Other Information

  75

PART III

       

Item 10.

 

Directors, Executive Officers and Corporate Governance(1)

  76

Item 11.

 

Executive Compensation(1)

  76

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters(1)

  76

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence(1)

  77

Item 14.

 

Principal Accounting Fees and Services(1)

  77

PART IV

       

Item 15.

 

Exhibits, Financial Statement Schedules

  78

(1)
All or portions of this item are incorporated by reference to the Registrant's Definitive Proxy Statement for its 2011 Annual Meeting of Shareholders.

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Forward-Looking Statements

        This Report contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on many assumptions and estimates and are not guarantees of future performance. Our actual results may differ materially from those anticipated in any forward-looking statements, as they will depend on many factors about which we are unsure, including many factors which are beyond our control. The words "may," "would," "could," "will," "expect," "anticipate," "believe," "intend," "plan,""predict,""should," and "estimate," as well as similar expressions, are meant to identify such forward-looking statements. Potential risks and uncertainties include, but are not limited to those described below under "Risk Factors."


PART I

Item 1.    Business.

        SCBT Financial Corporation ("SCBT"), headquartered in Columbia, South Carolina, is a bank holding company incorporated in 1985 under the laws of South Carolina. We were formerly named First National Corporation until February 2004. We provide a wide range of banking services and products to our customers through our wholly-owned subsidiary, SCBT, N.A. (which we sometimes refer to as "our bank" or "the bank"), a national bank that opened for business in 1934. We operate as South Carolina Bank and Trust, South Carolina Bank and Trust of the Piedmont ("Piedmont"), North Carolina Bank and Trust ("NCBT"), Community Bank and Trust ("CBT"),and Habersham Bank ("Habersham"). Piedmont, NCBT, CBT, and Habersham are divisions of SCBT, N.A.

        SCBT is a legal entity separate and distinct from its subsidiary. We coordinate the financial resources of the consolidated enterprise and thereby maintain financial, operation and administrative systems that allow centralized evaluation of subsidiary operations and coordination of selected policies and activities. SCBT's operating revenues and net income are derived primarily from cash dividends received from our bank subsidiary.

        Our bank provides a full range of retail and commercial banking services, mortgage lending services, trust and investment services, and consumer finance loans through 46 financial centers in 17 South Carolina counties, 3 financial centers in Mecklenburg County of North Carolina, and 27 financial centers in 10 counties in Northeast Georgia. Our bank has served the Carolinas for more than seventy-six years. At December 31, 2010, we had approximately $3.6 billion in assets, $2.6 billion in loans, $3.0 billion in deposits, $330.0 million in shareholders' equity, and market capitalization of $419.0 million.

        We began operating in 1934 in Orangeburg, South Carolina and have maintained our ability to provide superior customer service while also leveraging our size to offer many products more common to super-regional banks. We have pursued a growth strategy that relies primarily on organic growth, supplemented by the acquisition of select financial institutions or branches in certain market areas.

        In recent years, we have continued to grow our business in South Carolina, and have expanded into North Carolina and Georgia, as highlighted below:

    Subsequent to year-end on February 18, 2011—acquired all of the deposits, certain other borrowings, and certain assets of Habersham , a full service Georgia-state-chartered community bank headquartered in Clarkesville, Georgia in a Federal Deposit Insurance Corporation ("FDIC")-assisted transaction. The transaction added 8 banking locations in Northeast Georgia. Habersham operates as a division of SCBT, N.A.

    November 2010—Spartanburg Wealth Management office expanded its services to include a full-service branch.

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    January 29, 2010—acquired all of the deposits excluding brokered deposits, certain other borrowings, and certain assets of CBT, a full service Georgia-state-chartered community bank headquartered in Cornelia, Georgia in a FDIC-assisted transaction. The transaction initially added 38 locations, including 36 banking, 1 trust office, and 1 loan production office ("LPO") in North Georgia. CBT operates as a division of SCBT, N.A.

    November 2009—our Wealth Management department hired the former Wachovia regional executive team to lead our entry into the Spartanburg, South Carolina market.

    November 2009—opened a full-service branch in Mt. Pleasant, South Carolina which replaced an LPO located on Daniel Island, South Carolina.

    December 2008—opened a full-service branch on James Island, South Carolina.

    December 2008—opened a full-service branch in Irmo, South Carolina to replace the limited-service branch.

    December 2008—merged Piedmont into our bank and continued to operate as South Carolina Bank and Trust of the Piedmont, a division of SCBT, N.A.

    November 2008—merged The Scottish Bank ("TSB") into our bank and began operating as NCBT, a division of SCBT, N.A.

        Our principal executive offices are located at 520 Gervais Street, Columbia, South Carolina 29201. Our mailing address at this facility is Post Office Box 1030, Columbia, South Carolina 29202 and our telephone number is (800) 277-2175.

Withstanding Market Turbulence

        Despite the turbulence in financial markets and the financial services industry, we believe that our credit quality measures continue to outperform those of the majority of our primary competitors in North and South Carolina and Georgia. We attribute this historical performance to sound credit underwriting and risk selection, as well as our approach of hiring experienced financial services professionals in the markets in which we operate. Generally, hiring bankers in the markets in which we operate has enabled us to further our growth without experiencing significant credit quality related losses like many other financial institutions of similar size or that operate in our market areas.

Available Information

        We provide our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") on our website at www.scbtonline.com. These filings are made accessible as soon as reasonably practicable after they have been filed electronically with the Securities and Exchange Commission (the "SEC"). These filings are also accessible on the SEC's website at www.sec.gov. In addition, we make available on our website the following: (i) Corporate Governance Guidelines, (ii) Code of Conduct & Ethics, which applies to our directors and all employees, and (iii) the charters of the Audit, Compensation, and Corporate Governance & Nominating Committees of our board of directors. These materials are available in a printed format free of charge to shareholders who request them in writing. Please address your request to: Financial Management Division, SCBT Financial Corporation, 520 Gervais Street, Columbia, South Carolina 29201. Statements of beneficial ownership of equity securities filed by directors, officers, and 10% or greater shareholders under Section 16 of the Exchange Act are also available through our website, http://www.scbtonline.com/filings. The information on our website is not incorporated by reference into this report.

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Territory Served and Competition

        We serve customers and conduct our business through the Bank from seventy-six financial centers in seventeen South Carolina counties, Mecklenburg County of North Carolina, and ten northeast Georgia counties. Piedmont, NCBT, and CBT are divisions of SCBT, N.A. Piedmont operates from six financial centers in two South Carolina counties; NCBT operates from three financial centers in Mecklenburg County of North Carolina; and CBT operates from twenty-seven financial centers in ten Northeast Georgia counties. Subsequent to year-end on February 18, 2011, we continued our expansion into Northeast Georgia with the acquisition of all of the deposits (excluding brokered deposits), certain other borrowings, and certain other assets of Habersham. SCBT currently operates from eight locations in six Northeast Georgia counties as Habersham Bank, a division of SCBT, N.A.

        We compete in the highly competitive banking and financial services industry. Our profitability depends principally on our ability to effectively compete in the markets in which we conduct business. We expect competition in the industry to continue to increase as a result of consolidation among banking and financial services firms. Competition may further intensify as additional companies enter the markets where we conduct business and we enter mature markets in accordance with our expansion strategy.

        We experience strong competition from both bank and non-bank competitors in certain markets. Broadly speaking, we compete with super-regional, smaller community banks, and non-traditional internet-based banks. We compete for deposits and loans with commercial banks, savings institutions, and credit unions. In addition, we compete with other financial intermediaries and investment alternatives such as mortgage companies, credit card issuers, leasing companies, finance companies, money market mutual funds, brokerage firms, governmental and corporation bonds, and other securities firms. Many of these non-bank competitors are not subject to the same regulatory oversight, affording them a competitive advantage in some instances. In many cases, our competitors have substantially greater resources, can provide higher lending limits, and offer certain services that we are unable to provide to our customers.

        We encounter strong competition in making loans and attracting deposits. We compete with other financial institutions to offer customers the competitive interest rates on deposit accounts, the competitive interest rates charged on loans and other credit, and reasonable service charges. Our customers also consider the quality and scope of the services provided, the convenience of banking facilities, and relative lending limits in the case of loans to commercial borrowers. Our customers may also take into account the fact that other banks offer different services from those that we provide. The large national and super-regional banks may have significantly greater lending limits and may offer additional products. However, we believe that SCBT has been able to compete successfully with our competitors, regardless of their size. We do this by emphasizing customer service and by providing a wide variety of services.

Employees

        As of December 31, 2010, our bank had 1,015 full-time equivalent employees compared to 700 as of the same date in 2009. We consider our relationship with our employees instrumental to the success of our business. We provide our employees with a comprehensive employee benefit program which includes the following: group life, health and dental insurance, paid vacation, sick leave, educational opportunities, a cash incentive plan, a stock purchase plan, stock incentive, deferred compensation plans for officers and key employees, a defined benefit pension plan for employees hired on or before December 31, 2005 (except for employees acquired in the SunBank acquisition), and a 401(k) plan with employer match. Effective July 1, 2009, the Company suspended the accrual of benefits for plan participants under the non-contributory defined benefit plan. Effective April 1, 2009, we temporarily suspended the employer match contribution to all participants in the plan. Effective January 1, 2010,

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we reinstated the employer match so that participating employees would receive a 50% matching of their 401(k) plan contribution, up to 4% of salary.

Regulation and Supervision

        As a financial institution, we operate under a regulatory framework. The framework outlines a regulatory environment applicable to financial holding companies, bank holding companies, and their subsidiaries. Below, we have provided some specific information relevant to SCBT. The regulatory framework under which we operate is intended primarily for the protection of depositors and the Deposit Insurance Fund and not for the protection of our security holders and creditors. To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions.

General

        The current regulatory environment for financial institutions includes substantial enforcement activity by the federal banking agencies, the U.S. Department of Justice, the Securities and Exchange Commission, and other state and federal law enforcement agencies, reflecting an increase in activity over prior years. This environment entails significant potential increases in compliance requirements and associated costs.

        We are a bank holding company registered with the Board of Governors of the Federal Reserve System and are subject to the supervision of, and to regular inspection by, the Federal Reserve Board. Our bank is organized as a national banking association. It is subject to regulation, supervision, and examination by the Office of the Comptroller of the Currency (the "OCC"). In addition, SCBT and our Bank are subject to regulation (and in certain cases examination) by the FDIC, other federal regulatory agencies, the South Carolina State Board of Financial Institutions (the "State Board"), the North Carolina Office of the Commissioner of Banks, and the Georgia Department of Banking and Finance. The following discussion summarizes certain aspects of banking and other laws and regulations that affect SCBT and its subsidiary bank.

        Under the Bank Holding Company Act (the "BHC Act"), our activities and those of our subsidiary bank are limited to banking, managing or controlling banks, furnishing services to or performing services for our subsidiary bank, or any other activity which the Federal Reserve Board determines to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. The BHC Act requires prior Federal Reserve Board approval for, among other things, the acquisition by a bank holding company of direct or indirect ownership or control of more than 5% of the voting shares or substantially all the assets of any bank, or for a merger or consolidation of a bank holding company with another bank holding company. The BHC Act also prohibits a bank holding company from acquiring direct or indirect control of more than 5% of the outstanding voting stock of any company engaged in a non-banking business unless such business is determined by the Federal Reserve Board to be so closely related to banking as to be a proper incident thereto. Further, under South Carolina law, it is unlawful without the prior approval of the State Board for any South Carolina bank holding company (i) to acquire direct or indirect ownership or control of more than 5% of the voting shares of any bank or any other bank holding company, (ii) to acquire all or substantially all of the assets of a bank or any other bank holding company, or (iii) to merge or consolidate with any other bank holding company.

        The Graham-Leach-Bliley Act amended a number of federal banking laws affecting SCBT and our bank. In particular, the Graham-Leach-Bliley Act permits a bank holding company to elect to become a "financial holding company," provided certain conditions are met. A financial holding company, and the companies it controls, are permitted to engage in activities considered "financial in nature" as defined by the Graham-Leach-Bliley Act and Federal Reserve Board interpretations (including, without

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limitation, insurance and securities activities), and therefore may engage in a broader range of activities than permitted by bank holding companies and their subsidiaries. We remain a bank holding company, but may at some time in the future elect to become a financial holding company.

Interstate Banking

        National banks are required by the National Bank Act to adhere to branch office banking laws applicable to state banks in the states in which they are located. In July 1994, South Carolina enacted legislation which effectively provided that, after June 30, 1996; out-of-state bank holding companies may acquire other banks or bank holding companies in South Carolina, subject to certain conditions. Further, pursuant to the Riegel-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Banking and Branching Act"), a bank holding company became able to acquire banks in states other than its home state, beginning in September 1995, without regard to the permissibility of such acquisition under state law, subject to certain exceptions. The Interstate Banking and Branching Act also authorized banks to merge across state lines, thereby creating interstate branches, unless a state, prior to the July 1, 1997 effective date, determined to "opt out" of coverage under this provision. In addition, the Interstate Banking and Branching Efficiency Act authorized a bank to open new branches in a state in which it does not already have banking operations if such state enacted a law permitting such "de novo" branching.

        Effective July 1, 1996, South Carolina law was amended to permit interstate branching through acquisitions but not de novo branching by an out-of-state bank.

        North Carolina opted-in to the provision of the Interstate Banking and Branching Act that allows out-of-state banks to branch into their state by establishing a de novo branch in the state, but only on a reciprocal basis. This means that an out-of-state bank could establish a de novo branch in North Carolina only if the home state of such bank would allow North Carolina banks (including national banks with their home office in North Carolina) to establish de novo branches in that home state under substantially the same terms as allowed in North Carolina. Because some states impose greater limits on de novo branching by out-of-state banks, this provided a limited barrier of entry into the North Carolina banking market. Georgia has not opted-in to the provision allowing out-of-state banks to branch into their state. Therefore, interstate merger has been the only method through which a bank located outside of Georgia may branch into Georgia, which in effect has provided a limited barrier of entry into the Georgia banking market.

        On July 21, 2010, the U.S. President signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). The Dodd-Frank Act removes previous state law restrictions on de novo interstate branching in states such as South Carolina, North Carolina, and Georgia. This change effectively permits out-of-state banks to open de nova branches in states where the laws of the state where the de nova to be opened would permit a bank chartered by that sate to open a de nova branch.

Obligations of Holding Company to its Subsidiary Banks

        Under the policy of the Federal Reserve Board, a bank holding company is required to serve as a source of financial strength to its subsidiary depository institutions and to commit resources to support such institutions in circumstances where it otherwise might not desire or be able to do so. Under the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), to avoid receivership of its insured depository institution subsidiary, a bank holding company is required to guarantee the compliance of any insured depository institution subsidiary that may become "undercapitalized" within the terms of any capital restoration plan filed by such subsidiary with its appropriate federal banking agency up to the lesser of (i) an amount equal to 5% of the institution's total assets at the time the institution became undercapitalized, or (ii) the amount which is necessary (or would have been

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necessary) to bring the institution into compliance with all applicable capital standards as of the time the institution fails to comply with such capital restoration plan.

        In addition, the "cross-guarantee" provisions of the Federal Deposit Insurance Act, as amended ("FDIA"), require insured depository institutions under common control to reimburse the FDIC for any loss suffered or reasonably anticipated by the FDIC as a result of the default of a commonly controlled insured depository institution or for any assistance provided by the FDIC to a commonly controlled insured depository institution in danger of default. The FDIC's claim for damages is superior to claims of shareholders of the insured depository institution or its holding company, but is subordinate to claims of depositors, secured creditors and holders of subordinated debt (other than affiliates) of the commonly controlled insured depository institutions.

        The FDIA also provides that amounts received from the liquidation or other resolution of any insured depository institution by any receiver must be distributed (after payment of secured claims) to pay the deposit liabilities of the institution prior to payment of any other general or unsecured senior liability, subordinated liability, general creditor or shareholder. This provision would give depositors a preference over general and subordinated creditors and shareholders in the event a receiver is appointed to distribute the assets of our bank.

        Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. In the event of a bank holding company's bankruptcy, any commitment by the bank holding company 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.

        Under the National Bank Act, if the capital stock of a national bank is impaired by losses or otherwise, the OCC is authorized to require payment of the deficiency by assessment upon the bank's shareholders, pro rata, and if any such assessment is not paid by any shareholder after three months notice, to sell the stock of such shareholder to make good the deficiency.

Government Actions

        The following is a summary of certain recently enacted laws and regulations that could materially impact our business, financial condition or results of operations.

        In response to the challenges facing the financial services sector, several regulatory and governmental actions have recently been announced including:

    The Emergency Economic Stabilization Act of 2008 ("EESA"), approved by Congress and signed by President Bush on October 3, 2008, which, among other provisions, allowed the U.S. Treasury to purchase up to $700 billion of mortgages, mortgage-backed securities and certain other financial instruments from financial institutions for the purpose of stabilizing and providing liquidity to the U.S. financial markets. EESA also temporarily raised the basic limit of FDIC deposit insurance from $100,000 to $250,000;

    On October 7, 2008, the FDIC approved a plan to increase the rates banks pay for deposit insurance (see page 16, "Insurance of Deposits");

    On October 14, 2008, the U.S. Treasury announced the creation of a new program, the Troubled Asset Relief Program (the "TARP") Capital Purchase Program (the "CPP") that encourages and allows financial institutions to build capital through the sale of senior preferred shares to the U.S. Treasury on terms that are non-negotiable. During the second quarter of 2009, we repurchased from the U.S. Treasury the preferred stock and common stock warrant that we issued to it on January 16, 2009 (see below and "Note 30—Participation in U.S. Treasury Capital Purchase Program" on page F-70);

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    On October 14, 2008, the FDIC announced the creation of the Temporary Liquidity Guarantee Program (the "TLGP"), which seeks to strengthen confidence and encourage liquidity in the banking system. The TLGP has two primary components that are available on a voluntary basis to financial institutions:

    The Transaction Account Guarantee Program ("TAGP"), which provides unlimited deposit insurance coverage through December 31, 2013 for noninterest-bearing transaction accounts (typically business checking accounts) and certain funds swept into noninterest-bearing savings accounts. Institutions participating in the TLGP pay a 10 basis points fee (annualized) on the balance of each covered account in excess of $250,000, while the extra deposit insurance is in place;

    The Debt Guarantee Program ("DGP"), under which the FDIC guarantees certain senior unsecured debt of FDIC-insured institutions and their holding companies. The unsecured debt must have been issued on or after October 14, 2008 and not later than October 31, 2009, and the guarantee is effective through the earlier of the maturity date or December 31, 2012. The DGP coverage limit is generally 125% of the eligible entity's eligible debt outstanding on September 30, 2008 and scheduled to mature on or before June 30, 2009 or, for certain insured institutions, 2% of their liabilities as of September 30, 2008. Depending on the term of the debt maturity, the nonrefundable DGP fee ranges from 50 to 100 basis points (annualized) for covered debt outstanding until the earlier of maturity or June 30, 2012. The TAGP and DGP are in effect for all eligible entities, unless the entity opted out on or before December 5, 2008.

    In December 2008, we decided to participate in the TLGP's enhanced deposit insurance program. As a result of the enhancements to deposit insurance protection and the demands on the FDIC's deposit insurance fund, our deposit insurance costs increased significantly during 2009.

    On February 10, 2009, the U.S. Treasury announced the Financial Stability Plan, which earmarked $350 billion of the TARP funds authorized under EESA. Among other things, the Financial Stability Plan includes:

    A capital assistance program that invested in mandatory convertible preferred stock of certain qualifying institutions determined on a basis and through a process similar to the Capital Purchase Program;

    A consumer and business lending initiative to fund new consumer loans, small business loans and commercial mortgage asset-backed securities issuances;

    A public-private investment fund program that is intended to leverage public and private capital with public financing to purchase up to $500 billion to $1 trillion of legacy "toxic assets" from financial institutions; and

    Assistance for homeowners by providing up to $75 billion to reduce mortgage payments and interest rates and establishing loan modification guidelines for government and private programs.

    On February 17, 2009, the American Recovery and Reinvestment Act (the "Recovery Act") became law. The Recovery Act specifies appropriations of approximately $787 billion for a wide range of Federal programs and increases or extends certain benefits payable under the Medicaid, unemployment compensation, and nutrition assistance programs. The Recovery Act also reduces individual and corporate income tax collections and makes a variety of other changes to tax laws. The Recovery Act also imposes certain limitations on compensation paid by participants in the U.S. Treasury's TARP.

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    On March 23, 2009, the U.S. Treasury, in conjunction with the FDIC and the Federal Reserve, announced the Public-Private Partnership Investment Program for Legacy Assets which consists of two separate programs, addressing two distinct asset groups:

    The first plan is the Legacy Loan Program, which has a primary purpose to facilitate the sale of troubled mortgage loans by eligible institutions, including FDIC-insured federal or state banks and savings associations. Eligible assets are not strictly limited to loans; however, what constitutes an eligible asset will be determined by participating banks, their primary regulators, the FDIC and the Treasury. Under the Legacy Loan Program, the FDIC has sold certain troubled assets out of an FDIC receivership in two separate transactions relating to the failed Illinois bank, Corus Bank, NA, and the failed Texas bank, Franklin Bank, S.S.B. These transactions were completed in September 2009 and October 2009, respectively.

    The second plan is the Securities Program, which is administered by the Treasury and involves the creation of public-private investment funds ("PPIFs") to target investments in eligible residential mortgage-backed securities and commercial mortgage-backed securities issued before 2009 that originally were rated AAA or the equivalent by two or more nationally recognized statistical rating organizations, without regard to rating enhancements (collectively, "Legacy Securities"). Legacy Securities must be directly secured by actual mortgage loans, leases or other assets, and may be purchased only from financial institutions that meet TARP eligibility requirements. The U.S.Treasury received over 100 unique applications to participate in the Legacy Securities PPIP and in July 2009 selected nine PPIF managers. As of September 30, 2010, the PPIFs had completed their fundraising have closed on approximately $7.4 billion of private sector equity capital, which was matched 100 percent by Treasury, representing $14.7 billion of total equity capital. Treasury has also provided $14.7 billion of debt capital, representing $29.4 billion of total purchasing power. As of September 30, 2010, PPIFs have drawn-down approximately $18.6 billion of total capital which has been invested in eligible assets and cash equivalents pending investment.

    On May 22, 2009, the FDIC levied a one-time special assessment on all banks due on September 30, 2009.

    In November 2009, the FDIC announced a final rule to require FDIC insured banks to prepay the fourth quarter assessment and the next three years assessment by December 31, 2009. The calculation of the prepaid assessment provides for a 5% growth rate assumption in the deposit base and a 3 basis point increase in FDIC assessments in 2011 and 2012. See page 16 under "Insurance of Deposits" for more information.

    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 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

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      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.

