FCB FINANCIAL HOLDINGS, INC. - FORM 10-Q

FCB FINANCIAL HOLDINGS, INC. - FORM 10-Q - November 13, 2014

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file	filename
EXCEL - IDEA: XBRL DOCUMENT - FCB FINANCIAL HOLDINGS, INC.	Financial_Report.xls
EX-32.1 - EX-32.1 - FCB FINANCIAL HOLDINGS, INC.	d790578dex321.htm
EX-31.1 - EX-31.1 - FCB FINANCIAL HOLDINGS, INC.	d790578dex311.htm
EX-31.2 - EX-31.2 - FCB FINANCIAL HOLDINGS, INC.	d790578dex312.htm
EX-32.2 - EX-32.2 - FCB FINANCIAL HOLDINGS, INC.	d790578dex322.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2014

¨	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 001-36586

FCB FINANCIAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

001-36586

27-0775699

(State or other jurisdiction

of incorporation)

(Commission

file number)

(IRS Employer

Identification Number)

2500 Weston Road, Suite 300

Weston, Florida 33331

(Address of principal executive offices)

(954) 984-3313

(Registrant’s telephone number, including area code)

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. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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). x Yes ¨ No

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 definitions of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

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

As of October 31, 2014, there were 35,395,225 shares of Class A Common Stock and 7,133,917 shares of Class B Non-voting Common Stock outstanding.

FCB FINANCIAL HOLDINGS, INC.

FORM 10-Q

INDEX


PART I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)
	Consolidated Balance Sheets	1
	Consolidated Statements of Income	2
	Consolidated Statements of Comprehensive Income (Loss)	3
	Consolidated Statements of Changes in Stockholders’ Equity	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	72

Item 4.	Controls and Procedures	75

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	76

Item 1A.	Risk Factors	76

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76

Item 3.	Default Upon Senior Securities	76

Item 4.	Mine Safety Disclosures	76

Item 5.	Other Information	76

Item 6.	Exhibits	76

	Signatures	78

FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except share and per share data)


	September 30, 2014			December 31, 2013
Assets:
Cash and due from banks	$	28,288		$	28,819
Interest-earning deposits in other banks		112,342			210,398
Investment securities:
Held to maturity securities (fair value of $0 and $364, respectively)		—			365
Available for sale securities, at fair value		1,771,321			1,145,771
Federal Home Loan Bank and other bank stock, at cost		71,217			36,187

Total investment securities		1,842,538			1,182,323

Loans held for sale		108			—
Loans:
New loans		2,686,043			1,770,711
Acquired loans ($286,416 and $359,255 covered by FDIC loss share, respectively)		873,761			488,073
Allowance for loan losses		(20,440	)		(14,733	)

Loans, net		3,539,364			2,244,051

FDIC loss share indemnification asset		69,920			87,229
Due from Federal Deposit Insurance Corporation (“FDIC”)		104			3,659
Premises and equipment, net		42,226			40,992
Other real estate owned ($26,312 and $27,299 of foreclosed property covered by FDIC loss share, respectively)		78,512			34,682
Goodwill and other intangible assets		89,040			39,369
Deferred tax assets, net (including valuation allowance of $9,151 and $0, respectively)		41,257			5,828
Bank-owned life insurance		138,264			75,257
Other assets		72,981			20,763

Total assets	$	6,054,944		$	3,973,370

Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Transaction accounts:
Noninterest bearing	$	525,152		$	291,658
Interest bearing		2,221,250			1,336,679

Total transaction accounts		2,746,402			1,628,337
Time deposits		1,244,958			1,165,196

Total deposits		3,991,360			2,793,533
Borrowings (including FHLB advances of $1,079,870 and $431,013, respectively)		1,164,404			435,866
Investment securities purchased not yet settled		6,283			—
Other liabilities		57,170			27,857

Total liabilities		5,219,217			3,257,256

Commitments and contingencies (Note 16)
Stockholders’ Equity:
Class A common stock, par value $0.001 per share; 100 million shares authorized; 35,395,225, 28,992,314 issued and 34,467,913, 28,065,002 outstanding		36			29
Class B common stock, par value $0.001 per share; 50 million shares authorized; 7,133,917, 8,019,284 issued and 6,941,785, 7,827,152 outstanding		7			8
Additional paid-in capital		833,478			723,631
Retained earnings		22,044			12,772
Accumulated other comprehensive income (loss)		(1,087	)		(1,575	)
Treasury stock, at cost; 1,119,444 Class A and 192,132 Class B common shares		(18,751	)		(18,751	)

Total stockholders’ equity		835,727			716,114

Total liabilities and stockholders’ equity	$	6,054,944		$	3,973,370

The accompanying notes are an integral part of these consolidated financial statements

FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except share and per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Interest income:
Interest and fees on loans	$	42,085		$	26,232		$	114,770		$	78,047
Interest and dividends on investment securities		11,530			9,184			32,094			27,909
Other interest income		37			104			158			175

Total interest income		53,652			35,520			147,022			106,131

Interest expense:
Interest on deposits		6,124			4,886			17,266			13,842
Interest on borrowings		1,633			1,051			4,363			3,147

Total interest expense		7,757			5,937			21,629			16,989

Net interest income		45,895			29,583			125,393			89,142
Provision for loan losses		2,805			(631	)		7,131			938

Net interest income after provision for loan losses		43,090			30,214			118,262			88,204

Noninterest income:
Service charges and fees		738			610			2,183			1,681
Loan and other fees		1,238			1,356			4,523			3,498
Bank-owned life insurance income		1,151			—			3,007			—
FDIC loss share indemnification loss		(5,862	)		(5,010	)		(16,101	)		(13,528	)
Income from resolution of acquired assets		1,109			1,268			3,838			7,183
Gain (loss) on sales of other real estate owned		(128	)		73			(56	)		1,073
Gain on investment securities		2,785			2,106			9,728			5,202
Other noninterest income		1,319			600			4,466			2,238

Total noninterest income		2,350			1,003			11,588			7,347

Noninterest expense:
Salaries and employee benefits		28,525			10,625			58,356			33,982
Occupancy and equipment expenses		3,606			2,412			10,816			7,424
Other real estate and acquired assets resolution related expenses		3,203			4,524			10,302			16,309
Professional services		1,203			1,278			4,387			4,782
Data processing and network		2,538			1,944			8,105			5,383
Regulatory assessments and insurance		2,466			1,403			6,160			3,969
Amortization of intangibles		426			367			1,285			1,159
Other operating expenses		6,992			1,707			14,758			5,234

Total noninterest expense		48,959			24,260			114,169			78,242

Income (loss) before income tax provision expense (benefit)		(3,519	)		6,957			15,681			17,309
Income tax provision (benefit)		(97	)		2,486			6,409			6,063

Net income (loss)	$	(3,422	)	$	4,471		$	9,272		$	11,246

Earnings (loss) per share:
Basic	$	(0.09	)	$	0.12		$	0.25		$	0.30
Diluted	$	(0.09	)	$	0.12		$	0.25		$	0.30
Weighted average shares outstanding:
Basic		38,952,127			37,011,598			36,923,354			37,011,598
Diluted		38,952,127			37,019,163			37,094,590			37,018,494

The accompanying notes are an integral part of these consolidated financial statements

FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(Dollars in thousands)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Net income (loss)	$	(3,422	)	$	4,471		$	9,272		$	11,246
Other comprehensive income (loss):
Unrealized net holding gains (losses) on investment securities available for sale, net of taxes of $5,001, $2,863, $245 and $5,972, respectively		(7,961	)		(4,556	)		(391	)		(9,508	)
Reclassification adjustment for (gains) losses on investment securities available for sale included in net income, net of taxes of $818, $726, $(552) and $1,749, respectively		(1,303	)		(1,157	)		879			(2,785	)

Total other comprehensive income (loss)		(9,264	)		(5,713	)		488			(12,293	)

Total comprehensive income (loss)	$	(12,686	)	$	(1,242	)	$	9,760		$	(1,047	)

The accompanying notes are an integral part of these consolidated financial statements

FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

Nine Months Ended September 30, 2014 and 2013

(Dollars in thousands, except for share data)


	Common Stock Shares Outstanding					Common Stock Issued					Additional Paid in			Retained Earnings			Treasury			Accumulated Other Comprehensive			Total Stockholders’
	Class A		Class B			Class A		Class B			Capital			(Deficit)			Stock			Income (Loss)			Equity
Balance as of January 1, 2013		28,992,314		8,019,284		$	29	$	8		$	720,996		$	(4,399	)	$	—		$	11,540		$	728,174
Net income		—		—			—		—			—			11,246			—			—			11,246
Stock-based compensation, RSU and warrant expense		—		—			—		—			2,126			—			—			—			2,126
Other comprehensive income (loss)		—		—			—		—			—			—			—			(12,293	)		(12,293	)

Balance as of September 30, 2013		28,992,314		8,019,284		$	29	$	8		$	723,122		$	6,847		$	—		$	(753	)	$	729,253

