C1 Financial, Inc. - FORM 10-Q

Attached files

file	filename
EX-31.1 - EXHIBIT 31.1 - C1 Financial, Inc.	v412511_ex31-1.htm
EX-32.2 - EXHIBIT 32.2 - C1 Financial, Inc.	v412511_ex32-2.htm
EX-31.2 - EXHIBIT 31.2 - C1 Financial, Inc.	v412511_ex31-2.htm
EX-32.1 - EXHIBIT 32.1 - C1 Financial, Inc.	v412511_ex32-1.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 June 30, 2015.

¨ 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 001-36595

C1 FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

Florida		46-4241720
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

100 5th Street South		33701
St. Petersburg, Florida		(Zip Code)
(Address of principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x 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).

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes ¨ No ¨

Indicate the number of shares outstanding of the issuer’s common stock, par value $1.00 per share, as of July 24, 2015: 16,100,966.

C1 FINANCIAL, INC. AND SUBSIDIARIES
INDEX

		Page

Part I Financial Information		3
Item 1. Financial Statements		3
Unaudited Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014		3
Unaudited Consolidated Statements of Income - Three and Six Months Ended June 30, 2015 and 2014		4
Unaudited Consolidated Statements of Comprehensive Income - Three and Six Months Ended June 30, 2015 and 2014		5
Unaudited Consolidated Statements of Changes in Stockholders’ Equity - Six Months Ended June 30, 2015 and 2014		6
Unaudited Consolidated Statements of Cash Flows - Six Months Ended June 30, 2015 and 2014		7
Notes to Unaudited Consolidated Financial Statements		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
Item 3. Quantitative and Qualitative Disclosure About Market Risk		57
Item 4. Controls and Procedures.		58
Part II Other Information		59
Item 1. Legal Proceedings		59
Item 1A. Risk Factors		59
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		78
Item 3. Defaults Upon Senior Securities		78
Item 4. Mine Safety Disclosures		78
Item 5. Other Information		78
Item 6. Exhibits		78
Signatures
Exhibit Index		79
		80

Forward-Looking Statements

We have made statements under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other sections of this Quarterly Report on Form 10-Q that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or “may,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events.

Any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

There are a number of potential factors, risks and uncertainties that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including, the following:

changes in general economic and financial market conditions;

changes in the regulatory environment, economic conditions generally and in the financial services industry;

changes in the economy affecting real estate values;

our ability to achieve loan and deposit growth;

projected population and income growth in our targeted market areas;

volatility and direction of market interest rates and a weakening of the economy which could materially impact credit quality trends and the ability to generate loans; and

those other factors and risks described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Item 1A of Part II of this Quarterly Report of C1 Financial, Inc. on Form 10-Q for the quarter ended June 30, 2015.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform our prior statements to actual results or revised expectations.

Part I

Financial Information

Item 1.

Financial Statements

C1 Financial, Inc.

Consolidated Balance Sheets (Unaudited)

June 30, 2015 and December 31, 2014

(Dollars in thousands, except per share data)

(Balance Sheet data at December 31, 2014 is derived from audited financial statements)

	June 30, 2015		December 31, 2014
ASSETS
Cash and cash equivalents	$	165,200	$	185,703
Time deposits in other financial institutions		247		-
Federal Home Loan Bank stock, at cost		12,476		9,224
Loans receivable (net of allowance of $7,675 at June 30, 2015 and $5,324 at December 31, 2014)		1,348,185		1,179,056
Premises and equipment, net		63,576		64,075
Other real estate owned, net		27,686		34,916
Bank-owned life insurance (BOLI)		42,743		43,907
Accrued interest receivable		3,953		3,490
Core deposit intangible		824		987
Prepaid expenses		4,983		5,243
Other assets		7,933		10,090
Total assets	$	1,677,806	$	1,536,691

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Noninterest bearing	$	322,173	$	278,543
Interest bearing		893,815		888,959
Total deposits		1,215,988		1,167,502
Federal Home Loan Bank advances		261,000		178,500
Other liabilities		6,263		4,051
Total liabilities		1,483,251		1,350,053
Commitments and contingencies (Note 8)

Stockholders’ equity
Common stock, par value $1.00; 100,000,000 shares authorized; 16,100,966 shares issued and outstanding at both June 30, 2015 and December 31, 2014		16,101		16,101
Additional paid-in capital		148,122		148,122
Retained earnings		30,332		22,415
Accumulated other comprehensive income		-		-
Total stockholders’ equity		194,555		186,638
Total liabilities and stockholders’ equity	$	1,677,806	$	1,536,691

See accompanying notes to unaudited consolidated financial statements.

C1 Financial, Inc.

Consolidated Income STATEMENTS

(Unaudited)

(Dollars in thousands, except per share data)

	Three Months Ended June 30,					Six Months Ended June 30,
	2015		2014 (1)			2015		2014 (1)
Interest income
Loans, including fees	$	18,899	$	15,468		$	36,463	$	30,453
Securities		3		29			6		57
Federal funds sold and other		213		215			415		397
Total interest income		19,115		15,712			36,884		30,907
Interest expense
Savings and interest-bearing demand deposits		631		518			1,233		1,026
Time deposits		677		984			1,461		1,966
Federal Home Loan Bank advances		996		599			1,804		1,143
Other borrowings		-		14			-		29
Total interest expense		2,304		2,115			4,498		4,164
Net interest income		16,811		13,597			32,386		26,743
Provision for loan losses		1,276		4,572			1,467		4,608
Net interest income after provision for loan losses		15,535		9,025			30,919		22,135
Noninterest income
Gains on sales of securities		-		241			-		241
Gains on sales of loans		584		804			814		1,548
Service charges and fees		581		538			1,148		1,132
Bargain purchase gain		-		(30	)		-		11
Gains on sales of other real estate owned, net		48		375			396		652
Bank-owned life insurance		258		41			350		77
Mortgage banking fees		-		4			-		47
Gains on disposals of premises and equipment		2,588		-			2,590		-
Other noninterest income		276		374			639		679
Total noninterest income		4,335		2,347			5,937		4,387
Noninterest expense
Salaries and employee benefits		5,229		4,282			10,446		8,749
Occupancy expense		1,360		1,109			2,572		2,172
Furniture and equipment		740		641			1,496		1,281
Regulatory assessments		390		355			751		705
Network services and data processing		1,080		940			2,164		1,791
Printing and office supplies		71		88			129		193
Postage and delivery		80		74			164		129
Advertising and promotion		1,053		939			1,879		1,822
Other real estate owned related expense, net		498		494			1,091		1,114
Other real estate owned – valuation allowance expense		35		185			66		564
Amortization of intangible assets		80		141			163		295
Professional fees		509		828			1,207		1,424
Loan collection expenses		3		175			87		323
Other noninterest expense		717		699			1,465		1,385
Total noninterest expense		11,845		10,950			23,680		21,947
Income before income taxes		8,025		422			13,176		4,575
Income tax expense		3,282		192			5,259		1,819
Net income	$	4,743	$	230		$	7,917	$	2,756
Earnings per common share:
Basic	$	0.29	$	0.02		$	0.49	$	0.21
Diluted	$	0.29	$	0.02		$	0.49	$	0.21

(1) Per share amounts have been restated to reflect the 7-for-1 reverse stock split completed on August 13, 2014. Please refer to Note 2 – Initial Public Offering for additional information related to the reverse stock split.

See accompanying notes to unaudited consolidated financial statements.

C1 Financial, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)
(Dollars in thousands)

	Three Months Ended June 30,					Six Months Ended June 30,
	2015		2014			2015		2014
Net income	$	4,743	$	230		$	7,917	$	2,756
Other comprehensive income:
Unrealized gains/losses on available-for-sale securities:
Unrealized holding gains arising during the period		-		59			-		241
Reclassification adjustments for gains included in net income*		-		(241	)		-		(241	)
Tax effect*		-		71			-		-
Total other comprehensive income, net of tax		-		(111	)		-		-
Comprehensive income	$	4,743	$	119		$	7,917	$	2,756

Amounts for realized gains on available-for-sale securities are included in gains on sales of securities in the consolidated income statements. Income taxes associated with the unrealized holding gains arising during the period, net of the reclassification adjustments for gains included in net income were $0 and $71 for the three months ended June 30, 2015 and 2014, respectively, and $0 for both the six months ended June 30, 2015 and 2014. The amounts related to income taxes on gains included in net income are included in income tax expense in the consolidated income statements.

See accompanying notes to unaudited consolidated financial statements.

C1 Financial, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)
Six Months Ended June 30, 2015 and 2014

(Dollars in thousands)

	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance at January 1, 2014	$	12,217	$	93,906	$	15,691	$	-	$	121,814
Issuance of common stock, net of costs of $0 (1,122,905 shares) (1)		1,123		14,498		-		-		15,621
Net income		-		-		2,756		-		2,756
Other comprehensive income		-		-		-		-		-
Balance at June 30, 2014	$	13,340	$	108,404	$	18,447	$	-	$	140,191

Balance at January 1, 2015	$	16,101	$	148,122	$	22,415	$	-	$	186,638
Net income		-		-		7,917		-		7,917
Other comprehensive income		-		-		-		-		-
Balance at June 30, 2015	$	16,101	$	148,122	$	30,332	$	-	$	194,555

(1) Amounts have been restated to reflect the 7-for-1 reverse stock split completed on August 13, 2014. Please refer to Note 2 – Initial Public Offering for additional information related to the reverse stock split.

See accompanying notes to unaudited consolidated financial statements.

C1 Financial, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)

	Six Months Ended June 30,
	2015			2014
Cash flows from operating activities
Net income	$	7,917		$	2,756
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan losses		1,467			4,608
Depreciation		1,641			1,334
Net accretion of purchase accounting adjustments		(922	)		(1,304	)
Accretion of loan discount		(116	)		(137	)
Amortization of other intangible assets		163			295
Increase in other real estate owned valuation allowance		66			564
Increase in cash surrender value of BOLI		(350	)		(77	)
Gains on sales of securities		-			(241	)
Bargain purchase gain		-			(11	)
Net change in deferred income tax expense		611			71
Gains on sales of loans		(814	)		(1,548	)
Gains on sales of other real estate owned, net		(396	)		(652	)
Gains on disposals of premises and equipment		(2,590	)		-
Net change in other assets and liabilities:
Accrued interest receivable and other assets		1,343			(2,035	)
Other liabilities		2,409			(1,726	)
Net cash from operating activities		10,429			1,897
Cash flows from investing activities
Net change in time deposits in other financial institutions		(247	)		-
Loan originations, net of repayments		(185,891	)		(27,299	)
Proceeds from loans sold		15,825			16,659
Proceeds from sales of other real estate owned		8,720			5,545
Proceeds from sales, calls and maturities of securities		-			996
Purchases of Federal Home Loan Bank stock		(4,479	)		(675	)
Proceeds from sales of Federal Home Loan Bank stock		1,227			246
Purchases of premises and equipment		(3,000	)		(6,988	)
Proceeds from sales of premises and equipment		4,448			-
Surrender of BOLI		1,457			-
Net cash transferred in bank acquisition		-			11
Net cash from investing activities		(161,940	)		(11,505	)
Cash flows from financing activities
Net proceeds from issuance of common stock		-			15,621
Net change in deposits		48,508			94,479
Repayment of Federal Home Loan Bank advances		(17,500	)		-
Proceeds from Federal Home Loan Bank advances		100,000			15,000
Net cash from financing activities		131,008			125,100
Net change in cash and cash equivalents		(20,503	)		115,492
Cash and cash equivalents at beginning of the period		185,703			143,452
Cash and cash equivalents at end of the period	$	165,200		$	258,944
Supplemental information:
Cash paid during the period for interest	$	4,507		$	4,368
Cash paid during the period for income taxes		5,161			5,170
Non-cash items:
Transfers from loans to other real estate owned		1,160			686

See accompanying notes to unaudited consolidated financial statements.