    On July 21, 2010, the U.S. President signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act"), a comprehensive regulatory framework that will likely result in dramatic changes across the financial regulatory system, some of which became effective immediately and some of which will not become effective until various future dates. Implementation of the Dodd-Frank Act will require many new rules to be made by various federal regulatory agencies over the next several years. Uncertainty remains as to the ultimate impact of the Dodd-Frank Act until final rulemaking is complete, which could have a material adverse impact either on the financial services industry as a whole or on our business, financial condition, results of operations, and cash flows. Provisions in the legislation that affect consumer financial protection regulations, deposit insurance assessments, payment of interest on demand deposits, and interchange fees could increase the costs associated with deposits and place limitations on certain revenues those deposits may generate. The Dodd-Frank Act includes provisions that, among other things, will:

    Centralize responsibility for consumer financial protection by creating a new agency, the Bureau of Consumer Financial Protection, responsible for implementing, examining, and enforcing compliance with federal consumer financial laws;

    Create the Financial Stability Oversight Council that will recommend to the Federal Reserve increasingly strict rules for capital, leverage, liquidity, risk management and other requirements as companies grow in size and complexity;

    Provide mortgage reform provisions regarding a customer's ability to repay, restricting variable-rate lending by requiring that the ability to repay variable-rate loans be determined by using the maximum rate that will apply during the first five years of a variable-rate loan term, and making more loans subject to provisions for higher cost loans, new disclosures, and certain other revisions;

    Change the assessment base for federal deposit insurance from the amount of insured deposits to consolidated assets less tangible capital, eliminate the ceiling on the size of the Deposit Insurance Fund ("DIF"), and increase the floor on the size of the DIF, which generally will require an increase in the level of assessments for institutions with assets in excess of $10 billion;

    Make permanent the $250,000 limit for federal deposit insurance and provide unlimited federal deposit insurance until December 31, 2012 for noninterest-bearing demand transaction accounts at all insured depository institutions;

    Implement corporate governance revisions, including with regard to executive compensation and proxy access by shareholders, which apply to all public companies, not just financial institutions;

    Repeal the federal prohibitions on the payment of interest on demand deposits, thereby permitting depository institutions to pay interest on business transactions and other accounts;

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      Amend the Electronic Fund Transfer Act ("EFTA") to, among other things, give the Federal Reserve the authority to establish rules regarding interchange fees charged for electronic debit transactions by payment card issuers having assets over $10 billion and to enforce a new statutory requirement that such fees be reasonable and proportional to the actual cost of a transaction to the issuer;

      Eliminate the Office of Thrift Supervision ("OTS") one year from the date of the new law's enactment. The OCC, which is currently the primary federal regulator for national banks, will become the primary federal regulator for federal thrifts. In addition, the Federal Reserve will supervise and regulate all savings and loan holding companies that were formerly regulated by the OTS.

    On September 27, 2010, the U.S. President signed into law the Small Business Jobs Act of 2010 (the "Act"). The Small Business Lending Fund (the "SBLF"), which was enacted as part of the Act, is a $30 billion fund that encourages lending to small businesses by providing Tier 1 capital to qualified community banks with assets of less than $10 billion. On December 21, 2010, the U.S. Treasury published the application form, term sheet and other guidance for participation in the SBLF. Under the terms of the SBLF, the Treasury will purchase shares of senior preferred stock from banks, bank holding companies, and other financial institutions that will qualify as Tier 1 capital for regulatory purposes and rank senior to a participating institution's common stock. The application deadline for participating in the SBLF is March 31, 2011.

    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. The U.S. federal banking agencies support this agreement. In December 2010, the Basel Committee issued the Basel III rules text, outlining the details and time-lines of global regulatory standards on bank capital adequacy and liquidity. According to the Basel Committee, the framework sets out higher and better-quality capital, better risk coverage, the introduction of a leverage ratio as a backstop to the risk-based requirement, measures to promote the build-up of capital that can be drawn down in periods of stress, and the introduction of two global liquidity standards.

    In November 2010, the Federal Reserve's monetary policymaking committee, the Federal Open Market Committee ("FOMC"), decided that further support to the economy was needed. With short-term interest rates already nearing 0%, the FOMC agreed to deliver that support by committing to purchase additional longer-term securities, as it did in 2008 and 2009. The FOMC intends to buy an additional $600 billion of longer-term U.S. Treasury securities by mid-2011 and will continue to reinvest repayments of principal on its holdings of securities, as it has been doing since August 2010.

    In November 2010, the FDIC approved two proposals that amend the deposit insurance assessment regulations. The first proposal implements a provision in the Dodd-Frank Act that changes the assessment base from one based on domestic deposits (as it has been since 1935) to one based on assets. The assessment base changes from adjusted domestic deposits to average consolidated total assets minus average tangible equity. The second proposal changes the deposit insurance assessment system for large institutions in conjunction with the guidance given in the

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      Dodd-Frank Act. Since the new base would be much larger than the current base, the FDIC will lower assessment rates, which achieves the FDIC's goal of not significantly altering the total amount of revenue collected from the industry. Risk categories and debt ratings will be eliminated from the assessment calculation for large banks which will instead use scorecards. The scorecards will include financial measures that are predictive of long-term performance. A large financial institution will continue to be defined as an insured depository institution with at least $10 billion in assets. Both changes in the assessment system will be effective as of April 1, 2011 and will be payable at the end of September. In December 2010, the FDIC voted to increase the required amount of reserves for the designated reserve ratio ("DRR") to 2.0%. The ratio is higher than the 1.35% set by the Dodd-Frank Act in July 2010 and is an integral part of the FDIC's comprehensive, long-range management plan for the DIF. On December 16, 2010, the Federal Reserve issued a proposal to implement a provision in the Dodd-Frank Act that requires the Federal Reserve to set debit card interchange fees. The proposed rule, if implemented in its current form, would result in a significant reduction in debit-card interchange revenue. Though the rule technically does not apply to institutions with less than $10 billion in assets, there is concern that the price controls may harm community banks, which could be pressured by the marketplace to lower their own interchange rates. In February 2011, the FDIC approved the final rules that, as noted above, change the assessment base from domestic deposits to average assets minus average tangible equity, adopt a new scorecard-based assessment system for financial institutions with more than $10 billion in assets, and finalize the DRR target size at 2.0% of insured deposits.

    On December 29, 2010, the Dodd-Frank Act was amended to include full FDIC insurance on Interest on Lawyers Trust Accounts ("IOLTAs"). IOLTAs will receive unlimited insurance coverage as noninterest-bearing transaction accounts for two years ending December 31, 2012.

        Although it is likely that further regulatory actions may arise as the Federal government continues to attempt to address the economic situation, 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.

Participation in the Capital Purchase Program of the Troubled Asset Relief Program

        As discussed above, under TARP authorized by the EESA, the U.S. Treasury established the CPP providing for the purchase of senior preferred shares of qualifying U.S. controlled banks, savings associations and certain bank and savings and loan holding companies. On January 16, 2009, pursuant to the CPP, SCBT sold 64,779 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series T (the "Series T Preferred Stock") and a warrant to acquire 303,083 shares of common stock (the "Warrant") to the U.S. Treasury for aggregate consideration of $64.8 million. On May 20, 2009, we entered into a repurchase letter agreement with the U. S. Treasury, pursuant to which we repurchased all 64,779 shares of its Series T Preferred Stock for an aggregate purchase price of approximately $64.8 million, which included accrued and unpaid dividends of approximately $45,000. On June 24, 2009, we entered into an agreement with the U.S. Treasury to repurchase the Warrant for a purchase price of $1.4 million. As a result of the Warrant repurchase, we have repurchased all securities issued to the U.S. Treasury under the CPP.

Capital Adequacy

        The various federal bank regulators, including the Federal Reserve Board and the OCC, have adopted risk-based capital requirements for assessing bank holding company and bank capital adequacy. These standards define what qualifies as capital and establish minimum capital standards in relation to assets and off-balance sheet exposures, as adjusted for credit risks. Capital is classified into tiers. For bank holding companies, Tier 1 or "core" capital consists primarily of common and qualifying preferred

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shareholders' equity, less certain intangibles and other adjustments ("Tier 1 Capital"). Tier 2 capital consists primarily of the allowance for possible loan losses (subject to certain limitations) and certain subordinated and other qualifying debt ("Tier 2 Capital"). Tier 3 capital consists primarily of qualifying unsecured subordinated debt. A minimum ratio of total capital to risk-weighted assets of 8.00% is required and Tier 1 Capital must be at least 50% of total capital. The Federal Reserve Board also has adopted a minimum leverage ratio of Tier 1 Capital to adjusted average total assets (not risk-weighted) of 3%. The 3% Tier 1 Capital to average total assets ratio constitutes the leverage standard for bank holding companies and national banks, and is used in conjunction with the risk based ratio in determining the overall capital adequacy of banking organizations.

        The Federal Reserve Board and the OCC have emphasized that the foregoing standards are supervisory minimums and that an institution would be permitted to maintain such levels of capital only if it had a composite rating of "1" under the regulatory rating systems for bank holding companies and banks. All other bank holding companies are required to maintain a leverage ratio of 3% plus at least 1% to 2% of additional capital. These rules further provide that banking organizations experiencing internal growth or making acquisitions will be expected to maintain capital positions substantially above the minimum supervisory levels and comparable to peer group averages, without significant reliance on intangible assets. The Federal Reserve Board continues to consider a "tangible Tier 1 leverage ratio" in evaluating proposals for expansion or new activities. The tangible Tier 1 leverage ratio is the ratio of a banking organization's Tier 1 Capital less all intangibles, to total assets, less all intangibles. The Federal Reserve Board has not advised us of any specific minimum leverage ratio applicable to SCBT.

        As of December 31, 2010 and 2009, SCBT and our subsidiary bank had the following leverage ratios and total risk-based capital ratios:

 
  December 31,  
(In percent)
  2010   2009  

Tier 1 Leverage Ratios

             

SCBT Financial Corporation

    8.48     9.89  

SCBT, N.A. 

    8.38     9.79  

Total Risk-Based Capital

             

SCBT Financial Corporation

    14.60     14.42  

SCBT, N.A. 

    14.43     14.28  

        Provisions within the Dodd-Frank Act will require institutions that had more than $15 billion in assets on December 31, 2009, will no longer be able to include trust preferred securities ("TRUPs") as Tier 1 capital beginning in 2013. One third will be phased out over the next two years ending in 2015. Financial institutions with less than $15 billion in total assets, such as SCBT, may continue to include their TRUPs issued prior to May 19, 2010 in Tier 1 capital, but cannot issue new capital TRUPs.

        The FDICIA, among other items, identifies five capital categories for insured depository institutions (well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized) and requires the respective Federal regulatory agencies to implement systems for "prompt corrective action" for insured depository institutions that do not meet minimum capital requirements within such categories. The FDICIA also imposes progressively more restrictive constraints on operations, management and capital distributions, depending on the category in which an institution is classified. Failure to meet the capital guidelines could also subject a banking institution to capital raising requirements. An "undercapitalized" bank must develop a capital restoration plan and its parent holding company must guarantee that bank's compliance with the plan (see "Obligations of Holding Company to its Subsidiary Banks," above). In addition, the FDICIA requires the various regulatory agencies to prescribe certain non-capital standards for safety and soundness relating

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generally to operations and management, asset quality, and executive compensation. The FDICIA permits regulatory action against a financial institution that does not meet such standards.

        The various regulatory agencies have adopted substantially similar regulations that define the five capital categories identified by the FDICIA, using the total risk-based capital, Tier 1 risk-based capital, and Tier 1 leverage ratios as the relevant capital measures. Such regulations establish various degrees of corrective action to be taken when an institution is considered undercapitalized. Under the regulations, an institution will be categorized as:

    "Well-capitalized" if the institution has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 5.0% or greater, and is not subject to any order or written directive by any such regulatory authority to meet and maintain a specific capital level for any capital measure.

    "Adequately-capitalized" if the institution has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 4.0% or greater, a leverage ratio of 4.0% or greater, and is not categorized as well-capitalized.

    "Undercapitalized" if the institution has a total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital ratio of less than 4.0%, or a leverage ratio of less than 4.0%.

    "Significantly-undercapitalized" if the institution has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 3.0%, or a leverage ratio of less than 3.0%.

    "Critically-undercapitalized" if the institution's tangible equity is equal to or less than 2.0% of average quarterly tangible assets.

        Under these guidelines, our bank is considered "well capitalized."

        Banking agencies have also adopted final regulations which mandate that regulators take into consideration (i) concentration of credit risk, (ii) interest rate risk (when the interest rate sensitivity of an institution's assets does not match the sensitivity of its liabilities or its off-balance-sheet position), and (iii) risks from non-traditional activities, as well as an institution's ability to manage those risks, when determining the adequacy of an institution's capital. That evaluation will be made as a part of the institution's regular safety and soundness examination. In addition, the banking agencies have amended their regulatory capital guidelines to incorporate a measure for market risk. In accordance with the amended guidelines, if we were to engage in significant trading activity (as defined in the amendment) we must incorporate a measure for market risk in our respective regulatory capital calculations effective for reporting periods after January 1, 1998.

Payment of Dividends

        SCBT is a legal entity separate and distinct from its subsidiary bank. Funds for cash distributions to our shareholders are derived primarily from dividends received from our bank subsidiary. Our bank is subject to various general regulatory policies and requirements relating to the payment of dividends. Any restriction on the ability of our bank to pay dividends will indirectly restrict the ability of SCBT to pay dividends.

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        The approval of the OCC is required if the total of all dividends declared by a national bank in any calendar year will exceed the total of its retained net profits for that year combined with its retained net profits for the two preceding years, less any required transfers to surplus. In addition, national banks can only pay dividends to the extent that retained net profits (including the portion transferred to surplus) exceed statutory bad debts in excess of the bank's allowance for loan losses ("ALLL"). Further, if in the opinion of the OCC a bank under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice (which, depending on the financial condition of the bank, could include the payment of dividends), the OCC may require, after notice and a hearing, that such bank cease and desist from such practice. The OCC has indicated that paying dividends that deplete a national bank's capital base to an inadequate level would be an unsafe and unsound banking practice. The Federal Reserve Board, the OCC, and the FDIC have issued policy statements which provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings.

        In addition to the foregoing, the ability of SCBT and its bank to pay dividends may be affected by the various minimum capital requirements and the capital and non-capital standards established under the FDICIA, as described above. The right of SCBT, its shareholders, and its creditors to participate in any distribution of the assets or earnings of its subsidiary is further subject to the prior claims of creditors of our subsidiary bank.

Certain Transactions by SCBT and its Affiliates

        Various legal limitations place restrictions on the ability of the bank to lend or otherwise supply funds to SCBT and its affiliate. The Federal Reserve Act limits a bank's "covered transactions," which include extensions of credit, with any affiliate to 10% of such bank's capital and surplus. All covered transactions with its affiliate cannot in the aggregate exceed 20% of a bank's capital and surplus. All covered and exempt transactions between a bank and its affiliate must be on terms and conditions consistent with safe and sound banking practices, and banks and their subsidiaries are prohibited from purchasing low-quality assets from the bank's affiliate. Also, the Federal Reserve Act requires that all of a bank's extensions of credit to an affiliate be appropriately secured by acceptable collateral, generally United States government or agency securities. In addition, the Federal Reserve Act limits covered and other transactions among affiliates to terms and circumstances, including credit standards, that are substantially the same or at least as favorable to a bank holding company, a bank or a subsidiary of either as prevailing at the time for transactions with unaffiliated companies.

Insurance of Deposits

        Deposits at our bank are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. The Deposit Insurance Fund is the successor to the Bank Insurance Fund and the Savings Association Insurance Fund, which were merged effective March 31, 2006. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC insured institutions. It also may prohibit any FDIC insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the insurance fund. The FDIC also has the authority to initiate enforcement actions against savings institutions, after giving the OTS an opportunity to take such action, and may terminate the deposit insurance if it determines that the institution has engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

        Under regulations effective January 1, 2007, the FDIC adopted a new risk-based premium system that provides for quarterly assessments based on an insured institution's ranking in one of four risk categories based upon supervisory and capital evaluations. For deposits held as of March 31, 2009, institutions were assessed at annual rates ranging from 12 to 50 basis points, depending on each institution's risk of default as measured by regulatory capital ratios and other supervisory measures. Effective April 1, 2009, assessments also took into account each institution's reliance on secured

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liabilities and brokered deposits. This resulted in assessments ranging from 7 to 77.5 basis points. In May 2009, the FDIC issued a final rule which levied a special assessment applicable to all insured depository institutions totaling 5 basis points of each institution's total assets less Tier 1 capital as of June 30, 2009, not to exceed 10 basis points of domestic deposits. This special assessment was part of the FDIC's efforts to rebuild the Deposit Insurance Fund. We paid this one-time special assessment in the amount of $1.3 million to the FDIC during the second quarter of 2009.

        In November 2009, the FDIC published a final rule to require FDIC insured banks to prepay the fourth quarter assessment and the next three years assessment by December 31, 2009. The calculation of the prepaid assessment provides for a 5% growth rate assumption in the deposit base and a 3 basis point increase in FDIC assessments in 2011 and 2012. Therefore, if deposits grow quicker than 5%, our quarterly expense in the future will increase compared to previous periods. The prepayment does not immediately impact expense levels during 2009, but does impact our liquidity. At December 31, 2010, the Company had a prepaid assessment to the FDIC of $7.1 million compared to $11.2 million at December 31, 2009. As a result of these factors, our FDIC general assessment rates in 2009 increased.

        FDIC insured institutions are required to pay a Financing Corporation assessment to fund the interest on bonds issued to resolve thrift failures in the 1980s. The Financing Corporation quarterly assessment for the fourth quarter of 2010 equaled 5.765 basis points for each $100 in domestic deposits at our institution. These assessments, which may be revised based upon the level of deposits, will continue until the bonds mature in the years 2017 through 2019.

        The FDIC may terminate the deposit insurance of any insured depository institution, including the bank, if it determines after a hearing that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the OCC. It also may suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance, if the institution has no tangible capital. If insurance of accounts is terminated, the accounts at the institution at the time of the termination, less subsequent withdrawals, shall continue to be insured for a period of six months to two years, as determined by the FDIC. Management of the bank is not aware of any practice, condition or violation that might lead to termination of the bank's deposit insurance.

International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001

        On October 26, 2001, the President signed the USA Patriot Act of 2001 into law. This act contains the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 (the "IMLAFA"). The IMLAFA contains anti-money laundering measures affecting insured depository institutions, broker-dealers, and certain other financial institutions. The IMLAFA requires U.S. financial institutions to adopt new policies and procedures to combat money laundering. Further, the Act grants the Secretary of the Treasury broad authority to establish regulations and to impose requirements and restrictions on financial institution's operations. We have adopted policies and procedures to comply with the provisions of the IMLAFA.

        The Office of Foreign Assets Control ("OFAC"), which is a division of the U.S. Department of the Treasury, is responsible for helping to insure that United States entities do not engage in transactions with "enemies" of the United States, as defined by various Executive Orders and Acts of Congress. OFAC has sent, and will send, our banking regulatory agencies lists of names of persons and organizations suspected of aiding, harboring or engaging in terrorist acts. If the bank finds a name on any transaction, account or wire transfer that is on an OFAC list, it must freeze such account, file a suspicious activity report and notify the FBI. The bank has appointed an OFAC compliance officer to oversee the inspection of its accounts and the filing of any notifications. The bank actively checks high-risk OFAC areas such as new accounts, wire transfers and customer files. The bank performs these

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checks utilizing software, which is updated each time a modification is made to the lists provided by OFAC and other agencies of Specially Designated Nationals and Blocked Persons.

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 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.

Other Laws and Regulations

        Interest and certain other charges collected or contracted for by our bank is subject to state usury laws and certain federal laws concerning interest rates. Our bank's operations are also subject to certain federal laws applicable to credit transactions, such as the following:

    Federal Truth-In-Lending Act, which governs disclosures of credit terms to consumer borrowers,

    Community Reinvestment Act requiring financial institutions to meet their obligations to provide for the total credit needs of the communities they serve (which includes the investment of assets in loans to low- and moderate-income borrowers),

    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,

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

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

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

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

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        The deposit operations of our bank is also 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 govern 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.

        From time to time, bills come before the United States Congress and in the North Carolina, South Carolina, and Georgia state legislatures that in certain cases contain wide-ranging proposals for altering the structure, regulation, and competitive relationships of financial institutions. Among such bills are proposals to prohibit banks and bank holding companies from conducting certain types of activities, to subject banks to increased disclosure and reporting requirements, to alter the statutory separation of commercial and investment banking, and to further expand the powers of banks, bank holding companies and competitors of banks. We cannot predict whether or in what form any of these proposals will be adopted or the extent to which our business may be affected.

Fiscal and Monetary Policy

        Banking is a business that depends largely on interest rate differentials. In general, the difference between the interest we pay on our deposits and other borrowings, and the interest we receive on our loans and securities holdings, constitutes the major portion of our bank's earnings. Thus, our earnings and growth will be subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve Board. The Federal Reserve Board regulates, among other things, the supply of money through various means, including open-market dealings in United States government securities, the discount rate at which banks may borrow from the Federal Reserve Board, and the reserve requirements on deposits. We cannot predict the nature and timing of any changes in such policies and their impact on our business.

Proposed Legislation and Regulatory Action

        From time to time, various legislative and regulatory initiatives are introduced in Congress and state legislatures, as well as by regulatory agencies. Such initiatives may include proposals to expand or contract the powers of bank holding companies and depository institutions or proposals to substantially change the financial institution regulatory system. Such legislation could change banking statutes and the operating environment of the Company in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. We cannot predict whether any such legislation will be enacted, and, if enacted, the effect that it, or any implementing regulations, would have on the financial condition or results of operations of the Company. A change in statutes, regulations or regulatory policies applicable to the Company or the Bank could have a material effect on the business of the Company.

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Executive Officers of SCBT

        Executive officers of SCBT are elected by the board of directors annually and serve at the pleasure of the board of directors. The executive officers and their ages, positions with SCBT over the past five years, and terms of office as of March 1, 2011, are as follows:

Name (age)
  Position and Five Year History with SCBT   With SCBT Since  
Robert R. Hill, Jr. (44)   President, Chief Executive Officer and Director
President and Chief Operating Officer of
South Carolina Bank and Trust (1999–2004)
    1995  

John C. Pollok (45)

 

Senior Executive Vice President and
Chief Operating Officer
Chief Financial Officer (2007–2010)

 

 

1996

 

Donald E. Pickett (50)

 

Executive Vice President and Chief Financial Officer

 

 

2010

 

Joseph E. Burns (56)

 

Senior Executive Vice President and Chief Risk Officer
Chief Credit Officer (2000–2009)

 

 

2000

 

John F. Windley (58)

 

President and Chief Banking Officer,
South Carolina Bank and Trust Regional President,
South Carolina Bank and Trust (2002–2006)

 

 

2002

 

Renee R. Brooks (41)

 

Corporate Secretary and Chief Administrative Officer
Corporate Secretary and Retail & Commercial Banking Officer (2009–2010)
Commercial Department Manager—SCBT of the Piedmont (2005–2009)

 

 

1996

 

        None of the above officers are related and there are no arrangements or understandings between them and any other person pursuant to which any of them was elected as an officer, other than arrangements or understandings with the directors or officers of SCBT acting solely in their capacities as such.