Balance as of January 1, 2014		28,065,002		7,827,152		$	29	$	8		$	723,631		$	12,772		$	(18,751	)	$	(1,575	)	$	716,114
Net income		—		—			—		—			—			9,272			—			—			9,272
Shares issued in offering, net		5,274,045		—			6		—			104,469			—			—			—			104,475
Settlement of RSU shares		243,499		—			—		—			(5,688	)		—			—			—			(5,688	)
Deferred placement fee		—		—			—		—			(10,000	)		—			—			—			(10,000	)
Minority interest		—		—			—		—			495			—			—			—			495
Exchange of B shares to A shares		885,367		(885,367	)		1		(1	)		—			—			—			—			—
Stock-based compensation, RSU and warrant expense		—		—			—		—			20,571			—			—			—			20,571
Other comprehensive income (loss)		—		—			—		—			—			—			—			488			488

Balance as of September 30, 2014		34,467,913		6,941,785		$	36	$	7		$	833,478		$	22,044		$	(18,751	)	$	(1,087	)	$	835,727

The accompanying notes are an integral part of these consolidated financial statements

FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


	Nine Months Ended September 30,
	2014			2013
Cash Flows From Operating Activities:
Net income	$	9,272		$	11,246
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		7,131			938
Amortization of intangible assets		1,285			1,159
Depreciation of premises and equipment		2,917			2,118
Accretion of discount on loans		(25,659	)		(23,959	)
Net amortization (accretion) of premium (discount) on investment securities		1,777			1,917
Net amortization (accretion) of premium (discount) on time deposits		(1,358	)		(206	)
Net amortization (accretion) on FHLB advances and other borrowings		(870	)		1,000
Impairment of other real estate owned		1,690			3,351
FDIC Loss share indemnification loss		16,101			13,528
Gain on investment securities		(9,728	)		(5,202	)
Gain on sale of loans		(611	)		(404	)
Gain (loss) on sale of other real estate owned		56			(1,073	)
Loss on sale of premises and equipment		21			30
Stock-based compensation expense		20,571			2,126
Increase in cash surrender value of BOLI		(3,007	)		—
Net change in operating assets and liabilities:
Net change in loans held for sale		(50	)		51
Net change in other assets		(45,592	)		(33,297	)
Net change in other liabilities		28,244			10,306

Net cash provided by (used in) operating activities		2,190			(16,371	)

Cash Flows From Investing Activities:
Purchase of investment securities available for sale		(1,172,833	)		(865,156	)
Sales of investment securities available for sale		673,229			530,764
Paydown and maturities of investment securities held to maturity		372			200
Paydown and maturities of investment securities available for sale		160,434			405,277
Purchase of FHLB and other bank stock		(59,175	)		(4,786	)
Sales of FHLB and other bank stock		24,144			5,060
Net cash paid in acquisition		(14,073	)		—
Collection from FDIC on loss share indemnification asset		6,566			28,418
Net change in loans		(534,675	)		(498,198	)
Purchase of loans		(234,473	)		(29,628	)
Proceeds from sale of loans		23,329			30,490
Purchase of bank-owned life insurance		(60,000	)		—
Proceeds from sale of other real estate owned		27,225			32,179
Purchase of premises and equipment		(1,603	)		(956	)
Proceeds from the sale of premises and equipment		22			88

Net cash provided by (used in) investing activities		(1,161,511	)		(366,248	)

Cash Flows From Financing Activities:
Net change in deposits		335,209			362,372
Net change in FHLB advances and other borrowings		637,811			18,152
Net change in repurchase agreements		(1,073	)		1,139
Proceeds from capital raise		104,475			—
Deferred placement fee		(10,000	)		—
Settlement of RSU shares		(5,688	)		—

Net cash provided by (used in) financing activities		1,060,734			381,663

Net Change in Cash and Cash Equivalents		(98,587	)		(956	)
Cash and Cash Equivalents at Beginning of Period		239,217			96,220

Cash and Cash Equivalents at End of Period	$	140,630		$	95,264

Supplemental Disclosures of Cash Flow Information:
Interest paid	$	21,030		$	15,994
Income taxes paid		9,932			5,204
Supplemental disclosure of noncash investing and financing activities:
Transfer of loans to other real estate owned	$	17,716		$	23,288
Fair value of assets acquired		957,324			—
Goodwill recorded		47,355			—
Liabilities assumed		962,194			—

The accompanying notes are an integral part of these consolidated financial statements

NOTE 1. BASIS OF PRESENTATION

General

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all information and notes to the consolidated financial statements necessary for a complete presentation of financial position, results of operations, comprehensive income and cash flows in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and should be read in conjunction with the Company’s consolidated financial statements and the notes thereto appearing in FCB Financial Holdings, Inc.’s (the “Company” or “FCB”) prospectus filed pursuant to Rule 424(b) under the Securities Act (File No. 333-196935) on August 4, 2014 forming part of the Registrant’s Registration Statement on Form S-1, as amended (File No. 333-196935), originally filed on June 20, 2014 (the “Prospectus”). In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or for any other interim period.

Nature of Operations

FCB, formerly known as Bond Street Holdings, Inc., is a national bank holding company with one wholly-owned national bank subsidiary, Florida Community Bank, National Association (“Florida Community Bank” or the “Bank), headquartered in Weston, Florida, and provides a full range of banking and related services to individual and corporate customers through 54 banking centers located in Florida at September 30, 2014.

On June 13, 2014, Bond Street Holdings, Inc. changed its legal name to FCB Financial Holdings, Inc.

On July 31, 2014, the Securities and Exchange Commission declared effective the Company’s registration statement on Form S-1 registering the shares of the Company’s Class A common stock. The Class A common stock was authorized for trading on the New York Stock Exchange (“NYSE”) under the symbol “FCB.” On August 6, 2014, the Company completed the initial public offering of 7,520,000 shares of Class A common stock for $22.00 per share. Of the 7,520,000 shares sold, 4,554,045 shares were sold by the Company and 2,965,955 shares were sold by certain selling shareholders. In addition, on September 3, 2014, the Company sold an additional 720,000 shares of Class A common stock to cover the exercise of the underwriters’ over-allotment option. The Company received net proceeds of approximately $104.5 million from the offering, after deducting the underwriting discounts and commissions of $8.1 million and estimated offering expenses of $3.4 million. The Company did not receive any proceeds from the sale of shares by the selling shareholders.

On November 7, 2014, FCB Financial Holdings, Inc. filed a registration statement on Form S-1/A registering the resale by the selling stockholders named therein of (i) up to 20,667,727 issued and outstanding shares of the registrant’s Class A Common Stock, par value $0.001 per share (the “Class A Common Stock”), (ii) up to 5,236,234 issued and outstanding shares of the registrant’s Class A Common Stock issuable upon conversion or exchange of currently issued and outstanding shares of the issuer’s Class B Common Stock, par value $0.001 per share (the “Class B Common Stock”), (iii) up to 3,310,428 shares of Class A Common Stock issuable upon the exercise of certain currently outstanding warrants, and (iv) up to an aggregate of 243,499 shares of the registrant’s Class A Common Stock issued pursuant to certain restricted stock unit awards. Pursuant to Rule 416 under the Securities Act of 1933, as amended, this registration statement shall also cover any additional shares of the registrant’s common stock that shall become issuable by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration that results in an increase in the number of the outstanding shares of the registrant’s common stock. FCB Financial Holdings, Inc. is not selling any shares of common stock and will not receive any proceeds from the sale of the shares by the selling stockholders.

Reclassifications

In certain instances, amounts reported in prior periods consolidated financial statements have been reclassified to conform to the current period presentation. Such reclassifications had no effect on previously reported cash flows, stockholders’ equity or net income.

Use of Estimates

The preparation of financial statements in conformity with U.S GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates that are susceptible to significant change in the near term are the allowance for credit losses, valuation of and accounting for loans covered by loss sharing arrangements with the FDIC and the related loss share receivable, valuation of and accounting for acquired loans, determination of fair value of financial instruments, valuation of goodwill, intangible assets and other purchase accounting adjustments.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements

In January 2014, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-04, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” This update defines “in substance repossession or foreclosure” because the diversity in practice regarding when entities were reclassifying loans receivable to other real estate owned. A creditor is considered to have received physical possession (resulting from an in substance repossession or foreclosure) of residential real estate property collateralizing a consumer mortgage loan only upon the occurrence of either of the following:

•

The creditor obtains legal title to the residential real estate property upon completion of a foreclosure. A creditor may obtain legal title to the residential real estate property even if the borrower has redemption rights that provide the borrower with a legal right for a period of time after a foreclosure to reclaim the real estate property by paying certain amounts specified by law.

•

The borrower conveys all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The deed in lieu of foreclosure or similar legal agreement is completed when agreed-upon terms and conditions have been satisfied by both the borrower and the creditor.

