The following discussion and analysis is intended to focus on significant changes in the financial condition and results of operations of the Company during the three and six months ended June 30, 2012 and should be read in conjunction with the consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and BKU's 2011 Annual Report on Form 10-K for the year ended December 31, 2011 (the "2011 Annual Report on Form 10-K").

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the Company's current views with respect to, among other things, future events and financial performance. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," and similar expressions identify forward-looking statements. These forward-looking statements are based on the historical performance of the Company or on the Company's current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by the Company that the future plans, estimates or expectations so contemplated will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to the Company's operations, financial results, financial condition, business prospects, growth strategy and liquidity. If one or more of these or other risks or uncertainties materialize, or if the Company's underlying assumptions prove to be incorrect, the Company's actual results may vary materially from those indicated in these statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. Factors that may cause actual results to differ materially from these forward-looking statements include but are not limited to, the risk factors described in Part I, Item 1A of the 2011 Annual Report on Form 10-K. The Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Quarterly Highlights

† Net income for the quarter ended June 30, 2012 was $48.9 million or $0.48 per share, as compared to $44.0 million or $0.44 per share, for the quarter ended June 30, 2011.

† Net interest income increased by $28.5 million to $145.8 million for the quarter ended June 30, 2012 from $117.3 million for the quarter ended June 30, 2011. The primary drivers of the increase in net interest income were an increase in interest income on loans of $20.4 million and a decrease in interest expense on deposits of $2.0 million. The yield on loans decreased to 11.87% for the quarter ended June 30, 2012 from 13.15% for the quarter ended June 30, 2011, reflecting a decrease in the yield on new loans and an increase in the proportion of the portfolio comprised of new loans, partially offset by an increase in the yield on covered loans. The average rate paid on deposits declined to 0.84% for the quarter ended June 30, 2012 from 1.12% for the quarter ended June 30, 2011 reflecting declines in market interest rates and a continued shift in deposit mix away from time deposits toward lower cost deposit products. The net interest margin decreased to 5.82% from 5.99%.

† Loans, net of discount and deferred fees and costs, increased by $369.4 million during the quarter ended June 30, 2012. New loans grew by $501.2 million while covered loans declined by $131.8 million.

† Asset quality remained strong, with a ratio of non-performing assets to total assets of 0.98%, a ratio of non-performing loans to total loans of 0.54%, and an annualized net charge-off ratio (net charge-offs to average loans) of 0.19%. Substantially all non-performing assets were covered assets at June 30, 2012.

† Demand deposits represented 20.1% of total deposits at June 30, 2012 compared to 16.6% of total deposits at December 31, 2011 while time deposits declined to 31.9% of total deposits at June 30, 2012 from 35.1% at December 31, 2011.

† The Company's capital ratios continue to exceed the requirements to be considered well capitalized under applicable regulatory guidelines, with a Tier 1 leverage ratio of 12.8%, a Tier 1 risk-based capital ratio of 34.8% and a Total risk-based capital ratio of 36.2% at June 30, 2012.

Results of Operations

Net Interest Income

Net interest income is the difference between interest earned on interest earning assets and interest incurred on interest bearing liabilities and is the primary driver of core earnings. Net interest income is impacted by the relative mix of interest earning assets and interest bearing liabilities, the ratio of interest earning assets to total assets and of interest bearing liabilities to total funding sources, movements in market interest rates, levels of non-performing assets and pricing pressure from competitors.

The mix of interest earning assets is influenced by loan demand and by management's continual assessment of the rate of return and relative risk associated with various classes of earning assets. The mix of interest bearing liabilities is influenced by management's assessment of the need for lower cost funding sources weighed against relationships with customers and growth requirements and is impacted by competition for deposits in the Company's markets and the availability and pricing of other sources of funds.