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Item 1A.    Risk Factors.

        Our business operations and the value of securities issued by us may be adversely affected by certain risk factors, many of which are outside of our control. We believe the risk factors listed could materially and adversely affect our business, financial condition or results of operations. We may also be adversely affected by additional risks and uncertainties or those that we believe are currently immaterial to our business operations. In such cases, you could lose part or all of your investment.

General Business Risks

Recent negative developments in the financial industry, the domestic and international credit markets, and the economy in general may adversely affect our operations and results.

        Negative developments in the global credit and securitization markets have resulted in uncertainty in the financial markets in general with the expectation of continued uncertainty in 2011. As a result of this "credit crunch," commercial as well as consumer loan portfolio performances deteriorated at institutions and the competition for deposits and quality loans has increased significantly. In addition, the values of real estate collateral supporting many commercial loans and home mortgages have declined and may continue to decline. Global securities markets, and bank holding company stock prices in particular, have been negatively affected, as has in general the ability of banks and bank holding companies to raise capital or borrow in the debt markets. Bank regulatory agencies are expected to be active in responding to concerns and trends identified in examinations, including the expected issuance of many formal enforcement orders. Negative developments in the financial industry and the domestic and international credit markets, and the impact of new legislation in response to those developments, may negatively impact our operations by restricting our business operations, including our ability to originate or sell loans, and adversely impact our financial performance. We can provide no assurance regarding the manner in which any new laws and regulations will affect us.

There can be no assurance that recently enacted legislation will help stabilize the U.S. financial system.

        Under the EESA, which was enacted on October 3, 2008, the U.S. Treasury has the authority to, among other things, invest in financial institutions and purchase up to $700 billion of troubled assets and mortgages from financial institutions for the purpose of stabilizing and providing liquidity to the U.S. financial markets. Under the CPP, the U.S. Treasury committed to purchase up to $250 billion of preferred stock and warrants in eligible institutions. The EESA also temporarily increased FDIC deposit insurance coverage to $250,000 per depositor through December 31, 2009, which was recently permanently increased to $250,000 under the Dodd-Frank Act.

        On February 10, 2009, the U.S. Treasury announced the Financial Stability Plan which, among other things, provides a forward-looking supervisory capital assessment program that is mandatory for banking institutions with over $100 billion of assets and makes capital available to financial institutions qualifying under a process and criteria similar to the CPP. In addition, the Recovery Act was signed into law on February 17, 2009 and includes among other things, extensive new restrictions on the compensation and governance arrangements of financial institutions.

        On July 21, 2010, the President signed into law the Dodd-Frank Act, a comprehensive regulatory framework that will affect every financial institution in the U.S. The Dodd-Frank Act includes, among other measures, changes to the deposit insurance and financial regulatory systems, enhanced bank capital requirements and provisions designed to protect consumers in financial transactions. Regulatory agencies will implement new regulations in the future which will establish the parameters of the new regulatory framework and provide a clearer understanding of the legislation's effect on banks. The changes resulting from the Dodd-Frank 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. In particular, the potential impact

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of the Dodd-Frank Act on our operations and activities, both currently and prospectively, include, among others:

    a reduction in our ability to generate or originate revenue-producing assets as a result of compliance with heightened capital standards;

    increased cost of operations due to greater regulatory oversight, supervision and examination of banks and bank holding companies, and higher deposit insurance premiums;

    the limitation on our ability to raise capital through the use of trust preferred securities as these securities may no longer be included as Tier 1 capital going forward; and

    the limitation on our ability to expand consumer product and service offerings due to anticipated stricter consumer protection laws and regulations.

        Numerous actions have been taken by the U.S. Congress, the Federal Reserve, the U.S. Treasury, the FDIC, the SEC and others to address the current liquidity and credit crisis that followed the sub-prime mortgage crisis that commenced in 2007, including the Financial Stability Program adopted by the U.S. Treasury. We cannot predict the actual effects of EESA, ARRA, the Dodd-Frank Act, and various other governmental, regulatory, monetary and fiscal initiatives which have been and may be enacted on the economy, the financial markets, or on us. The terms and costs of these activities, or the failure of these actions to help stabilize the financial markets, asset prices, market liquidity and a continuation or worsening of current financial market and economic conditions, could materially and adversely affect our business, financial condition, results of operations, and the price of our common stock.

Our estimated allowance for loan losses may be inadequate and an increase in the allowance would reduce earnings.

        We are exposed to the risk that our customers will be unable to repay their loans according to their terms and that any collateral securing the payment of their loans will not be sufficient to ensure full repayment. Credit losses are inherent in the lending business and could have a material adverse effect on our operating results and ability to meet obligations. The volatility and deterioration in foreign and domestic markets may also increase our risk for credit losses. The composition of our loan portfolio, primarily secured by real estate, reduces loss exposure. At December 31, 2010, we had approximately 13,164 of non-acquired loans secured by real estate with an average loan balance of approximately $152,000. At December 31, 2010, we had approximately 25,865 total non-acquired loans with an average loan balance of approximately $88,000. We evaluate the collectability of our loan portfolio and provide an allowance for loan losses that we believe to be adequate based on a variety of factors including but not limited to: the risk characteristics of various classifications of loans, previous loan loss experience, specific loans that have loss potential, delinquency trends, estimated fair market value of the collateral, current economic conditions, the views of our regulators, and geographic and industry loan concentrations. If our evaluation is incorrect and borrower defaults cause losses that exceed our allowance for loan losses, our earnings could be significantly and adversely affected. These risks have been exacerbated by the recent developments in national and international financial markets and the economy in general. No assurance can be given that the allowance will be adequate to cover loan losses inherent in our portfolio. We may experience losses in our loan portfolios or perceive adverse conditions and trends that may require us to significantly increase our allowance for loan losses in the future, a decision that would reduce earnings.

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

        Commercial real estate, commercial business and construction lending usually involves higher credit risks than that of single-family residential lending. These types of loans involve larger loan

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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, as well as 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 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) and the availability of permanent take-out financing. 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.

        Commercial business 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 collateral securing the loans have the following characteristics: (i) depreciate over time, (ii) difficult to appraise and liquidate, and (iii) fluctuate in value based on the success of the business.

        Commercial real estate, commercial business, and construction 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 December 31, 2010, our outstanding commercial real estate loans were equal to 218.8% of our total risk-based 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 enhanced 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.

Our business is predominately in three states, South Carolina, Mecklenburg County of North Carolina, and Northeast Georgia; therefore, continuation of the economic downturn in South Carolina, this North Carolina County, and Northeast Georgia could negatively impact results from operations and our financial condition.

        Because of our concentration of business in the Southeast, continuation of the economic downturn in this region could make it more difficult to attract deposits and could cause higher rates of loss and delinquency on our loans than if the loans were more geographically diversified. Adverse economic conditions in these regions, including, without limitation, declining real estate values, could cause our levels of non-performing assets and loan losses to increase. If the economic downturn continues or a prolonged economic recession occurs in the economy as a whole, borrowers will be less likely to repay their loans as scheduled. A continued economic downturn could, therefore, result in losses that materially and adversely affect our business.

A significant portion of our loan portfolio is secured by real estate, and events that negatively impact the real estate market could hurt our business.

        A significant portion of our non-covered loan portfolio is secured by real estate. As of December 31, 2010, approximately 87.3% of our loans had real estate as a primary or secondary component of collateral. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. We have identified credit concerns with respect to certain loans in our loan portfolio

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which are primarily related to the downturn in the real estate market. The real estate market has been substantially impacted by the current economic environment, increased levels of inventories of unsold homes, and higher foreclosure rates. As a result, property values for this type of collateral have declined substantially and market appraisal assumptions continue to trend downward significantly. These loans carry a higher degree of risk than long-term financing of existing real estate since repayment is dependent on the ultimate completion of the project or home and usually on the sale of the property or permanent financing. Slow housing conditions have affected some of these borrowers' ability to sell the completed projects in a timely manner, and we believe that these trends are likely to continue. In some cases, this downturn has resulted in an impairment to the value of our collateral and our ability to sell the collateral upon foreclosure. As a result, we incurred higher charge-offs in 2009 and 2010 and increased our allowance for loan losses during these periods to address the probable credit risks inherent within our loanportfolio. Further deterioration in the real estate market may cause us to adjust our opinion of the level of credit quality in our loan portfolio. Such a determination may lead to an additional increase in our provisions for loan losses, which could also adversely impact our business, financial condition, and results of operations.

Liquidity needs could adversely affect our results of operations and financial condition.

        The primary sources of our bank's funds are client deposits and loan repayments. While scheduled loan repayments are a relatively stable source of funds, they are subject to the ability of borrowers to repay the loans. The ability of borrowers to repay loans can be adversely affected by a number of factors, including changes in economic conditions, adverse trends or events affecting business industry groups, reductions in real estate values or markets, business closings or lay-offs, inclement weather, natural disasters, which could be exacerbated by potential climate change, and international instability. Additionally, deposit levels may be affected by a number of factors, including rates paid by competitors, general interest rate levels, regulatory capital requirements, returns available to clients on alternative investments and general economic conditions. Accordingly, we may be required from time to time to rely on secondary sources of liquidity to meet withdrawal demands or otherwise fund operations. Such sources include Federal Home Loan Bank advances, sales of securities and loans, and federal funds lines of credit from correspondent banks, as well as out-of-market time deposits. While we believe that these sources are currently adequate, there can be no assurance they will be sufficient to meet future liquidity demands, particularly if we continue to grow and experience increasing loan demand. We may be required to slow or discontinue loan growth, capital expenditures or other investments or liquidate assets should such sources not be adequate.

We may decide to make future acquisitions, which could dilute current shareholders' stock ownership and expose us to additional risks.

        In accordance with our strategic plan, we regularly evaluate opportunities to acquire other banks and branch locations to expand SCBT, including potential acquisitions of assets and liabilities of target banks that are in receivership through the FDIC bid process for failed institutions. Our acquisition activities could be material to SCBT. For example, we could issue additional shares of common stock in a purchase transaction, which could dilute current shareholders' ownership interest in SCBT. These activities could require us to use a substantial amount of cash or other liquid assets and to incur debt. In addition, if goodwill recorded in connection with our prior or potential future acquisitions 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. Any potential charges for impairment related to goodwill would not impact cash flow, tangible capital or liquidity.

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        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 merger partners 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;

    the time and expense required to integrate the operations and personnel of the combined businesses;

    creating an adverse short-term effect on our results of operations; and

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

        If we do not successfully manage these risks, our acquisition activities could have a material effect on our operating results and financial condition, including short and long-term liquidity.

        Any acquisition of assets and liabilities of target banks that are in receivership through the FDIC bid process for failed institutions requires us, through our bank subsidiary, to enter into a Purchase & Assumption Agreement (the "P&A Agreement") with the FDIC. The P&A Agreement is a form document prepared by the FDIC, and our ability to negotiate the terms of this agreement is extremely limited. P&A Agreements typically provide for limited disclosure about, and limited indemnification for, risks associated with the target banks (as did the P&A Agreement related to our acquisition of deposits (excluding brokered deposits), certain other borrowings and certain assets from CBT and Habersham). There is a risk that such disclosure regarding, and indemnification for, the assets and liabilities of target banks will not be sufficient and we will incur unanticipated losses in connection with any acquisition of assets and liabilities of target banks that are in receivership through the FDIC bid process for failed institutions. In any future P&A Agreements, we may be required to make an additional payment to the FDIC under certain circumstances following the completion of an FDIC-assisted acquisition if, for example, actual losses related to the target bank's assets acquired are less than a stated threshold. The P&A Agreements related to our acquisitions of deposits (excluding brokered deposits), certain borrowings and certain assets from CBT and Habersham include such a true-up provision.

        In addition, the FDIC bid process for failed depository institutions is competitive. We cannot provide any assurances that we will be successful in bidding for any target bank or for other failed depository institutions in the future.

We may be exposed to difficulties in combining the operations of acquired businesses such as those of Habersham Bank in Northeast Georgia 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. Inherent uncertainties exist in integrating the operations of an acquired business, such as the business of Habersham, in which we assumed all deposits (excluding brokered deposits) and purchased certain other assets on February 18, 2011 through an FDIC-assisted transaction. In addition, the markets and industries in which SCBT and our potential acquisition targets operate are highly competitive. We may lose customers or the customers of acquired entities as a result of an acquisition. We also may lose key personnel from the acquired entity as a result of an acquisition. We may not discover all known and unknown factors when examining a company for acquisition during the due diligence period. These factors could produce unintended and unexpected consequences for us. Undiscovered factors as a result of acquisition, pursued by non-related third party entities, could bring civil, criminal, and financial liabilities against us, our management, and the management of those

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entities acquired. These factors could contribute to SCBT not achieving the expected benefits from its acquisitions within desired time frames.

New or acquired banking office facilities and other facilities may not be profitable.

        We may not be able to identify profitable locations for new banking offices. The costs to start up new banking offices or to acquire existing branches, and the additional costs to operate these facilities, may increase our non-interest expense and decrease our earnings in the short term. If branches of other banks become available for sale, we may acquire those offices. It may be difficult to adequately and profitably manage our growth through the establishment or purchase of additional banking offices and we can provide no assurance that any such banking offices will successfully attract enough deposits to offset the expenses of their operation. In addition, any new or acquired banking offices will be subject to regulatory approval, and there can be no assurance that we will succeed in securing such approval.

We are exposed to a need for additional capital resources for the future and these capital resources may not be available when needed or at all.

        We may need to incur additional debt or equity financing in the future to make strategic acquisitions or investments or to strengthen our capital position. Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control and our financial performance. We cannot provide assurance that such financing will be available to us on acceptable terms or at all.

Our net interest income may decline based on the interest rate environment.

        We depend on our net interest income to drive profitability. Differences in volume, yields or interest rates and differences in income earning products such as interest-earning assets and interest-bearing liabilities determine our net interest income. We are exposed to changes in general interest rate levels and other economic factors beyond our control. Net interest income may decline in a particular period if:

    In a declining interest rate environment, more interest-earning assets than interest-bearing liabilities re-price or mature, or

    In a rising interest rate environment, more interest-bearing liabilities than interest-earning assets re-price or mature.

        Our net interest income may decline based on our exposure to a difference in short-term and long-term interest rates. If the difference between the interest rates shrinks or disappear, the difference between rates paid on deposits and received on loans could narrow significantly resulting in a decrease in net interest income. In addition to these factors, if market interest rates rise rapidly, interest rate adjustment caps may limit increases in the interest rates on adjustable rate loans, thus reducing our net interest income. Also, certain adjustable rate loans re-price based on lagging interest rate indices. This lagging effect may also negatively impact our net interest income when general interest rates continue to rise periodically.

        Our primary policy for managing interest rate risk exposure involves monitoring exposure to interest rate increases and decreases of as much as 200 basis points ratably over a 12-month period. As of December 31, 2010, the earnings simulations indicated that the impact of a 200 basis point increase in rates over 12 months would result in an approximate 1.6% increase in net interest income—as compared with a base case unchanged interest rate environment. As a result of the current rate environment with federal funds rates between zero and 25 basis points, our simulation does not produce a realistic scenario for the impact of a 200 basis point decrease in rates. These results indicate

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that our rate sensitivity is slightly asset sensitive to the indicated change in interest rates over a one-year horizon.

We are exposed to the possibility that more prepayments may be made by customers to pay down loan balances, which could reduce our interest income and profitability.

        Prepayment rates stem from consumer behavior, conditions in the housing and financial markets, general United States economic conditions, and the relative interest rates on fixed-rate and adjustable-rate loans. Therefore, changes in prepayment rates are difficult to predict. Recognition of deferred loan origination costs and premiums paid in originating these loans are normally recognized over the contractual life of each loan. As prepayments occur, the rate at which net deferred loan origination costs and premiums are expensed will accelerate. The effect of the acceleration of deferred costs and premium amortization may be mitigated by prepayment penalties paid by the borrower when the loan is paid in full within a certain period of time, which varies between loans. If prepayment occurs after the period of time when the loan is subject to a prepayment penalty, the effect of the acceleration of premium and deferred cost amortization is no longer mitigated. We recognize premiums paid on mortgage-backed securities as an adjustment from interest income over the expected life of the security based on the rate of repayment of the securities. Acceleration of prepayments on the loans underlying a mortgage-backed security shortens the life of the security, increases the rate at which premiums are expensed and further reduces interest income. We may not be able to reinvest loan and security prepayments at rates comparable to the prepaid instrument particularly in a period of declining interest rates.

We may not be able to adequately anticipate and respond to changes in market interest rates.

        We may be unable to anticipate changes in market interest rates, which are affected by many factors beyond our control including but not limited to inflation, recession, unemployment, money supply, monetary policy, and other changes that affect financial markets both domestic and foreign. Our net interest income is affected not only by the level and direction of interest rates, but also by the shape of the yield curve and relationships between interest sensitive instruments and key driver rates, as well as balance sheet growth, customer loan and deposit preferences, and the timing of changes in these variables. In the event rates increase, our interest costs on liabilities may increase more rapidly than our income on interest earning assets, thus a deterioration of net interest margins. As such, fluctuations in interest rates could have significant adverse effects on our financial condition and results of operations.

We may be adversely affected by the soundness of other financial institutions.

        Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. Many of these transactions expose us to credit risk in the event of a default by a counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by SCBT cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to SCBT. Any such losses could have a material adverse effect on our financial condition and results of operations.

We could experience a loss due to competition with other financial institutions.

        The banking and financial services industry is very competitive. Legal and regulatory developments have made it easier for new and sometimes unregulated competitors to compete with us. The financial services industry has and is experiencing an ongoing trend towards consolidation in which fewer large national and regional banks and other financial institutions are replacing many smaller and more local

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banks. These larger banks and other financial institutions hold a large accumulation of assets and have significantly greater resources and a wider geographic presence or greater accessibility. In some instances, these larger entities operate without the traditional brick and mortar facilities that restrict geographic presence. Some competitors are able to offer more services, more favorable pricing or greater customer convenience than SCBT. In addition, competition has increased from new banks and other financial services providers that target our existing or potential customers. As consolidation continues among large banks, we expect other smaller institutions to try to compete in the markets we serve.

        Technological developments have allowed competitors, including some non-depository institutions, to compete more effectively in local markets and have expanded the range of financial products, services and capital available to our target customers. If we are unable to implement, maintain and use such technologies effectively, we may not be able to offer products or achieve cost-efficiencies necessary to compete in the industry. In addition, some of these competitors have fewer regulatory constraints and lower cost structures.

We depend on the accuracy and completeness of information about clients and counterparties.

        In deciding whether to extend credit or enter into other transactions with clients and counterparties, we may rely on information furnished to us by or on behalf of clients and counterparties, including financial statements and other financial information. We also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to clients, we may assume that a customer's audited financial statements conform to accounting principles generally accepted in the United States of America ("GAAP") and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. Our earnings are significantly affected by our ability to properly originate, underwrite and service loans. Our financial condition and results of operations could be negatively impacted to the extent we incorrectly assess the creditworthiness of our borrowers, fail to detect or respond to deterioration in asset quality in a timely manner, or rely on financial statements that do not comply with GAAP or are materially misleading.

The accuracy of our financial statements and related disclosures could be affected because we are exposed to conditions or assumptions different from the judgments, assumptions or estimates used in our critical accounting policies.

        The preparation of financial statements and related disclosure in conformity with GAAP 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, included in this document, describe those significant accounting policies and methods used in the preparation of our consolidated financial statements that are considered "critical" by us because they require judgments, assumptions and estimates that materially impact 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, such events or assumptions could have a material impact on our audited consolidated financial statements and related disclosures.

We are exposed to the possibility of technology failure and a disruption in our operations may adversely affect our business.

        We rely on our computer systems and the technology of outside service providers. Our daily operations depend on the operational effectiveness of their technology. We rely on our systems to accurately track and record our assets and liabilities. If our computer systems or outside technology sources become unreliable, fail, or experience a breach of security, our ability to maintain accurate

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financial records may be impaired, which could materially affect our business operations and financial condition. In addition, a disruption in our operations resulting from failure of transportation and telecommunication systems, loss of power, interruption of other utilities, natural disaster, fire, global climate changes, computer hacking or viruses, failure of technology, terrorist activity or the domestic and foreign response to such activity or other events outside of our control could have an adverse impact on the financial services industry as a whole and/or on our business. Our business recovery plan may not be adequate and may not prevent significant interruptions of our operations or substantial losses.

We are exposed to a possible loss of our employees and critical management team.

        We are dependent on the ability and experience of a number of key management personnel who have substantial experience with our operations, the financial services industry, and the markets in which we offer products and services. The loss of one or more senior executives or key managers may have an adverse effect on our operations. Also, as we continue to grow operations, our success depends on our ability to continue to attract, manage, and retain other qualified middle management personnel. We cannot guarantee that we will continue to attract or retain such personnel.

The FDIC Deposit Insurance assessments that we are required to pay may materially increase in the future, which would have an adverse effect on our earnings.

        As a member institution of the FDIC, we are required to amortize into expense the three year prepayment of FDIC assessments which was levied at the end of 2009. The Company's deposit insurance assessments expense totaled $4.7 million for the year ended December 31, 2010. Compared to the year ended December 31, 2009, the deposit insurance assessment expense was $5.0 million, including a one-time special assessment of $1.3 million. Due to the recent failure of several unaffiliated FDIC insurance depository institutions and the FDIC's new liquidity guarantee program, the deposit insurance premium assessments paid by all banks has increased. In addition, new FDIC requirements shift a greater share of any increase in such assessments onto institutions with higher risk profiles, including banks with heavy reliance on brokered deposits, such as our bank. At December 31, 2009, the Company prepaid to the FDIC $11.2 million under the November 2009 final rule requiring a prepayment of the next three years' assessments. The remaining unamortized amount was carried as a prepaid asset as of December 31, 2010, and totaled approximately $7.1 million.

Negative public opinion surrounding our company and the financial institutions industry generally could damage our reputation and adversely impact our earnings.

        Reputation risk, or the risk to our business, earnings and capital from negative public opinion surrounding our company and the financial institutions industry generally, is inherent in our business. Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance and acquisitions, and from actions taken by government regulators and community organizations in response to those activities. Negative public opinion can adversely affect our ability to keep and attract clients and employees and can expose us to litigation and regulatory action. Although we take steps to minimize reputation risk in dealing with our clients and communities, this risk will always be present given the nature of our business.

Legal and Regulatory Risks

We are subject to extensive regulation that could restrict our activities and impose financial requirements or limitations on the conduct of our business and limit our ability to receive dividends from our bank.