The Company is required to adopt this update for annual periods beginning after December 15, 2014, and interim and annual periods thereafter. The update may result in revised disclosures in the Company’s consolidated financial statements but will not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360)—“Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”. The amendments in this update change the definition of a discontinued operation and, thus, limit the circumstances under which a disposal may be reported as a discontinued operation. Under the amendments, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results. This ASU is effective for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific revenue recognition guidance throughout the Accounting Standards Codification. The amendments in this update affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets unless those contracts, including leases and insurance contracts, are within the scope of other standards. The amendments establish a core principle requiring the recognition of revenue to depict the transfer of promised goods or services to customers in an amount reflecting the consideration to which the entity expects to be entitled in exchange for such goods or services. The amendments also require expanded disclosures concerning the nature, amount, timing and uncertainty of revenues and cash flows arising from contracts with customers. For public entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and can be applied retrospectively. Early application is not permitted. The Company is currently evaluating this guidance to determine the impact on its consolidated financial position, results of operations or cash flows.

In June 2014, the FASB issued ASU No. 2014-11, “Transfers and Servicing (topic 860)—Repurchase-to- Maturity Transactions, Repurchase Financing, and Disclosures”. This update changes the accounting for repurchase-to-maturity transactions and linked repurchase financings to secured borrowing accounting, which is consistent with the accounting for other repurchase agreements. The amendments also require two new disclosures. The first disclosure requires an entity to disclose information on transfers accounted for as sales in transactions that are economically similar to repurchase agreements. The second disclosure provides increased transparency about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The disclosure for certain transactions accounted for as a sale is required to be presented for interim and annual periods beginning after December 15, 2014, and the disclosure for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In June 2014, the FASB issued ASU No. 2014-12, “Compensation- Stock Compensation (Topic 718) —Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period”. This update provides specific guidance on whether to treat a performance target that could be achieved after the requisite service period as a performance condition that affects vesting or as a nonvesting condition that affects the grant-date fair value of an award. This ASU is effective for fiscal years and interim periods beginning after December 15, 2015. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In August 2014, the FASB issued ASU No. 2014-14, “Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40)”. This update requires that government guaranteed mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if certain conditions are met. This ASU is effective for interim and annual reporting periods beginning after December 15, 2014. The Company is currently evaluating this guidance to determine the impact on its consolidated financial position, results of operations or cash flows.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40)”. This update requires management to evaluate whether there are conditions and events that raise substantial doubt about an entity’s ability to continue as a going concern. The guidance is intended to incorporate into GAAP a requirement that management perform a going concern evaluation similar to the auditor’s evaluation required by standards issued by the Public Company Accounting Oversight Board (“PCAOB”) and American Institute of Certified Public Accountants (“AICPA”). The guidance is effective for all entities for annual periods ending after December 15, 2016 and for annual and interim periods thereafter. Early application is permitted. The Company believes that this ASU will not have a material impact upon adoption.

Updates to Significant Accounting Policies

Loans Held for Sale

Certain residential fixed rate and adjustable rate mortgage loans originated by the Company with the intent to sell in the secondary market are carried at the lower of cost or fair value, as determined by outstanding commitments from investors. These loans are generally sold on a non-recourse basis with servicing released. Gains and losses on the sale of loans recognized in earnings are measured based on the difference between proceeds received and the carrying amount of the loans, inclusive of deferred origination fees and costs, if any.

NOTE 3. BUSINESS ACQUISITIONS

On January 31, 2014, the Bank acquired all the outstanding common stock in Great Florida Bank (“GFB” or “Great Florida”). GFB had total assets of $957.3 million and total liabilities of $962.2 million at fair value as of January 31, 2014. Holders of GFB common stock received $3.24 per share in cash for each common share owned resulting in total cash purchase price of $42.5 million. At the time of acquisition, GFB had 25 banking locations within Southeast Florida and the Miami metropolitan area. The Company contributed capital of $125 million to the Bank at the time of the GFB acquisition.

The Company determined that the acquisition of Great Florida Bank constitutes a business combination as defined by the FASB ASC topic 805, “Business Combinations”. Accordingly, the assets acquired and liabilities assumed were recorded at their fair values on the date of acquisition. Fair values were determined in accordance with the guidance provided in FASB ASC Topic 820, “Fair Value Measurements”. In many cases the determination of the fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. The Company utilized the assistance of third-party advisors in the determination of fair values for loans, other real estate owned and deferred tax assets acquired.

The following table presents a summary of the assets acquired and liabilities assumed in the Great Florida Bank acquisition recorded at fair value.


	(Dollars in thousands)
Consideration paid:
Cash	$	42,485
Fair value of assets acquired:
Cash and cash equivalents		28,412
Investment securities		277,639
Loans		548,129
Other real estate owned		55,085
Core deposit intangible		3,601
Fixed assets		2,576
Deferred tax asset		35,736
Other assets		6,146

Total identifiable assets acquired		957,324
Fair value of liabilities assumed:
Deposits		863,976
FHLB advances and other borrowings		92,669
Other liabilities		5,549

Total liabilities assumed		962,194

Fair value of net assets acquired		(4,870	)

Goodwill resulting from acquisition	$	47,355

The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above:

Cash and Cash Equivalents:

These assets are carried at amounts that approximate fair value due to their short-term nature and generally negligible credit risk.

Investment Securities:

Fair value measurement is based upon quoted market prices for similar securities in active or inactive markets (Level 2). Federal Home Loan Bank of Atlanta (“FHLB”) and other bank stock are carried at par, which has historically represented the redemption price and is therefore considered to approximate fair value.

Loans:

Acquired loans are recorded at their fair value at the date of acquisition. Fair value for acquired loans is based on a discounted cash flow methodology that considers factors including the type of loan and related collateral type, delinquency and credit classification status, fixed or variable interest rate, term of loan, whether or not the loan was amortizing, and current discount rates. Additional assumptions used include default rates, loss severity, loss curves and prepayment speeds. Discounts due to credit quality are included in the determination of fair value; therefore an allowance for loan losses is not recorded at the acquisition date. The discount rates used for the cash flow methodology are based on market rates for new originations of comparable loans at the time of acquisition and include adjustments for liquidity concerns. The fair value is determined from the discounted cash flows for each individual loan, and for ASC 310-30 loans are then aggregated at the unit of account, or pool level.

The following is a summary of the acquired loans accounted for under ASC 310-30 as well as those excluded from ASC 310-30, or Non-ASC 310-30 acquired loans, in connection with the acquisition of Great Florida Bank:


	(Dollars in thousands)
Acquired loans accounted for under ASC 310-30:
Contractual cash flows	$	426,116
Contractual cash flows not expected to be collected (non-accretable difference)		102,581

Expected cash flows		323,535
Excess of the expected undiscounted cash flows over the carrying value (accretable discount)		40,444

Fair value at acquisition	$	283,091
Acquired loans not accounted for under ASC 310-30 (Non-ASC 310-30 loans):
Unpaid principal balance	$	275,772
Fair value discount		(10,734	)

Fair value at acquisition		265,038

Total fair value at acquisition	$	548,129

The Company acquired loans with a fair value of $265.0 million that are classified as Non-ASC 310-30 loans as these specific loans did not exhibit deteriorated credit quality since origination or were loans to borrowers that had revolving privileges at acquisition date. The acquired Non-ASC 310-30 loans with revolving privileges had a total unpaid principal balance of $71.5 million and a fair value of $60.6 million at acquisition. The acquired Non-ASC 310-30 loans without revolving privileges had a total unpaid principal balance of $204.3 million and a fair value of $204.4 million at acquisition.

Other Real Estate Owned (“OREO”):

The fair value of acquired OREO is based on the fair value of the property, less estimated cost to sell. Fair value of OREO is typically based on third party real estate appraisals which utilize market and income valuation techniques.

Deferred Tax Asset:

Deferred tax assets represent acquired loss and credit carryforwards and the net tax-affected differences between the book basis and tax basis of certain assets and liabilities, including investment securities, loans, OREO, fixed assets, core deposit intangible assets, time deposits, FHLB advances and other borrowings. The deferred tax assets are evaluated for certain carryover limitations at the acquisition date, such as Section 382 limitations, and whether it is more likely than not that the benefit from certain net operating loss carryforwards can be realized.

As part of the acquisition of Great Florida Bank, the Bank recorded $35.7 million in deferred tax assets, net of $9.2 million in valuation allowance, at acquisition. Upon acquisition, Great Florida Bank incurred a Section 382 ownership change. As such, the Company’s ability to benefit from the use of Great Florida Bank’s pre-ownership change net operating loss and tax credit carry forwards, as well as the potential deductibility of certain of its built-in losses, will be limited to approximately $1.5 million per year, putting at risk the utilization of associated deferred tax assets before they expire. The Company estimates that it is more likely than not that the benefit from certain net operating loss carryforwards will not be realized. In recognition of this risk, a valuation allowance of $9.2 million was established against the deferred tax assets associated with Great Florida Bank’s pre-ownership change net operating loss carryforwards.

Deposits:

The fair value of demand deposits, savings accounts and money market deposits is the amount payable on demand at the acquisition date. The fair value of fixed-maturity certificates of deposit is estimated using discounted cash flow analysis and using the rates currently offered for deposits of similar remaining maturities.