C1 Financial, Inc.

NOTES TO Consolidated FINANCIAL Statements

(Unaudited)
June 30, 2015 and 2014

(Dollars in thousands, except per share data)

NOTE 1 – BASIS OF PRESENTATION

Nature of Operations and Principles of Consolidation: The consolidated financial statements as of and for the three and six months ended June 30, 2015 and 2014 include C1 Financial, Inc. (“Parent Company”) and its wholly owned subsidiary, C1 Bank (the “Bank”), together referred to as “the Company”.

C1 Bank is a state chartered bank and is subject to the regulations of certain government agencies. The Bank provides a variety of banking services to individuals through its 31 banking centers and one loan production office located in nine counties (Pinellas, Hillsborough, Pasco, Manatee, Sarasota, Charlotte, Lee, Miami-Dade, and Orange). Its primary deposit products are checking, money market, savings, and term certificate accounts, and its primary lending products are commercial real estate loans, residential real estate loans, commercial loans, and consumer loans. Substantially all loans are secured by specific items of collateral including commercial and residential real estate, business assets and consumer assets. There are no significant concentrations of loans to any one industry or customer. However, the customers’ ability to repay their loans is dependent on real estate values and general economic conditions.

The consolidated financial information included herein as of and for the three and six months ended June 30, 2015 and 2014 is unaudited. Accordingly, it does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. However, such information reflects all adjustments consisting of normal recurring accruals which are, in the opinion of management, necessary for a fair statement of the financial condition and results of operations for the interim periods. Certain account reclassifications have been made to the 2014 financial statements in order to conform to classifications used in the current year. Reclassifications had no effect on 2014 net income or stockholders’ equity. The results for the three and six months ended June 30, 2015 are not indicative of annual results. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The December 31, 2014 consolidated balance sheet was derived from the Company’s December 31, 2014 audited Consolidated Financial Statements.

Earnings per share: Basic earnings per common share is net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share includes the effect of any potentially dilutive common stock equivalents (i.e., outstanding stock options). Earnings per common share is restated for all stock splits and stock dividends through the date of the issuance of the financial statements.

NOTE 2 – INITIAL PUBLIC OFFERING

C1 Financial, Inc. qualifies as an “emerging growth company” as defined by the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). On June 2, 2014, the Company submitted a confidential draft Registration Statement on Form S-1 with the Securities and Exchange Commission (“SEC”) with respect to the shares to be registered and sold. On July 11, 2014, the Company filed a public Registration Statement on Form S-1 with the SEC. On July 17, 2014, the Board of Directors of the Company approved a resolution for C1 Financial, Inc. to sell shares of common stock to the public in an initial public offering. The Registration statement was declared effective by the SEC on August 13, 2014. The Company issued 2,761,356 shares of common stock at $17 per share, which included 129,777 shares of common stock purchased by the underwriters of the offering on September 9, 2014 in connection with the partial exercise of the over-allotment option held by such underwriters. Total proceeds received by the Company, net of offering costs was $42.3 million.

In connection with the initial public offering, on July 17, 2014, the Board of Directors approved a 7-for-1 reverse stock split of the Company’s common stock, which was approved by the majority stockholders and became effective on August 13, 2014. The effect of the split on authorized, issued and outstanding common and preferred shares and earnings per share has been retroactively applied to all periods presented.

NOTE 3 – INVESTMENT SECURITIES

C1 Financial, Inc.’s Directors’ Asset Liability Committee resolved in early 2013 that improving economic conditions could begin to put upward pressure on interest rates in 2013 and beyond, especially considering the fact that rates still remain at historically low levels. Given the concern relative to this economic and interest rate scenario, the Committee made the decision to sell all marketable securities in the Bank’s portfolio. These actions, taken in September and August of 2013, eliminated the mark-to-market risk that holding the securities would have posed in a rising interest rate environment and allowed the excess funds to be redeployed into loans. As a result, the Bank had no securities available for sale as of June 30, 2015 and December 31, 2014.

As of March 31, 2014, the Bank carried $938 thousand of equity securities corresponding to a fund investment from an acquired bank, which was converted to equity shares as a result of a public offering. These shares were sold at a gain during the three months ended June 30, 2014.

Proceeds and gross gains and (losses) from the sales of securities available for sale for the three and six months ended June 30, 2015 and 2014, respectively, were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Proceeds from sales of securities	$	-	$	996	$	-	$	996
Gross gains	$	-	$	241	$	-	$	241
Gross (losses)		-		-		-		-
Net gains (losses) on sales of securities	$	-	$	241	$	-	$	241

NOTE 4 – LOANS

The loan portfolio was as follows at June 30, 2015 and December 31, 2014:

	June 30, 2015			December 31, 2014
Real estate
Residential	$	236,708		$	224,416
Commercial		809,693			723,577
Construction		152,571			107,436
Total real estate		1,198,972			1,055,429
Commercial		77,746			75,360
Consumer		84,741			57,733
Total loans, gross		1,361,459			1,188,522
Less:
Net deferred loan fees		(5,599	)		(4,142	)
Allowance for loan losses		(7,675	)		(5,324	)
Total loans, net	$	1,348,185		$	1,179,056

The Bank has divided the loan portfolio into various portfolio segments, each with different risk characteristics and methodologies for assessing risk. The portfolio segments identified are as follows:

Residential real estate loans are typically secured by 1-4 family residential properties located mostly in Florida and are underwritten in accordance with policies set forth and approved by the Board of Directors, including repayment capacity and source, value of the underlying property, credit history and stability.

Repayment of residential real estate loans is primarily dependent upon the personal income or business income generated by the secured rental property of the borrowers (in the case of investment properties), which can be impacted by the economic conditions in their market area or, in the case of loans to foreign borrowers, their country of origin from which their source of income originates. Risk is mitigated by the fact that the properties securing the Bank’s residential real estate loan portfolio are diverse in type and spread over a large number of borrowers.

Commercial real estate loans are typically segmented into classes such as office buildings and condominiums, retail buildings and shopping centers, warehouse and other. Commercial real estate loans are secured by the subject property and are underwritten based upon standards set forth in the Bank’s policies approved by the Board of Directors. Such standards include, among other factors, loan to value limits, cash flow and debt service coverage, and general creditworthiness of the obligors.

Construction loans to borrowers are extended for the purpose of financing the construction of owner occupied and nonowner occupied properties. These loans are categorized as construction loans during the construction period, later converting to commercial or residential real estate loans after the construction is complete and amortization of the loan begins. Construction loans are approved based on an analysis of the borrower and guarantor, the viability of the project and on an acceptable percentage of the appraised value of the property securing the loan. Construction loan funds are disbursed periodically based on the percentage of construction completed.

Commercial loans are primarily underwritten on the basis of the borrowers’ ability to service such debt from income. When possible, commercial loans are secured by real estate. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. As a general practice, collateral is taken as a security interest in any available real estate, equipment, or other chattel, although loans may also be made on an unsecured basis. Collateralized working capital loans typically are secured by short-term assets whereas long-term loans are primarily secured by long-term assets.

Consumer loans are extended for various purposes. This segment also includes home improvement loans, lines of credit, personal loans, and deposit account collateralized loans. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Loans to consumers are extended after a credit evaluation, including the creditworthiness of the borrower, the purpose of the credit, and the primary and secondary sources of repayment.

The following tables present the activity in the allowance for loan losses by portfolio segment for the three months ended June 30, 2015 and 2014:

Three Months Ended June 30, 2015	Residential Real Estate		Commercial Real Estate		Construction		Commercial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	930	$	3,478	$	479	$	430		$	470		$	5,787

Loans charged-off		-		-		-		(66	)		(3	)		(69	)
Recoveries		153		33		69		412			14			681
Net (charge-offs) recoveries		153		33		69		346			11			612

Provision (reversal of provision) for loan losses		236		966		252		(246	)		68			1,276
Ending balance	$	1,319	$	4,477	$	800	$	530		$	549		$	7,675

Three Months Ended June 30, 2014	Residential Real Estate			Commercial Real Estate			Construction			Commercial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	413		$	2,012		$	217		$	624		$	360		$	3,626
Loans charged-off		(98	)		(47	)		-			(4,037	)		(236	)		(4,418	)
Recoveries		277			140			220			162			14			813
Net (charge-offs) recoveries		179			93			220			(3,875	)		(222	)		(3,605	)
Provision (reversal of provision) for loan losses		149			548			(157	)		3,898			134			4,572
Ending balance	$	741		$	2,653		$	280		$	647		$	272		$	4,593

The following tables present the activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2015 and 2014:

Six Months Ended June 30, 2015	Residential Real Estate		Commercial Real Estate			Construction		Commercial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	820	$	3,423		$	416	$	373		$	292		$	5,324
Loans charged-off		-		(1	)		-		(66	)		(6	)		(73	)
Recoveries		222		145			92		445			53			957
Net recoveries		222		144			92		379			47			884
Provision (reversal of provision) for loan losses		277		910			292		(222	)		210			1,467
Ending balance	$	1,319	$	4,477		$	800	$	530		$	549		$	7,675

Six Months Ended June 30, 2014	Residential Real Estate			Commercial Real Estate			Construction			Commercial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	439		$	1,860		$	241		$	537		$	335		$	3,412
Loans charged-off		(98	)		(204	)		-			(4,046	)		(238	)		(4,586	)
Recoveries		437			229			303			175			15			1,159
Net (charge-offs) recoveries		339			25			303			(3,871	)		(223	)		(3,427	)
Provision (reversal of provision) for loan losses		(37	)		768			(264	)		3,981			160			4,608
Ending balance	$	741		$	2,653		$	280		$	647		$	272		$	4,593

On June 30, 2014, the Bank charged-off in-full its only loan under the shared national credit program in the amount of $4.0 million. The Bank deemed the loan to be uncollectible in June 2014 and the full loan was charged off as the Bank believed that cash flow to repay the loan was collateral-dependent and other sources of repayment were no more than nominal. The value of the collateral, in this case closely held stock, was determined to be uncertain.