        We are subject to Federal Reserve Board regulation. Our bank is subject to extensive regulation, supervision, and examination by our primary federal regulator, the OCC, and by the FDIC, the

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regulating authority that insures customer deposits. Also, as a member of the Federal Home Loan Bank ("FHLB"), our bank must comply with applicable regulations of the Federal Housing Finance Board and the FHLB. Regulation by these agencies is intended primarily for the protection of our depositors and the deposit insurance fund and not for the benefit of our shareholders. Our bank's activities are also regulated under consumer protection laws applicable to our lending, deposit, and other activities. A sufficient claim against our bank under these laws could have a material adverse effect on our results of operations.

We are exposed to declines in the value of qualified pension plan assets or unfavorable changes in laws or regulations that govern pension plan funding, which could require us to provide significant amounts of funding for our qualified pension plan.

        As a matter of course, we anticipate that we will make material cash contributions to our qualified defined benefit pension plan in the near and long term. A significant decline in the value of qualified pension plan assets in the future or unfavorable changes in laws or regulations that govern pension plan funding could materially change the timing and amount of required pension funding. As a result, we may be required to fund our qualified defined benefit pension plan with a greater amount of cash from operations, perhaps by an additional material amount.

We are exposed to further changes in the regulation of financial services companies.

        Proposals for further regulation of the financial services industry are continually being introduced in the Congress of the United States of America, the General Assembly of the State of South Carolina, the General Assembly of the State of North Carolina, and the General Assembly of the State of Georgia. The agencies regulating the financial services industry also periodically adopt changes to their regulations. On September 7, 2008, the U.S. Treasury announced that Freddie Mac (along with Fannie Mae) has been placed into conservatorship under the control of the newly created Federal Housing Finance Agency. On October 3, 2008, EESA was signed into law, and on October 14, 2008 the U.S. Treasury announced its CPP under EESA. On February 17, 2009, the Recovery Act was signed into law. In November 2009, the FDIC announced a final rule to require FDIC insured banks to prepay the fourth quarter assessment and the next three years assessment by December 31, 2009. On July 21, 2010, the Dodd-Frank Act was signed into law. One of the provisions of the Dodd-Frank Act amended the Electronic Fund Transfer Act ("EFTA") to, among other things, give the Federal Reserve the authority to establish rules regarding interchange fees charged for electronic debit transactions by payment card issuers having assets over $10 billion and to enforce a new statutory requirement that such fees be reasonable and proportional to the actual cost of a transaction to the issuer. The interchange fee provisions under the Dodd-Frank Act provide an exception for institutions with less than $10 billion in assets. While SCBT would not be subject to the interchange fee restrictions, it could negatively impact bank card services income if the reductions that are required of larger banks cause industry wide reductions of swipe fees. It is possible that additional legislative proposals may be adopted or regulatory changes may be made that would have an adverse effect on our business. We can provide no assurance regarding the manner in which any new laws and regulations will affect us. See "Risk Factors—We are subject to extensive regulation that could restrict our activities and impose financial requirements or limitations on the conduct of our business and limit our ability to receive dividends from our bank" above.

Risks Related to an Investment in Our Common Stock

Our ability to pay cash dividends is limited, and we may be unable to pay future dividends even if we desire to do so.

        Our ability to pay cash dividends may be limited by regulatory restrictions, by our bank's ability to pay cash dividends to our holding company and by our need to maintain sufficient capital to support

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our operations. The ability of our bank to pay cash dividends to our holding company is limited by its obligation to maintain sufficient capital and by other restrictions on its cash dividends that are applicable to national banks and banks that are regulated by the FDIC. If our bank is not permitted to pay cash dividends to our holding company, it is unlikely that we would be able to pay cash dividends on our common stock. Moreover, holders of our common stock are entitled to receive dividends only when, and if declared by our board of directors. Although we have historically paid cash dividends on our common stock, we are not required to do so and our board of directors could reduce or eliminate our common stock dividend in the future. See above "Risk Factors—We are subject to extensive regulation that could restrict our activities and impose financial requirements or limitations on the conduct of our business and limit our ability to receive dividends from our bank".

We may issue additional shares of stock or equity derivative securities that will dilute the percentage ownership interest of existing shareholders and may dilute the book value per share of our common stock and adversely affect the terms on which we may obtain additional capital.

        Our authorized capital includes 40,000,000 shares of common stock and 10,000,000 shares of preferred stock. As of December 31, 2010, we had 12,793,823 shares of common stock outstanding and had reserved for issuance 386,207 shares underlying options that are or may become exercisable at an average price of $29.02 per share. In addition, as of December 31, 2010, we had the ability to issue 155,634 shares of common stock pursuant to options and restricted stock that may be granted in the future under our existing equity compensation plans. As of December 31, 2010, we had no shares of preferred stock outstanding. Subject to applicable NASDAQ rules, our board generally has the authority, without action by or vote of the shareholders, to issue all or part of any authorized but unissued shares of stock for any corporate purpose, including issuance of equity-based incentives under or outside of our equity compensation plans. We may seek additional equity capital in the future as we develop our business and expand our operations. Any issuance of additional shares of stock or equity derivative securities will dilute the percentage ownership interest of our shareholders and may dilute the book value per share of our common stock. Shares we issue in connection with any such offering will increase the total number of outstanding shares and may dilute the economic and voting ownership interest of our existing shareholders.

        Subsequent to year-end, the Company entered into a Securities Purchase Agreement, effective as of February 18, 2011, with accredited institutional investors, pursuant to which the Company sold a total of 1,129,032 shares of its common stock at a purchase price of $31.00 per share (the "Private Placement"). The proceeds to the Company from the Private Placement were $34.7 million, net of approximately $315,000 in issuance costs. The Private Placement was completed on February 18, 2011, and was contingent on a successful bid for Habersham.

Our stock price may be volatile, which could result in losses to our investors and litigation against us.

        Our stock price has been volatile in the past and several factors could cause the price to fluctuate substantially in the future. These factors include but are not limited to: actual or anticipated variations in earnings, changes in analysts' recommendations or projections, our announcement of developments related to our businesses, operations and stock performance of other companies deemed to be peers, new technology used or services offered by traditional and non-traditional competitors, news reports of trends, concerns, irrational exuberance on the part of investors, and other issues related to the financial services industry. Our stock price may fluctuate significantly in the future, and these fluctuations may be unrelated to our performance. General market declines or market volatility in the future, especially in the financial institutions sector, could adversely affect the price of SCBT's common stock, and the current market price may not be indicative of future market prices.

        Stock price volatility may make it more difficult for you to resell your common stock when you want and at prices you find attractive. Moreover, in the past, securities class action lawsuits have been

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instituted against some companies following periods of volatility in the market price of its securities. We could in the future be the target of similar litigation. Securities litigation could result in substantial costs and divert management's attention and resources from our normal business.

Future sales of our stock by our shareholders or the perception that those sales could occur may cause our stock price to decline.

        Although our common stock is listed for trading in The NASDAQ Global Select MarketSM, the trading volume in our common stock is lower than that of other larger financial services companies. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of our common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control. Given the relatively low trading volume of our common stock, significant sales of our common stock in the public market, or the perception that those sales may occur, could cause the trading price of our common stock to decline or to be lower than it otherwise might be in the absence of those sales or perceptions.

The existence of outstanding stock options issued to our current or former executive officers, directors, and employees may result in dilution of your ownership and adversely affect the terms on which we can obtain additional capital.

        As of December 31, 2010, we had outstanding options to purchase 386,207 shares of our common stock at a weighted average exercise price of $29.02 per share. All of these options are held by our current or former executive officers, directors, and employees. Also, as of December 31, 2010, we had the ability to issue options and restricted stock to purchase an additional 155,634 shares of our common stock. The issuance of shares subject to options under the equity compensation plans will result in dilution of our shareholders' ownership of our common stock.

        The exercise of stock options could also adversely affect the terms on which we can obtain additional capital. Option holders are most likely to exercise their options when the exercise price is less than the market price for our common stock. They profit from any increase in the stock price without assuming the risks of ownership of the underlying shares of common stock by exercising their options and selling the stock immediately.

State law and provisions in our articles of incorporation or bylaws could make it more difficult for another company to purchase us, even though such a purchase may increase shareholder value.

        In many cases, shareholders may receive a premium for their shares if we were purchased by another company. State law and our articles of incorporation and bylaws could make it difficult for anyone to purchase us without the approval of our board of directors. For example, our articles of incorporation divide the board of directors into three classes of directors serving staggered three-year terms with approximately one-third of the board of directors elected at each annual meeting of shareholders. This classification of directors makes it more difficult for shareholders to change the composition of the board of directors. As a result, at least two annual meetings of shareholders would be required for the shareholders to change a majority of the directors, whether or not a change in the board of directors would be beneficial and whether or not a majority of shareholders believe that such a change would be desirable.

        Our articles of incorporation provide that a merger, exchange or consolidation of SCBT with, or the sale, exchange or lease of all or substantially all of our assets to, any person or entity (referred to herein as a "Fundamental Change"), must be approved by the holders of at least 80% of our outstanding voting stock if the board of directors does not recommend a vote in favor of the Fundamental Change. The articles of incorporation further provide that a Fundamental Change

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involving a shareholder that owns or controls 20% or more of our voting stock at the time of the proposed transaction (a "Controlling Party") must be approved by the holders of at least (i) 80% of our outstanding voting stock, and (ii) 67% of our outstanding voting stock held by shareholders other than the Controlling Party, unless (x) the transaction has been recommended to the shareholders by a majority of the entire board of directors or (y) the consideration per share to be received by our shareholders generally is not less than the highest price per share paid by the Controlling Party in the acquisition of its holdings of our common stock during the preceding three years. The approval by the holders of at least 80% of our outstanding voting stock is required to amend or repeal these provisions contained in our articles of incorporation. Finally, in the event that any such Fundamental Change is not recommended by the board of directors, the holders of at least 80% of our outstanding voting stock must attend a meeting called to address such transaction, in person or by proxy, in order for a quorum for the conduct of business to exist. If the 80% and 67% vote requirements described above do not apply because the board of directors recommends the transaction or the consideration is deemed fair, as applicable, then pursuant to the provisions of the South Carolina Business Corporation Act, the Fundamental Change generally must be approved by two-thirds of the votes entitled to be cast with respect thereto.

        Consequently, a takeover attempt may prove difficult, and shareholders may not realize the highest possible price for their securities.

Item 1B.    Unresolved Staff Comments.

        None.

Item 2.    Properties.

        Our corporate headquarters are located in a four-story facility, located at 520 Gervais Street, Columbia, South Carolina. The Midlands region lead branch of SCBT, N.A., is also located in this approximately 57,000 square-foot building. The main offices of SCBT, N.A. are in a four-story facility with approximately 48,000 square feet of space for operating and administrative purposes, located at 950 John C. Calhoun Drive, S.E., Orangeburg, South Carolina. NCBT, a division of SCBT, N.A., leases approximately 13,000 square feet in a building located at 6525 Morrison Boulevard, Charlotte, North Carolina. The main offices of CBT, a division of SCBT, N.A., are located in a 12,000 square-foot facility at 448 North Main Street, Cornelia, Georgia. Including these main locations, our bank owns fifty-one properties and leases forty-five properties, all of which are used, substantially, as branch locations or for housing other operational units in North and South Carolina and Georgia.

        Subsequent to year-end, on February 18, 2011, we entered into a purchase and assumption agreement ("P&A Agreement") with loss share arrangements with the FDIC to purchase certain assets and assume substantially all of the deposits and certain liabilities of Habersham Bank. The main offices of Habersham Bank are located in an 11,000 square-foot facility at 1151 Washington Street, Clarkesville, Georgia. The Bank did not immediately acquire the real estate, banking facilities, furniture or equipment of Habersham Bank as a part of the P&A Agreement. However, the Bank has the option to purchase the real estate, furniture and equipment from the FDIC. The term of this option expires approximately 90 days from the date of the P&A Agreement.

        Although the properties owned and leased are generally considered adequate, we have a continuing program of modernization, expansion, and when necessary, occasional replacement of facilities.

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Item 3.    Legal Proceedings.

        As of December 31, 2010 and the date of this form 10-K, we are not a party to, nor is any of our property the subject of, any pending material proceeding other than those that may occur in our ordinary course of business.

Item 4.    (Removed and Reserved).

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PART II

Item 5.    Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

    (a)
    The table below describes historical information regarding our common equity securities:

 
  2010   2009   2008   2007   2006  

Stock Performance

                               

Dividends per share

  $ 0.68   $ 0.68   $ 0.68   $ 0.68   $ 0.68  

Dividend payout ratio

    16.43 %   74.66 %   40.93 %   29.17 %   30.88 %

Dividend yield (based on the average of the high and low for the year)

    1.98 %   2.67 %   1.90 %   1.94 %   1.81 %

Price/earnings ratio (based on year-end stock price and diluted earnings per share)

    8.03x     37.42x     22.70x     13.65x     19.39x  

Price/book ratio (end of year)

    1.27x     1.25x     1.58x     1.50x     2.25x  

Common Stock Statistics

                               

Stock price ranges:

                               
 

High

  $ 41.03   $ 34.37   $ 45.24   $ 40.84   $ 42.93  
 

Low

    27.59     16.53     26.25     28.29     32.38  
 

Close

    32.75     27.69     34.50     31.67     41.73  

Volume traded on exchanges

    9,948,300     11,219,700     8,098,600     4,359,700     2,510,900  

As a percentage of average shares outstanding

    77.91 %   92.07 %   75.65 %   42.91 %   28.89 %

Earnings per share, basic

  $ 4.11   $ 0.74   $ 1.53   $ 2.33   $ 2.17  

Earnings per share, diluted

    4.08     0.74     1.52     2.32     2.15  

Book value per share

    25.79     22.20     21.77     21.17     18.57  

        In reference to the table above, per share data have been retroactively adjusted to give effect to a 5% common stock dividend paid to shareholders of record on March 9, 2007. Also, we pay cash dividends on common shares out of earnings generated by SCBT in the preceding quarter; therefore, our dividend payout ratio is calculated by dividing total dividends paid during 2010 by the total net income available to common shareholders reported in the fourth quarter of 2009, first quarter of 2010, second quarter of 2010 and third quarter of 2010.

Quarterly Common Stock Price Ranges and Dividends

 
  Year Ending
December 31, 2010
  Year Ending
December 31, 2009
 
Quarter
  High   Low   Dividend   High   Low   Dividend  

1st

  $ 38.78   $ 27.59   $ 0.17   $ 34.37   $ 16.53   $ 0.17  

2nd

    41.03     32.78     0.17     26.76     19.68     0.17  

3rd

    35.36     28.28     0.17     28.83     20.58     0.17  

4th

    32.86     29.84     0.17     28.36     25.14     0.17  

        As of March 9, 2011, we had issued and outstanding 13,958,824 shares of common stock which were held by approximately 5,500 shareholders of record. Our common stock trades in The NASDAQ Global Select MarketSM under the symbol "SCBT."

        We pay cash dividends to SCBT shareholders from our assets, which are provided primarily by dividends paid to SCBT by our bank subsidiary. Certain restrictions exist regarding the ability of our

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subsidiary to transfer funds to SCBT in the form of cash dividends, loans or advances. The approval of the OCC is required to pay dividends in excess of our bank's respective retained net profits for the current year plus retained net profits (net profits less dividends paid) for the preceding two years, less any required transfers to surplus. As of December 31, 2010, approximately $58.4 million of our bank's retained earnings were available for distribution to SCBT as dividends without prior regulatory approval. For the year ended December 31, 2010, our bank paid dividends of approximately $8.7 million to SCBT. We anticipate that we will continue to pay comparable cash dividends from our bank to SCBT in the future, however, this is evaluated each quarter.

    (b)
    Not applicable.

    (c)
    Issuer Purchases of Equity Securities:

        In February 2004, we announced a program with no formal expiration date to repurchase up to 250,000 of our common shares. The following table reflects share repurchase activity during the fourth quarter of 2010:

Period
  (a) Total
Number of
Shares (or
Units)
Purchased
  (b) Average
Price Paid per
Share (or Unit)
  (c) Total
Number of
Shares (or
Units)
Purchased as
Part of Publicly
Announced
Plans or
Programs
  (d) Maximum
Number (or
Approximate
Dollar Value) of
Shares (or
Units) that
May Yet Be
Purchased
Under the
Plans or
Programs
 

October 1 – October 31

    * $         147,872  

November 1 – November 30

    201 *   30.91         147,872  

December 1 – December 31

    1,619 *   31.62         147,872  
                     

Total

    1,820               147,872  
                     

*
These shares were repurchased under arrangements, authorized by our stock-based compensation plans and Board of Directors, whereby officers or directors may sell previously owned shares to SCBT in order to pay for the exercises of stock options or for income taxes owed on vesting shares of restricted stock. These shares are not purchased under the plan to repurchase 250,000 shares.

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Item 6.    Selected Financial Data.

        The following table presents selected financial and quantitative data for the five years ended December 31 for SCBT Financial Corporation:

(Dollars in thousands, except per share)
  2010   2009   2008   2007   2006  

Balance Sheet Data Period End

                               

Assets

  $ 3,594,791   $ 2,702,188   $ 2,766,710   $ 2,597,183   $ 2,178,413  

Loans covered under loss share agreements

    321,038                  

Non-acquired loans

    2,296,200     2,203,238     2,316,076     2,083,047     1,760,830  

Loans, net of unearned income*

    2,617,238     2,203,238     2,316,076     2,083,047     1,760,830  

Investment securities

    237,912     211,112     222,227     258,309     210,391  

FDIC receivable for loss share agreements

    212,103                  

Goodwill and other intangible assets

    72,605     65,696     66,221     65,618     35,679  

Deposits

    3,004,148     2,104,639     2,153,274     1,927,889     1,706,715  

Nondeposit borrowings

    237,995     306,139     349,870     440,046     293,521  

Shareholders' equity

    329,957     282,819     244,928     215,065     161,888  

Number of common shares outstanding

    12,793,823     12,739,533     11,250,603     10,160,432     8,719,146  

Book value per common share

    25.79     22.20     21.77     21.17     18.57  

Tangible book value per common share

    20.12     17.04     15.88     14.71     14.47  

Annualized Performance Ratios

                               

Return on average assets

    1.43 %   0.48 %   0.58 %   0.95 %   0.97 %

Return on average equity

    15.45     4.66     7.00     12.42     12.72  

Return on average tangible equity

    20.12     6.18     10.26     16.28     16.83  

Net interest margin (taxable equivalent)

    4.00     4.05     3.83     3.85     3.91  

Efficiency ratio

    46.68     61.17     63.17     65.31     63.80  

Dividend payout ratio

    16.43     74.66     40.93     29.17     30.88  

Asset Quality Ratios

                               

Allowance for loan losses to period end loans**

    2.07 %   1.70 %   1.36 %   1.28 %   1.29 %

Allowance for loan losses to period end nonperforming loans**

    68.71     75.38     211.34     419.22     492.14  

Nonperforming assets to period end loans and repossessed assets**

    3.74     2.40     0.91     0.33     0.30  

Nonperforming assets to period end total assets**

    2.41     1.96     0.76     0.27     0.24  

Net charge-offs to average loans**

    1.99     0.92     0.26     0.13     0.16  

Capital Ratios

                               

Equity to assets

    9.18 %   10.47 %   8.85 %   8.28 %   7.43 %

Tangible equity to tangible assets

    7.31     8.24     6.62     5.90     5.89  

Tier 1 leverage ratio

    8.48     9.89     8.54     8.42     8.11  

Tier 1 risk-based capital

    13.34     12.47     10.42     9.64     10.11  

Total risk-based capital

    14.60     14.42     12.34     10.89     11.36  

Other Data

                               

Number of financial centers

    76     48     50     50     45  

Number of employees (full-time equivalent basis)

    1,015     700     692     701     634  

*
—Excludes loans held for sale.

**
—Excludes assets covered under FDIC loss share agreements.

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        The table below provides a reconciliation of non-GAAP measures to GAAP for the five years ended December 31:

 
  2010   2009   2008   2007   2006  

Tangible book value per common share

                               

Tangible book value per common share (non-GAAP)

  $ 20.12   $ 17.04   $ 15.88   $ 14.71   $ 14.47  

Effect to adjust for tangible assets

    5.67     5.16     5.89     6.46     4.10  
                       

Book value per common share (GAAP)

    25.79     22.20     21.77     21.17     18.57  
                       

Return on average tangible equity

                               

Return on average tangible equity (non-GAAP)

    20.12 %   6.18 %   10.26 %   16.28 %   16.83 %

Effect to adjust for tangible assets

    (4.67 )   (1.52 )   (3.26 )   (3.86 )   (4.11 )
                       

Return on average equity (GAAP)

    15.45     4.66     7.00     12.42     12.72  
                       

Tangible equity to tangible assets

                               

Tangible equity to tangible assets (non-GAAP)

    7.31 %   8.24 %   6.62 %   5.90 %   5.89 %

Effect to adjust for tangible assets

    1.87     2.23     2.23     2.38     1.54  
                       

Equity to assets (GAAP)

    9.18     10.47     8.85     8.28     7.43  
                       

        The tangible measures above are non-GAAP measures and exclude the effect of period end or average balance of intangible assets. The tangible return on equity measures also add back the after-tax amortization of intangibles to GAAP basis net income. Management believes that these non-GAAP tangible measures provide additional useful information, particularly since these measures are widely used by industry analysts for companies with prior merger and acquisition activities. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company's results or financial condition as reported under GAAP.

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        The following table presents selected financial data for the five years ended December 31:

(Dollars in thousands, except per share)
  2010   2009   2008   2007   2006  

Summary of Operations

                               

Interest income

  $ 155,354   $ 141,798   $ 156,075   $ 149,199   $ 127,808  

Interest expense

    32,737     37,208     60,298     68,522     54,281  
                       
 

Net interest income

    122,617     104,590     95,777     80,677     73,527  

Provision for loan losses

    54,282     26,712     10,736     4,384     5,268  
                       
 

Net interest income after provision for loan losses

    68,335     77,878     85,041     76,293     68,259  

Noninterest income

    137,735     26,246     19,049     27,359     23,962  

Noninterest expense

    125,242     83,646     79,796     71,402     62,132  
                       
 

Income before provision for income taxes

    80,828     20,478     24,294     32,250     30,089  

Provision for income taxes

    28,946     6,883     8,509     10,685     10,284  
                       
 

Net income

    51,882     13,595     15,785     21,565     19,805  

Preferred stock dividends

        1,115              

Accretion on preferred stock discount

        3,559              
                       
 

Net income available to common shareholders

  $ 51,882   $ 8,921   $ 15,785   $ 21,565   $ 19,805  
                       

Earnings Per Common Share

                               

Net income available to common shareholders, basic

  $ 4.11   $ 0.74   $ 1.53   $ 2.33   $ 2.17  

Net income available to common shareholders, diluted

    4.08     0.74     1.52     2.32     2.15  

Cash dividends

    0.68     0.68     0.68     0.68     0.68  

        In reference to the table above, net income per share data have been retroactively adjusted to give effect to 5% common stock dividend paid to shareholders of record on March 9, 2007.