Advances from the FHLB and Other Borrowings:

The fair value of advances from the FHLB and other borrowings are estimated by discounting the future cash flows using the current rate at which similar borrowings with similar remaining maturities could be obtained.

The Great Florida Bank acquisition resulted in goodwill of $47.4 million as the estimated fair value of liabilities assumed and consideration paid exceeded the estimated fair value of assets acquired. The goodwill is included within “Goodwill and other intangible assets” in the consolidated balance sheets. None of the goodwill resulting from the Great Florida Bank acquisition is deductible for tax purposes.

The acquisition of Great Florida Bank is expected to benefit the Company through revenue and expense synergies in addition to the further expansion into the Miami metropolitan area. Management believes the Great Florida Bank acquisition will create opportunities through commercial lending and access to core deposits through a larger branch network.

The core deposit intangible is being amortized on straight line basis over the estimated life, currently expected to be 10 years.

For the nine months ended September 30, 2014, the Company incurred $5.0 million of bank acquisition, legal fees, accounting advisory, data conversion, retention payments and severance expenses related to the acquisition of Great Florida Bank which is recorded in noninterest expenses in the consolidated statement of income.

The provisional amounts recorded for the Great Florida Bank acquisition may be updated if better information is obtained about the initial assumptions used to determine fair value amounts or if new information is obtained regarding the facts and circumstances that existed at the date of acquisition. The provisional amounts may be adjusted through the completion of the measurement period, which does not exceed one year from the date of acquisition.

NOTE 4. INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses and approximate fair values of securities available for sale and held to maturity are as follows:


	Amortized		Unrealized				Fair
September 30, 2014	Cost		Gains		Losses		Value
	(Dollars in thousands)
Held to maturity:
Foreign bonds	$	—	$	—	$	—	$	—

Available for sale:
U.S. Government agencies and sponsored enterprises obligations	$	52,628	$	60	$	352	$	52,336
U.S. Government agencies and sponsored enterprises mortgage-backed securities		510,322		2,372		2,006	$	510,688
State and municipal obligations		2,040		190		—	$	2,230
Asset-backed securities		545,773		2,347		4,360	$	543,760
Corporate bonds and other debt securities		552,887		3,704		1,411	$	555,180
Preferred stock and other equity securities		109,441		12		2,326	$	107,127

Total available for sale	$	1,773,091	$	8,685	$	10,455	$	1,771,321


	Amortized		Unrealized				Fair
December 31, 2013	Cost		Gains		Losses		Value
	(Dollars in thousands)
Held to maturity:
Foreign bonds	$	365	$	—	$	1	$	364

Available for sale:
U.S. Government agencies and sponsored enterprises obligations	$	51,553	$	58	$	456	$	51,155
U.S. Government agencies and sponsored enterprises mortgage-backed securities		243,062		1,071		2,495		241,638
State and municipal obligations		2,039		85		—		2,124
Asset-backed securities		385,979		3,267		1,281		387,965
Corporate bonds and other debt securities		375,373		4,453		601		379,225
Preferred stock and other equity securities		90,330		205		6,871		83,664

Total available for sale	$	1,148,336	$	9,139	$	11,704	$	1,145,771

As part of the Company’s liquidity management strategy, the Company pledges loans and securities to secure borrowings from the FHLB. The Company also pledges securities to collateralize public deposits. The carrying value of all pledged securities totaled $870.3 million and $437.4 million at September 30, 2014 and December 31, 2013, respectively.

The amortized cost and estimated fair value of securities available for sale and held to maturity, by contractual maturity, are as follows:


	September 30, 2014				December 31, 2013
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(Dollars in thousands)
Held to maturity:
Due in one year or less	$	—	$	—	$	365	$	364

Total held to maturity	$	—	$	—	$	365	$	364

Available for sale:
Due in one year or less	$	23,796	$	23,966	$	10,085	$	10,212
Due after one year through five years		358,602		360,261		305,317		309,064
Due after five years through ten years		119,990		119,962		10,735		10,665
Due after ten years		105,167		105,557		51,913		52,044
U.S. Government agencies and sponsored enterprises mortgage-backed securities and asset-backed securities		1,056,095		1,054,448		679,956		680,122
Preferred stock and other equity securities		109,441		107,127		90,330		83,664

Total available for sale	$	1,773,091	$	1,771,321	$	1,148,336	$	1,145,771

For purposes of the maturity table, mortgage-backed securities and asset-backed securities, the principal of which are repaid periodically, are presented as a single amount. The expected lives of these securities will differ from contractual maturities because borrowers may have the right to prepay the underlying loans with or without prepayment penalties.

The following tables present the estimated fair values and gross unrealized losses on investment securities available for sale, aggregated by investment category and length of time individual securities have been in a continuous unrealized loss position for the periods presented:


	Less than 12 Months				12 Months or More				Total
September 30, 2014	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(Dollars in thousands)
Available for sale:
U.S. Government agencies and sponsored enterprises obligations	$	26,853	$	124	$	17,983	$	228	$	44,836	$	352
U.S. Government agencies and sponsored enterprises mortgage-backed securities		170,423		651		53,442		1,355		223,865		2,006
State and municipal obligations		—		—		—		—		—		—
Asset-backed securities		369,793		3,719		27,109		641		396,902		4,360
Corporate bonds and other debt securities		152,990		1,411		—		—		152,990		1,411
Preferred stock and other equity securities		76,174		1,336		25,714		990		101,888		2,326

Total available for sale	$	796,233	$	7,241	$	124,248	$	3,214	$	920,481	$	10,455


	Less than 12 Months				12 Months or More				Total
December 31, 2013	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(Dollars in thousands)
Available for sale:
U.S. Government agencies and sponsored enterprises obligations	$	41,276	$	456	$	—	$	—	$	41,276	$	456
U.S. Government agencies and sponsored enterprises mortgage-backed securities		141,304		2,494		636		1		141,940		2,495
State and municipal obligations		—		—		—		—		—		—
Asset-backed securities		161,879		1,233		11,949		48		173,828		1,281
Corporate bonds and other debt securities		58,596		601		—		—		58,596		601
Preferred stock and other equity securities		65,061		6,871		—		—		65,061		6,871

Total available for sale	$	468,116	$	11,655	$	12,585	$	49	$	480,701	$	11,704

At September 30, 2014, the Company’s security portfolio consisted of 322 securities, of which 150 securities were in an unrealized loss position. A total of 121 were in an unrealized loss position for less than 12 months. The unrealized losses for these securities resulted primarily from changes in interest rates. All securities available for sale at September 30, 2014 and December 31, 2013 are investment grade based on ratings from recognized rating agencies.

The Company monitors its investment securities for other than temporary impairment (“OTTI”). Impairment is evaluated on an individual security basis considering numerous factors, and its relative significance varies depending on the situation. The Company has evaluated the nature of unrealized losses in the investment securities portfolio to determine if OTTI exists. The unrealized losses relate to changes in market interest rates and specific market conditions that do not represent credit-related impairments. Furthermore, the Company does not intend to sell nor is it more likely than not that it will be required to sell these investments before the recovery of their amortized cost basis. Management has completed an assessment of each security in an unrealized loss position for credit impairment, including securities with existing characteristics that are covered under the Volcker Rule, and has determined that no individual security was other than temporarily impaired at September 30, 2014 or December 31, 2013. The following describes the basis under which the Company has evaluated OTTI:

U.S. Government Agencies and Sponsored Enterprises Obligations and Mortgage-Backed Securities (“MBS”):

The unrealized losses associated with U.S. Government agencies and sponsored enterprises obligations and MBS are primarily driven by changes in interest rates. These securities have either an explicit or implicit U.S. government guarantee.

Corporate Bonds and Asset Backed Securities:

Securities were generally underwritten in accordance with the Company’s own investment standards prior to the decision to purchase, without relying on a bond issuer’s guarantee in making the investment decision. These investments are investment grade and will continue to be monitored as part of the Company’s ongoing impairment analysis, but are expected to perform in accordance with their terms.

Preferred Stock and Other Equity Securities:

The unrealized losses associated with preferred stock and other equity investments in large U.S. financial institutions are primarily driven by changes in interest rates. These securities were generally underwritten in accordance with the Company’s own investment standards prior to the decision to purchase. These investments are investment grade and will continue to be monitored as part of the Company’s ongoing impairment analysis, but are expected to perform in accordance with their terms.