The following table provides the allocation of the allowance for loan losses by portfolio segment at June 30, 2015:

June 30, 2015	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Specific Reserves:
Impaired Loans	$	149	$	347	$	1	$	82	$	22	$	601
Purchased credit impaired loans		32		17		4		-		-		53
Total Specific Reserves		181		364		5		82		22		654
General Reserves		1,138		4,113		795		448		527		7,021
Total	$	1,319	$	4,477	$	800	$	530	$	549	$	7,675

Loans:
Individually evaluated for impairment	$	1,822	$	5,593	$	55	$	862	$	79	$	8,411
Purchased credit impaired loans		5,802		18,152		1,304		666		64		25,988
Collectively evaluated for impairment		229,084		785,948		151,212		76,218		84,598		1,327,060
Total ending loans balance	$	236,708	$	809,693	$	152,571	$	77,746	$	84,741	$	1,361,459

The following table provides the allocation of the allowance for loan losses by portfolio segment at December 31, 2014:

December 31, 2014	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Consumer		Total
Specific Reserves:
Impaired Loans	$	107	$	339	$	-	$	68	$	-	$	514
Purchased credit impaired loans		46		37		8		-		1		92
Total Specific Reserves		153		376		8		68		1		606
General Reserves		667		3,047		408		305		291		4,718
Total	$	820	$	3,423	$	416	$	373	$	292	$	5,324

Loans:
Individually evaluated for impairment	$	1,813	$	5,395	$	230	$	1,013	$	104	$	8,555
Purchased credit impaired loans		6,580		19,360		1,480		687		66		28,173
Collectively evaluated for impairment		216,023		698,822		105,726		73,660		57,563		1,151,794
Total ending loans balance	$	224,416	$	723,577	$	107,436	$	75,360	$	57,733	$	1,188,522

The following table presents loans individually evaluated for impairment by portfolio segment as of June 30, 2015 and December 31, 2014. The difference between the unpaid principal balance and the recorded investment is the amount of partial charge-offs that have been taken.

	June 30, 2015						December 31, 2014
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Residential real estate	$	1,289	$	1,201	$	-	$	1,643	$	1,464	$	-
Commercial real estate
Multifamily		-		-		-		-		-		-
Owner occupied		4,362		3,940		-		4,346		4,000		-
Nonowner occupied		600		522		-		608		553		-
Secured by farmland		185		143		-		185		143		-
Construction		-		-		-		280		230		-
Commercial		864		669		-		1,007		777		-
Consumer		1		1		-		169		104		-
With allowance recorded:
Residential real estate		652		621		149		364		349		107
Commercial real estate
Multifamily		-		-		-		-		-		-
Owner occupied		1,047		988		347		776		699		339
Nonowner occupied		-		-		-		-		-		-
Secured by farmland		-		-		-		-		-		-
Construction		89		55		1		-		-		-
Commercial		218		193		82		314		236		68
Consumer		80		78		22		-		-		-
Total	$	9,387	$	8,411	$	601	$	9,692	$	8,555	$	514

Average impaired loans and related interest income for the three months ended June 30, 2015 and 2014 were as follows:

	Three Months Ended June 30, 2015						Three Months Ended June 30, 2014
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Residential real estate	$	1,220	$	4	$	-	$	1,032	$	5	$	-
Commercial real estate
Multifamily		-		-		-		-		-		-
Owner occupied		4,011		2		-		1,855		-		-
Nonowner occupied		536		-		-		597		1		-
Secured by farmland		143		-		-		1,893		8		-
Construction		-		-		-		-		-		-
Commercial		673		1		-		268		2		-
Consumer		1		-		-		28		-		-
With allowance recorded:
Residential real estate		656		-		-		695		4		-
Commercial real estate
Multifamily		-		-		-		-		-		-
Owner occupied		993		4		-		1,664		12		-
Nonowner occupied		-		-		-		204		-		-
Secured by farmland		-		-		-		-		-		-
Construction		55		-		-		-		-		-
Commercial		198		2		-		781		4		-
Consumer		80		-		-		-		-		-
Total	$	8,566	$	13	$	-	$	9,017	$	36	$	-

Average impaired loans and related interest income for the six months ended June 30, 2015 and 2014 were as follows:

	Six Months Ended June 30, 2015						Six Months Ended June 30, 2014
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With no related allowance recorded:
Residential real estate	$	1,260	$	4	$	-	$	819	$	5	$	-
Commercial real estate
Multifamily		-		-		-		-		-		-
Owner occupied		3,936		2		-		2,806		13		-
Nonowner occupied		542		-		-		769		1		-
Secured by farmland		143		-		-		1,914		8		-
Construction		65		-		-		3		-		-
Commercial		703		1		-		270		6		-
Consumer		1		-		-		54		-		-
With allowance recorded:
Residential real estate		598		-		-		466		6		-
Commercial real estate
Multifamily		-		-		-		-		-		-
Owner occupied		838		8		-		1,248		17		-
Nonowner occupied		-		-		-		102		-		-
Secured by farmland		-		-		-		-		-		-
Construction		27		-		-		-		-		-
Commercial		211		3		-		815		7		-
Consumer		40		-		-		-		-		-
Total	$	8,364	$	18	$	-	$	9,266	$	63	$	-

The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual as of June 30, 2015 and December 31, 2014:

June 30, 2015	Nonaccrual		Loans Past Due Over 90 Days Still Accruing
Residential real estate	$	3,306	$	-
Commercial real estate		12,604		-
Construction		100		-
Commercial		1,369		-
Consumer		79		-
Total	$	17,458	$	-

December 31, 2014	Nonaccrual		Loans Past Due Over 90 Days Still Accruing
Residential real estate	$	4,168	$	-
Commercial real estate		14,582		-
Construction		449		-
Commercial		1,591		-
Consumer		104		-
Total	$	20,894	$	-

The reported amounts as of June 30, 2015 and December 31, 2014 include nonaccrual purchased credit impaired loans of $10,641 and $12,980, respectively. Loans are placed on nonaccrual and accounted for under the cost recovery method when repayment is expected through foreclosure or repossession of the collateral, and the timing of foreclosure or repossession cannot be estimated with reasonable certainty. These loans are measured for impairment under the Bank’s policy for measuring impairment on collateral dependent impaired loans that were originated by the Bank and included in impaired loans if there is a subsequent decline in the value of the collateral.

The following table presents the aging of the recorded investment in past due loans as of June 30, 2015:

June 30, 2015	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 89 Days Past Due		Total Past Due		Loans Not Past Due		Total
Residential real estate	$	1,156	$	-	$	3,306	$	4,462	$	232,246	$	236,708
Commercial real estate
Multifamily		-		-		-		-		31,761		31,761
Owner occupied		219		2,394		8,869		11,482		220,752		232,234
Nonowner occupied		-		-		3,592		3,592		487,289		490,881
Secured by farmland		-		-		143		143		54,674		54,817
Construction		442		177		100		719		151,852		152,571
Commercial		143		-		1,369		1,512		76,234		77,746
Consumer		25		-		79		104		84,637		84,741
Total	$	1,985	$	2,571	$	17,458	$	22,014	$	1,339,445	$	1,361,459

The following table presents the aging of the recorded investment in past due loans as of December 31, 2014:

December 31, 2014	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater than 89 Days Past Due		Total Past Due		Loans Not Past Due		Total
Residential real estate	$	1,256	$	165	$	4,168	$	5,589	$	218,827	$	224,416
Commercial real estate
Multifamily		356		-		-		356		32,545		32,901
Owner occupied		1,829		-		10,261		12,090		219,146		231,236
Nonowner occupied		2,593		-		4,178		6,771		392,831		399,602
Secured by farmland		-		-		143		143		59,695		59,838
Construction		85		-		449		534		106,902		107,436
Commercial		550		-		1,591		2,141		73,219		75,360
Consumer		49		48		104		201		57,532		57,733
Total	$	6,718	$	213	$	20,894	$	27,825	$	1,160,697	$	1,188,522

Troubled Debt Restructurings:

The following tables summarize troubled debt restructurings that were performing in accordance with the restructured terms at June 30, 2015 and December 31, 2014:

June 30, 2015	Number of Loans		Recorded Investment
Residential real estate		-	$	-
Commercial real estate
Multifamily		-		-
Owner occupied		1		520
Nonowner occupied		1		371
Secured by farmland		-		-
Construction		-		-
Commercial		-		-
Consumer		-		-
Total		2	$	891

December 31, 2014	Number of Loans		Recorded Investment
Residential real estate		-	$	-
Commercial real estate
Multifamily		-		-
Owner occupied		1		532
Nonowner occupied		1		374
Secured by farmland		-		-
Construction		-		-
Commercial		-		-
Consumer		-		-
Total		2	$	906

As of June 30, 2015 and December 31, 2014, the Bank had no nonaccruing troubled debt restructurings and was not committed to lend any additional amounts to customers with outstanding loans that were classified as troubled debt restructurings.

There were no loans modified as troubled debt restructurings during the six months ended June 30, 2015 and 2014.

There were no troubled debt restructurings that defaulted during the six months ended June 30, 2015 and 2014. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

Credit Quality Indicators:

The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Bank analyzes loans individually by classifying the loans as to credit risk. This analysis is performed at least annually. The Bank uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans not meeting the criteria above include homogeneous loans, which includes residential real estate and consumer loans. The credit quality indicators used for loans not meeting the criteria above are payment status and historical payment experience. As of June 30, 2015 and December 31, 2014, loans by risk category were as follows:

June 30, 2015	Pass		Special Mention		Substandard		Doubtful		Total
Residential real estate	$	228,959	$	2,349	$	5,400	$	-	$	236,708
Commercial real estate
Multifamily		31,761		-		-		-		31,761
Owner occupied		208,563		10,000		13,671		-		232,234
Nonowner occupied		482,500		4,789		3,592		-		490,881
Secured by farmland		54,048		626		143		-		54,817
Construction		150,764		1,090		717		-		152,571
Commercial		75,794		403		1,549		-		77,746
Consumer		84,534		53		154		-		84,741
Total	$	1,316,923	$	19,310	$	25,226	$	-	$	1,361,459

December 31, 2014	Pass		Special Mention		Substandard		Doubtful		Total
Residential real estate	$	215,998	$	2,405	$	6,013	$	-	$	224,416
Commercial real estate
Multifamily		32,667		234		-		-		32,901
Owner occupied		205,078		11,059		15,099		-		231,236
Nonowner occupied		389,430		5,994		4,178		-		399,602
Secured by farmland		59,022		673		143		-		59,838
Construction		105,027		1,357		1,052		-		107,436
Commercial		73,321		311		1,728		-		75,360
Consumer		57,568		61		104		-		57,733
Total	$	1,138,111	$	22,094	$	28,317	$	-	$	1,188,522

The Bank acquired loans through the acquisitions of First Community Bank of America, The Palm Bank and First Community Bank of Southwest Florida for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of these purchased credit impaired loans at June 30, 2015 and December 31, 2014 was approximately $25,935 and $28,081, respectively.