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

        The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") describes SCBT Financial Corporation and its subsidiary's results of operations for the year ended December 31, 2010 as compared to the year ended December 31, 2009, and also analyzes our financial condition as of December 31, 2010 as compared to December 31, 2009. Like most financial institutions, we derive most of our income from interest we receive on our loans and investments. Our primary source of funds for making these loans and investments is our deposits, on most of which we pay interest. Consequently, one of the key measures of our success is the amount of net interest income, or the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities, such as deposits. Another key measure is the spread between the yield we earn on these interest-earning assets and the rate we pay on our interest-bearing liabilities.

        Of course, there are risks inherent in all loans, so we maintain an allowance for loan losses to absorb our estimate of probable losses on existing loans that may become uncollectible. We establish and maintain this allowance by charging a provision for loan losses against our operating earnings. In the following section, we have included a detailed discussion of this process.

        In addition to earning interest on our loans and investments, we earn income through fees and other expenses we charge to our customers. We describe the various components of this noninterest income, as well as our noninterest expense, in the following discussion.

        The following section also identifies significant factors that have affected our financial position and operating results during the periods included in the accompanying financial statements. We encourage you to read this discussion and analysis in conjunction with the financial statements and the related notes and the other statistical information also included in this report.

Overview

        We achieved a record net income available to common shareholders of $51.9 million during 2010 compared to $8.9 million in 2009, due to the $62.5 million after-tax gain on the acquisition of CBT. We continued to experience pressures from the deteriorating U.S. economy and the economies in our markets. The gain from the CBT acquisition was offset by a $27.6 million increase in the provision for loan losses and a $41.6 million increase in noninterest expenses. Consolidated net income available to common shareholders increased 481.6%, or $43.0 million. In 2009, net income was reduced by $4.7 million in preferred stock dividends and accretion on preferred stock discount related to repurchasing the preferred stock from the U.S. Treasury in the second quarter of 2009. Diluted earnings per share increased 451.4% to $4.08 for the year ended December 31, 2010 as compared to $0.74 for the year ended December 31, 2009. Our net interest income increased 17.2% to $122.6 million related to the addition of loans and securities from the CBT acquisition, and declines in interest rates paid on deposits as certificates of deposit balances re-priced lower during the year. Interest income increased 9.6% while interest expense decreased 12.0% for the year ended December 31, 2010 compared to the same period in 2009.

        Non-acquired nonperforming assets ("NPAs") increased to $86.5 million at December 31, 2010 up from $52.9 million at December 31, 2009. NPAs as a percentage of loans and repossessed assets increased to 3.74% at December 31, 2010 as compared to 2.40% at December 31, 2009 and 3.80% at September 30, 2010. NPAs to total assets at December 31, 2010 were 2.41% compared to 1.96% at the end of 2009 and 2.39% at the end of the third quarter of 2010. The increase continues to reflect the pressure within the real estate market and within the U.S. economy as a whole. The allowance for loans losses represented 2.07% of total non-acquired period-end loans at $47.5 million. The current allowance for loan losses provides 0.69 times coverage of period-end non-acquired nonperforming

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loans. Nonperforming loans totaled $69.1 million, representing 3.01% of period-end loans (non-acquired).

        Our noninterest income increased during 2010 by $111.5 million, resulting primarily from the gain on the acquisition of CBT of $98.1 million. The remaining $13.4 million increase resulted from an $11.9 million increase from the addition of the CBT branches and $1.5 million increase in legacy SCBT noninterest income. Our noninterest expense increased during 2010, resulting from the acquisition of CBT branches by $22.6 million; and by $19.0 million due to the following: the prepayment fee paid to the FHLB on advances paid off of $3.2 million, merger expenses of $5.5 million, increase in personnel cost of $9.2 million, including a $1.1 million group insurance termination fee, and increase in business development of $1.3 million. Our efficiency ratio was 46.7% at December 31, 2010 as compared to 61.2% at December 31, 2009. This lower ratio was the result in the large gain from the CBT acquisition. On an adjusted basis for December 31, 2010, the efficiency ratio was 67.9% excluding the gain from the CBT transaction, merger cost, prepayment fee on FHLB advances, and the termination fee on group insurance.

        On January 16, 2009, we completed the sale of $64.8 million in preferred stock and a warrant to the U.S. Treasury as part of the government's TARP CPP. We issued to the U.S. Treasury 64,779 shares of Series T Preferred Stock and a ten-year warrant to purchase up to 303,083 shares of our common stock (the "Warrant") at an initial exercise price of $32.06 per share. On May 20, 2009, we repurchased all of the shares of Series T Preferred Stock issued to the U.S. Treasury. As a result, we recorded a $3.3 million accelerated deemed dividend on the preferred stock to account for the difference between the original purchase price for the preferred stock and its redemption price. On June 24, 2009, we paid the U.S. Treasury $1.4 million to repurchase the Warrant. With the repurchase of the Warrant, we have repurchased all securities issued to the U.S. Treasury under the CPP.

        We continue to remain well-capitalized with a total risk-based capital ratio of 14.60% as of December 31, 2010. The increase from the prior year reflected the acquisition gain of $98.1 million recorded on the CBT acquisition. We believe our current capital ratios position us well during this time of continued economic uncertainty.

        At December 31, 2010, we had $3.6 billion in assets and 1,015 full-time equivalent employees. Through our banking subsidiary we provide our customers with checking accounts, NOW accounts, savings and time deposits of various types, brokerage services and alternative investment products such as annuities and mutual funds, trust and asset management services, loans for businesses, agriculture, real estate, personal use, home improvement and automobiles, credit cards, letters of credit, home equity lines of credit, safe deposit boxes, bank money orders, wire transfer services, correspondent banking services, and use of ATM facilities.

        Subsequent to year-end, on February 18, 2011, the Company entered into a purchase and assumption ("P&A") agreement with loss share arrangements with the FDIC to purchase certain assets and assume substantially all of the deposits and certain liabilities of Habersham, a full service Georgia state-chartered community bank headquartered in Clarkesville, Georgia. Habersham operated 8 branches in the Northeast region of Georgia. Excluding the effects of purchase accounting, the Company acquired $387.7 million in total assets, including loans of $223.7 million, and $384.8 million in total liabilities, including $339.9 million in deposits, based on December 31, 2010 unaudited balances. Pursuant to the P&A agreement, SCBT, N.A. received a discount of $38.3 million on the assets acquired and did not pay the FDIC a premium to assume all customer deposits. Most of the loans and foreclosed real estate purchased are covered by a loss share agreement between the FDIC and SCBT, N.A. Under this loss share agreement, the FDIC has agreed to cover 80% of loan and foreclosed real estate losses. The loss sharing agreement applicable to single family residential mortgage loans provides for loss sharing with the FDIC for up to ten years, and for commercial loans and other covered assets provides for loss sharing for up to five years with the FDIC. The Company did not immediately acquire

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the real estate, banking facilities, furniture or equipment of Habersham as a part of the P&A agreement. However, the Company has the option to purchase the real estate and furniture and equipment from the FDIC. The term of this option expires approximately 90 days from the date of the acquisition.

        Subsequent to year-end, the Company entered into a Securities Purchase Agreement, effective as of February 18, 2011, with accredited institutional investors, pursuant to which the Company sold a total of 1,129,032 shares of its common stock at a purchase price of $31.00 per share (the "Private Placement"). The proceeds to the Company from the Private Placement were $34.7 million, net of approximately $315,000 in issuance costs. The Private Placement was completed on February 18, 2011, and was contingent on a successful bid for Habersham.

Recent Government Actions

        Please see the caption "Government Actions" under PART I, Item 1 Business on page 8.

Critical Accounting Policies and Estimates

        We have established various accounting policies that govern the application of accounting principles generally accepted in the United States of America in the preparation of our financial statements. Significant accounting policies are described in Note 1 to the audited consolidated financial statements. These policies may involve significant judgments and estimates that have a material impact on the carrying value of certain assets and liabilities. Different assumptions made in the application of these policies could result in material changes in our financial position and results of operations.

Allowance for Loan Losses

        The allowance for loan losses reflects the estimated losses that will result from the inability of our bank's borrowers to make required loan payments. In determining an appropriate level for the allowance, we identify portions applicable to specific loans as well as providing amounts that are not identified with any specific loan but are derived with reference to actual loss experience, loan types, loan volumes, economic conditions, and industry standards. Changes in these factors may cause our estimate of the allowance to increase or decrease and result in adjustments to the provision for loan losses. See "Allowance for Loan Losses" in this MD&A and "Allowance for Loan Losses" in Note 1 and "Loans and Allowances for Loan Losses" in Note 5 to the audited consolidated financial statements for further detailed descriptions of our estimation process and methodology related to the allowance for loan losses.

Other Real Estate Owned ("OREO")

        OREO, consisting of properties obtained through foreclosure or through a deed in lieu of foreclosure in satisfaction of loans, is reported at the lower of cost or fair value, determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for estimated selling costs. Management also considers other factors, including changes in absorption rates, length of time the property has been on the market and anticipated sales values, which have resulted in adjustments to the collateral value estimates indicated in certain appraisals. At the time of foreclosure or initial possession of collateral, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the allowance for loan losses.

        Subsequent declines in the fair value of OREO below the new cost basis are recorded through valuation adjustments. Significant judgments and complex estimates are required in estimating the fair value of other real estate, and the period of time within which such estimates can be considered current is significantly shortened during periods of market volatility. In response to market conditions

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and other economic factors, management may utilize liquidation sales as part of its problem asset disposition strategy. As a result of the significant judgments required in estimating fair value and the variables involved in different methods of disposition, the net proceeds realized from sales transactions could differ significantly from appraisals, comparable sales, and other estimates used to determine the fair value of other real estate. Management reviews the value of other real estate each quarter and adjusts the values as appropriate. Revenue and expenses from OREO operations as well as gains or losses on sales and any subsequent adjustments to the value are recorded as OREO expense and loan related expense, a component of non-interest expense.

Goodwill and Other Intangible Assets

        Goodwill represents the excess of the purchase price over the sum of the estimated fair values of the tangible and identifiable intangible assets acquired less the estimated fair value of the liabilities assumed. Goodwill has an indefinite useful life and is evaluated for impairment annually or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset's fair value. The goodwill impairment analysis is a two-step test. The first step, used to identify potential impairment, involves comparing each reporting unit's estimated fair value to its carrying value, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is considered not to be impaired. If the carrying value exceeds estimated fair value, there is an indication of potential impairment and the second step is performed to measure the amount of impairment.

        If required, the second step involves calculating an implied fair value of goodwill for each reporting unit for which the first step indicated impairment. The implied fair value of goodwill is determined in a manner similar to the amount of goodwill calculated in a business combination, by measuring the excess of the estimated fair value of the reporting unit, as determined in the first step, over the aggregate estimated fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination. If the implied fair value of goodwill exceeds the carrying value of goodwill assigned to the reporting unit, there is no impairment. If the carrying value of goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess. An impairment loss cannot exceed the carrying value of goodwill assigned to a reporting unit, and the loss establishes a new basis in the goodwill. Subsequent reversal of goodwill impairment losses is not permitted. Management has determined that SCBT has one reporting unit.

        Our stock price has historically traded above its book value and tangible book value. During 2010, the lowest trading price for our stock was $27.59, and the stock price closed on December 31, 2010 at $32.75, above book value and tangible book value. In the event our stock were to trade below its book value at any time during the reporting period, we would perform an evaluation of the carrying value of goodwill as of the reporting date. Such a circumstance would be one factor in our evaluation that could result in an eventual goodwill impairment charge. We evaluated the carrying value of goodwill as of April 30, 2010, our annual test date, and determined that no impairment charge was necessary. Additionally, should our future earnings and cash flows decline and/or discount rates increase, an impairment charge to goodwill and other intangible assets may be required.

        Core deposit intangibles, included in other assets in the condensed consolidated balance sheets, consist of costs that resulted from the acquisition of deposits from other commercial banks or the estimated fair value of these assets acquired through business combinations. Core deposit intangibles represent the estimated value of long-term deposit relationships acquired in these transactions. These costs are amortized over the estimated useful lives of the deposit accounts acquired on a method that we believe reasonably approximates the anticipated benefit stream from the accounts. The estimated useful lives are periodically reviewed for reasonableness.

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Income Taxes and Deferred Tax Assets

        Income taxes are provided for the tax effects of the transactions reported in our condensed consolidated financial statements and consist of taxes currently due plus deferred taxes related to differences between the tax basis and accounting basis of certain assets and liabilities, including available-for-sale securities, allowance for loan losses, accumulated depreciation, net operating loss carry forwards, accretion income, deferred compensation, intangible assets, and pension plan and post-retirement benefits. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets and liabilities are reflected at income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. A valuation allowance is recorded in situations where it is "more likely than not" that a deferred tax asset is not realizable. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. We file a consolidated federal income tax return for our subsidiary. At December 31, 2010, we are in a deferred tax liability position which resulted from the acquisition gain recorded in 2010. In addition, we evaluate the need for income tax reserves related to uncertain income tax positions but had no such reserves at December 31, 2010.

Other-Than-Temporary Impairment ("OTTI")

        We evaluate securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) the outlook for receiving the contractual cash flows of the investments, (4) the anticipated outlook for changes in the general level of interest rates, and (5) our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value or for a debt security whether it is more-likely-than-not that the Company will be required to sell the debt security prior to recovering its fair value. See page 55 "Available-for-sale" for further discussion.

Business Combinations, Method of Accounting for Loans Acquired, and FDIC Indemnification Asset

        We account for acquisitions under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. No allowance for loan losses related to the acquired loans is recorded on the acquisition date because the fair value of the loans acquired incorporates assumptions regarding credit risk.

        Acquired credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality, found in FASB ASC Topic 310-30, Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality, formerly American Institute of Certified Public Accountants ("AICPA") Statement of Position (SOP) 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer, and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loans. Loans acquired in business combinations with evidence of credit deterioration are considered impaired. Loans acquired through business combinations that do not meet the specific criteria of FASB ASC Topic 310-30, but for which a discount is attributable, at least in part to credit quality, are also accounted for under this guidance.

        In accordance with FASB ASC Topic 805, the FDIC Indemnification Asset was initially recorded at its fair value, and is measured separately from the loan assets and foreclosed assets because the loss sharing agreements are not contractually embedded in them or transferrable with them in the event of disposal.

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        For further discussion of the Company's loan accounting and acquisitions, see Note 1—Summary of Significant Accounting Policies, Note 2—Mergers and Acquisitions to the audited condensed consolidated financial statements and Note 5—Loans and Allowance for Loan Losses.

Recent Accounting Standards and Pronouncements

        For information relating to recent accounting standards and pronouncements, see Note 1 to our audited consolidated financial statements entitled "Summary of Significant Accounting Policies."

Results of Operations

        Consolidated net income available to common shareholders increased by $43.0 million for the year ended December 31, 2010 compared to the year ended December 31, 2009. The increase reflects the acquisition gain recorded on the CBT acquisition and improved net interest income offset by a higher provision for loan losses and higher noninterest expenses throughout the year. Below are key highlights of our results of operations during 2010:

    Consolidated net income available to common shareholders increased 481.7% to $51.9 million in 2010 compared with $8.9 million in 2009 and $15.8 million in 2008, which reflects a decrease of 43.5% in 2009 compared to 2008.

    Basic earnings per common share increased 455.4% to $4.11 in 2010 compared with $0.74 in 2009 and $1.53 in 2008.

    Diluted earnings per common share increased 451.4% to $4.08 in 2010 compared with $0.74 in 2009 and $1.52 in 2008.

    Book value per common share was $25.79 at the end of 2010, an increase from $22.20 at the end of 2009 and $21.77 at the end of 2008.

    Return on average assets increased to 1.43% in 2010, compared with 0.48% in 2009 and 0.58% in 2008. Our return on average assets was affected by an increase in average total assets and net income caused primarily by the $98.1 million acquisition gain on the CBT acquisition partially offset by a 103.2% increase in the provision for loan losses for the year ended December 31, 2010 compared to December 31, 2009.

    Return on average shareholders' equity increased to 15.45% in 2010, compared with 4.66% in 2009 and 7.00% in 2008. The increase reflected the significant impact of higher net income for the year ended December 31, 2010 from the CBT acquisition gain.

    Our dividend payout ratio decreased to 16.43% for the year ended December 31, 2010 compared with 74.66% in 2009 and 40.93% in 2008. The decrease from 2009 to 2010 reflects higher net income available to common shareholders for the year ended December 31, 2010 due to the acquisition gain recorded on the FDIC-assisted acquisition of CBT. See the paragraph in Item 5.a. on page 35 for more information on the calculation of the Company's dividend payout ratio.

    Our equity to assets ratio decreased to 9.18% at December 31, 2010 compared with 10.47% in 2009, and increased compared with 8.85% in 2008.

        The higher provision for loan losses for the year ended December 31, 2010 as compared to the same period in 2009 was partially offset by the higher net interest income. The impacts of the CBT acquisition and a decline in the average rate of interest-bearing liabilities of 53 basis points were the main drivers causing net interest income to increase by $18.0 million, or 17.2%, during 2010. The average yield on interest-earning assets declined by 44 basis points; however, the growth in the average balance of interest-earning assets of $498.5 million, or 19.1%, drove total interest income to increase by

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$13.6 million, or 9.6%. The higher total interest income resulted from the increase in average interest-earning assets due to the CBT acquisition, partially offset by the decline in the average yield on the loan portfolio during a falling interest rate environment. The average balance of interest-earning liabilities grew by $608.4 million, or 28.0%; however, the 102 basis point decline in the average rate on certificates and other time deposits drove total interest expense to decrease by $4.5 million, or 12.0%. Overall, the higher net interest income was largely a result of the impact of the CBT acquisition and average rates on interest-bearing liabilities declining more quickly than average yields on interest-earning assets.

        In the table below, we have reported our results of operations by quarter for the years ended December 31, 2010 and 2009.

Table 1—Quarterly Results of Operations (unaudited)

 
  2010 Quarters   2009 Quarters  
(Dollars in thousands)
  Fourth   Third   Second   First   Fourth   Third   Second   First  

Interest income

  $ 39,789   $ 39,249   $ 39,112   $ 37,204   $ 34,473   $ 35,020   $ 35,857   $ 36,448  

Interest expense

    7,974     8,238     7,952     8,573     7,281     8,639     9,838     11,450  
                                   
 

Net interest income

    31,815     31,011     31,160     28,631     27,192     26,381     26,019     24,998  
                                   

Provision for loan losses

    10,667     10,328     12,509     20,778     10,158     6,990     4,521     5,043  

Noninterest income

    13,256     11,830     11,028     101,621     5,763     5,591     7,761     7,131  

Noninterest expense

    33,746     29,932     28,984     32,580     20,624     21,797     21,038     20,187  
                                   
 

Income before income taxes

    658     2,581     695     76,894     2,173     3,185     8,221     6,899  

Income taxes

    99     794     120     27,933     654     1,014     2,836     2,379  
                                   
 

Net income

    559     1,787     575     48,961     1,519     2,171     5,385     4,520  

Preferred stock dividends

                            450     665  

Accretion on preferred stock discount

                            3,410     149  
                                   

Net income available to common shareholders

  $ 559   $ 1,787   $ 575   $ 48,961   $ 1,519   $ 2,171   $ 1,525   $ 3,706  
                                   

Earnings Per Common Share

                                                 

Net income available to common shareholders, basic

  $ 0.04   $ 0.14   $ 0.05   $ 3.89   $ 0.12   $ 0.17   $ 0.13   $ 0.33  

Net income available to common shareholders, diluted

    0.04     0.14     0.05     3.86     0.12     0.17     0.13     0.33  

Cash dividends

    0.17     0.17     0.17     0.17     0.17     0.17     0.17     0.17  

Net Interest Income

        Net interest income is the largest component of our net income. Net interest income is the difference between income earned on interest-earning assets and interest paid on deposits and borrowings. Net interest income is determined by the yields earned on interest-earning assets, rates paid on interest-bearing liabilities, the relative balances of interest-earning assets and interest-bearing liabilities, the degree of mismatch, and the maturity and repricing characteristics of interest-earning assets and interest-bearing liabilities. Net interest income divided by average interest-earning assets represents our net interest margin.

        The Federal Reserve's Federal Open Market Committee's Fed funds remained at a target range of zero to 0.25% for the year ended December 31, 2010. We continued to reduce rates on all of our deposit products in early 2010 in line with the historically low Fed funds target. The reductions in the

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rates on interest-bearing liabilities contributed to higher net interest income for 2010 as compared to 2009. The repricing of our certificates of deposits to lower interest rates drove interest expense lower by $6.5 million for the year ended December 31, 2010. While the average balance of certificates of deposits grew by $242.8 million due to the acquisition of CBT during 2010, the ending balance increased $266.4 million from the balance at December 31, 2009. Interest expense from other borrowings also declined by $2.4 million in 2010 compared to 2009, due to the repayment of all FHLB advances in the first quarter of 2010 and repayment of subordinated indebtedness of $15.0 million during the fourth quarter of 2010. Offsetting the decrease from certificates of deposits and other borrowings was an increase of $4.3 million in interest expense on the $365.6 million increase in average balances of all other deposit categories. The average rates on interest-bearing liabilities adjusted downward more quickly than the decrease in average yields on interest-earning assets.

        Net interest income highlighted for the year ended December 31, 2010:

    Net interest income increased by $18.0 million, or 17.2%, to $122.6 million during 2010.

    Higher 2010 net interest income was driven by a 53 basis point decrease in the average rate on interest-bearing liabilities.

    A decrease in the average rate on certificates and other time deposits was the largest contributor to the rate decrease.

    An increase of 9 basis points in net interest spread contributed to higher net interest income during 2010.

    Non-TE (non-taxable equivalent) net interest margin decreased 7 basis points to 3.95% from 4.02% in 2009.

    Net interest margin (taxable equivalent) decreased 5 basis points to 4.00% during 2010.

    Interest-free funds favorably impacted net interest margin by 12 basis points, a decrease of 16 basis points from December 31, 2009. The decrease is being driven largely by the Federal Reserve lowering the targets on Fed funds.

    The yield on loans covered under loss share agreements was 5.6% and positively impacted the net interest margin. This partially offset the impact of declining interest rates on non-acquired loans.

        Net interest income highlighted for the year ended December 31, 2009:

    Net interest income increased by $8.8 million, or 9.2%, to $104.6 million during 2009.

    Higher 2009 net interest income was driven by a 107 basis point decrease in the average rate on interest-bearing liabilities.

    A decrease in the average rate on certificates and other time deposits was the largest contributor to the rate decrease.

    An increase of 33 basis points in net interest spread contributed to higher net interest income during 2009.

    Non-TE (non-taxable equivalent) net interest margin increased 23 basis points to 4.02% from 3.79% in 2008.

    Net interest margin (taxable equivalent) increased 22 basis points to 4.05% during 2009.

    Interest-free funds favorably impacted net interest margin by 28 basis points.

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        Net interest income highlighted for the year ended December 31, 2008:

    Net interest income increased by $15.1 million, or 18.7%, to $95.8 million during 2008.

    Higher 2008 net interest income was driven by volume as total average interest-earning assets increased by $410.4 million, or 19.4%, during 2008 and a 104 basis point rate decrease in the average rate on interest-bearing liabilities.