Gross realized gains and losses on the sale of securities available for sale are shown below. The cost of securities sold is based on the specific identification method.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	(Dollars in thousands)
Proceeds from sales	$	204,211		$	226,494		$	697,373		$	535,824
Gross realized gains	$	3,057		$	2,023		$	10,954		$	4,589
Gross realized losses		(272	)	$	(189	)		(1,284	)	$	(281	)

Net realized gains (losses)	$	2,785		$	1,834		$	9,670		$	4,308

NOTE 5. LOANS, NET

The Company’s loan portfolio consists of new and acquired loans. The Company classifies originated loans and purchased loans not acquired through business combinations as new loans (“New” loans). The Company classifies loans acquired through business combinations as acquired loans (“Acquired” loans). The acquired loan portfolio is segmented into “Covered Loans”, loans subject to loss sharing with the FDIC, and “Non-Covered Loans”, acquired loans without loss share reimbursement. Additionally, the new loan portfolio is classified as “Non-Covered Loans”. A portion of the acquired loan portfolio, both Covered and Non-Covered Loans, exhibited evidence of deterioration in credit quality since origination, and are accounted for under ASC 310-30. The remaining portfolio of acquired loans consists of loans that were not considered ASC 310-30 loans at acquisition and are classified as Non-ASC 310-30 loans. Approximately 8.0% and 15.9% of total portfolio loans are covered by loss sharing agreements with the FDIC as of September 30, 2014 and December 31, 2013, respectively.

The following tables summarize the Company’s loans by portfolio segment as of the periods presented, net of deferred fees:


	Covered Loans				Non-Covered Loans
September 30, 2014	ASC 310-30 Loans		Non-ASC 310-30 Loans		ASC 310-30 Loans		Non-ASC 310-30 Loans		New Loans (1)		Total
	(Dollars in thousands)
Real estate loans:
Commercial real estate (2)	$	162,547	$	8,979	$	202,206	$	76,495	$	983,475	$	1,433,702
1-4 single family residential		35,498		7,040		55,254		98,521		734,608		930,921
Construction, land and development		20,641		—		50,412		9,744		160,899		241,696
Home equity loans and lines of credit		—		11,056		—		45,114		12,774		68,944

Total real estate loans	$	218,686	$	27,075	$	307,872	$	229,874	$	1,891,756	$	2,675,263

Other loans:
Commercial and industrial	$	36,218	$	3,790	$	36,730	$	9,771	$	791,843	$	878,352
Consumer		559		88		2,377		721		2,444		6,189

Total other loans		36,777		3,878		39,107		10,492		794,287		884,541

Total loans held in portfolio	$	255,463	$	30,953	$	346,979	$	240,366	$	2,686,043	$	3,559,804

Allowance for loan losses												(20,440	)

Loans held in portfolio, net											$	3,539,364


	Covered Loans				Non-Covered Loans
December 31, 2013	ASC 310-30 Loans		Non-ASC 310-30 Loans		ASC 310-30 Loans		Non-ASC 310-30 Loans		New Loans (1)		Total
	(Dollars in thousands)
Real estate loans:
Commercial real estate (2)	$	195,672	$	10,175	$	78,475	$	2,530	$	669,711	$	956,563
1-4 single family residential		46,461		8,029		10,284		2,145		359,818		426,737
Construction, land and development		36,727		—		19,209		—		75,666		131,602
Home equity loans and lines of credit		—		10,773		—		1,225		19,303		31,301

Total real estate loans	$	278,860	$	28,977	$	107,968	$	5,900	$	1,124,498	$	1,546,203

Other loans:
Commercial and industrial	$	46,184	$	4,286	$	10,863	$	754	$	645,037	$	707,124
Consumer		902		46		3,090		243		1,176		5,457

Total other loans		47,086		4,332		13,953		997		646,213		712,581

Total loans held in portfolio	$	325,946	$	33,309	$	121,921	$	6,897	$	1,770,711	$	2,258,784

Allowance for loan losses												(14,733	)

Loans held in portfolio, net											$	2,244,051

(1)	Balance includes $6.0 million and $6.4 million of net deferred fees and unamortized premium as of September 30, 2014 and December 31, 2013, respectively.

(2)	Balance new loans includes $261.5 million and $155.0 million of owner occupied commercial real estate loans as of September 30, 2014 and December 31, 2013, respectively.

At September 30, 2014 and December 31, 2013, the unpaid principal balance (“UPB”) of ASC 310-30 loans were $797.8 million and $628.5 million, respectively. At September 30, 2014 and December 31, 2013, the Company had pledged loans as collateral for FHLB advances with a carrying amount of $1.35 billion and $741.9 million, respectively. The recorded investments of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process as of September 30, 2014 totaled $11.1 million. The Company held $478.8 million and $481.0 million of syndicated national loans as of September 30, 2014 and December 31, 2013, respectively.

During the three and nine months ended September 30, 2014, the Company purchased approximately $156.6 and $227.8 million, respectively, in residential mortgage loans from third parties. During the three and nine months ended September 30, 2013, the Company purchased approximately $29.0 million in residential mortgage loans from a third party.

During the three months ended September 30, 2014, the Company did not have any residential mortgage loans sold to third parties. During the nine months ended September 30, 2014, the Company sold approximately $23.0 million in residential mortgage loans to a third party. There were no residential mortgage loan sales during the three or nine months ended September 30, 2013.

The accretable discount on ASC 310-30 loans represents the amount by which the undiscounted expected cash flows on such loans exceed their carrying value. The increase in expected cash flow for certain ASC 310-30 loan pools resulted in the reclassification of $19.5 million and $33.7 million in non-accretable difference to accretable discount during the nine months ended September 30, 2014 and 2013, respectively. Changes in accretable discount for ASC 310-30 loans for the nine months ended September 30, 2014 and 2013 were as follows:


	Nine Months Ended September 30,
	2014			2013
	(Dollars in thousands)
Balance at January 1,	$	148,501		$	175,873
Additions to accretable discount from GFB acquisition		40,444			—
Accretion		(46,956	)		(47,025	)
Reclassifications from non-accretable difference		19,543			33,657

Balance at September 30,	$	161,532		$	162,505

NOTE 6. ALLOWANCE FOR LOAN LOSSES (“ALL”)

The ALL reflects management’s estimate of probable credit losses inherent in the loan portfolio. The computation of the ALL includes elements of judgment and high levels of subjectivity. Substantially all of the Company’s loans that were acquired in failed bank acquisitions were acquired at a substantial discount to their original book value and are covered by loss sharing agreements with the FDIC.

The Company’s accounting method for loans and the corresponding ALL differs depending on whether the loans are new or acquired. The Company therefore assesses and monitors credit risk and portfolio performance using distinct methodologies for acquired loans, both ASC 310-30 Loans and Non-ASC 310-30 Loans, and New loans. Within each class the Company further disaggregates the portfolios into the following segments: Commercial real estate, 1-4 single family residential, Construction, land and development, Home equity loans and lines of credit, Commercial and industrial and Consumer.

Changes in the ALL by loan class and portfolio segment for the three and nine months ended September 30, 2014 and 2013 are as follows:


	Commercial Real Estate		1- 4 Single Family Residential		Construction, Land and Development			Home Equity Loans and Lines of Credit			Commercial and Industrial			Consumer			Total
	(Dollars in thousands)
Balance at July 1, 2014	$	7,160	$	2,426	$	1,935		$	113		$	5,924		$	326		$	17,884

Provision (credit) for ASC 310-30 loans		785		—		(1	)		—			(290	)		(9	)		485
Provision (credit) for non-ASC 310-30 loans		125		144		29			264			15			1			578
Provision (credit) for New loans		311		1,015		137			7			273			(1	)		1,742

Total provision		1,221		1,159		165			271			(2	)		(9	)		2,805

Charge-offs for ASC 310-30 loans		—		—		1			—			(93	)		(10	)		(102	)
Charge-offs for non-ASC 310-30 loans		—		—		—			(173	)		—			—			(173	)
Charge-offs for New loans		—		—		—			—			—			—			—

Total charge-offs		—		—		1			(173	)		(93	)		(10	)		(275	)

Recoveries for ASC 310-30 loans		24		—		—			—			—			1			25
Recoveries for non-ASC 310-30 loans		—		—		—			—			—			—			—
Recoveries for New loans		—		—		—			—			1			—			1

Total recoveries		24		—		—			—			1			1			26

Ending ALL balance
ASC 310-30 loans		3,692		207		660			—			976			280			5,815
Non-ASC 310-30 loans		140		151		29			123			21			4			468
New loans		4,573		3,227		1,412			88			4,833			24			14,157

Balance at September 30, 2014	$	8,405	$	3,585	$	2,101		$	211		$	5,830		$	308		$	20,440


	Commercial Real Estate			1- 4 Single Family Residential			Construction, Land and Development			Home Equity Loans and Lines of Credit			Commercial and Industrial			Consumer			Total
	(Dollars in thousands)
Balance at July 1, 2013	$	5,591		$	1,125		$	3,179		$	50		$	5,512		$	299		$	15,756

Provision (credit) for ASC 310-30 loans		(841	)		(445	)		728			—			(574	)		43			(1,089	)
Provision (credit) for non-ASC 310-30 loans		(3	)		(2	)		(1	)		93			2			—			89
Provision (credit) for New loans		83			267			(236	)		69			189			(3	)		369

Total provision		(761	)		(180	)		491			162			(383	)		40			(631	)

Charge-offs for ASC 310-30 loans		(335	)		(140	)		(1,506	)		—			(122	)		(89	)		(2,192	)
Charge-offs for non-ASC 310-30 loans		—			—			—			(99	)		(3	)		—			(102	)
Charge-offs for New loans		—			—			(51	)		—			—			—			(51	)