The Bank maintained an allowance for loan losses of $53 and $92 at June 30, 2015 and December 31, 2014, respectively, for loans acquired with deteriorated quality. During the three months ended June 30, 2015 and 2014, the Bank accreted $136 and $102, respectively, into interest income on these loans. During the six months ended June 30, 2015 and 2014, the Bank accreted $277 and $251, respectively, into interest income on these loans. The remaining accretable discount was $2,144 at June 30, 2015. The Bank did not transfer any nonaccretable discount on these loans during the periods presented.

NOTE 5 – FAIR VALUES

Fair value is the exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels that may be used to measure fair value:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). Discounted cash flows are calculated using spread to swap and LIBOR curves that are updated to incorporate loss severities, volatility, credit spread and optionality. During times when trading is more liquid, broker quotes are used (if available) to validate the model. Rating agency and industry research reports as well as defaults and deferrals on individual securities are reviewed and incorporated into the calculations. The fair value of investment securities available for sale is considered a Level 2 in the fair value hierarchy and is measured on a recurring basis.

The Company had no securities available for sale or any other assets or liabilities measured at fair value on a recurring basis at June 30, 2015 and December 31, 2014.

The fair values of impaired loans with specific allocations of the allowance for loan losses and other real estate owned are generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. For the commercial real estate impaired loans and other real estate owned, appraisers may use either a single valuation approach or a combination of approaches such as comparative sales, cost or the income approach. A significant unobservable input in the income approach is the estimated income capitalization rate for a given piece of collateral. At June 30, 2015 and December 31, 2014, the range of capitalization rates utilized to determine the fair value of the underlying collateral ranged from 8.0% to 12.0%. Adjustments to comparable sales may be made by the appraiser to reflect local market conditions or other economic factors and may result in changes in the fair value of a given asset over time. As such, the fair values of impaired loans and other real estate owned are considered a Level 3 in the fair value hierarchy and are measured on a nonrecurring basis.

The following tables present assets reported on the balance sheet at their fair value by level within the fair value hierarchy as of June 30, 2015 and December 31, 2014. As required by Accounting Standards Codification (“ASC”) 820, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The fair value of assets measured on a nonrecurring basis was as follows at June 30, 2015:

	June 30, 2015 Using:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Fair Value Measured on a Nonrecurring Basis:
Impaired Loans
Residential real estate	$	-	$	-	$	472
Commercial real estate		-		-		641
Construction		-		-		54
Commercial		-		-		111
Consumer		-		-		56
Total Impaired Loans		-		-		1,334
Other real estate owned
Residential		-		-		1,296
Commercial		-		-		10,931
Total other real estate owned		-		-		12,227
Total	$	-	$	-	$	13,561

Impaired loans, which had a specific allowance for loan losses allocated, had a fair value of $1,334 (recorded investment of $1,935 with a valuation allowance of $601) at June 30, 2015, which reflected a provision for loan losses of $110 and $91 for the three and six months ended June 30, 2015, respectively.

Other real estate owned, which is measured at fair value less costs to sell, had a net carrying amount of $12,227 (recorded investment of $15,509, net of a valuation allowance of $3,282) at June 30, 2015, which reflected write-downs of $35 and $66 for the three and six months ended June 30, 2015, respectively.

The fair value of assets measured on a nonrecurring basis was as follows at December 31, 2014:

	December 31, 2014 Using:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Fair Value Measured on a Nonrecurring Basis:
Impaired Loans
Residential real estate	$	-	$	-	$	242
Commercial real estate		-		-		360
Construction		-		-		-
Commercial		-		-		168
Consumer		-		-		-
Total Impaired Loans		-		-		770
Other real estate owned
Residential		-		-		2,337
Commercial		-		-		12,867
Total other real estate owned		-		-		15,204
Total	$	-	$	-	$	15,974

Impaired loans, which had a specific allowance for loan losses allocated, had a fair value of $770 (recorded investment of $1,284 with a valuation allowance of $514) at December 31, 2014, which reflected a provision for loan losses of $292 for the year ended December 31, 2014.

Other real estate owned had a net carrying amount of $15,204 (recorded investment of $20,054, net of a valuation allowance of $4,850) at December 31, 2014, which reflected write-downs of $3,242 for the year ended December 31, 2014.

The following methods and assumptions were used to estimate the fair value of each class of financial assets and liabilities for which it is practicable to estimate that value. These financial assets and liabilities are reported in the Company’s consolidated balance sheets at their carrying amounts. Fair value methods and assumptions are periodically evaluated by the Company.

Cash and cash equivalents – For these short-term highly liquid instruments, the carrying amount is a reasonable estimate of fair value.

Investment securities – Fair values for investment securities, excluding Federal Home Loan Bank stock, are discussed above. It was not practicable to determine the fair value of Federal Home Loan Bank stock due to restrictions placed on its transferability.

Loans – The fair value measurement of certain impaired loans is discussed above. For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for all other loans are estimated using discounted cash flow analyses, using the interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. An overall valuation adjustment was made for specific credit risks as well as general portfolio credit risk. The methods utilized to estimate the fair value do not necessarily represent an exit price.

Accrued interest receivable and payable – The carrying amount of accrued interest receivable and payable approximates fair value due to the short-term nature of these financial instruments.

Deposits – The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable upon demand at June 30, 2015 and December 31, 2014, resulting in a Level 1 classification in the fair value hierarchy. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities, resulting in a Level 2 classification in the fair value hierarchy.

Short-term borrowings – Rates currently available to the Company for borrowings with similar terms and remaining maturities are used to estimate fair value of existing borrowings by discounting future cash flows.

Long-term debt – Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value of existing debt by discounting future cash flows.

Commitments to extend credit and standby letters of credit – The value of the unrecognized financial instruments is estimated based on the related deferred fee income associated with the commitments, which is not material to the Company's financial statements at June 30, 2015 and December 31, 2014.

The estimated fair values of the Bank's financial assets and liabilities at June 30, 2015 and December 31, 2014 approximated as follows:

			Fair Value Measurement at June 30, 2015 Using:
	Carrying amount		(Level 1)		(Level 2)		(Level 3)
Financial assets
Cash and cash equivalents	$	165,200	$	165,200	$	-	$	-
Loans, net		1,348,185		-		-		1,352,262
Accrued interest receivable		3,953		-		-		3,953
Financial liabilities
Deposits	$	1,215,988	$	954,054	$	262,551	$	-
Federal Home Loan Bank advances		261,000		-		258,005		-
Accrued interest payable		148		-		148		-

			Fair Value Measurement at December 31, 2014 Using:
	Carrying amount		(Level 1)		(Level 2)		(Level 3)
Financial assets
Cash and cash equivalents	$	185,703	$	185,703	$	-	$	-
Loans, net		1,179,056		-		-		1,177,725
Accrued interest receivable		3,490		-		-		3,490
Financial liabilities
Deposits	$	1,167,502	$	854,246	$	314,201	$	-
Federal Home Loan Bank advances		178,500		-		178,162		-
Accrued interest payable		235		-		235		-

NOTE 6 – EARNINGS PER COMMON SHARE

Basic earnings per common share is net income divided by the weighted average number of shares outstanding during the period. Diluted earnings per share includes the effect of any potentially dilutive common stock equivalents (i.e., outstanding stock options). There were no antidilutive common stock equivalents during the periods presented.

The following table provides information on the calculation of earnings per common share for the three and six months ended June 30, 2015 and 2014, respectively:

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014 (1)		2015		2014 (1)
Basic
Net Income	$	4,743	$	230	$	7,917	$	2,756

Weighted average shares of common stock outstanding		16,100,966		13,232,152		16,100,966		12,868,044

Basic earnings per common share	$	0.29	$	0.02	$	0.49	$	0.21

Diluted
Net Income	$	4,743	$	230	$	7,917	$	2,756

Weighted average shares of common stock outstanding		16,100,966		13,232,152		16,100,966		12,868,044
Add: Dilutive effect of common stock equivalents		-		-		-		-
Average shares and dilutive potential common shares		16,100,966		13,232,152		16,100,966		12,868,044

Diluted earnings per common share	$	0.29	$	0.02	$	0.49	$	0.21

(1)

Share and per share amounts have been restated to reflect the 7-for-1 reverse stock split completed on August 13, 2014. Please refer to Note 2 – Initial Public Offering for additional information related to the reverse stock split.

NOTE 7 – REGULATORY MATTERS

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies, including the Bank’s primary federal regulator, the Federal Deposit Insurance Corporation (FDIC). Failure to meet the minimum regulatory capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators, which if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines involving quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined), or leverage ratio. Beginning in 2015, Interim Final Basel III rules require the Bank to maintain minimum amounts and ratios of common equity Tier I capital (as defined in the regulations) to risk-weighted assets (as defined). Additionally under Basel III rules, the decision was made to opt-out of including accumulated other comprehensive income in regulatory capital. For December 31, 2014, regulatory capital ratios were calculated under Basel I rules.

To be categorized as well capitalized, the Bank must maintain minimum Total risk-based, Tier I risk-based, common equity Tier I risk-based (2015) and Tier I leverage ratios as set forth in the table below. As of June 30, 2015 and December 31, 2014, the Bank met all capital adequacy requirements to be considered well capitalized. There were no conditions or events since the end of the second quarter of 2015 that management believes have changed the Bank’s classification as well capitalized. There is no threshold for well-capitalized status for bank holding companies.

Certain of our activities are restricted due to commitments entered into with the Federal Reserve by us and certain of our foreign national controlling stockholders, including but not limited to being prohibited from incurring additional debt to any third party without prior approval from the Federal Reserve.