    An increase in loans was the largest contributor to volume increase. The increase in loans accounted for 96.8% of the growth in the average balance of total interest-earning assets for the year ended December 31, 2008.

    An increase of 17 basis points in net interest spread contributed to higher net interest income during 2008.

    Non-TE (non-taxable equivalent) net interest margin decreased 3 basis points to 3.79% from 3.82% in 2007.

    Net interest margin (taxable equivalent) decreased 2 basis points to 3.83% during 2008.

    Interest-free funds favorably impacted net interest margin by 38 basis points.

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Table 2—Volume and Rate Variance Analysis

 
  2010 Compared to 2009
Increase (Decrease) due to
  2009 Compared to 2008
Increase (Decrease) due to
 
(Dollars in thousands)
  Volume(1)   Rate(1)   Total   Volume(1)   Rate(1)   Total  

Interest income on:

                                     
 

Loans, net of unearned income(2)

  $ 20,053   $ (8,007 ) $ 12,046   $ 1,794   $ (13,200 ) $ (11,406 )
 

Loans held for sale

    (194 )   (129 )   (323 )   805     (259 )   546  
 

Investment securities:

                                     
   

Taxable

    3,375     (1,891 )   1,484     (1,645 )   (919 )   (2,564 )
   

Tax exempt(3)

    48     (131 )   (83 )   (322 )   (213 )   (535 )
 

Federal funds sold and securities purchased under agreements to resell and time deposits

    425     7     432     1,811     (2,129 )   (318 )
                           
     

Total interest income

    23,707     (10,151 )   13,556     2,443     (16,720 )   (14,277 )
                           

Interest expense on:

                                     

Deposits

                                     
 

Transaction and money market accounts

    2,470     1,750     4,220     983     (2,838 )   (1,855 )
 

Savings deposits

    191     (86 )   105     120     (1,071 )   (951 )
 

Certificates and other time deposits

    6,242     (12,771 )   (6,529 )   (621 )   (13,486 )   (14,107 )

Federal funds purchased and securities sold under agreements to repurchase

    13     114     127     (1,253 )   (3,672 )   (4,925 )

Other borrowings

    (2,725 )   331     (2,394 )   (780 )   (472 )   (1,252 )
                           
   

Total interest expense

    6,191     (10,662 )   (4,471 )   (1,551 )   (21,539 )   (23,090 )
                           
     

Net interest income

  $ 17,516   $ 511   $ 18,027   $ 3,994   $ 4,819   $ 8,813  
                           

(1)
The rate/volume variance for each category has been allocated on an equal basis between rate and volumes.

(2)
Nonaccrual loans are included in the above analysis.

(3)
Tax exempt income is not presented on a taxable-equivalent basis in the above analysis.

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Table 3—Yields on Average Interest-Earning Assets and Rates on Average Interest-Bearing Liabilities

 
  Years Ended December 31,  
 
  2010   2009   2008  
(Dollars in thousands)
  Average
Balance
  Interest
Earned/
Paid
  Average
Yield/
Rate
  Average
Balance
  Interest
Earned/
Paid
  Average
Yield/
Rate
  Average
Balance
  Interest
Earned/
Paid
  Average
Yield/
Rate
 

Assets

                                                       

Interest-earning assets:

                                                       
 

Loans, net of unearned income(1)

  $ 2,594,742   $ 142,303     5.48 % $ 2,248,568   $ 130,257     5.79 % $ 2,220,448   $ 141,663     6.38 %
 

Loans held for sale

    27,197     1,190     4.38 %   31,187     1,513     4.85 %   17,022     967     5.68 %
 

Investment securities:

                                                       
   

Taxable

    250,271     9,985     3.99 %   179,148     8,501     4.75 %   210,436     11,065     5.26 %
   

Tax-exempt

    30,168     853     2.83 %   28,703     936     3.26 %   36,760     1,471     4.00 %
 

Federal funds sold and securities purchased under agreements to resell and time deposits

    200,126     1,023     0.51 %   116,422     591     0.51 %   38,907     909     2.31 %
                                             
     

Total interest-earning assets

    3,102,504     155,354     5.01 %   2,604,028     141,798     5.45 %   2,523,573     156,075     6.18 %

Noninterest-earning assets:

                                                       
 

Cash and due from banks

    62,249                 44,192                 51,747              
 

FDIC receivable for loss share agreements

    239,397                                              
 

Other real estate owned

    44,967                                              
 

Other assets

    211,442                 198,467                 178,824              
 

Allowance for loan losses

    (42,969 )               (32,761 )               (28,189 )            
                                                   
   

Total noninterest-earning assets

    515,086                 209,898                 202,382              
                                                   
     

Total assets

  $ 3,617,590               $ 2,813,926               $ 2,725,955              
                                                   

Liabilities

                                                       

Interest-bearing liabilities:

                                                       
 

Deposits

                                                       
   

Transaction and money market accounts

  $ 1,047,283   $ 8,395     0.80 % $ 658,030   $ 4,175     0.63 % $ 565,815   $ 6,030     1.07 %
   

Savings deposits

    195,252     860     0.44 %   155,797     755     0.48 %   145,579     1,706     1.17 %
   

Certificates and other time deposits

    1,246,372     19,272     1.55 %   1,003,572     25,801     2.57 %   1,019,434     39,908     3.91 %
 

Federal funds purchased and securities sold under agreements to repurchase

    214,096     629     0.29 %   208,565     502     0.24 %   271,143     5,427     2.00 %
 

Other borrowings

    81,822     3,581     4.38 %   150,446     5,975     3.97 %   168,645     7,227     4.29 %
                                             
     

Total interest-bearing liabilities

    2,784,825     32,737     1.18 %   2,176,410     37,208     1.71 %   2,170,616     60,298     2.78 %

Noninterest-bearing liabilities:

                                                       
 

Noninterest-bearing deposits

    465,698                 329,782                 315,167              
 

Other liabilities

    31,214                 16,144                 14,688              
                                                   
 

Total noninterest-bearing liabilities

    496,912                 345,926                 329,855              
 

Shareholders' equity

    335,853                 291,590                 225,484              
                                                   
     

Total noninterest-bearing liabilities and shareholders' equity

    832,765                 637,516                 555,339              
                                                   
       

Total liabilities and shareholders' equity

  $ 3,617,590               $ 2,813,926               $ 2,725,955              
                                                   

Net interest spread

               
3.83

%
             
3.74

%
             
3.41

%

Impact of interest free funds

                0.12 %               0.28 %               0.38 %
                                                   

Net interest margin (non-taxable equivalent)

                3.95 %               4.02 %               3.79 %
                                             
       

Net interest income

        $ 122,617               $ 104,590               $ 95,777        
                                                   

(1)
Nonaccrual loans are included in the above analysis.

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Noninterest Income and Expense

        Noninterest income provides us with additional revenues that are significant sources of income. In 2010, 2009, and 2008, noninterest income comprised 52.9%, 20.1%, and 16.6%, respectively, of total net interest and noninterest income. The increase from 2009 resulted primarily from the $98.1 million pre-tax gain recorded for the CBT acquisition for the year ended December 31, 2010 as compared to the same period in 2009.

Table 4—Noninterest Income for the Three Years

 
  Years Ended December 31,  
(Dollars in thousands)
  2010   2009   2008  

Gain on acquisition

  $ 98,081   $   $  

Service charges on deposit accounts

    21,342     15,498     16,117  

Bankcard services income

    8,987     5,043     4,832  

Mortgage banking income, net of commissions

    6,564     6,552     3,455  

Trust and investment services income

    4,251     2,517     2,756  

Securities gains (losses), net

    292     82     (43 )

Total other-than-temporary impairment losses

    (1,281 )   (10,494 )   (9,884 )

Portion of impairment losses recognized in other comprehensive loss

    (5,489 )   5,489      
               
 

Net impairment losses recognized in earnings

    (6,770 )   (5,005 )   (9,884 )

Other

    4,988     1,559     1,816  
               
 

Total noninterest income

  $ 137,735   $ 26,246   $ 19,049  
               

        Excluding the pre-tax gain from the CBT acquisition, noninterest income increased 51.1% for the year ended December 31, 2010 compared to 2009 resulting from the following:

    Service charges on deposit accounts increased 37.7% driven by the service charges on the acquired CBT deposit accounts.

    Bankcard services income increased 78.2%. This increase was primarily the result of adding CBT bankcard services income. Excluding CBT, bankcard services income was up 25.9% for the year ended December 31, 2010.

    Trust and investment services income increased 68.9% driven largely by Wealth Management's expansion into the Spartanburg, South Carolina market in November of 2009 and the CBT acquisition in January of 2010.

    Net impairment losses recognized in earnings was higher during the year ended December 31, 2010 compared to the same period in 2009. We recorded $6.6 million of OTTI on all seven pooled trust preferred securities and $130,000 on other equities for the year ended December 31, 2010 (additional detailed discussion of OTTI can be found in Note 4—Investment Securities).

    Other noninterest income increased 219.9%, primarily driven by $2.4 million of accretion on the receivable for the FDIC loss share agreement from the CBT acquisition (additional detailed discussion of the accretion on the receivable for the FDIC loss share agreements can be found in Note 1—Summary of Significant Accounting Policies).

        Noninterest income increased 37.8% for the year ended December 31, 2009 compared to 2008 resulting from the following:

    Mortgage banking income increased 89.6%, driven by an increase in fees paid by investors to purchase mortgage loans sold in the secondary market for the year ended December 31, 2009.

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      During 2009, production in secondary market mortgages was strong during the first and second quarters of 2009 and overall higher than in the previous year.

    Net impairment losses recognized in earnings was lower during the year ended December 31, 2009 compared to the same period in 2008. We recorded $4.9 million of OTTI on seven pooled trust preferred securities and $83,000 on other equities for the year ended December 31, 2009 (additional detailed discussion of OTTI can be found in Note 4—Investment Securities).

    Other noninterest income decreased 14.2%, primarily driven by a reduction in the cash surrender value of bank-owned life insurance and miscellaneous other income.

        Noninterest expense represents the largest expense category for our company. During 2010, we continued to emphasize carefully controlling our noninterest expense.

Table 5—Noninterest Expense for the Three Years

 
  Years Ended December 31,  
(Dollars in thousands)
  2010   2009   2008  

Salaries and employee benefits

  $ 60,795   $ 40,787   $ 42,554  

Information services expense

    9,144     5,557     4,878  

Net occupancy expense

    8,544     6,392     6,103  

Furniture and equipment expense

    7,530     6,049     6,246  

Merger expense

    5,504         405  

OREO expense and loan related

    5,304     5,641     1,759  

FDIC assessment and other regulatory charges

    5,283     5,449     1,837  

Advertising and marketing

    3,618     2,497     3,870  

Business development and staff related

    3,258     1,947     2,184  

Federal Home Loan Bank advances prepayment fee

    3,189          

Professional fees

    2,046     1,782     2,243  

Amortization of intangibles

    1,650     526     575  

Other

    9,377     7,019     7,142  
               
 

Total noninterest expense

  $ 125,242   $ 83,646   $ 79,796  
               

        Noninterest expense increased 49.7% for the year ended December 31, 2010 compared to 2009 primarily as a result of the following:

    Salaries and employee benefits expense increased 49.1%, driven by the addition of CBT and increases in both incentive and merit pay for employees during 2010.

    Information services expense increased 64.5%, driven mainly by a $2.6 million incremental increase from CBT and an increase in cost related to internet banking and general computer servicing.

    Merger expenses of $5.5 million were incurred related to the CBT acquisition.

    In February of 2010, the Company paid off the $80.3 million in outstanding FHLB advances. This repayment included a $3.2 million prepayment fee for the early payoff.

    Amortization of intangibles increased 213.7%, driven by $1.1 million in amortization on the core deposit intangible recorded on the deposits acquired from CBT.

    OREO and loan related expenses for the year ended December 31, 2010 were $5.3 million, including $1.2 million related to covered OREO and loans acquired in the CBT acquisition. Excluding expenses on covered OREO and loans, the expense on non-acquired loans was

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      $4.1 million, a decrease of $1.6 million, or 28.0%, from the balance at December 31, 2009. The decrease was largely driven by a lower net loss on legacy SCBT property sold during the year.

        Noninterest expense increased 4.8% for the year ended December 31, 2009 compared to 2008 primarily as a result of the following:

    Salaries and employee benefits expense decreased 4.2%, driven mainly by a $1.2 million decrease in the employer match on the 401(k) plan, an $863,000 decrease in employee incentive pay, and a $521,000 decrease in pension cost during the 2009.

    Information services expense increased 13.9%, driven by an increase in cost related to internet banking and general computer servicing.

    FDIC assessments and other regulatory charges increased 196.6%, driven by continued quarterly increases by the FDIC. In November 2009, the FDIC published a final rule to require FDIC insured banks to prepay the fourth quarter assessment and the next three years assessment by December 31, 2009. The calculation of the prepaid assessment provides for a 5% growth rate assumption in the deposit base and a 3 basis point increase in FDIC assessments in 2011 and 2012. Therefore, if deposits grow faster than 5%, our quarterly expense in the future will increase compared to previous periods. The prepayment does not immediately impact expense levels during 2009, but does impact our liquidity. At December 31, 2009, we had a prepaid assessment of $11.2 million.

    Other real estate owned ("OREO") expense and loan related expense increased 220.7%, mostly driven by a $3.5 million increase in valuation losses on OREO. We believe that our OREO expense will remain elevated and could rise as problem loans are foreclosed on and we dispose of these assets in 2010 and 2011.

    Advertising and marketing expense decreased 35.5%, driven largely by a $539,000, or 26.9%, decrease in advertising expense, a $394,000, or 37.1%, decrease in public relations expense and a $351,000, or 63.8%, decrease in debit card rewards expense.

Income Tax Expense

        Our effective tax rate increased to 35.8% at December 31, 2010, compared to 33.6% at December 31, 2009. The higher effective tax rate in 2010 is attributable to higher pre-tax earnings driven by the acquisition gain recorded on the CBT acquisition.

Investment Securities

        We use investment securities, the second largest category of interest-earning assets, to generate interest income through the employment of excess funds, to provide liquidity, to fund loan demand or deposit liquidation, and to pledge as collateral for public funds deposits and repurchase agreements. The composition of the investment portfolio changed from 2009 primarily as a result of securities acquired through the CBT acquisition, the sale of $44.7 million in government sponsored entities ("GSE") debentures, mortgage-backed securities, and seven of the eight pooled trust preferred securities, and maturing or called securities that were purchased in higher interest rate environments. The average life of the investment portfolio at December 31, 2010 was approximately 4.03 years, compared with 4.97 years at December 31, 2009. At December 31, 2010, investment securities were $237.9 million, or 7.8% of earning assets, compared with $211.1 million, or 8.3% of earning assets, at December 31, 2009. See Note 1 "Summary of Significant Accounting Policies" in the audited consolidated financial statements for our accounting policy on investment securities.

        As securities are purchased, they are designated as held to maturity or available for sale based upon our intent, which incorporates liquidity needs, interest rate expectations, asset/liability

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management strategies, and capital requirements. We do not currently hold, nor have we ever held, any securities that are designated as trading securities. The following table presents the reported values reported of investment securities for the past five years as of December 31:

Table 6—Investment Securities for the Five Years

 
  December 31,  
(Dollars in thousands)
  2010   2009   2008   2007   2006  

Held-to-maturity (amortized cost):

                               

State and municipal obligations

  $ 19,941   $ 21,538   $ 24,228   $ 21,457   $ 18,112  
                       
 

Total held-to-maturity

    19,941     21,538     24,228     21,457     18,112  
                       

Available-for-sale (fair value):

                               

Government-sponsored enterprises debt

    70,534     36,615     28,672     71,952     67,448  

State and municipal obligations

    40,004     26,805     10,558     10,233      

GSE mortgage-backed securities

    84,440     103,268     133,505     118,205     93,238  

Trust preferred (collateralized debt obligations)

    2,034     6,250     10,083     14,246     14,358  

Corporate stocks

    362     365     402     8,744     7,069  
                       
 

Total available-for-sale

    197,374     173,303     183,220     223,380     182,113  
                       
 

Total other investments

    20,597     16,271     14,779     13,472     10,166  
                       

Total investment securities

  $ 237,912   $ 211,112   $ 222,227   $ 258,309   $ 210,391  
                       

        During 2010, total investment securities increased $26.8 million, or 12.7%, from December 31, 2009. The increase was primarily the result of securities acquired through the CBT acquisition, offset by $44.7 million in securities sold and maturing or called securities that were purchased in higher interest rate environments, and in the writedown of some pooled trust preferred securities. The decrease in held-to-maturity ("HTM") securities was the result of called and maturing state and municipal tax-exempt securities during 2010. These are generally longer-maturity bonds that we classified at the time of purchase as HTM. Beginning in the latter portion of 2008, we began to typically classify new purchases of municipal securities as available-for-sale to increase future flexibility to sell some of these securities if conditions warrant. At December 31, 2010, the fair value of the total investment securities portfolio (including HTM) was $2.4 million, or 1.00%, above its book value. Comparable valuations at December 31, 2009 reflected a total investment portfolio fair value that was $1.4 million, or 0.64%, lower than book value.

Held-to-maturity

        HTM securities consist solely of some of our tax-exempt state and municipal securities. The following are highlights:

    Total HTM securities decreased $1.6 million from the balance at December 31, 2009.

    The balance of HTM securities represented 0.6% and 0.8% of total assets at December 31, 2010 and 2009, respectively.

    Interest earned amounted to $811,000, a decrease of $99,000, or 10.9%, from $910,000 in the comparable year of 2009. The average balance of the HTM portfolio decreased by $2.0 million during 2010. The overall yield on the HTM portfolio decreased by 9 basis points from 2009 and by 8 basis points from 2008 attributable to maturing or called securities that were purchased in higher interest rate environments.

        The average life of the held to maturity portfolio was 10.3 years and 10.7 years at December 31, 2010 and 2009, respectively.

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Available-for-sale

        Securities available for sale consist mainly of government-sponsored enterprises, state and municipal bonds, and mortgage-backed securities. At December 31, 2010, investment securities with an amortized cost of $195.2 million and fair value of $197.4 million were classified as available for sale. The positive adjustment of $2.1 million between the carrying value of these securities and their amortized cost has been reflected, net of tax, in the consolidated balance sheet as a component of accumulated other comprehensive loss. The following are highlights:

    Total securities available for sale increased $24.1 million, or 13.9%, from the balance at December 31, 2009, primarily the result of securities acquired through the CBT acquisition, offset by $44.7 million in securities sold, maturing, or called securities that were purchased in higher interest rate environments, and the write down and ultimate sale of our pooled trust preferred securities.

    The balance of securities available for sale represented 5.5% of total assets at December 31, 2010 and 6.4% at December 31, 2009.

    Interest income earned in 2010 amounted to $10.0 million, an increase of $1.5 million, or 17.8%, from $8.5 million in the comparable year of 2009. The increase in interest earned reflected the increase from CBT acquisition offset by a 74 basis point decrease in the yield on available for sale securities, reflecting the ongoing low interest rate environment throughout 2010.

        At December 31, 2010, we had 56 securities available for sale in an unrealized loss position, which totaled $1.2 million. During 2010, the credit and capital markets continued to experience very high levels of turmoil globally. These situations largely reflect an ongoing decrease in liquidity in the capital markets and substantial volatility of spreads (over the U.S. Treasury yield curve) that many market segments experienced during the period. The unrealized loss position at December 31, 2010 includes $290,000 attributable to one pooled senior-tranche trust preferred security. This security is collateralized by subordinated debt issued by other financial institutions diversified across the United States. In evaluating whether or not this security is other-than-temporarily impaired, we have considered the financial health of these institutions, and the priority ranking of our ownership interest in the expected cash flows, and determined it was not in an other-than-temporary impairment ("OTTI") position. In 2010, we recorded $6.6 million in OTTI on seven mezzanine tranche pooled trust preferred securities. In the fourth quarter of 2010, we elected to sell these mezzanine tranche securities at an additional realized loss of $1.3 million. During 2009, we recorded $4.9 million in credit related OTTI on these mezzanine tranche pooled trust preferred securities. See Note 4—Investment Securities for additional information.

        The market for originating new pooled trust preferred securities, as well as the secondary market for such existing securities, continued to be extremely illiquid in 2010. Accordingly, we used a pricing model as the most appropriate method for valuing these securities. The pricing model uses observable market data and unobservable market inputs. Therefore, these valuations are considered Level 3 valuations under the three-tier value hierarchy. See "Note 4—Investment Securities" to the audited consolidated financial statements for information pertaining to our securities available for sale with gross unrealized losses at December 31, 2010 and 2009, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position and see "Note 26—Fair Value" for information pertaining to fair value methodologies.

        Investment securities in an unrealized loss position as of December 31, 2010 continue to perform as scheduled. We have the intent to hold all securities within the portfolio until their maturity or until their value recovers and it is more-likely-than-not that we will be not required to sell the debt securities. Therefore, we do not consider these investments to be other-than-temporarily impaired at December 31, 2010. We continue to monitor all of these securities with a high degree of scrutiny.

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There can be no assurance that we will not conclude in future periods that conditions existing at that time indicate some or all of these securities are other than temporarily impaired, which would require a charge to earnings in such periods. Any charges for other-than-temporary impairment related to securities available for sale would not impact cash flow, tangible capital or liquidity.

        While securities classified as available for sale may be sold from time to time to meet liquidity or other needs, it is not our normal practice to trade this segment of the investment securities portfolio. While we generally hold these assets on a long-term basis or until maturity, any short-term investments or securities available for sale could be sold at an earlier point, depending partly on changes in interest rates and alternative investment opportunities.

Other Investments

        Other investment securities include primarily our investments in Federal Reserve Bank stock and Federal Home Loan Bank of Atlanta ("FHLB") stock, each with no readily determinable market value. The amortized cost and fair value of all these securities are equal at year end. As of December 31, 2010, the investment in FHLB stock represented approximately $13.3 million, or 0.4% of total assets. The following factors have been evaluated and considered in determining the carrying amount of the FHLB stock:

    We evaluate ultimate recoverability of the par value.

    We currently have sufficient liquidity or have access to other sources of liquidity to meet all operational needs in the foreseeable future, and would not have the need to dispose of this stock below the recorded amount.

    Historically, the FHLB does not allow for discretionary purchases or sales of its stock. Redemptions of the stock occur at the discretion of the FHLB, subsequent to the maturity of outstanding advances held by the member institutions. We redeemed approximately $1.6 million of our investment during 2010, at par value.

    We have reviewed the assessments by rating agencies, which have concluded that debt ratings are likely to remain unchanged and the FHLB has the ability to absorb economic losses, given the expectation that the various FHLBanks have a very high degree of government support.

    The unrealized losses related to the securities owned by the FHLBanks are manageable given the capital levels of these organizations.

    All of the FHLBs are meeting their debt obligations.