Total charge-offs		(335	)		(140	)		(1,557	)		(99	)		(125	)		(89	)		(2,345	)

Recoveries for ASC 310-30 loans		159			15			126			—			—			—			300
Recoveries for non-ASC 310-30 loans		—			—			—			—			—			—			—
Recoveries for New loans		—			—			—			—			—			—			—

Total recoveries		159			15			126			—			—			—			300

Ending ALL balance
ASC 310-30 loans		3,146			25			1,515			—			2,370			233			7,289
Non-ASC 310-30 loans		11			9			—			32			7			4			63
New loans		1,497			786			724			81			2,627			13			5,728

Balance at September 30, 2013	$	4,654		$	820		$	2,239		$	113		$	5,004		$	250		$	13,080


	Commercial Real Estate			1- 4 Single Family Residential			Construction, Land and Development			Home Equity Loans and Lines of Credit			Commercial and Industrial			Consumer			Total
	(Dollars in thousands)
Balance at January 1, 2014	$	4,834		$	1,443		$	1,819		$	132		$	6,331		$	174		$	14,733

Provision (credit) for ASC 310-30 loans		976			152			132			—			(1,161	)		223			322
Provision (credit) for non-ASC 310-30 loans		130			99			29			393			(94	)		33			590
Provision (credit) for New loans		2,424			1,921			578			(38	)		1,327			7			6,219

Total provision		3,530			2,172			739			355			72			263			7,131

Charge-offs for ASC 310-30 loans		(74	)		(30	)		(1,244	)		—			(203	)		(101	)		(1,652	)
Charge-offs for non-ASC 310-30 loans		—			—			—			(276	)		(24	)		(29	)		(329	)
Charge-offs for New loans		—			—			—			—			(348	)		—			(348	)

Total charge-offs		(74	)		(30	)		(1,244	)		(276	)		(575	)		(130	)		(2,329	)

Recoveries for ASC 310-30 loans		115			—			787			—			1			1			904
Recoveries for non-ASC 310-30 loans		—			—			—			—			—			—			—
Recoveries for New loans		—			—			—			—			1			—			1

Total recoveries		115			—			787			—			2			1			905

Ending ALL balance
ASC 310-30 loans		3,692			207			660			—			976			280			5,815
Non-ASC 310-30 loans		140			151			29			123			21			4			468
New loans		4,573			3,227			1,412			88			4,833			24			14,157

Balance at September 30, 2014	$	8,405		$	3,585		$	2,101		$	211		$	5,830		$	308		$	20,440


	Commercial Real Estate			1- 4 Single Family Residential			Construction, Land and Development			Home Equity Loans and Lines of Credit			Commercial and Industrial			Consumer			Total
	(Dollars in thousands)
Balance at January 1, 2013	$	4,107		$	3,049		$	5,239		$	67		$	6,054		$	433		$	18,949

Provision (credit) for ASC 310-30 loans		1,793			(1,598	)		1,191			—			(1,544	)		529			371
Provision (credit) for non-ASC 310-30 loans		(9	)		(33	)		(3	)		69			(108	)		—			(84	)
Provision (credit) for New loans		(101	)		164			(336	)		77			892			(45	)		651

Total provision		1,683			(1,467	)		852			146			(760	)		484			938

Charge-offs for ASC 310-30 loans		(1,321	)		(829	)		(3,886	)		—			(128	)		(668	)		(6,832	)
Charge-offs for non-ASC 310-30 loans		—			—			—			(100	)		(162	)		—			(262	)
Charge-offs for New loans		—			—			(108	)		—			—			—			(108	)

Total charge-offs		(1,321	)		(829	)		(3,994	)		(100	)		(290	)		(668	)		(7,202	)

Recoveries for ASC 310-30 loans		185			67			142			—			—			1			395
Recoveries for non-ASC 310-30 loans		—			—			—			—			—			—			—
Recoveries for New loans		—			—			—			—			—			—			—

Total recoveries		185			67			142			—			—			1			395

Ending ALL balance
ASC 310-30 loans		3,146			25			1,515			—			2,370			233			7,289
Non-ASC 310-30 loans		11			9			—			32			7			4			63
New loans		1,497			786			724			81			2,627			13			5,728

Balance at September 30, 2013	$	4,654		$	820		$	2,239		$	113		$	5,004		$	250		$	13,080

Credit Quality Indicators

In evaluating credit risk, the Company looks at multiple factors including delinquencies. Management considers delinquency status to be the most meaningful indicator of the credit quality of 1-4 single family residential, home equity loans and lines of credit and consumer loans. Delinquency statistics are updated at least monthly.

The following tables present an aging analysis of the recorded investment for delinquent loans by class and portfolio segment (excluding loans accounted for under ASC 310-30):


	Accruing
September 30, 2014	30 to 59 Days Past Due		60 to 89 Days Past Due		90 Days or More Past Due		Non- Accrual		Total
	(Dollars in thousands)
New Loans:
Real estate loans:
Commercial real estate	$	115	$	—	$	—	$	—	$	115
1-4 single family residential		—		—		—		—		—
Construction, land and development		—		—		—		—		—
Home equity lines of credit		—		—		—		—		—

Total real estate loans		115		—		—		—		115

Other loans:
Commercial and industrial		—		—		—		—		—
Consumer		—		—		—		—		—

Total other loans		—		—		—		—		—

Total new loans	$	115	$	—	$	—	$	—	$	115

Acquired Loans:
Real estate loans:
Commercial real estate	$	807	$	354	$	—	$	4,855	$	6,016
1-4 single family residential		465		78		—		910		1,453
Construction, land and development		—		—		—		—		—
Home equity lines of credit		143		163		156		4,407		4,869

Total real estate loans		1,415		595		156		10,172		12,338

Other loans:
Commercial and industrial		63		—		—		1,555		1,618
Consumer		62		—		—		—		62

Total other loans		125		—		—		1,555		1,680

Total acquired loans	$	1,540	$	595	$	156	$	11,727	$	14,018


	Accruing
December 31, 2013	30 to 59 Days Past Due		60 to 89 Days Past Due		90 Days or More Past Due		Non- Accrual		Total
	(Dollars in thousands)
New Loans:
Real estate loans:
Commercial real estate	$	—	$	—	$	—	$	—	$	—
1-4 single family residential		4,688		2,164		—		1,052		7,904
Construction, land and development		—		—		—		—		—
Home equity lines of credit		198		—		—		—		198

Total real estate loans		4,886		2,164		—		1,052		8,102

Other loans:
Commercial and industrial		—		—		—		24		24
Consumer		—		—		—		—		—

Total other loans		—		—		—		24		24

Total new loans	$	4,886	$	2,164	$	—	$	1,076	$	8,126

Acquired Loans:
Real estate loans:
Commercial real estate	$	145	$	—	$	—	$	5,962	$	6,107
1-4 single family residential		923		—		—		144		1,067
Construction, land and development		—		—		—		—		—
Home equity lines of credit		96		218		—		1,996		2,310

Total real estate loans		1,164		218		—		8,102		9,484

Other loans:
Commercial and industrial		39		—		—		275		314
Consumer		—		—		—		29		29

Total other loans		39		—		—		304		343

Total acquired loans	$	1,203	$	218	$	—	$	8,406	$	9,827

Internal risk ratings are considered the most meaningful indicator of credit quality for Non-ASC 310-30 and new commercial, construction, land and development and commercial real estate loans. Internal risk ratings are updated on a continuous basis. Loans exhibiting potential credit weaknesses that deserve management’s close attention and that if left uncorrected may result in deterioration of the repayment capacity of the borrower are categorized as special mention. Loans with well-defined credit weaknesses including payment defaults, declining collateral values, frequent overdrafts, operating losses, increasing balance sheet leverage, inadequate cash flow, project cost overruns, unreasonable construction delays, past due real estate taxes or exhausted interest reserves are assigned an internal risk rating of substandard. A loan with a weakness so severe that collection in full is highly questionable or improbable will be assigned an internal risk rating of doubtful.

The following table summarizes the Company’s Non-ASC 310-30 and New loans by key indicators of credit quality. Loans accounted for under ASC 310-30 are excluded from the following analysis because their related allowance is determined by loan pool performance:


September 30, 2014	Pass		Special Mention		Substandard		Doubtful
	(Dollars in thousands)
New loans:
Commercial real estate	$	983,444	$	—	$	31	$	—
Construction, land and development		160,899		—		—		—
Commercial and industrial		791,843		—		—		—

Total new loans	$	1,936,186	$	—	$	31	$	—

Acquired loans:
Commercial real estate	$	79,030	$	782	$	5,662	$	—
Construction, land and development		9,744		—		—		—
Commercial and industrial		9,085		1,905		2,571		—

Total aquired loans	$	97,859	$	2,687	$	8,233	$	—


December 31, 2013	Pass		Special Mention		Substandard		Doubtful
	(Dollars in thousands)
New loans:
Commercial real estate	$	669,546	$	14	$	151	$	—
Construction, land and development		75,666		—		—		—
Commercial and industrial		645,013		—		24		—

Total new loans	$	1,390,225	$	14	$	175	$	—

Acquired loans:
Commercial real estate	$	5,523	$	895	$	6,287	$	—
Construction, land and development		—		—		—		—
Commercial and industrial		3,119		19		1,902		—

Total aquired loans	$	8,642	$	914	$	8,189	$	—

Internal risk ratings are a key factor in identifying loans that are individually evaluated for impairment and impact management’s estimates of loss factors used in determining the amount of the ALL.