The Company’s and Bank's actual and required capital ratios as of June 30, 2015 and December 31, 2014 were as follows:

	Actual					Required for Capital Adequacy Purposes					Well Capitalized Under Prompt Corrective Action Provision
June 30, 2015	Amount		Ratio			Amount		Ratio			Amount		Ratio

Total capital to risk-weighted assets
C1 Financial, Inc.	$	201,591		13.60	%	$	118,616		8.00	%	$	N/A		N/A
C1 Bank		200,898		13.55	%		118,608		8.00	%		148,259		10.00	%
Tier 1 capital to risk-weighted assets
C1 Financial, Inc.		193,915		13.08	%		88,962		6.00	%		N/A		N/A
C1 Bank		193,222		13.03	%		88,956		6.00	%		118,608		8.00	%
Common equity tier 1 capital to risk-weighted assets
C1 Financial, Inc.		193,915		13.08	%		66,721		4.50	%		N/A		N/A
C1 Bank		193,222		13.03	%		66,717		4.50	%		96,369		6.50	%
Tier 1 capital to average assets
C1 Financial, Inc.		193,915		12.01	%		64,593		4.00	%		N/A		N/A
C1 Bank		193,222		11.97	%		64,589		4.00	%		80,736		5.00	%

	Actual					Required for Capital Adequacy Purposes					Well Capitalized Under Prompt Corrective Action Provision
December 31, 2014	Amount		Ratio			Amount		Ratio			Amount		Ratio

Total capital to risk-weighted assets
C1 Financial, Inc.	$	190,712		14.74	%	$	103,532		8.00	%	$	N/A		N/A
C1 Bank		190,019		14.68	%		103,523		8.00	%		129,404		10.00	%
Tier 1 capital to risk-weighted assets
C1 Financial, Inc.		185,388		14.33	%		51,766		4.00	%		N/A		N/A
C1 Bank		184,695		14.27	%		51,762		4.00	%		77,642		6.00	%
Tier 1 capital to average assets
C1 Financial, Inc.		185,388		11.95	%		62,049		4.00	%		N/A		N/A
C1 Bank		184,695		11.91	%		62,045		4.00	%		77,556		5.00	%

NOTE 8 – COMMITMENTS AND CONTINGENCIES

The financial statements do not reflect various commitments and contingent liabilities which arise in the normal course of business and which involve elements of credit risk, interest rate risk and liquidity risk. These commitments and contingent liabilities are commitments to extend credit and standby letters of credit. A summary of these commitments and contingent liabilities is as follows:

June 30, 2015	Fixed		Variable		Total
Unused lines of credit	$	6,891	$	41,232	$	48,123
Standby letters of credit		2,108		182		2,290
Commitments to fund loans		18,704		168,760		187,464
Total	$	27,703	$	210,174	$	237,877

December 31, 2014	Fixed		Variable		Total
Unused lines of credit	$	3,549	$	36,081	$	39,630
Standby letters of credit		1,358		182		1,540
Commitments to fund loans		22,986		124,893		147,879
Total	$	27,893	$	161,156	$	189,049

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

The following is management’s discussion and analysis of certain significant factors that have affected our financial condition and operating results during the periods included in the accompanying consolidated financial statements, and should be read in conjunction with such financial statements. The following discussion pertains to our historical results on a consolidated basis. However, because we conduct all of our material business operations through the Bank, the discussion and analysis relates to activities primarily conducted at the subsidiary level.

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.

Overview

Our name expresses our ideals to put our Clients 1st and our Community 1st. We are focused on serving the needs of entrepreneurs, tailoring a wide range of relationship banking services to entrepreneurs and their families, including commercial loans and a full line of depository products. We are based in St. Petersburg, Florida and operate from 31 banking centers and one loan production office on the West Coast of Florida and in Miami-Dade and Orange Counties. As of December 31, 2014, we were the 18^th largest bank headquartered in the state of Florida by assets and the 16th largest by equity, having grown both organically and through acquisitions, and we were the sixth fastest-growing bank in the country as measured by asset growth for the five-year period ending June 30, 2014.

In April 2015, we opened a branch in Doral, our 31^st banking center and fourth in Miami-Dade County. This opening will strengthen our presence in Miami-Dade County and allow us to continue to serve our clients and expand our reach.

We generate most of our revenue from interest on loans. Our primary source of funding for our loans is deposits. Our largest expenses are interest on those deposits and salaries plus related employee benefits. We measure our performance through our net interest margin, return on average assets, and return on average common equity, while maintaining appropriate regulatory leverage and risk-based capital ratios.

Our common stock is listed on the New York Stock Exchange under the symbol “BNK”.

Overview of Recent Financial Performance and Trends

Our financial performance reflects improvements in economic conditions in the areas in which we operate across Florida, the acquisitions we have completed, our progress in restructuring the acquired banks and disposing of classified assets, the implementation of our banking strategy and other general economic and competitive trends in our markets.

Our net interest income was $16.8 million and $13.6 million in the three-month periods ended June 30, 2015 and June 30, 2014, respectively. In the three-month periods ended June 30, 2015 and June 30, 2014, our net income of $4.7 million and $230 thousand, respectively, represented a return on average assets, or ROAA, of 1.18% and 0.06%, respectively, and a return on average equity, or ROAE, of 9.88% and 0.66%, respectively. Our ratio of average equity to average assets in the three-month periods ended June 30, 2015 and June 30, 2014 was 11.92% and 9.86%, respectively.

Our net interest income was $32.4 million and $26.7 million in the six-month periods ended June 30, 2015 and June 30, 2014, respectively. In the six-month periods ended June 30, 2015 and June 30, 2014, our net income of $7.9 million and $2.8 million, respectively, represented an ROAA of 1.00% and 0.40%, respectively, and an ROAE of 8.37% and 4.14%, respectively. Our ratio of average equity to average assets in the six-month periods ended June 30, 2015 and June 30, 2014 was 11.96% and 9.56%, respectively.

Our assets totaled $1.678 billion and $1.537 billion as of June 30, 2015 and December 31, 2014, respectively. Loans receivable, net, as of June 30, 2015 and December 31, 2014 were $1.348 billion and $1.179 billion, respectively. Total deposits were $1.216 billion and $1.168 billion as of June 30, 2015 and December 31, 2014, respectively.

On July 17, 2014, the Board of Directors of the Company approved a resolution for C1 Financial, Inc. to sell shares of common stock to the public in an initial public offering. On June 2, 2014, the Company submitted a confidential draft Registration Statement on Form S-1 with the SEC with respect to the shares to be registered and sold. On July 11, 2014, the Company filed a public Registration Statement on Form S-1 with the SEC. The Registration statement was declared effective by the SEC on August 13, 2014. The Company issued 2,761,356 shares of common stock at $17 per share, which included 129,777 shares of common stock purchased by the underwriters of the offering, on September 9, 2014 in connection with the partial exercise of the over-allotment option held by such underwriters. Total proceeds received by the Company, net of offering costs, was approximately $42.3 million.

In connection with the initial public offering, on July 17, 2014, the Board of Directors approved a 7-for-1 reverse stock split of the Company’s common stock, which was approved by the majority shareholders and became effective on August 13, 2014. The effect of the split on authorized, issued and outstanding common and preferred shares and income per share has been retroactively applied to all periods presented.

Critical Accounting Policies and Estimates

To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, our management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The allowance for loan losses, fair value of other real estate owned, purchased credit impaired, or PCI, loans, deferred tax assets and fair values of financial instruments are particularly subject to change.

Allowance for Loan Losses

The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required for each loan portfolio segment using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

All substandard commercial, commercial real estate and construction loans are individually evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, may be collectively evaluated for impairment, and accordingly, not separately identified for impairment disclosures.

Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral-dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, we determine the amount of valuation allowance in accordance with the accounting policy for the allowance for loan losses.

The general component of our allowance analysis covers nonimpaired loans and is based on our historical loss experience over the past two years as adjusted for certain current factors described in the paragraph below. As of June 30, 2015, approximately 23% of our loan portfolio consisted of loans underwritten by different credit teams than our current team, including loans acquired from Community Bank of Manatee, First Community Bank of America, The Palm Bank and First Community Bank of Southwest Florida (together, the “Acquired Loans”). The Acquired Loans were originated under different economic conditions than exist today and were underwritten utilizing different underwriting standards. We consider the Acquired Loans to be seasoned since they were originated more than five years ago. As such, we use the historical loss experience for the pool of Acquired Loans over the past two years as part of the general component of our allowance analysis for the Acquired Loans.

This actual historical loss experience is supplemented with management adjustment factors based on the risks present for each portfolio segment (separated for originated and acquired loans), including: (i) levels of and trends in delinquencies and nonaccrual loans; (ii) trends in volume and terms of loans; (iii) changes in lending policies, procedures, and practices; (iv) experience, ability and depth of lending management and other relevant staff; (v) changes in the quality of the loan review system; (vi) changes in the underlying collateral; (vii) changes in competition, and legal and regulatory environment; (viii) effects of changes in credit concentrations; and (ix) national and local economic trends and conditions. To determine the impact of these factors, management looks at external indicators such as unemployment rate, GDP growth, trends in consumer credit, real estate prices in the geographical areas where the Bank operates, information related to the other Florida banks, the competitive and regulatory environment, as well as internal indicators such as loan growth, credit concentrations and loan review process. Each of the adjustment factors is graded in a scale from “significantly improved compared to historical period” to “significantly declined compared to historical period,” and historical loss rates are adjusted based on this assessment. If a factor is graded “same compared to historical period,” no adjustments are made to the historical loss experience for that specific pool and loan category with respect to such factor. In addition, a risk rating adjustment factor is determined at the loan level, based on the individual risk rating of each loan.

As of June 30, 2015, approximately 77% of our loan portfolio consists of loans originated by C1 Bank from 2010 to the present and, as such, may not be seasoned. Generally, the historical loss rate of the C1 Bank originated loans has been very low; however, due to the unseasoned nature of the C1 Bank originated loans, the historical loss rate may not effectively capture the probable incurred losses in this portion of our loan portfolio. Accordingly, we performed a peer statistical analysis of U.S. banks to determine what would be a normalized loss rate for our originated loans, considering characteristics like profitability, asset growth and geographical location, among others. While there are characteristics unique to each financial institution that drive loss rates and make a bank more or less risky than its peers, the purpose of this peer statistical analysis was to estimate a “better” loss rate, but in the context of a model that controls for characteristics like geography, asset growth and recovering economic conditions.

For this analysis, we first looked at two- and three-year median loss rates for all U.S. banks, which were both below loss rates in the C1 Bank originated loan portfolio after factoring in management adjustments. Understanding that the median peer loss rates may not capture specifics of the C1 Bank originated loans, such as profitability, asset growth and geographical location, among others, we performed a regression-based study of credit-loss rates for all commercial banks in the United States over a three-year period ending in 2013. The model incorporated the following variables: amount of past due loans, geography, capitalization, bank age, management, asset size, asset quality, earnings, and credit risk. We completed this analysis during the second quarter of 2014 and it was first used for the calculation of the allowance for loan losses as of June 30, 2014.

This peer analysis affects the determination of our allowance for loan losses, as we use the highest of the actual losses and the outcome of the analysis as the input for the calculation of the general component of the allowance for loan losses for the C1 Bank originated loans. The peer analysis will be updated during the first quarter of each year and will be used as an element for the calculation of the allowance for loan losses during that specific year, until such time when we develop relevant loss history for C1 Bank originated loans. The purpose of using the highest of actual and peer analysis loss rates is to prevent relying on lower C1 Bank originated loan loss rates, which could actually be caused by an unseasoned portfolio and may not effectively capture the probable incurred losses in the C1 Bank originated loan portion of our portfolio.