    Our holdings of FHLB stock are not intended for the receipt of dividends or stock growth, but for the purpose and right to receive advances, or funding. We deem the FHLB's process of determining after each quarter end whether it will pay a dividend and, if so, the amount, as essentially similar to standard practice by most dividend-paying companies. Based on the FHLB's performance over the past seven consecutive quarters, starting with the second quarter 2009, the FHLB has announced a dividend payment after each quarter's performance, with the most recent dividend payment on November 4, 2010 related to the third quarter of 2010.

        For the reasons above, we have concluded that our holdings of FHLB stock are not other than temporarily impaired as of December 31, 2010 and ultimate recoverability of the par value of this investment is probable.

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Table 7—Maturity Distribution and Yields of Investment Securities

 
  Due In
1 Year or Less
  Due After
1 Thru 5 Years
  Due After
5 Thru 10 Years
  Due After
10 Years
   
   
   
   
 
 
  Total    
   
 
 
  Par
Value
  Fair
Value
 
(Dollars in thousands)
  Amount   Yield   Amount   Yield   Amount   Yield   Amount   Yield   Amount   Yield  

Held-to-maturity

                                                                         

State and municipal obligations(2)

  $ 340     8.15 % $ 260     6.53 % $ 5,119     6.10 % $ 14,222     5.97 % $ 19,941     6.05 % $ 19,965   $ 20,150  
                                                   
 

Total held-to-maturity

    340     8.15 %   260     6.53 %   5,119     6.10 %   14,222     5.97 %   19,941     6.05 %   19,965     20,150  
                                                   

Available-for-sale

                                                                         

Government-sponsored enterprises debt

        0.00 %   5,097     3.01 %   15,730     1.89 %   49,707     2.65 %   70,534     2.51 %   69,265     70,534  

State and municipal obligations(2)

    250     3.84 %   744     8.03 %   6,201     5.88 %   32,809     6.16 %   40,004     6.14 %   39,720     40,004  

Mortgage-backed securities

    1     5.49 %   84     4.21 %   20,671     2.97 %   63,684     3.70 %   84,440     3.52 %   81,692     84,440  

Trust preferred (collateralized debt obligations)

        0.00 %       0.00 %       0.00 %   2,034     7.50 %   2,034     7.50 %   2,242     2,034  

Corporate stocks(1)

        0.00 %       0.00 %       0.00 %   362     2.79 %   362     2.79 %   362     362  
                                                   
 

Total available-for-sale

    251     3.85 %   5,925     3.65 %   42,602     2.99 %   148,596     3.94 %   197,374     3.73 %   193,281     197,374  
                                                   
 

Total other investments(1)

        0.00 %       0.00 %       0.00 %   20,597     2.27 %   20,597     2.27 %   20,597     20,597  
                                                   

Total investment securities

  $ 591     6.32 % $ 6,185     5.14 % $ 47,721     4.54 % $ 183,415     3.53 % $ 237,912     3.80 % $ 233,843   $ 238,121  
                                                   

Percent of total

    0 %         3 %         20 %         77 %                              

Cumulative percent of total

    0 %         3 %         23 %         100 %                              

(1)
Federal Reserve Bank and other corporate stocks have no set maturity date and are classified in "Due after 10 Years."

(2)
Yields on tax-exempt income have been presented on a taxable-equivalent basis in the above table.

Loan Portfolio

        Our loan portfolio remains our largest category of interest-earning assets. The addition of $321.0 million in loans covered under loss share agreements in the CBT acquisition along with a 10.0% increase in consumer real estate loans and a 20.5% increase in commercial owner occupied real estate loans contributed to overall loan growth for the year ended December 31, 2010. At December 31, 2010, total loans had grown to $2.6 billion, an increase of $414.0 million, or 18.8%, compared to $2.2 billion at the end of 2009. Average loans outstanding during 2010 were $2.6 billion, an increase of $346.2 million, or 15.4%, over the 2009 average of $2.2 billion. (For further discussion of the Company's acquired loan accounting, see Note 1—Summary of Significant Accounting Policies, Note 2—Mergers and Acquisitions and Note 5—Loans and Allowance for Loan Losses to the consolidated financial statements.)

        The following table presents a summary of the non-acquired loan portfolio by category:

Table 8—Distribution of Non-Acquired Loans by Type

 
  December 31,  
(Dollars in thousands)
  2010   2009   2008   2007   2006  

Real estate:

                               
 

Commercial non-owner occupied

  $ 728,422   $ 770,934   $ 866,430   $ 805,267   $ 680,972  
 

Consumer(1)

    586,631     533,123     515,546     436,767     392,650  

Commercial owner occupied real estate

    565,155     469,101     423,345     308,864     219,466  

Commercial and industrial

    202,987     214,174     251,929     257,170     198,044  

Other income producing property

    124,431     137,736     141,516     123,659     115,189  

Consumer

    67,768     68,770     95,098     118,756     131,202  

Other loans

    20,806     9,400     22,212     32,564     23,307  
                       
 

Total non-acquired loans

  $ 2,296,200   $ 2,203,238   $ 2,316,076   $ 2,083,047   $ 1,760,830  
                       

(1)
Includes owner occupied real estate.

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        The following table presents the loans covered under loss share agreements by each loan pool for the year ended December 31:

Table 9—Distribution of Loans Covered Under Loss Share Agreements by Type

(Dollars in thousands)
  2010  

Commercial loans greater than or equal to $1 million

  $ 84,288  

Commercial real estate

    66,628  

Commercial real estate—construction and development

    32,312  

Residential real estate

    87,545  

Residential real estate—junior lien

    3,673  

Home equity

    1,519  

Consumer

    10,915  

Commercial and industrial

    24,742  

Single pay

    9,416  
       
 

Total loans covered under loss share agreements

  $ 321,038  
       

        The Company did not have any loans covered under loss share agreements with the FDIC for the years ended December 31, 2009, 2008, 2007, and 2006.

        Real estate mortgage loans continue to comprise the largest segment of our loan portfolio. All commercial and residential loans secured by real estate are included in this category. As of December 31, 2010 compared to December 31, 2009:

    Loans covered under loss share agreements with the FDIC acquired in the CBT transaction were $321.0 million, or 12.3% of total loans at December 31, 2010.

    Non-acquired loans secured by real estate mortgages were $1.3 billion, and comprised 50.2% of the total loan portfolio. This was a decrease of $11.0 million, or 0.8%, over year-end 2009.

    Loans secured by commercial real estate decreased by $42.5 million, or 5.5%.

    Loans secured by consumer real estate grew by $53.5 million, or 10.0%. A general decline in rates on consumer real estate loans as well as a home equity loan campaign that began in July of 2010 contributed to the growth in consumer real estate loans.

    Commercial owner occupied real estate loans grew $96.1 million, or 20.5%, from the comparable year of 2009. The balance represented 21.5% of total loans at December 31, 2010. A promotion that began to run in January of 2010 and continued through December 31, 2010, was a driving factor in the increase in commercial real estate loans.

        Loan interest income, including fees, was $143.5 million in 2010, an increase of $11.7 million, or 8.9% , over 2009 income of $131.8 million. The increase was the result of the 15.4% growth in the average balance of the loan portfolio from the CBT acquisition and organic growth, offset by an average loan portfolio yield in 2010 of 5.48% which was 31 basis points lower than the 5.79% loan yield in 2009. Interest and fee income for 2009 was 7.6% below the 2008 income of $142.6 million. The average loan yield in 2009 was 59 basis points lower than the 2008 yield of 6.38%.

        Non-acquired loans secured by commercial real estate are comprised of $422.4 million in construction and land development loans and $306.0 million in commercial non-owner occupied loans at December 31, 2010. At December 31, 2009, we had $467.3 million in construction and land development loans and $303.6 million in commercial non-owner occupied loans. Construction and land development loans are more susceptible to a risk of loss during the current downturn in the business cycle.

        Non-acquired loans secured by consumer real estate comprise of $322.6 million in consumer owner occupied loans and $264.0 million in home equity loans at December 31, 2010. At December 31, 2009, we had $284.5 million in consumer owner occupied loans and $248.6 million in home equity loans.

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        The table below shows the contractual maturity of the loan portfolio at December 31, 2010.

Table 10—Maturity Distribution of Loans

December 31, 2010
(Dollars in thousands)

  Total   1 Year
or Less
  Maturity
1 to 5 Years
  Over
5 Years
 

Real estate:

                         
 

Commercial non-owner occupied

  $ 728,422   $ 256,220   $ 387,515   $ 84,687  
 

Consumer

    586,631     50,364     159,966     376,301  

Commercial owner occupied real estate

    565,155     91,681     324,238     149,236  

Commercial and industrial

    202,987     84,012     96,412     22,563  

Other income producing property

    124,431     38,073     75,342     11,016  

Consumer

    67,768     10,681     51,285     5,802  

Other loans

    20,806     4,859     10,008     5,939  

Loans covered under loss share agreements

    321,038     228,189     61,956     30,893  
                   
 

Total loans

  $ 2,617,238   $ 764,079   $ 1,166,722   $ 686,437  
                   

        At December 31, 2010 and 2009, we had a balance for loans due after one year of $339.8 million and $344.2 million, respectively, with fixed interest rates and $132.4 million and $129.1 million, respectively, with adjustable interest rates in the commercial non-owner occupied real estate loan category. At December 31, 2010 and 2009, we had a balance for loans due after one year of $432.4 million and $357.8 million, respectively, with fixed interest rates and $41.0 million and $34.8 million, respectively, with adjustable interest rates in the commercial owner occupied real estate loan category. At December 31, 2010 and 2009, we had a balance for loans due after one year of $107.5 million and $81.5 million, respectively, with fixed interest rates and $11.4 million and $19.2 million, respectively, with adjustable interest rates in the commercial and industrial loan category.

Nonaccrual Loans

        The placement of non-acquired loans on nonaccrual status can be dependent upon the type of loan, the past due status and the collection activities in progress. Non-real estate secured loans and commercial loans are typically moved to nonaccrual status at 90 days past due. Loans well secured and in the process of collection are allowed to remain on an accrual basis until they become 120 days past due. Unsecured loans are generally charged off at 120 days past due. Generally, commercial and real estate loans that are fully or partially secured are written down to the collateral value and placed on nonaccrual status after becoming 90 to 120 days past due. Consumer loans can be placed on nonaccrual status, but normally they are not moved into nonaccrual status before charge off occurs. Closed end consumer loans are charged off or written down to the collateral value on or before becoming 120 days past due. Open end consumer loans secured by real estate are charged off or written down to the collateral value on or before becoming 180 days past due.

Troubled Debt Restructurings ("TDRs")

        SCBT designates loan modifications as TDRs when, for economic or legal reasons related to the borrower's financial difficulties, it grants a concession to the borrower that it would not otherwise consider (ASC Topic 310.40). Loans on nonaccrual status at the date of modification are initially classified as nonaccrual TDRs. Loans on accruing status at the date of concession are initially classified as accruing TDRs if the note is reasonably assured of repayment and performance is expected in accordance with its modified terms. Such loans may be designated as nonaccrual loans subsequent to the concession date if reasonable doubt exists as to the collection of interest or principal under the restructuring agreement. TDRs are returned to accruing status when there is economic substance to the restructuring, there is documented credit evaluation of the borrower's financial condition, the remaining balance is reasonably assured of repayment in accordance with its modified terms, and the borrower has demonstrated sustained repayment performance in accordance with the modified terms for a

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reasonable period of time (generally a minimum of six months). At December 31, 2010 and 2009, total TDRs were $9.7 million and $2.0 million, respectively, of which $3.3 million were accruing restructured loans at December 31, 2010. The TDRs at December 31, 2009 were nonaccruing. SCBT does not have significant commitments to lend additional funds to these borrowers whose loans have been modified.

        The level of risk elements in the loan portfolio, OREO and other nonperforming assets for the past five years is shown below:

Table 11—Nonperforming Assets

 
  December 31,  
(Dollars in thousands)
  2010   2009   2008   2007   2006  

Nonaccrual loans(1)

  $ 62,661   $ 47,444   $ 14,624   $ 5,353   $ 3,567  

Accruing loans past due 90 days or more

    118     241     293     985     1,039  

Nonaccrual restructured loans

    6,365     2,048              
                       
 

Total nonperforming loans

    69,144     49,733     14,917     6,338     4,606  

Other real estate owned ("OREO")(2)

    17,264     3,102     6,126     490     597  

Other nonperforming assets(3)

    50     31     84     82      
                       
 

Total nonperforming assets excluding covered assets

    86,458     52,866     21,127     6,910     5,203  

Covered OREO

    69,317                  

Other covered nonperfoming assets

    19                  
                       
 

Total nonperforming assets

  $ 155,794   $ 52,866   $ 21,127   $ 6,910   $ 5,203  
                       

Excluding covered assets:

                               

Total nonperforming assets as a percentage of total loans and repossessed assets(4)

    3.74 %   2.40 %   0.91 %   0.33 %   0.30 %
                       

Total nonperforming assets as a percentage of total assets

    2.41 %   1.96 %   0.76 %   0.27 %   0.24 %
                       

Nonperforming loans as a percentage of period end loans(4)

    3.01 %   2.26 %   0.64 %   0.30 %   0.27 %
                       

Including covered assets:

                               

Total nonperforming assets as a percentage of total loans and repossessed assets(4)

    5.76 %   2.40 %   0.91 %   0.33 %   0.30 %
                       

Total nonperforming assets as a percentage of total assets

    4.33 %   1.96 %   0.76 %   0.27 %   0.00 %
                       

Nonperforming loans as a percentage of period end loans(4)

    2.64 %   2.26 %   0.64 %   0.30 %   0.00 %
                       

(1)
Loans covered under loss share agreements that were acquired in the CBT acquisition are considered to be performing due to the application of the accretion method under FASB ASC Topic 310-30. (For further discussion of the Company's application of the accretion method, see Business Combinations, Method of Accounting for Loans Acquired, and FDIC Indemnification Asset under Note 1—Summary of Significant Accounting Policies to the audited condensed consolidated financial statements.) Excludes the loans covered under loss agreements that are contractually past due totaling $93.6 million as of December 31, 2010, including the valuation discount.

(2)
Includes certain real estate acquired as a result of foreclosure and property not intended for bank use.

(3)
Consist of non-real estate foreclosed assets, such as repossessed vehicles.

(4)
Loan data excludes mortgage loans held for sale.

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        Excluding the loans covered by loss share agreements, total nonperforming loans were $69.1 million, or 3.01% of total loans, an increase of $19.4 million, or 39.0%, from December 31, 2009. The increase in nonaccrual loans was driven by an increase in commercial nonaccrual loans of $15.6 million and an increase in consumer nonaccrual loans of $4.0 million.

        Nonperforming non-acquired loans and restructured loans decreased by approximately $1.6 million during the fourth quarter of 2010 from the level at September 30, 2010. This was the result of loans moving into OREO through the foreclosure process, while the pace of loans moving to nonaccrual status slowed. The top 10 nonaccrual loans at December 31, 2010 consist of seven loans located along the coast of South Carolina and three located in the Charlotte MSA, and total $23.9 million. These loans comprise 34.6% of total nonaccrual loans at December 31, 2010 and are all real estate collateral dependent. The Company currently holds specific reserves of $2.0 million on five of these ten loans. Nine of the loans have appraisals from 2010 and one from 2009.

        At December 31, 2010, OREO not covered by loss share agreements increased by $14.2 million from December 31, 2009. At December 31, 2010, non-covered OREO consisted of 70 properties with an average value of $247,000, an increase of $123,000 from December 31, 2009, when we had 25 properties. In the fourth quarter of 2010, we added 28 properties with an aggregate value of $6.2 million into non-covered OREO, and we sold 19 properties with a basis of $2.5 million in that same quarter. We recorded a net loss of $156,000 for the quarter. Our non-covered OREO balance of $17.3 million, at December 31, 2010, is comprised of 14% in the Low Country region, 28% in the Georgetown/Myrtle Beach region, 14% in the Beaufort (Hilton Head) region, 18% in the Charlotte region and 14% in the Upstate (Greenville) region.

        Overall, we continue to believe that the loan portfolio remains manageable in terms of charge-offs and NPAs as a percentage of total loans. Given the industry-wide rise in credit costs, we have taken additional proactive measures to identify problem loans including in-house and independent review of larger transactions. Our policy for evaluating problem loans and OREO values includes obtaining new certified real estate appraisals as needed. We continue to monitor and review frequently the overall asset quality within the loan portfolio.

        Our general policy is to update valuations annually. OREO valuations include appraisals, broker opinions, previous offers received on the property, market conditions and the number of days the property has been on the market. In a market of declining property values, which we have experienced during 2010 and 2009, we may reduce an appraisal by an additional factor due to our knowledge and experience in the market. (See Other Real Estate Owned ("OREO") under Critical Accounting Policies and Estimates in Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion on the Company's OREO policies.)

Potential Problem Loans—Non-acquired

        Potential problem loans, which are not included in nonperforming loans, amounted to approximately $19.6 million, or 0.85% of total loans non-acquired outstanding at December 31, 2010, compared to $26.4 million, or 1.20% of total loans outstanding at December 31, 2009, and $18.0 million or 0.80% of total non-acquired loans outstanding at September 30, 2010. Potential problem loans represent those loans with a well-defined weakness and where information about possible credit problems of borrowers has caused management to have serious doubts about the borrower's ability to comply with present repayment terms.

Allowance for Loan Losses

        On December 13, 2006, the OCC, Federal Reserve, FDIC, and other regulatory agencies collectively revised the banking agencies' 1993 policy statement on the allowance for loan and lease

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losses to ensure consistency with generally accepted accounting principles in the United States and more recent supervisory guidance. Our loan loss policy adheres to the interagency guidance.

        The allowance for loan losses is based upon estimates made by management. We maintain an allowance for loan losses at a level that we believe is appropriate to cover estimated credit losses on individually evaluated loans that are determined to be impaired as well as estimated credit losses inherent in the remainder of our loan portfolio. Arriving at the allowance involves a high degree of management judgment and results in a range of estimated losses. We regularly evaluate the adequacy of the allowance through our internal risk rating system, outside credit review, and regulatory agency examinations to assess the quality of the loan portfolio and identify problem loans. The evaluation process also includes our analysis of current economic conditions, composition of the loan portfolio, past due and nonaccrual loans, concentrations of credit, lending policies and procedures, and historical loan loss experience. The provision for loan losses is charged to expense in an amount necessary to maintain the allowance at an appropriate level.

        The allowance consists of general and specific reserves. The general reserves are determined by applying loss percentages to the portfolio that are based on historical loss experience and management's evaluation and "risk grading" of the loan portfolio. Additionally, the general economic and business conditions affecting key lending areas, credit quality trends, collateral values, loan volumes and concentrations, seasoning of the loan portfolio, the findings of internal and external credit reviews and results from external bank regulatory examinations are included in this evaluation. The specific reserves are determined on a loan-by-loan basis based on management's evaluation of our exposure for each credit, given the current payment status of the loan and the value of any underlying collateral. These are loans classified by management as either doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. Generally, the need for a specific reserve is evaluated on impaired loans greater than $250,000 of all non-homogenous commercial loans. Loans for which specific reserves are provided are excluded from the calculation of the general reserves.

        In determining the acquisition date fair value of purchased loans, and in subsequent accounting, SCBT generally aggregates purchased loans into pools of loans with common risk characteristics. Expected cash flows at the acquisition date in excess of the fair value of loans are recorded as interest income over the life of the loans using a level yield method if the timing and amount of the future cash flows of the pool is reasonably estimable. Subsequent to the acquisition date, increases in cash flows over those expected at the acquisition date are recognized as interest income prospectively. Decreases in expected cash flows after the acquisition date are recognized by recording an allowance for loan losses. Evidence of credit quality deterioration for the loan pools may include information such as increased past-due and nonaccrual levels and migration in the pools to lower loan grades. Offsetting the impact of the provision established for the loan, the receivable from the FDIC is adjusted to reflect the indemnified portion of the post-acquisition exposure with a corresponding credit to the provision for loan losses. (For further discussion of the Company's allowance for loan losses on acquired loans, see Note 1—Summary of Significant Accounting Policies, Note 2—Mergers and Acquisitions and Note 5—Loans and Allowance for Loan Losses to the consolidated financial statements.)

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Table 12—Allocation of the Allowance for Loan Losses

 
  2010   2009   2008   2007   2006  
(Dollars in thousands)
  Amount   %*   Amount   %*   Amount   %*   Amount   %*   Amount   %*  

Real estate:

                                                             
 

Commercial non-owner occupied

  $ 20,670     43.5 % $ 14,961     39.9 % $ 11,960     37.4 % $ 10,442     38.7 % $ 8,886     38.7 %
 

Consumer owner occupied

    10,484     22.1 %   8,386     22.4 %   6,909     22.2 %   5,527     21.0 %   5,010     22.3 %

Commercial owner occupied real estate

    7,814     16.4 %   5,978     15.9 %   4,865     18.3 %   3,268     14.8 %   2,267     12.5 %

Commercial and industrial

    4,313     9.1 %   4,330     11.6 %   3,936     10.9 %   3,587     12.3 %   2,811     11.2 %

Other income producing property

    2,834     6.0 %   2,375     6.3 %   1,890     6.1 %   1,568     5.9 %   1,428     6.5 %

Consumer

    1,191     2.5 %   1,258     3.4 %   1,511     4.1 %   1,594     5.7 %   1,768     7.5 %

Other loans

    206     0.4 %   200     0.4 %   454     1.0 %   584     1.6 %   498     1.3 %
                                                     
 

Total loans

  $ 47,512     100.0 % $ 37,488     100.0 % $ 31,525     100.0 % $ 26,570     100.0 % $ 22,668     100.0 %
                                                     

*
Loan balance in each category, expressed as a percentage of total non-acquired loans

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        The OCC recommends that banks take a broad view of certain factors in evaluating their allowance for loan losses. These factors include loan loss experience, specific allocations and other subjective factors. In our ongoing consideration of such factors, we consider our allowance for loan losses to be adequate. The following table presents changes in the allowance for loan losses on non-acquired loans for the five years at December 31:

Table 13—Summary of Loan Loss Experience

 
  Years Ended December 31,  
(Dollars in thousands)
  2010   2009   2008   2007   2006  

Allowance for loan losses at January 1

  $ 37,488   $ 31,525   $ 26,570   $ 22,668   $ 20,025  

Charge-offs:

                               
 

Real estate:

                               
   

Commercial non-owner occupied

    (22,161 )   (12,736 )   (1,532 )   (446 )   (798 )
   

Consumer

    (9,775 )   (3,340 )   (1,263 )   (374 )   (170 )
 

Commercial owner occupied real estate

    (2,625 )   (571 )   (61 )       (43 )
 

Commercial and industrial

    (9,138 )   (2,528 )   (1,449 )   (682 )   (454 )
 

Other income producing property

    (338 )   (867 )   (185 )   (84 )   (418 )
 

Consumer*

    (2,780 )   (2,005 )   (2,263 )   (1,738 )   (1,553 )
 

Other loans

        (3 )   (1 )   (1 )   (2 )
                       
   

Total charge-offs

    (46,817 )   (22,050 )   (6,754 )   (3,325 )   (3,438 )
                       

Recoveries:

                               
 

Real estate:

                               
   

Commercial non-owner occupied

    814     381     103     99     54  
   

Consumer

    194     38     94     28     31  
 

Commercial owner occupied real estate

    126     4     11         6  
 

Commercial and industrial

    713     192     140     254     199  
 

Other income producing property

    6     3     4     22     60  
 

Consumer*

    706     681     620     605     463  
 

Other loans

        2     1          
                       
   

Total recoveries

    2,559     1,301     973     1,008     813  
                       

Net charge-offs

    (44,258 )   (20,749 )   (5,781 )   (2,317 )   (2,625 )
                       

Provision for loan losses

    54,282     26,712     10,736     4,384     5,268  

Allowance from acquisition

                1,835      
                       

Allowance for loan losses at December 31

  $ 47,512   $ 37,488   $ 31,525   $ 26,570   $ 22,668  
                       

Average non-acquired loans, net of unearned income**

  $ 2,224,397   $ 2,248,568   $ 2,220,448   $ 1,823,196   $ 1,646,906  

Ratio of net charge-offs to average non-acquired loans, net of unearned income*

    1.99 %   0.92 %   0.26 %   0.13 %   0.16 %

Allowance for loan losses as a percentage of total non-acquired loans

    2.07 %   1.70 %   1.36 %   1.28 %   1.29 %

*
Net charge-offs at December 31, 2010, 2009, 2008, 2007, and 2006 include automated overdraft protection ("AOP") principal net charge-offs of $610,000, $572,000, $559,000, $760,000, and $729,000, respectively, that are included in the consumer classification above.