Net interest income is also impacted by the accounting for ACI loans and to a declining extent, the accretion of fair value adjustments recorded in conjunction with the FSB Acquisition. ACI loans were initially recorded at fair value, measured based on the present value of expected cash flows. The excess of expected cash flows over carrying value, known as accretable yield, is being recognized as interest income over the lives of the underlying loans. Accretion related to ACI loans has a positive impact on our net interest income, net interest margin and interest rate spread. The impact of accretion related to ACI loans on net interest income, the net interest margin and the interest rate spread is expected to continue to decline as ACI loans comprise a declining percentage of total loans. The proportion of total loans represented by ACI loans will decline as the ACI loans are resolved and new loans are added to the portfolio. ACI loans represented 37.4% and 50.8% of total loans, net of discounts, premiums and deferred costs and fees, at June 30, 2012, and December 31, 2011, respectively. As the impact of accretion related to ACI loans declines, we expect our net interest margin and interest rate spread to decrease.

Payments received in excess of expected cash flows may result in a pool of ACI residential loans becoming fully amortized and its carrying value reduced to zero even though outstanding contractual balances remain related to loans in the pool. Once the carrying value of a pool is reduced to zero, any future proceeds from the remaining loans are recognized as interest income upon receipt. The carrying value of one pool was reduced to zero in late 2011. Future expected cash flows from this pool totaled $165.7 million as of June 30, 2012. The UPB of loans remaining in this pool was $344.3 million at June 30, 2012. We expect that future proceeds from loans in this pool will result in an increase in interest income from the pool. To some extent, the increase in interest income will be offset by a reduction in non-interest income reported in the consolidated statement of operations line item "Income from resolution of covered assets, net." The timing of receipt of proceeds from loans in this pool may be unpredictable, leading to increased volatility in the yield on the pool.

Fair value adjustments of interest earning assets and interest bearing liabilities recorded at the time of the FSB Acquisition are accreted to interest income or expense over the lives of the related assets or liabilities. Generally, accretion of fair value adjustments increases interest income and decreases interest expense, and thus has a positive impact on our net interest income, net interest margin and interest rate spread. The impact of accretion of fair value adjustments on interest income and interest expense will continue to decline as these assets and liabilities mature or are repaid and constitute a smaller portion of total interest earning assets and interest bearing liabilities.

The impact of accretion and ACI loan accounting on net interest income makes it difficult to compare our net interest margin and interest rate spread to those reported by other financial institutions.

The following tables present, for the periods indicated, information about
(i) average balances, the total dollar amount of interest income from earning assets and the resultant average yields; (ii) average balances, the total

dollar amount of interest expense on interest bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. Nonaccrual and restructured loans are included in the average balances presented in this table; however, interest income foregone on nonaccrual loans is not included. Yields have been calculated on a pre-tax basis (dollars in thousands):

                                                   Three Months Ended June 30,
                                          2012                                    2011
                             Average                   Yield/       Average                    Yield/
                             Balance      Interest    Rate (1)      Balance      Interest     Rate (1)
Assets:
Interest earning assets:
Investment securities
available for sale         $  4,688,632   $  34,059       2.91 %  $  3,541,723   $  29,237         3.30 %
Other interest earning
assets                          522,874       1,235       0.95 %       572,792         617         0.43 %
Loans                         4,813,393     142,621      11.87 %     3,722,389     122,243        13.15 %
Total interest earning
assets                       10,024,899     177,915       7.11 %     7,836,904     152,097         7.77 %
Allowance for loan and
lease losses                    (57,351 )                              (61,168 )
Non-interest earning
assets                        2,414,312                              2,983,739
Total assets               $ 12,381,860                           $ 10,759,475
Liabilities and
Stockholders' Equity:
Interest bearing
liabilities:
Interest bearing demand
deposits                   $    502,313         814       0.65 %  $    372,060         624         0.67 %
Savings and money market
deposits                      3,958,633       6,491       0.66 %     3,248,353       7,023         0.87 %
Time deposits                 2,624,250       9,742       1.49 %     2,546,673      11,377         1.79 %
Total interest bearing
deposits                      7,085,196      17,047       0.97 %     6,167,086      19,024         1.24 %
Borrowings:
FHLB advances                 2,229,410      15,036       2.71 %     2,248,514      15,747         2.81 %
Short-term borrowings            35,244          35       0.40 %         3,785           4         0.42 %
Total interest bearing
liabilities                   9,349,850      32,118       1.38 %     8,419,385      34,775         1.66 %
Non-interest bearing
demand deposits               1,055,998                                619,052
Other non-interest
bearing liabilities             302,923                                270,951
Total liabilities            10,708,771                              9,309,388
Stockholders' equity          1,673,089                              1,450,087
Total liabilities and
stockholders' equity       $ 12,381,860                           $ 10,759,475
Net interest income                       $ 145,797                              $ 117,322
Interest rate spread                                      5.73 %                                   6.11 %
Net interest margin                                       5.82 %                                   5.99 %