The following table shows the Company’s investment in impaired loans disaggregated based on the method of evaluating impairment:


	Loans - Recorded Investment						Allowance for Credit Loss
September 30, 2014	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		ASC 310- 30 Loans		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		ASC 310- 30 Loans
	(Dollars in thousands)
New Loans:
Real estate loans:
Commercial real estate	$	—	$	983,475	$	—	$	—	$	4,573	$	—
1-4 single family residential		—		734,608		—		—		3,227		—
Construction, land and development		—		160,899		—		—		1,412		—
Home equity loans and lines of credit		—		12,774		—		—		88		—

Total real estate loans	$	—	$	1,891,756	$	—	$	—	$	9,300	$	—

Other loans
Commercial and industrial	$	—	$	791,843	$	—	$	—	$	4,833	$	—
Consumer		—		2,444		—		—		24		—

Total other loans	$	—	$	794,287	$	—	$	—	$	4,857	$	—

Acquired Loans:
Real estate loans:
Commercial real estate	$	4,527	$	80,947	$	364,753	$	4	$	136	$	3,692
1-4 single family residential		—		105,561		90,752		—		151		207
Construction, land and development		—		9,744		71,053		—		29		660
Home equity loans and lines of credit		184		55,986		—		—		123		—

Total real estate loans	$	4,711	$	252,238	$	526,558	$	4	$	439	$	4,559

Other loans
Commercial and industrial	$	—	$	13,561	$	72,948	$	—	$	21	$	976
Consumer		—		809		2,936		—		4		280

Total other loans	$	—	$	14,370	$	75,884	$	—	$	25	$	1,256


	Loans - Recorded Investment						Allowance for Credit Loss
December 31, 2013	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		ASC 310- 30 Loans		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		ASC 310- 30 Loans
	(Dollars in thousands)
New Loans:
Real estate loans:
Commercial real estate	$	—	$	669,711	$	—	$	—	$	2,149	$	—
1-4 single family residential		—		359,818		—		—		1,306		—
Construction, land and development		—		75,666		—		—		834		—
Home equity loans and lines of credit		—		19,303		—		—		126		—

Total real estate loans	$	—	$	1,124,498	$	—	$	—	$	4,415	$	—

Other loans
Commercial and industrial	$	—	$	645,037	$	—	$	—	$	3,853	$	—
Consumer		—		1,176		—		—		17		—

Total other loans	$	—	$	646,213	$	—	$	—	$	3,870	$	—

Acquired Loans:
Real estate loans:
Commercial real estate	$	5,134	$	7,571	$	274,147	$	—	$	10	$	2,675
1-4 single family residential		189		9,985		56,745		44		8		85
Construction, land and development		—		—		55,936		—		—		985
Home equity loans and lines of credit		386		11,612		—		105		34		—

Total real estate loans	$	5,709	$	29,168	$	386,828	$	149	$	52	$	3,745

Other loans
Commercial and industrial	$	—	$	5,040	$	57,047	$	—	$	6	$	2,339
Consumer		—		289		3,992		—		—		157

Total other loans	$	—	$	5,329	$	61,039	$	—	$	6	$	2,496

The following tables set forth certain information regarding the Company’s impaired loans (excluding loans accounted for under ASC 310-30) that were evaluated for specific reserves:


	Impaired Loans - With Allowance						Impaired Loans - With no Allowance
September 30, 2014	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance
	(Dollars in thousands)
New Loans:
Real estate loans:
Commercial real estate	$	—	$	—	$	—	$	—	$	—
1-4 single family residential		—		—		—		—		—
Construction, land and development		—		—		—		—		—
Home equity loans and lines of credit		—		—		—		—		—

Total real estate loans	$	—	$	—	$	—	$	—	$	—

Other loans
Commercial and industrial	$	—	$	—	$	—	$	—	$	—
Consumer		—		—		—		—		—

Total other loans	$	—	$	—	$	—	$	—	$	—

Acquired Loans:
Real estate loans:
Commercial real estate	$	4,527	$	4,695	$	4	$	—	$	—
1-4 single family residential		—		—		—		—		—
Construction, land and development		—		—		—		—		—
Home equity loans and lines of credit		—		—		—		184		253

Total real estate loans	$	4,527	$	4,695	$	4	$	184	$	253

Other loans
Commercial and industrial	$	—	$	—	$	—	$	—	$	—
Consumer		—		—		—		—		—

Total other loans	$	—	$	—	$	—	$	—	$	—


	Impaired Loans - With Allowance						Impaired Loans - With no Allowance
December 31, 2013	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance
	(Dollars in thousands)
New Loans:
Real estate loans:
Commercial real estate	$	—	$	—	$	—	$	—	$	—
1-4 single family residential		—		—		—		—		—
Construction, land and development		—		—		—		—		—
Home equity loans and lines of credit		—		—		—		—		—

Total real estate loans	$	—	$	—	$	—	$	—	$	—

Other loans
Commercial and industrial	$	—	$	—	$	—	$	—	$	—
Consumer		—		—		—		—		—

Total other loans	$	—	$	—	$	—	$	—	$	—

Acquired Loans:
Real estate loans:
Commercial real estate	$	—	$	—	$	—	$	5,134	$	5,218
1-4 single family residential		189		277		44		—		—
Construction, land and development		—		—		—		—		—
Home equity loans and lines of credit		386		500		105		—		—

Total real estate loans	$	575	$	777	$	149	$	5,134	$	5,218

Other loans
Commercial and industrial	$	—	$	—	$	—	$	—	$	—
Consumer		—		—		—		—		—

Total other loans	$	—	$	—	$	—	$	—	$	—


	Three Months Ended September 30,
	2014				2013
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)
Impaired loans with no related allowance:
Real estate loans:
Commercial real estate	$	—	$	—	$	5,134	$	—
1-4 single family residential		—		—		—		—
Construction, land and development		—		—		—		—
Home equity loans and lines of credit		184		—		—		—

Total real estate loans	$	184	$	—	$	5,134	$	—

Other loans:
Commercial and industrial	$	—	$	—	$	247	$	—
Consumer		—		—		—		—

Total other loans	$	—	$	—	$	247	$	—

Impaired loans with an allowance:
Real estate loans:
Commercial real estate	$	4,624	$	—	$	—	$	—
1-4 single family residential		—		—		—		—
Construction, land and development		—		—		—		—
Home equity loans and lines of credit		—		—		—		—

Total real estate loans	$	4,624	$	—	$	—	$	—

Other loans:
Commercial and industrial	$	—	$	—	$	—	$	—
Consumer		—		—		—		—

Total other loans	$	—	$	—	$	—	$	—


	Nine Months Ended September 30,
	2014				2013
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)
Impaired loans with no related allowance:
Real estate loans:
Commercial real estate	$	—	$	—	$	5,213	$	—
1-4 single family residential		—		—		—		—
Construction, land and development		—		—		—		—
Home equity loans and lines of credit		184		—		—		—

Total real estate loans	$	184	$	—	$	5,213	$	—

Other loans:
Commercial and industrial	$	—	$	—	$	262	$	—
Consumer		—		—		—		—

Total other loans	$	—	$	—	$	262	$	—

Impaired loans with an allowance:
Real estate loans:
Commercial real estate	$	4,687	$	—	$	—	$	—
1-4 single family residential		—		—		—		—
Construction, land and development		—		—		—		—
Home equity loans and lines of credit		—		—		—		—

Total real estate loans	$	4,687	$	—	$	—	$	—

Other loans:
Commercial and industrial	$	—	$	—	$	—	$	—
Consumer		—		—		—		—

Total other loans	$	—	$	—	$	—	$	—

NOTE 7. COVERED ASSETS AND LOSS SHARING AGREEMENTS

In each of the 2010 and 2011 Acquisitions (except Sunshine State Community Bank and First Peoples Bank), the Bank and the FDIC entered into loss sharing agreements.

The following table summarizes the carrying value of assets covered by the loss sharing agreements:


	September 30, 2014		December 31, 2013
	(Dollars in thousands)
Loans, excluding allowance for loan losses	$	286,416	$	359,255
OREO		26,312		27,299

Total Covered Assets	$	312,728	$	386,554

When a provision for loan loss is required for a loan subsequent to acquisition that is covered under a loss sharing agreement, the Company records an increase in the loss share indemnification asset and an increase to noninterest income in the consolidated statement of income based on the applicable loss sharing ratio. Increases in the loss share indemnification asset of $1.4 million and $4.6 million were included in noninterest income for the nine months ended September 30, 2014 and 2013, respectively, related to the provision for loan losses on Covered Loans, including both ASC 310-30 and Non-ASC 310-30 loans.