**
Average loans, net of unearned income does not include loans held for sale.

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        The higher provision in 2010 reflects higher net charge-offs than in 2009. The following provides highlights for the years ended December 31, 2010 and 2009:

    Total net charge-offs increased $23.5 million, or 113.3% for the year ended December 31, 2010 compared to a $15.0 million, or 258.9%, increase for the comparable year in 2009. The increase in net charge-offs between December 31, 2010 and December 31, 2009 was in all loan types, except other income producing property. Commercial non-owner occupied was up $9.0 million; commercial owner-occupied was up $1.9 million; consumer real estate up $6.3 million; and commercial and industrial up $6.1 million.

    Although management currently expects the level of net charge-offs to moderate during 2011 as compared to 2010, the pressures within the real estate market and the economy as a whole remain. Over the past three years, the dollar amount of charge-offs has increased substantially, while the loan portfolio has increased only moderately. The ratio of charge-offs to average loans increased to 1.99% at the end of 2010 compared to 0.92% at the end of 2009.

        The provision for loan losses as a percent of average loans reflects an increase due to the increase in our nonperforming assets and an increase in net charge-offs during 2010 compared to 2009. Net charge-offs increased substantially in all categories during 2010 compared to 2009, except in other income producing property. Of the total net charge-offs during 2010, 48%, or $21.3 million, were in commercial non-owner occupied real estate lending which includes construction and land development loans, 22%, or $9.6 million, were in consumer real estate loans which include home equity loans, 19%, or $8.4 million, were in commercial and industrial loans, 6%, or $2.5 million, were in commercial owner occupied real estate, and 5%, or $2.1 million, were in consumer loans which includes overdraft and NSF loans. During 2010, one large holding company loan was partially charged off in the amount of $6.4 million. This compares to 2009 when the amount of charge offs in all categories were less than 2010, except for the other income producing property where charge-offs declined by approximately $532,000. We continue to aggressively charge off loans resulting from the decline in the appraised value of the underlying collateral (real estate) and the overall concern that borrowers will be unable to meet the contractual payments of principal and interest. Additionally, there continues to be concern about the economy as a whole and the market conditions throughout the Southeast during 2011. Excluding covered assets, nonperforming loans declined by $1.6 million during the fourth quarter compared to the third quarter of 2010. The ratio of the ALLL to cover these loans decreased from 75% at December 31, 2009 to 69% at December 31, 2010.

        We increased the ALLL for the fourth quarter of 2010 compared to the fourth quarter of 2009 due to the increase in risk within the overall loan portfolio. On a general basis, we consider three-year historical loss rates on all loan portfolios, except residential lot loans where two-year historical loss rates are applied. We also consider economic risk, model risk and operational risk when determining the ALLL. All of these factors are reviewed and adjusted each reporting period to account for management's assessment of loss within the loan portfolio.

        The historical loss rates on an overall basis increased from December 31, 2009 due to the increase in net charge-offs throughout the year when compared to the removal of much lower historical loss rates in our rolling averages. This resulted in an increase of 50 basis points in the ALLL. Compared to the third quarter of 2010, the increase was 10 basis points.

        Economic risk increased by 2 basis points during the fourth quarter of 2010 as compared to 2009 due to a rise in unemployment and rise in foreclosures. Compared to the third quarter of 2010, we noted no significant economic trends that necessitated a change in our economic risk factors.

        Model risk declined 1 basis point compared to the fourth quarter of 2009, and was the same as the third quarter of 2010. This risk comes from the fact that our ALLL model is not all-inclusive. Risk inherent with new products, new markets, and timeliness of information are examples of this type of

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exposure. Management has reduced this factor since our model has been used for approximately three years, and we believe more adequately addresses this inherent risk in our loan portfolio.

        Operational risk consists of the underwriting, documentation, closing and servicing associated with any loan. This risk is managed through policies and procedures, portfolio management reports, best practices and the approval process. The risk factors evaluated include the following: exposure outside our deposit footprint, changes in underwriting standards, levels of past due loans, loan growth, supervisory loan to value exceptions, results of external loan reviews, our centralized loan documentation process and significant loan concentrations. We believe that the overall operational risk has declined by 14 basis points during the fourth quarter of 2010 compared to the fourth quarter of 2009, due primarily to the termination of the loan participations, decrease in the overall level of past due loans, reduced exposure outside of the depository footprint, lower exposure to certain loan concentrations and supervisory loan to value exceptions given the increase in capital in 2010.

        On a specific reserve basis, the allowance for loan losses at December 31, 2010 increased by approximately $95,000 from December 31, 2009. The loan balances being evaluated for specific reserves during the year grew from $34.7 million to $50.6 million at December 31, 2010. Our practice, generally, is that once a specific reserve is established for a loan, a charge off of that amount occurs in the quarter subsequent to the establishment of the specific reserve.

        In terms of the conditions and how the allowance has changed since December 31, 2009, we continue to build the allowance for loan losses by increasing the provision for loan losses due to the continued higher level of net charge offs, the continued high unemployment rates, weakened real estate markets, and overall recessionary pressures within our markets. Offsetting these increases are declines in the overall past due level, reduced supervisory loan to value exceptions and reduced loan concentrations.

Liquidity

        Liquidity refers to our ability to generate sufficient cash to meet our financial obligations, which arise primarily from the withdrawal of deposits, extension of credit and payment of operating expenses. Our Asset Liability Management Committee ("ALCO") is charged with the responsibility of monitoring policies that are designed to ensure acceptable composition of our asset/liability mix. Two critical areas of focus for ALCO are interest rate sensitivity and liquidity risk management. We have employed our funds in a manner to provide liquidity from both assets and liabilities sufficient to meet our cash needs.

        Asset liquidity is maintained by the maturity structure of loans, investment securities and other short-term investments. Management has policies and procedures governing the length of time to maturity on loans and investments. As reported in Table 7, less than one percent of the investment portfolio contractually matures in one year or less, but an additional amount of securities could also be called or prepaid in this time horizon. This segment of the portfolio consists largely of municipal obligations. Normally, changes in the earning asset mix are of a longer-term nature and are not utilized for day-to-day corporate liquidity needs.

        Our liabilities provide liquidity on a day-to-day basis. Daily liquidity needs are met from deposit levels or from our use of federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings. We engage in routine activities to retain deposits intended to enhance our liquidity position. These routine activities include various measures, such as the following:

    Emphasizing relationship banking to new and existing customers, where borrowers are encouraged and normally expected to maintain deposit accounts with our bank,

    Pricing deposits, including certificates of deposit, at rate levels that will attract and/or retain balances of deposits that will enhance our bank's asset/liability management and net interest margin requirements, and

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    Continually working to identify and introduce new products that will attract customers or enhance our bank's appeal as a primary provider of financial services.

        On January 29, 2010, we acquired CBT in an FDIC-assisted deal which provided approximately $312.2 million in cash and cash equivalents at January 29, 2010. Deposits in the amount of $1.0 billion were also assumed. Of this amount, $96.0 million were in the form of highly liquid transaction accounts. Certificates of deposit and interest-bearing deposits comprised $912.5 million of total deposits, or 90.5%. In accordance with the P&A Agreement and the desire to lower our cost of funds, we decided to lower rates on all time deposits for depositors who had no other relationship with us other than their time deposit products. As anticipated, we experienced approximately $200 million in run-off of time deposit account balances between the acquisition date and December 31, 2010. Our liquidity position could continue to be affected by potential run-off of deposits in these northeast Georgia markets.

        The FDIC-assisted acquisition of CBT was the largest contributing factor in the increase in our liquidity position at December 31, 2010 from our position at December 31, 2009. On January 29, 2010, we acquired $80.6 million in cash and cash equivalents, excluding cash paid by the FDIC to consummate the acquisition, as well as $105.6 million of investment securities. Total cash received and due from the FDIC was $231.6 million which included $73.6 million paid to our Bank to compensate for the liabilities assumed in excess of assets acquired and the $158.0 million asset discount bid. We received $225.7 million in cash from the FDIC on February 1, 2010. During 2010, we received $71.4 in payments from the FDIC for loss share agreements which also contributed to our increased liquidity position at December 31, 2010.

        Total cash and cash equivalents was $237.1 million at December 31, 2010 as compared to $104.9 million at December 31, 2009.

        At December 31, 2010 and 2009, we had no brokered deposits. Total deposits increased 42.7% to $3.0 billion resulting mainly from the CBT acquisition; however, excluding CBT, total deposits increased $160.6 million, or 7.6%. Excluding CBT, we increased our noninterest-bearing deposit balance by $54.9 million, or 15.9%, at December 31, 2010 as compared to the balance at December 31, 2009. Federal funds purchased and securities sold under agreements to repurchase increased $28.5 million, or 17.5%, from the balance at December 30, 2009. Other borrowings declined by $96.6 million, or 67.3%, from December 31, 2009 due to the repayment of all FHLB borrowings and subordinated indebtedness. During the first quarter of 2010, we repaid the FHLB $166.0 million which included FHLB advances assumed in the FDIC-assisted acquisition of CBT and the prepayment fee. To the extent that we employ other types of non-deposit funding sources, typically to accommodate retail and correspondent customers, we continue to emphasize shorter maturities of such funds. Our approach may provide an opportunity to sustain a low funding rate or possibly lower our cost of funds but could also increase our cost of funds if interest rates rise.

        Our ongoing philosophy is to remain in a liquid position as reflected by such indicators as the composition of our earning assets, typically including some level of federal funds sold, balances at the Federal Reserve Bank, reverse repurchase agreements, and/or other short-term investments; asset quality; well-capitalized position; and profitable operating results. Cyclical and other economic trends and conditions can disrupt our bank's desired liquidity position at any time. We expect that these conditions would generally be of a short-term nature. Under such circumstances, our bank's federal funds sold position, or balances at the Federal Reserve Bank, if any, serves as the primary source of immediate liquidity. At December 31, 2010, our bank had total federal funds credit lines of $238.0 million with no outstanding advances. If additional liquidity were needed, the bank would turn to short-term borrowings as an alternative immediate funding source and would consider other appropriate actions such as promotions to increase core deposits or the sale of a portion of our investment portfolio. At December 31, 2010, our bank had $42.7 million of credit available at the

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Federal Reserve Bank's discount window, but had no outstanding advances as of the end of 2010. In addition, we could draw on additional alternative immediate funding sources from lines of credit extended to us from our correspondent banks and/or the Federal Home Loan Bank. At December 31, 2010, our bank had a total FHLB credit facility of $201.0 million with no outstanding advances and outstanding uses of FHLB letters of credit to secure certain public funds deposits of $101.2 million. We believe that our liquidity position continues to be adequate and readily available.

        Our contingency funding plan describes several potential stages based on liquidity levels. Our board of directors reviews liquidity benchmarks quarterly. Also, we review on at least an annual basis our liquidity position and our contingency funding plans with our principal banking regulator. Our subsidiary bank maintains various wholesale sources of funding. If our deposit retention efforts were to be unsuccessful, our bank would utilize these alternative sources of funding. Under such circumstances, depending on the external source of funds, our interest cost would vary based on the range of interest rates charged to our bank. This could increase our bank's cost of funds, impacting net interest margins and net interest spreads.

Derivatives and Securities Held for Trading

        The SEC has adopted rules that require comprehensive disclosure of accounting policies for derivatives as well as enhanced quantitative and qualitative disclosures of market risk for derivatives and other financial instruments. The market risk disclosures are classified into two categories: financial instruments entered into for trading purposes and all other instruments (non-trading purposes). We do not maintain a derivatives or securities trading portfolio.

Asset-Liability Management and Market Risk Sensitivity

        Our earnings and the economic value of our shareholders' equity may vary in relation to changes in interest rates and in relation to the accompanying fluctuations in market prices of certain of our financial instruments. We use a number of methods to measure interest rate risk, including simulating the effect on earnings of fluctuations in interest rates, monitoring the present value of asset and liability portfolios under various interest rate scenarios, and, to a lesser extent, monitoring the difference, or gap, between rate sensitive assets and liabilities. The earnings simulation models take into account our contractual agreements with regard to investments, loans, deposits, borrowings, and derivatives. While the simulation models are subject to the accuracy of the assumptions that underlie the process, we believe that such modeling provides a better illustration of the interest sensitivity of earnings than does static interest rate sensitivity gap analysis. The simulation models assist in measuring and achieving growth in net interest income by providing the Asset-Liability Management Committee ("ALCO") a reasonable basis for quantifying and managing interest rate risk. Various simulations incorporate interest rate changes as well as projected changes in the mix and volume of balance sheet assets and liabilities. Accordingly, the simulations are considered to provide a measurement of the degree of earnings risk we have, or may incur in future periods, arising from interest rate changes or other market risk factors.

        During 2009, we entered into a forward starting interest rate swap agreement to manage interest rate risk due to periodic rate resets in our junior subordinated debt issued by SCBT Capital Trust II, an unconsolidated subsidiary of SCBT established for the purpose of issuing trust preferred securities. The agreement hedges the subordinated debt against future interest rate increases by using an interest rate swap to effectively fix the rate to 5.85% on the debt beginning June 15, 2010, at which time the debt contractually converted from a fixed interest rate to a variable interest rate. This hedge expires on June 15, 2019.

        Our primary policy, established by ALCO and the board of directors, is to monitor exposure to interest rate increases and decreases of as much as 200 basis points ratably over a 12-month period.

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Our policy guideline prescribes 8% as the maximum negative impact on net interest income associated with a steady ("ramping") change in interest rates of 200 basis points over 12 months. This most-relied-upon simulation also uses a dynamic balance sheet that forecasts growth, not a static or frozen balance sheet. We traditionally have maintained a risk position well within the policy guideline level. As of December 31, 2010, the earnings simulations indicated that the impact of a 200 basis point increase in rates over 12 months would result in an approximate 1.6% increase in net interest income—as compared with a base case unchanged interest rate environment. Certain key rates in the simulations model (such as federal funds at zero to 0.25%) are at unprecedented low levels that can decline very little, if at all, and remain a positive number. Consequently, the simulations in the declining-rate scenarios are viewed by us and many other depository institutions as being remote and not meaningful. Therefore, declining rate scenario simulations are not currently being used in our assessment and management of interest rate risk. The simulations indicate that our rate sensitivity is currently somewhat asset sensitive to the indicated change in interest rates over a one-year horizon. As of December 31, 2009, the earnings simulations indicated that the impact of a 200 basis point increase in rates over 12 months would result in an approximate 0.08% increase in net interest income—as compared with a base case unchanged interest rate environment.

        The shape and non-parallel shifts of the fixed-income yield curve can also influence interest rate risk sensitivity. Therefore, we run a number of other rate scenario simulations to provide additional assessments of our interest rate risk posture. For example, in our analysis at December 31, 2010, a moderately flattening yield curve would have a somewhat dampening effect on our asset sensitivity. A further steepening of the current yield curve would boost net interest margins and provide additional net interest income as compared to a static yield curve.

        In addition to simulation analysis, we use Economic Value of Equity ("EVE") analysis as an indicator of the extent to which our capital could change, given potential changes in interest rates. This measure assumes no growth in the balance sheet (no management influence) but does assume mortgage-related prepayments and certain other cash flows. It provides a measure of rate risk extending beyond the analysis horizon contained in the simulation analyses. The EVE model is essentially a discounted cash flow of all of SCBT's assets, liabilities, and derivatives. The difference represented by the present value of assets minus the present value of liabilities is defined as the economic value of equity. At December 31, 2010, SCBT's ratio of EVE-to-assets was 7.23% in a flat interest rate environment and 7.19% in a hypothetical environment where rates increased 200 basis points instantaneously.

Deposits

        We rely on deposits by our customers as the primary source of funds for the continued growth of our loan and investment securities portfolios. Customer deposits are categorized as either noninterest-bearing deposits or interest-bearing deposits. Noninterest-bearing deposits (or demand deposits) are transaction accounts that provide SCBT with "interest-free" sources of funds. Interest-bearing deposits include savings deposit, interest-bearing transaction accounts, certificates of deposits, and other time deposits. Interest-bearing transaction accounts include NOW, HSA, IOLTA, and Market Rate checking accounts.

        During 2009, we implemented a deposit campaign to focus on increasing core deposits (excluding certificates of deposits and other time deposits). The deposit campaign led to increases in demand deposits, savings deposits and interest-bearing deposits. Those increased core deposit balances helped offset a planned decline in certificate of deposit balances, which are higher cost funds to the bank.

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        The following table presents total deposits for the five years at December 31:

Table 14—Total Deposits

 
  December 31,  
(Dollars in thousands)
  2010   2009   2008   2007   2006  

Demand deposits

  $ 484,838   $ 346,248   $ 303,689   $ 315,791   $ 256,717  
                       

Savings deposits

    202,054     163,348     141,379     137,129     76,734  

Interest-bearing demand deposits

    1,186,260     731,060     575,991     588,289     579,398  
                       

Total savings and interest-bearing demand deposits

    1,388,314     894,408     717,370     725,418     656,132  
                       

Certificates of deposit

    1,129,892     863,507     1,131,828     886,330     793,540  

Other time deposits

    1,104     476     387     350     326  
                       

Total time deposits

    1,130,996     863,983     1,132,215     886,680     793,866  
                       

Total deposits

  $ 3,004,148   $ 2,104,639   $ 2,153,274   $ 1,927,889   $ 1,706,715  
                       

        The acquisition of CBT as well as organic growth in money market accounts drove the higher balance in total deposits at December 31, 2010 compared to 2009. The following are key highlights regarding overall growth in total deposits:

    Total deposits increased $899.5 million, or 42.7%, for the year ended December 31, 2010, driven largely by the FDIC-assisted acquisition of CBT. For the year ended December 31, 2009, total deposits decreased $48.6 million, or 2.3% from the year ended December 31, 2008.

    Noninterest-bearing deposits (demand deposits) increased by $138.6 million, or 40.0%, for the year ended December 31, 2010.

    Total savings and interest-bearing account balances increased $493.9 million for the year ended December 31, 2010. Savings deposits increased $38.7 million, or 23.7%, money market (Market Rate Checking) deposits increased $312.0 million, or 74.3%, and other interest-bearing deposits (NOW, IOLTA, and other) increased $143.2 million, or 46.1%.

    Interest-bearing deposits increased by $455.2 million, or 62.3%, for the year ended December 31, 2010.

    Excluding the CBT acquisition, total deposits increased $160.6 million including the following: money market deposits by $207.2 million, or 49.3%, and demand deposits by $54.9 million, or 15.9%, other interest-bearing deposits by $27.6 million, or 8.9%, and savings deposits by $10.1 million, or 6.2%. Off-setting these increases, certificates of deposits less than or equal to $100,000 decreased by $65.3 million, or 15.5% and certificates of deposit greater than $100,000 decreased by $74.7 million, or 16.9%.

    At December 31, 2010, the ratio of savings, interest-bearing, and time deposits to total deposits was 83.9%, up slightly from 83.5% at the end of 2009.

        The following are key highlights regarding overall growth in average total deposits:

    Total deposits averaged $3.0 billion in 2010, an increase of 37.6% from 2009. This increase is attributable to the FDIC-assisted acquisition of CBT. Total deposits averaged $2.1 billion in 2009, an increase of 4.9% from 2008.

    Average interest-bearing transaction account deposits grew by $671.5 million, or 36.9%, in 2010 compared to 2009.

    Average noninterest-bearing demand deposits increased by $135.9 million, or 41.2%, in 2010 compared to 2009.

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        The following table provides a maturity distribution of certificates of deposit of $100,000 or more for the next twelve months as of December 31:

Table 15—Maturity Distribution of Certificates of Deposits of $100 Thousand or More

 
  December 31,    
 
(Dollars in thousands)
  2010   2009   % Change  

Within three months

  $ 167,970   $ 129,168     30.0 %

After three through six months

    120,188     127,468     -5.7 %

After six through twelve months

    198,334     173,592     14.3 %

After twelve months

    44,266     16,371     170.4 %
                 

  $ 530,758   $ 446,599     18.8 %
                 

        In July 2010, the Dodd-Frank Act permanently increased the insurance limit on deposit accounts from $100,000 to $250,000. At December 31, 2010, SCBT had $177.5 million in certificates of deposits greater than $250,000.

Short-Term Borrowed Funds

        Our short-term borrowed funds consist of federal funds purchased and securities sold under repurchase agreements. Note 11, "Federal Funds Purchased and Securities Sold Under Agreements to Repurchase," in our audited financial statements provides a profile of these funds for the last three years at each year-end, the average amounts outstanding during each period, the maximum amounts outstanding at any month-end, and the weighted average interest rates on year-end and average balances in each category. Federal funds purchased and securities sold under agreements to repurchase most typically have maturities within one to three days from the transaction date. Certain of these borrowings have no defined maturity date.

Capital and Dividends

        Subsequent to year-end, the Company entered into a Securities Purchase Agreement, effective as of February 18, 2011, with accredited institutional investors, pursuant to which the Company sold a total of 1,129,032 shares of its common stock at a purchase price of $31.00 per share (the "Private Placement"). The proceeds to the Company from the Private Placement were $34.7 million, net of approximately $315,000 in issuance costs. The Private Placement was completed on February 18, 2011, and was contingent on a successful bid for Habersham.

        Our ongoing capital requirements have been met primarily through retained earnings, less the payment of cash dividends. As of December 31, 2010, shareholders' equity was $330.0 million, an incre