During the first quarter of 2015, we updated the analysis applying the same statistical regression for the two and three year periods ending in 2014, and the result was used as an element to the calculation of the allowance for loan losses as of June 30, 2015.

We view this peer analysis as a short-term proxy until we develop additional loss history for the C1 Bank originated loans that approximate a full business cycle. The average business cycle length according to the National Bureau of Economic Research during the last 11 business cycles has been close to six years, and the FDIC defines seven years as a de novo period for extended supervisory activities for new charters (although we are not a de novo institution). By the end of 2015, our first loans (2010 vintage) will be completing 6 years since origination, in line with the average U.S. business cycle and close to the 7-year de novo period defined by the FDIC. We expect our historical losses to become more representative as we get closer to this point.

Fair Value of Other Real Estate Owned

Other real estate owned (“OREO”) represents assets acquired through foreclosure or other proceedings. Foreclosed assets acquired are initially recorded at fair value at the date of foreclosure less estimated costs to sell, which establishes a new cost basis. Any write-down to fair value at the time of transfer to OREO is charged to the allowance for loan losses. After foreclosure, valuations are periodically performed by management to ensure that properties recorded in OREO are carried at the lower of cost or fair value less estimated costs of disposal. Valuation allowances are adjusted as necessary. Expenses from the operations of OREO foreclosed assets, net of rental income and changes in the OREO valuation allowance are included in noninterest expense.

Purchased Credit Impaired, or PCI, Loans

As part of our acquisitions, we acquired loans that have evidence of credit deterioration since origination. These acquired loans are recorded at their fair value, such that there is no carryover of the allowance for loan losses.

Such purchased loans are accounted for individually or aggregated into pools of loans based on common risk characteristics. We estimate the amount and timing of expected cash flows for each purchased loan or pool, and the expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan or pool (accretable yield). The excess of the loan’s or pool’s contractual principal and interest over expected cash flows is not recorded (nonaccretable difference). Over the life of the loan or pool, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded through the allowance for loan losses. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.

Loans are placed on nonaccrual and accounted for under the cost recovery method when repayment is expected through foreclosure or repossession of the collateral, and the timing of foreclosure or repossession cannot be estimated with reasonable certainty. These loans are measured for impairment under the Bank’s policy for measuring impairment on collateral-dependent impaired loans that were originated by the Bank and included in impaired loans if there is a subsequent decline in the value of the collateral.

Deferred Tax Assets

Income taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently due plus deferred taxes. The deferred tax assets and liabilities represent the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. We recognize interest and/or penalties related to income tax matters in income tax expense.

Fair Values of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates.

JOBS Act

The JOBS Act allows us to delay the implementation of certain new accounting standards on our financial statements. However, at June 30, 2015 and December 31, 2014, we have adopted all new accounting standards that could affect the comparability of our financial statements to those of other public entities.

Results of Operations

Net Interest Income

Net interest income is the largest component of our income, and is affected by the interest rate environment, and the volume and the composition of our interest-earning assets and interest-bearing liabilities. Net interest margin represents net interest income divided by average interest-earning assets. We earn interest income from interest, dividends and fees earned on interest-earning assets, as well as from accretion of discounts on acquired loans. Our interest-earning assets include loans, securities available for sale and other securities, Federal funds sold and balances at the Federal Reserve Bank, time deposits in other financial institutions, and Federal Home Loan Bank (“FHLB”) stock. We incur interest expense on interest-bearing liabilities, including interest-bearing deposits, borrowings and other forms of indebtedness as well as from amortization of premiums on purchased time deposits and debt. Our interest-bearing liabilities include deposits, advances from the FHLB, and other borrowings.

Three-month period ended June 30, 2015 compared to three-month period ended June 30, 2014

Our net interest income increased 23.6% to $16.8 million in the three-month period ended June 30, 2015 from $13.6 million in the three-month period ended June 30, 2014, primarily due to increased average balances and yields on earning assets, mainly relating to loans and improvements in deposit mix, which was partially offset by higher average balances and rates on FHLB borrowings. Net interest margin in the three-month period ended June 30, 2015 increased to 4.71% from 4.29% in the three-month period ended June 30, 2014, mainly due to the yield on average earning assets increasing 40 basis points.

Interest income increased 21.7% to $19.1 million in the three-month period ended June 30, 2015 from $15.7 million in the three-month period ended June 30, 2014, due to higher average balances of and yields earned on interest-earning assets. In the three-month period ended June 30, 2015, average interest-earning assets increased to $1.431 billion from $1.271 billion in the three-month period ended June 30, 2014, mainly due to growth in our loan portfolio, which resulted from organic loan originations (partially offset by acquired loans rolling off). The average yield earned on interest-earning assets increased to 5.36% in the three-month period ended June 30, 2015 from 4.96% in the three-month period ended June 30, 2014, primarily due to a higher yield on loans. The yield on loans was enhanced by greater loan fees and partially offset by a lower effect of accretion income on loans acquired from First Community Bank of Southwest Florida in 2013. The yield on interest-earning assets also improved due to a lower share of cash investments as a percentage of average interest-earning assets. Average loans receivable as a percentage of average interest-earning assets increased from 83.1% in the three-month period ended June 30, 2014 to 89.9% in the three-month period ended June 30, 2015.

Interest expense increased 8.9% to $2.3 million in the three-month period ended June 30, 2015 from $2.1 million in the three-month period ended June 30, 2014, due to an increase in the average balances of and rates paid on interest-bearing liabilities. In the three-month period ended June 30, 2015, average interest-bearing liabilities increased to $1.094 billion from $1.052 billion in the three-month period ended June 30, 2014, mainly due to longer term borrowings from the FHLB. In addition, the average rate paid on interest-bearing liabilities increased from 0.81% to 0.85%, primarily due to a higher rate on FHLB borrowings. Borrowing longer term from the FHLB was an asset/liability management decision to reduce exposure to increasing interest rates. Partially offsetting the increase in rates due to FHLB borrowings was a reduction in rates on interest-bearing deposits, mainly due to an improvement in the deposit mix. The cost of interest-bearing deposits decreased to 0.61% in the three-month period ended June 30, 2015 when compared to 0.68% in the three-month period ended June 30, 2014, due to a lower share of time deposits. In addition, average noninterest-bearing deposits increased by 42.2% to $324.8 million in the three-month period ended June 30, 2015 (representing 27.4% of total average deposits), from $228.5 million in the three-month period ended June 30, 2014 (representing 20.4% of total average deposits).

The table below shows the average balances, income and expense, and yields and rates of each of our interest-earning assets and interest-bearing liabilities for the periods indicated:

	Three-Month Periods Ended June 30,
	2015							2014
	Average		Income/		Yields/			Average		Income/		Yields/
	Balances(1)		Expense		Rates			Balances(1)		Expense		Rates
	(in thousands)
Interest-earning assets:
Loans receivable(2)	$	1,286,665	$	18,899		5.89	%	$	1,056,231	$	15,468		5.87	%
Securities available for sale and other securities		250		3		4.56	%		1,050		29		10.79	%
Federal funds sold and balances at Federal Reserve Bank		132,527		93		0.28	%		205,689		138		0.27	%
Time deposits in other financial institutions		147		-		0.43	%		-		-		0.00	%
FHLB stock		11,300		120		4.26	%		8,320		77		3.73	%

Total interest-earning assets		1,430,889		19,115		5.36	%		1,271,290		15,712		4.96	%
Noninterest-earning assets:
Cash and due from banks		36,213							33,481
Other assets(3)		148,366							121,353
Total noninterest-earning assets		184,579							154,834

Total assets	$	1,615,468						$	1,426,124

Interest-bearing liabilities:
Interest-bearing deposits:
Time	$	235,998		677		1.15	%	$	365,812		984		1.08	%
Money market		440,430		476		0.43	%		341,248		364		0.43	%
Negotiable order of withdrawal (NOW)		145,027		133		0.37	%		143,973		132		0.37	%
Savings		39,039		22		0.22	%		38,899		22		0.22	%
Total interest-bearing deposits		860,494		1,308		0.61	%		889,932		1,502		0.68	%
Other interest-bearing liabilities:
FHLB advances		233,065		996		1.72	%		159,028		599		1.51	%
Other borrowings		-		-		0.00	%		3,000		14		1.96	%

Total interest-bearing liabilities		1,093,559		2,304		0.85	%		1,051,960		2,115		0.81	%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits		324,831							228,491
Other liabilities		4,467							5,020
Stockholders’ equity		192,611							140,653
Total noninterest-bearing liabilities and stockholders’ equity		521,909							374,164

Total liabilities and stockholders’ equity	$	1,615,468						$	1,426,124
Interest rate spread (taxable-equivalent basis)						4.51	%						4.15	%

Net interest income (taxable-equivalent basis)			$	16,811						$	13,597
Net interest margin (taxable-equivalent basis)						4.71	%						4.29	%
Average interest-earning assets to average interest-bearing liabilities						130.85	%						120.85	%

(1)

Calculated using daily averages.

(2)

Average loans are gross, including nonaccrual loans and overdrafts (net of deferred loan fees and before the allowance for loan losses). Interest on loans includes net deferred fees and costs, and other loan fees of $1.2 million and $712 thousand in the three-month periods ended June 30, 2015 and 2014, respectively.

(3)

Other assets include bank-owned life insurance, tax lien certificates, OREO, fixed assets, interest receivable, prepaid expense and others.

Six-month period ended June 30, 2015 compared to six-month period ended June 30, 2014

Our net interest income increased 21.1% to $32.4 million in the six-month period ended June 30, 2015 from $26.7 million in the six-month period ended June 30, 2014, primarily due to increased average balances and yields on earning assets, mainly relating to loans and improvements in deposit mix, which was partially offset by higher average balances and rates on FHLB borrowings. Net interest margin in the six-month period ended June 30, 2015 increased to 4.64% from 4.35% in the six-month period ended June 30, 2014, mainly due to the yield on average earning assets increasing 25 basis points.

Interest income increased 19.3% to $36.9 million in the six-month period ended June 30, 2015 from $30.9 million in the six-month period ended June 30, 2014, due to higher average balances of and yields earned on interest-earning assets. In the six-month period ended June 30, 2015, average interest-earning assets increased to $1.408 billion from $1.240 billion in the six-month period ended June 30, 2014, mainly due to growth in our loan portfolio, which resulted from organic loan originations (partially offset by acquired loans rolling off). The average yield earned on interest-earning assets increased to 5.28% in the six-month period ended June 30, 2015 from 5.03% in the six-month period ended June 30, 2014, primarily due to a higher yield on loans. The yield on loans was enhanced by greater loan fees and partially offset by a lower effect of accretion income on loans acquired from First Community Bank of Southwest Florida in 2013. The yield on interest-earning assets also improved due to a lower share of cash investments as a percentage of average interest-earning assets. Average loans receivable as a percentage of average interest-earning assets increased from 84.6% in the six-month period ended June 30, 2014 to 88.6% in the six-month period ended June 30, 2015.