                                                    Six Months Ended June 30,
                                           2012                                   2011
                              Average                   Yield/       Average                   Yield/
                              Balance      Interest    Rate (1)      Balance      Interest    Rate (1)
Assets:
Interest earning assets:
Investment securities
available for sale          $  4,543,664   $  67,098       2.95 %  $  3,372,406   $  61,786       3.66 %
Other interest earning
assets                           523,792       2,189       0.84 %       682,059       1,623       0.48 %
Loans                          4,544,554     278,918      12.30 %     3,762,366     236,894      12.62 %
Total interest earning
assets                         9,612,010     348,205       7.26 %     7,816,831     300,303       7.70 %
Allowance for loan and
lease losses                     (53,604 )                              (59,813 )
Non-interest earning
assets                         2,427,300                              3,078,889
Total assets                $ 11,985,706                           $ 10,835,907
Liabilities and
Stockholders' Equity:
Interest bearing
liabilities:
Interest bearing demand
deposits                    $    488,606       1,581       0.65 %  $    361,002       1,177       0.66 %
Savings and money market
deposits                       3,809,788      12,924       0.68 %     3,250,407      14,249       0.88 %
Time deposits                  2,601,538      19,502       1.51 %     2,719,296      23,904       1.77 %
Total interest bearing
deposits                       6,899,932      34,007       0.99 %     6,330,705      39,330       1.25 %
Borrowings:
FHLB advances                  2,231,918      30,555       2.75 %     2,250,855      31,319       2.81 %
Short-term borrowings             18,226          37       0.41 %         2,045           5       0.49 %
Total interest bearing
liabilities                    9,150,076      64,599       1.42 %     8,583,605      70,654       1.66 %
Non-interest bearing
demand deposits                  959,564                                572,595
Other non-interest
bearing liabilities              247,370                                274,350
Total liabilities             10,357,010                              9,430,550
Stockholders' equity           1,628,696                              1,405,357
Total liabilities and
stockholders' equity        $ 11,985,706                           $ 10,835,907
Net interest income                        $ 283,606                              $ 229,649
Interest rate spread                                       5.84 %                                 6.04 %
Net interest margin                                        5.90 %                                 5.87 %

Three months ended June 30, 2012 compared to three months ended June 30, 2011

Net interest income was $145.8 million for the three months ended June 30, 2012 compared to $117.3 million for the three months ended June 30, 2011, an increase of $28.5 million. The increase in net interest income was comprised of an increase in interest income of $25.8 million and a decrease in interest expense of $2.7 million.

The increase in interest income resulted primarily from a $20.4 million increase in interest income from loans and a $4.8 million increase in interest income from investment securities available for sale. Increased interest income from loans resulted from a $1.1 billion increase in the average balance outstanding and a decrease in the average yield to 11.87% for the three months ended June 30, 2012 from 13.15% for the comparable period in 2011. The yield on loans acquired in the FSB Acquisition was 20.46% for the three months ended June 30, 2012 as compared to 14.95% for the three months ended June 30, 2011. This increase resulted primarily from (i) covered loans being resolved at a faster rate than expected, resulting in higher accretion, (ii) improvements in probability of default and loss severity given default leading to an increase in expected cash flows, (iii) favorable resolutions of commercial ACI loans and
(iv) recognition of all proceeds from resolution of loans in one residential pool with a carrying value of zero as interest income as discussed above. The increased yield on loans acquired in the FSB Acquisition was offset by a decline in the yield on new loans to 4.38% for the three months ended June 30, 2012 from 5.21% for the three months ended June 30, 2011, coupled with an increase in the proportion of the total portfolio represented by new loans. The decline in yield on new loans was a function of lower market rates of