Changes in the loss share indemnification for the periods presented were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	(Dollars in thousands)
Balance at beginning of period	$	74,853		$	104,180		$	87,229		$	125,949
Reimbursable expenses		648			2,200			3,801			8,121
Amortization		(6,272	)		(6,137	)		(17,677	)		(18,596	)
Income resulting from impairment and charge-off of covered assets, net		1,474			1,098			2,680			7,078
Expense resulting from recoupment and disposition of covered assets, net		(678	)		(2,501	)		(3,101	)		(9,557	)
FDIC claims submissions		(105	)		(2,160	)		(3,012	)		(16,315	)

Balance at end of period	$	69,920		$	96,680		$	69,920		$	96,680

As of September 30, 2014 and December 31, 2013, the carrying value of loss share indemnification assets exceeded the total cash flow expected to be collected by $37.8 million and $29.8 million, respectively, and is being amortized using the effective interest method over the shorter of (1) the remaining expected term of the respective loans or (2) the remaining term of the loss sharing agreement.

The following table summarizes the changes in the clawback liability, included in Other Liabilities, for the periods presented:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2014		2013			2014		2013
	(Dollars in thousands)
Balance at beginning of period	$	12,525	$	12,870		$	11,753	$	11,966
Amortization impact		190		192			547		560
Remeasurement impact		842		(523	)		1,257		13

Balance at end of period	$	13,557	$	12,539		$	13,557	$	12,539

NOTE 8. GOODWILL AND INTANGIBLES

Goodwill and other intangible assets, which consist of core deposit intangibles are summarized as follows:


	September 30, 2014			December 31, 2013
	(Dollars in thousands)
Goodwill	$	81,104		$	33,749
Core deposit intangible		14,370			10,768

Total		95,474			44,517
Less: Accumulated amortization		(6,434	)		(5,148	)

Total, net	$	89,040		$	39,369

The amount of amortization expense for core deposit intangible assets to be recognized over the next five fiscal years at September 30, 2014 is as follows:


Type of intangibles	Remainder of 2014		2015		2016		2017		2018		Total
	(Dollars in thousands)
Core deposit intangible	$	425	$	1,630	$	1,189	$	1,023	$	1,023	$	5,290

During the three months ended September 30, 2014 and 2013, the Company recognized $426 thousand and $367 thousand, respectively, of amortization expense related to intangible assets. During the nine months ended September 30, 2014 and 2013, the Company recognized $1.3 million and $1.2 million, respectively, of amortization expense related to intangible assets.

NOTE 9. BANK-OWNED LIFE INSURANCE (“BOLI”)

Bank-owned life insurance policies are held in order to insure the key officers and employees of the Bank. Per ASC 325-30, “Investments in Insurance Contracts,” this policy is recorded at the cash surrender value adjusted for other charges or other amounts due that are probable at settlement, if applicable. As of September 30, 2014, the BOLI cash surrender value was $138.3 million resulting in other income for the three and nine months ended September 30, 2014 of $1.2 million and $3.0 million and an annualized pre-tax yield of 3.52% and 3.54%, respectively. The total death benefit of the BOLI policies at September 30, 2014 totaled $442.2 million. The Bank did not hold BOLI policies during the three or nine months ended September 30, 2013.

The following table summarizes the changes in the cash surrender value of BOLI for the periods presented:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
	(Dollars in thousands)
Balance at beginning of period	$	117,113	$	—	$	75,257	$	—
Additions from premium payments		20,000		—		60,000		—
Net gain in cash surrender value		1,151		—		3,007		—

Balance at end of period	$	138,264	$	—	$	138,264	$	—

NOTE 10. DERIVATIVES

The Company is a party to interest rate derivatives that are not designated as hedging instruments. These derivatives relate to interest rate swaps that the Company enters into with customers to allow customers to convert variable rate loans to a fixed rate. The Company pays interest to the customer at a floating rate on the notional amount and receives interest from the customer at a fixed rate for the same notional amount. At the same time the interest rate swap is entered into with the customer, an offsetting interest rate swap is entered into with another financial institution. The Company pays the other financial institution interest at the same fixed rate on the same notional amount as the swap entered into with the customer, and receives interest from the financial institution for the same floating rate on the same notional amount. The changes in the fair value of the swaps offset each other, except for any credit risk of the counterparties, which is determined by taking into consideration the risk rating, probability of default and loss of given default for all counterparties. Any fees received were recognized in earnings at the time of the transaction. The Company recorded $813 thousand and $898 thousand of customer swap fees in noninterest income in the accompanying consolidated statement of income for the three months ended September 30, 2014 and 2013, respectively and $3.0 million and $2.1 million for the nine months ended September 30, 2014 and 2013, respectively.

All derivative positions held by the Company as of September 30, 2014 were not designated as hedging instruments under ASC 815-10. As of September 30, 2014, the Company has not recorded any credit adjustments related to the credit risk of the counterparties. There was no change in the fair value of derivative assets and derivative liabilities attributable to credit risk included in “Noninterest Expense” on the statements of income for the three or nine months ended September 30, 2014.

The following tables summarize the Company’s derivatives outstanding included in “Other Assets” and “Other Liabilities” in the accompanying consolidated balance sheet:


September 30, 2014	Derivative Assets				Derivative Liabilities
	Notional		Fair Value		Notional		Fair Value
	(Dollars in thousands)
Derivative not designated as hedging instruments under ASC 815-10
Interest rate contracts - pay floating, receive fixed	$	339,963	$	8,159	$	33,044	$	361
Interest rate contracts - pay fixed, receive floating		—		—		373,007		7,798

Total derivatives	$	339,963	$	8,159	$	406,051	$	8,159


December 31, 2013	Derivative Assets				Derivative Liabilities
	Notional		Fair Value		Notional		Fair Value
	(Dollars in thousands)
Derivative not designated as hedging instruments under ASC 815-10
Interest rate contracts - pay floating, receive fixed	$	126,011	$	2,660	$	43,539	$	1,488
Interest rate contracts - pay fixed, receive floating		—		—		169,551		1,172

Total derivatives	$	126,011	$	2,660	$	213,090	$	2,660

The Company has entered into transactions subject to an enforceable master netting arrangement with a financial institution. The following table summarizes the gross and net fair values of the Company’s derivatives outstanding with this counterparty included in “Other Liabilities” in the accompanying consolidated balance:


September 30, 2014	Gross amounts of recognized liabilities		Gross amounts offset in the consolidated balance sheets			Net amounts in the consolidated balance sheets
	(Dollars in thousands)
Offsetting derivative liabilities
Counterparty A - Interest rate contracts	$	8,159	$	(361	)	$	7,798

Total	$	8,159	$	(361	)	$	7,798


December 31, 2013	Gross amounts of recognized liabilities		Gross amounts offset in the consolidated balance sheets			Net amounts in the consolidated balance sheets
	(Dollars in thousands)
Offsetting derivative liabilities
Counterparty A - Interest rate contracts	$	2,660	$	(1,488	)	$	1,172

Total	$	2,660	$	(1,488	)	$	1,172

At September 30, 2014, the Company has pledged investment securities available for sale with a carrying amount of $10.0 million as collateral for these interest rate swaps in a liability position. The amount of collateral required to be posted by the Company varies based on the settlement value of outstanding swaps.

As of September 30, 2014 and December 31, 2013, substantially all of the floating rate terms within the interest rate contracts held by the Company were indexed to 1-month LIBOR.

The fair value of the derivative assets and liabilities are included in a table in Note 17 “Fair Value Measurements,” in the line items “Derivative assets” and “Derivative liabilities.”

NOTE 11. DEPOSITS

The following table sets forth the Company’s deposits by category:


	September 30, 2014		December 31, 2013
	(Dollars in thousands)
Noninterest bearing demand deposits	$	525,152	$	291,658
Interest-bearing NOW accounts		526,013		84,837
Savings and money market accounts		1,695,237		1,251,842
Time deposits		1,244,958		1,165,196

Total deposits	$	3,991,360	$	2,793,533

Time deposits $100,000 and greater	$	787,935	$	674,172
Time deposits $250,000 and greater		252,301		216,309

The aggregate amount of overdraft demand deposits that have been reclassified to loans was $405 thousand at September 30, 2014. The aggregate amount of maturities for time deposits for each of the five years following the latest balance sheet date totaled $680.6 million, $180.0 million, $182.2 million, $164.0 million and $36.8 million, respectively.

NOTE 12. ACCUMULATED OTHER COMPREHENSIVE INCOME (“AOCI”)

Changes in AOCI for the periods indicated are summarized as follows:


	Three Months Ended September 30,
	2014							2013
	Before Tax		Tax Effect			Net of Tax		Before Tax		Tax Effect			Net of Tax
	(Dollars in thousands)
Balance at beginning of period	$	13,313	$	(5,136	)	$	8,177	$	8,076	$	(3,116	)	$	4,960
Unrealized gain (loss) on investment securities available for sale:

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company