Interest expense increased 8.0% to $4.5 million in the six-month period ended June 30, 2015 from $4.2 million in the six-month period ended June 30, 2014, due to an increase in the average balances of and rates paid on interest-bearing liabilities. In the six-month period ended June 30, 2015, average interest-bearing liabilities increased to $1.088 billion from $1.044 billion in the six-month period ended June 30, 2014, mainly due to longer term borrowings from the FHLB. In addition, the average rate paid on interest-bearing liabilities increased from 0.80% to 0.83%, primarily due to a higher rate on FHLB borrowings. Borrowing longer term from the FHLB was an asset/liability management decision to reduce exposure to increasing interest rates. Partially offsetting the increase in rates due to FHLB borrowings was a reduction in rates on interest-bearing deposits, mainly due to an improvement in the deposit mix. The cost of interest-bearing deposits decreased to 0.62% in the six-month period ended June 30, 2015 when compared to 0.68% in the six-month period ended June 30, 2014, due to a lower share of time deposits. In addition, average noninterest-bearing deposits increased by 42.6% to $313.0 million in the six-month period ended June 30, 2015 (representing 26.4% of total average deposits), from $219.6 million in the six-month period ended June 30, 2014 (representing 19.9% of total average deposits).

The table below shows the average balances, income and expense, and yields and rates of each of our interest-earning assets and interest-bearing liabilities for the periods indicated:

	Six-Month Periods Ended June 30,
	2015							2014
	Average		Income/		Yields/			Average		Income/		Yields/
	Balances(1)		Expense		Rates			Balances(1)		Expense		Rates
	(in thousands)
Interest-earning assets:
Loans receivable(2)	$	1,247,199	$	36,463		5.90	%	$	1,049,220	$	30,453		5.85	%
Securities available for sale and other securities		250		6		4.56	%		657		57		17.63	%
Federal funds sold and balances at Federal Reserve Bank		149,377		190		0.26	%		182,103		226		0.25	%
Time deposits in other financial institutions		74		-		0.47	%		-		-		0.00	%
FHLB stock		10,654		225		4.25	%		8,250		171		4.18	%

Total interest-earning assets		1,407,554		36,884		5.28	%		1,240,230		30,907		5.03	%
Noninterest-earning assets:
Cash and due from banks		37,189							42,763
Other assets(3)		151,309							120,025
Total noninterest-earning assets		188,498							162,788
Total assets	$	1,596,052						$	1,403,018

Interest-bearing liabilities:
Interest-bearing deposits:
Time	$	263,195		1,461		1.12	%	$	366,247		1,966		1.08	%
Money market		425,077		921		0.44	%		337,181		713		0.43	%
NOW		145,482		269		0.37	%		144,432		270		0.38	%
Savings		38,914		43		0.22	%		38,452		43		0.22	%
Total interest-bearing deposits		872,668		2,694		0.62	%		886,312		2,992		0.68	%
Other interest-bearing liabilities:
FHLB advances		215,132		1,804		1.69	%		155,147		1,143		1.49	%
Other borrowings		-		-		0.00	%		3,000		29		1.96	%

Total interest-bearing liabilities		1,087,800		4,498		0.83	%		1,044,459		4,164		0.80	%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits		313,030							219,557
Other liabilities		4,379							4,875
Stockholders’ equity		190,843							134,127
Total noninterest-bearing liabilities and stockholders’ equity		508,252							358,559

Total liabilities and stockholders’ equity	$	1,596,052						$	1,403,018
Interest rate spread (taxable-equivalent basis)						4.45	%						4.23	%
Net interest income (taxable-equivalent basis)			$	32,386						$	26,743
Net interest margin (taxable-equivalent basis)						4.64	%						4.35	%
Average interest-earning assets to average interest-bearing liabilities						129.39	%						118.74	%

(1)

Calculated using daily averages.

(2)

Average loans are gross, including nonaccrual loans and overdrafts (net of deferred loan fees and before the allowance for loan losses). Interest on loans includes net deferred fees and costs, and other loan fees of $2.1 million and $1.1 million in the six-month periods ended June 30, 2015 and 2014, respectively.

(3)

Other assets include bank-owned life insurance, tax lien certificates, OREO, fixed assets, interest receivable, prepaid expense and others.

Rate/Volume Analysis

The tables below detail the components of the changes in net interest income for the three-month period ended June 30, 2015 when compared to the three-month period ended June 30, 2014 and the six-month period ended June 30, 2015 when compared to the six-month period ended June 30, 2014. For each major category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes due to average volumes and changes due to average rates, with the changes in both volumes and rates allocated to these two categories based on the proportionate absolute changes in each category.

Three-month period ended June 30, 2015 compared to three-month period ended June 30, 2014

	Three-Month Period Ended June 30, 2015
	Compared to
	Three-Month Period Ended June 30, 2014
	Due to Changes in
	Average Volume			Average Rate			Net Increase (Decrease)
	(in thousands)
Interest income from earning assets:
Loans receivable(1)	$	3,378		$	53		$	3,431
Securities available for sale and other securities		(15	)		(11	)		(26	)
Federal funds sold and balances at Federal Reserve Bank		(50	)		5			(45	)
Time deposits in other financial institutions		-			-			-
FHLB stock		31			12			43
Total interest income(2)		3,344			59			3,403
Interest expense from deposits and borrowings:
Time deposits		(367	)		60			(307	)
Money market deposit accounts		112			-			112
NOW accounts		1			-			1
Savings deposits		-			-			-
FHLB advances		305			92			397
Other borrowings		(7	)		(7	)		(14	)
Total interest expense		44			145			189
Change in net interest income	$	3,300		$	(86	)	$	3,214

(1)

Average loans are gross, including nonaccrual loans and overdrafts (net of deferred loan fees and before the allowance for loan losses).

(2)

Interest on loans includes net deferred fees and costs, and other loan fees of $1.2 million and $712 thousand in the three-month periods ended June 30, 2015 and 2014, respectively.

The $3.4 million increase in interest income when comparing the three-month period ended June 30, 2015 to the three-month period ended June 30, 2014 was primarily due to changes in loan volumes and yields. Higher average loan balances and yields increased interest income $3.4 million and $53 thousand, respectively. The $189 thousand increase in interest expense when comparing the three-month period ended June 30, 2015 to the three-month period ended June 30, 2014 was primarily due to changes in volumes and rates of FHLB borrowings. Higher average balances and rates of FHLB borrowings increased interest expense $305 thousand and $92 thousand, respectively, for a total increase of $397 thousand. Partially offsetting the increase in interest expense due to FHLB borrowings was $194 thousand less in interest expense due to changes in interest-bearing deposit volumes and rates, which reflected an improvement in the deposit mix.

Six-month period ended June 30, 2015 compared to six-month period ended June 30, 2014

	Six-Month Period Ended June 30, 2015
	Compared to
	Six-Month Period Ended June 30, 2014
	Due to Changes in
	Average Volume			Average Rate			Net Increase (Decrease)
	(in thousands)
Interest income from earning assets:
Loans receivable(1)	$	5,748		$	262		$	6,010
Securities available for sale and other securities		(24	)		(27	)		(51	)
Federal funds sold and balances at Federal Reserve Bank		(45	)		9			(36	)
Time deposits in other financial institutions		-			-			-
FHLB stock		51			3			54
Total interest income(2)		5,730			247			5,977
Interest expense from deposits and borrowings:
Time deposits		(575	)		70			(505	)
Money market deposit accounts		191			17			208
NOW accounts		-			(1	)		(1	)
Savings deposits		-			-			-
FHLB advances		492			169			661
Other borrowings		(15	)		(14	)		(29	)
Total interest expense		93			241			334
Change in net interest income	$	5,637		$	6		$	5,643

(1)

Average loans are gross, including nonaccrual loans and overdrafts (net of deferred loan fees and before the allowance for loan losses).

(2)

Interest on loans includes net deferred fees and costs, and other loan fees of $2.1 million and $1.1 million in the six-month periods ended June 30, 2015 and 2014, respectively.

The $6.0 million increase in interest income when comparing the six-month period ended June 30, 2015 to the six-month period ended June 30, 2014 was primarily due to changes in loan volumes and yields. Higher average loan balances and yields increased interest income $5.7 million and $262 thousand, respectively. The $334 thousand increase in interest expense when comparing the six-month period ended June 30, 2015 to the six-month period ended June 30, 2014 was primarily due to changes in volumes and rates of FHLB borrowings. Higher average balances and rates of FHLB borrowings increased interest expense $492 thousand and $169 thousand, respectively, for a total increase of $661 thousand. Partially offsetting the increase in interest expense due to FHLB borrowings was $298 thousand less in interest expense due to changes in interest-bearing deposit volumes and rates, which reflected an improvement in the deposit mix.

Provision for Loan Losses

Three-month period ended June 30, 2015 compared to three-month period ended June 30, 2014

Our provision for loan losses declined to $1.3 million for the three-month period ended June 30, 2015 from $4.6 million for the three-month period ended June 30, 2014. The provision for the three-month period ended June 30, 2015 included $653 thousand of allowance for new loans funded during the quarter, $1.2 million in general reserves related to existing loans and a $42 thousand increase in specific reserves for impaired and purchased credit impaired loans, partially offset by $612 thousand in net recoveries (including a $393 thousand recovery related to our only shared national credit loan charged off in June 2014). The provision for the three-month period ended June 30, 2014 reflected primarily a charge off in-full of our only loan under the shared national credit program in the amount of $4.0 million.

Six-month period ended June 30, 2015 compared to six-month period ended June 30, 2014

Our provision for loan losses declined to $1.5 million for the six-month period ended June 30, 2015 from $4.6 million for the six-month period ended June 30, 2014. The provision for the six-month period ended June 30, 2015 included $1.1 million of allowance for new loans funded year-to-date, $1.2 million in general reserves related to existing loans and an $85 thousand increase in specific reserves for impaired and purchased credit impaired loans, partially offset by $884 thousand in net recoveries (including a $393 thousand recovery related to our only shared national credit loan charged off in June 2014). The provision for the six-month period ended June 30, 2014 reflected primarily the charge off in-full of our only loan under the shared national credit program in the amount of $4.0 million.

Noninterest Income

Noninterest income includes gains on sales of securities, gains on sales of loans, service charges and fees, bargain purchase gain, gains on sales of other real estate owned, net, bank-owned life insurance, mortgage banking fees and other noninterest income.