interest. New loans represented 53.39% of average loans outstanding for the three months ended June 30, 2012 as compared to 18.55% of average loans outstanding for the three months ended June 30, 2011.

Increased interest income on investment securities available for sale for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011 resulted from an increase of $1.1 billion in the average balance outstanding. The impact on interest income of the increase in the average balance was partially offset by a decline in the average yield to 2.91% for the three months ended June 30, 2012 from 3.30% for the three months ended June 30, 2011, reflecting the impact of lower market interest rates.

The primary component of the decrease in interest expense for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011, was a $2.0 million decline in interest expense on deposits. This decline was attributable primarily to a decrease in the average rate resulting from declining market rates of interest and a continued shift in deposit mix from time deposits to lower cost products. The decrease in average rate was partially offset by a $2.1 million reduction in accretion of fair value adjustments and an increase of $918.1 million in the average balance of interest bearing deposits.

The net interest margin for the three months ended June 30, 2012 was 5.82% as compared to 5.99% for the three months ended June 30, 2011, a decrease of 17 basis points. The net interest spread declined to 5.73% for the three months ended June 30, 2012 from 6.11% for the three months ended June 30, 2011. An improvement in the average rate paid on interest bearing deposits to 0.97% for the quarter ended June 30, 2012 from 1.24% for the quarter ended June 30, 2011 was offset by a decline in the average yield on interest earning assets to 7.11% from 7.77% for those same periods. The decline in the average yield on interest earning assets resulted from the lower yield on loans and investment securities as discussed above. The impact on the net interest margin of the decline in average yield was partly mitigated by an increase in average interest earning assets as a percentage of average total assets.

Six months ended June 30, 2012 compared to six months ended June 30, 2011

Net interest income was $283.6 million for the six months ended June 30, 2012 compared to $229.6 million for the six months ended June 30, 2011, an increase of $54.0 million. The increase in net interest income was comprised of an increase in interest income of $47.9 million and a decrease in interest expense of $6.1 million.

The increase in interest income resulted primarily from a $42.0 million increase in interest income from loans and a $5.3 million increase in interest income from investment securities available for sale. Increased interest income from loans was attributable to a $782.2 million increase in the average balance outstanding offset by a decrease in the average yield to 12.30% for the six months ended June 30, 2012 from 12.62% for the comparable period in 2011. The yield on loans acquired in the FSB Acquisition was 19.96% for the six months ended June 30, 2012 as compared to 14.05% for the six months ended June 30, 2011. The increased yield on loans acquired in the FSB Acquisition was offset by a decline in the yield on new loans to 4.43% for the six months ended June 30, 2012 from 5.32% for the six months ended June 30, 2011, coupled with an increase in the proportion of the total portfolio represented by new loans.

While the average volume of investment securities available for sale increased by $1.2 billion for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011, the yield declined to 2.95% for the six months ended June 30, 2012 from 3.66% for the six months ended June 30, 2011.

The primary component of the decrease in interest expense for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011, was a $5.3 million decline in interest expense on deposits.

The net interest margin for the six months ended June 30, 2012 was 5.90% as compared to 5.87% for the six months ended June 30, 2011, an increase of 3 basis points. The net interest spread declined to 5.84% for the six months ended June 30, 2012 from 6.04% for the six months ended June 30, 2011. An improvement in the average rate paid on interest bearing liabilities to 1.42% for the six months ended June 30, 2012 from 1.66% for the six months ended June 30, 2011 was offset by a decline in the average yield on interest earning assets to 7.26% from 7.70% for those same periods.

The factors impacting trends in net interest income for the six months ended June 30, 2012 were consistent with those impacting net interest income for the three months then ended, discussed above.

Provision for Loan Losses

The provision for loan losses is the amount of expense that, based on our judgment, is required to maintain the ALLL at an adequate level to absorb probable losses inherent in the loan portfolio at the balance sheet date and that, in management's judgment, is appropriate under U.S. generally accepted accounting principles. The determination of the amount of the ALLL is complex and involves a high degree of judgment and subjectivity. Our determination of the amount of the allowance and corresponding provision for loan losses considers ongoing evaluations of the various segments of the loan portfolio and of individually significant credits, levels of non-performing loans and charge-offs, statistical trends and economic and other relevant factors. See "Analysis of the Allowance for Loan and Lease Losses" below for more information about how we determine the appropriate level of the allowance.

Because the determination of fair value at which the loans acquired in the FSB acquisition were initially recorded encompassed assumptions about expected future cash flows and credit risk, no ALLL was recorded at the date of acquisition. An allowance related to ACI loans is recorded only when estimates of future cash flows related to these loans are revised downward, indicating further deterioration in credit quality. An allowance for non-ACI loans may be established if factors considered relevant by management indicate that the credit quality of the non-ACI loans has deteriorated.

Since the recognition of a provision for loan losses on covered loans represents an increase in the amount of reimbursement we ultimately expect to receive from the FDIC, we also record an increase in the FDIC indemnification asset for the present value of the projected increase in reimbursement, with a corresponding increase in non-interest income, recorded in "Net gain (loss) on indemnification asset" as discussed below in the section entitled "Non-interest income." Therefore, the impact on our results of operations of any provision for loan losses on covered loans is significantly mitigated by the corresponding impact on non-interest income. For the three months ended June 30, 2012 and 2011, we recorded provisions for (recovery of) loan losses on covered loans of $(1.5) million and $(6.4) million, respectively. For the three months ended June 30, 2012 and 2011, the impact on earnings from these provisions was significantly mitigated by recording reductions in non-interest income of $0.9 million and of $5.8 million, respectively. For the six months ended June 30, 2012 and 2011, we recorded provisions for loan losses on covered loans of $0.1 million and $3.6 million and related non-interest income of $0.7 million and $0.8 million, respectively.

For the three months ended June 30, 2012 and 2011, we recorded provisions for loan losses of $4.2 million and $3.6 million, respectively, related to new loans. For the six months ended June 30, 2012 and 2011, we recorded provisions for loan losses of $11.4 million and $5.0 million, respectively, related to new loans. The increase in the provision for losses on new loans related primarily to growth in the new loan portfolio. These loans are not protected by the Loss Sharing Agreements and as such, these provisions are not offset by an increase in non-interest income.

Non-Interest Income

The Company reported non-interest income of $21.7 million and $52.9 million for the three months ended June 30, 2012 and June 30, 2011, respectively. Non-interest income was $58.1 million for the six months ended June 30, 2012 as compared to $117.1 million for the six months ended June 30, 2011. The following table presents a comparison of the categories of non-interest income for the three and six month periods ended June 30, 2012 and 2011 (in thousands):

                                         Three Months Ended June 30,          Six Months Ended June 30,
                                            2012              2011             2012              2011
Accretion of discount on FDIC
indemnification asset                  $        4,294    $       14,873    $      11,081    $       34,443
Income from resolution of covered
assets, net                                    14,803             3,076           22,085             2,366
Net gain (loss) on indemnification
asset                                         (12,537 )          11,312          (12,403 )          37,634
FDIC reimbursement of costs of
resolution of covered assets                    3,333             8,241            9,849            18,741
Non-interest income from covered
assets                                          9,893            37,502           30,612            93,184
Service charges and fees                        3,229             2,648            6,345             5,332
Gain on sale of investment
securities available for sale, net                880               100              896               103
Mortgage insurance income                       2,649             6,784            6,339             8,085
. . .