Three-month period ended June 30, 2015 compared to three-month period ended June 30, 2014

Noninterest income increased 84.7% to $4.3 million in the three-month period ended June 30, 2015 from $2.3 million in the three-month period ended June 30, 2014. The increase was primarily due to a $2.6 million gain on the sale of land (excess parking lots in Wynwood), which was included in gains on disposals of premises and equipment, and $217 thousand more in income from BOLI due to the additional $35.0 million investment completed in December 2014. Partially offsetting these increases in noninterest income were a $220 thousand decline in gains on sales of Small Business Administration (“SBA”) loans and a $327 thousand decline in gains on sales of OREO. The decrease in gains on sales of SBA loans was mainly a result of the lower volume of loans sold, which depends on multiple factors such as loan originations, mix between marketable and portfolio loans (depending on loan type, terms and market conditions) and funding timing for loans available to be sold. Also included in noninterest income for the three-month period ended June 30, 2014 was $241 thousand in gains on sales of securities.

The following table sets forth the components of noninterest income for the periods indicated:

	Three-Month Periods Ended June 30,
	2015		2014
	(in thousands)
Gains on sales of securities	$	-	$	241
Gains on sales of loans		584		804
Service charges and fees		581		538
Bargain purchase gain		-		(30	)
Gains on sales of other real estate owned, net		48		375
Bank-owned life insurance		258		41
Mortgage banking fees		-		4
Gains on disposals of premises and equipment		2,588		-
Other noninterest income		276		374
Total noninterest income	$	4,335	$	2,347

Six-month period ended June 30, 2015 compared to six-month period ended June 30, 2014

Noninterest income increased 35.3% to $5.9 million in the six-month period ended June 30, 2015 from $4.4 million in the six-month period ended June 30, 2014, primarily due to the $2.6 million gain on the sale of land and $273 thousand more in income from BOLI due to the additional $35.0 million investment completed in December 2014. Partially offsetting these increases in noninterest income were a $734 thousand decline in gains on sales of SBA loans and a $256 thousand decline in gains on sales of OREO. The decrease in gains on sales of SBA loans was mainly a result of the lower volume of loans sold, which depends on multiple factors as described above. As with the three-month period ended June 30, 2014, noninterest income for the six-month period ended June 30, 2014 included $241 thousand in gains on sales of securities.

The following table sets forth the components of noninterest income for the periods indicated:

	Six-Month Periods Ended June 30,
	2015		2014
	(in thousands)
Gains on sales of securities	$	-	$	241
Gains on sales of loans		814		1,548
Service charges and fees		1,148		1,132
Bargain purchase gain		-		11
Gains on sales of other real estate owned, net		396		652
Bank-owned life insurance		350		77
Mortgage banking fees		-		47
Gains on disposals of premises and equipment		2,590		-
Other noninterest income		639		679
Total noninterest income	$	5,937	$	4,387

Noninterest Expense

Noninterest expense includes primarily salaries and employee benefits, occupancy expense, network services and data processing, advertising and promotion, OREO expenses and professional fees, among others. We monitor the ratio of noninterest expense to the sum of net interest income plus noninterest income, which is commonly known as the efficiency ratio.

Three-month period ended June 30, 2015 compared to three-month period ended June 30, 2014

Noninterest expense increased 8.2% to $11.8 million in the three-month period ended June 30, 2015 from $11.0 million in the three-month period ended June 30, 2014. The increase was mainly due to higher salaries and employee benefits ($947 thousand), occupancy expense ($251 thousand), network services and data processing ($140 thousand), and furniture and equipment ($99 thousand). The increase in salaries and employee benefits was primarily related to growth in our base of employees and provisions for incentive compensation booked in 2015 based on our anticipated growth. The increase in noninterest expense in each of the other categories related mainly to the increased scale of our operations, including three additional banking centers since the end of the second quarter of 2014. The increase in noninterest expense was partially offset by a reduction in professional fees ($319 thousand), loan collection expenses ($172 thousand) and OREO valuation allowance expense ($150 thousand). Lower professional fees and loan collection expenses were due to less activity required relating to nonperforming assets and lower OREO valuation allowance expense reflected that a smaller amount of write-downs were required on OREO properties.

The following table sets forth the components of noninterest expense for the periods indicated:

	Three-Month Periods Ended June 30,
	2015		2014
	(in thousands)
Salaries and employee benefits	$	5,229	$	4,282
Occupancy expense		1,360		1,109
Furniture and equipment		740		641
Regulatory assessments		390		355
Network services and data processing		1,080		940
Printing and office supplies		71		88
Postage and delivery		80		74
Advertising and promotion		1,053		939
Other real estate owned related expense		498		494
Other real estate owned – valuation allowance expense		35		185
Amortization of intangible assets		80		141
Professional fees		509		828
Loan collection expenses		3		175
Other noninterest expense		717		699
Total noninterest expense	$	11,845	$	10,950

In the three-month periods ended June 30, 2015 and June 30, 2014, our efficiency ratio was 56.0% and 69.7%, respectively. The improved efficiency ratio for the three-month period ended June 30, 2015 was mainly due to higher net interest income and the $2.6 million gain on the sale of land. We also closely track annualized revenue per employee and average assets per employee, as measures of efficiency. Annualized revenue per employee was $384 thousand in the three-month period ended June 30, 2015 as compared to $343 thousand in the three-month period ended June 30, 2014. The higher annualized revenue per employee amount for the three-month period ended June 30, 2015 was primarily a result of the $2.6 million gain on the sale of land. Average assets per employee were $6.6 million in the three-month period ended June 30, 2015 as compared to $6.8 million in the three-month period ended June 30, 2014, which reflected the growth in our employee base. We had 247 full-time equivalent employees at June 30, 2015 and 221 at June 30, 2014.

Six-month period ended June 30, 2015 compared to six-month period ended June 30, 2014

Noninterest expense increased 7.9% to $23.7 million in the six-month period ended June 30, 2015 from $21.9 million in the six-month period ended June 30, 2014. The increase was mainly due to higher salaries and employee benefits ($1.7 million), occupancy expense ($400 thousand), network services and data processing ($373 thousand), and furniture and equipment ($215 thousand). The increase in salaries and employee benefits was primarily related to growth in our base of employees and provisions for incentive compensation booked in 2015 based on our anticipated growth. The increase in noninterest expense in each of the other categories related mainly to the increased scale of our operations, including three additional banking centers since the end of the second quarter of 2014. The increase in noninterest expense was partially offset by a reduction in professional fees ($217 thousand), loan collection expenses ($236 thousand) and OREO valuation allowance expense ($498 thousand). Lower professional fees and loan collection expenses were due to less activity required relating to nonperforming assets and lower OREO valuation allowance expense reflected that a smaller amount of write-downs were required on OREO properties.

The following table sets forth the components of noninterest expense for the periods indicated:

	Six-Month Periods Ended June 30,
	2015		2014
	(in thousands)
Salaries and employee benefits	$	10,446	$	8,749
Occupancy expense		2,572		2,172
Furniture and equipment		1,496		1,281
Regulatory assessments		751		705
Network services and data processing		2,164		1,791
Printing and office supplies		129		193
Postage and delivery		164		129
Advertising and promotion		1,879		1,822
Other real estate owned related expense		1,091		1,114
Other real estate owned – valuation allowance expense		66		564
Amortization of intangible assets		163		295
Professional fees		1,207		1,424
Loan collection expenses		87		323
Other noninterest expense		1,465		1,385
Total noninterest expense	$	23,680	$	21,947

In the six-month periods ended June 30, 2015 and June 30, 2014, our efficiency ratio was 61.8% and 71.1%, respectively. The improved efficiency ratio for the six-month period ended June 30, 2015 was mainly due to higher net interest income and the $2.6 million gain on the sale of land. Annualized revenue per employee was $355 thousand in the six-month period ended June 30, 2015 as compared to $333 thousand in the six-month period ended June 30, 2014. The higher annualized revenue per employee amount for the six-month period ended June 30, 2015 was primarily a result of the $2.6 million gain on the sale of land. Average assets per employee were $6.6 million in both the six-month period ended June 30, 2015 and June 30, 2014.

Income Taxes

The provision for income taxes includes federal and state income taxes. Fluctuations in effective tax rates reflect the effect of the differences in the inclusion or deductibility of certain income and expenses, respectively, for income tax purposes. Our future effective income tax rate will fluctuate based on the mix of taxable and tax-free investments we make and our overall level of taxable income.

Three-month period ended June 30, 2015 compared to three-month period ended June 30, 2014

In the three-month period ended June 30, 2015, we recorded income tax expense of $3.3 million (an effective income tax rate of 40.9%), compared to income tax expense of $192 thousand (an effective income tax rate of 45.5%) in the three-month period ended June 30, 2014. The increase in income tax expense was due primarily to our greater income before taxes and included a $163 thousand tax adjustment made in connection with our recently completed 2012-2013 IRS tax audit.

Six-month period ended June 30, 2015 compared to six-month period ended June 30, 2014

In the six-month period ended June 30, 2015, we recorded income tax expense of $5.3 million (an effective income tax rate of 39.9%), compared to income tax expense of $1.8 million (an effective income tax rate of 39.8%) in the six-month period ended June 30, 2014. The increase in income tax expense was due primarily to our greater income before taxes and included a $163 thousand tax adjustment made in connection with our recently completed 2012-2013 IRS tax audit.

Net Income

We evaluate our net income using the common industry ratio, ROAA, which is equal to net income for the period annualized, divided by the daily average of total assets for the period. We also use ROAE, which is equal to net income for the period annualized, divided by the daily average of total stockholders’ equity for the period.

Three-month period ended June 30, 2015 compared to three-month period ended June 30, 2014

In the three-month period ended June 30, 2015, our net income of $4.7 million, or $0.29 basic and diluted net income per common share, represented an ROAA of 1.18% and an ROAE of 9.88%. Our average equity-to-assets ratio (average equity divided by average total assets) in the three-month period ended June 30, 2015 was 11.92%. In comparison, in the three-month period ended June 30, 2014, our net income of $230 thousand, or $0.02 basic and diluted net income per common share, represented an ROAA of 0.06% and an ROAE of 0.66%. Our average equity-to-assets ratio in the three-month period ended June 30, 2014 was 9.86%.

Six-month period ended June 30, 2015 compared to six-month period ended June 30, 2014

In the six-month period ended June 30, 2015, our net income of $7.9 million, or $0.49 basic and diluted net income per common share, represented an ROAA of 1.00% and an ROAE of 8.37%. Our average equity-to-assets ratio in the six-month period ended June 30, 2015 was 11.96%. In comparison, in the six-month period ended June 30, 2014, our net income of $2.8 million, or $0.21 basic and diluted net income per common share, represented an ROAA of 0.40% and an ROAE of 4.14%. Our average equity-to-assets ratio in the six-month period ended June 30, 2014 was 9.56%.

Financial Condition

Our assets totaled $1.678 billion and $1.537 billion at June 30, 2015 and December 31, 2014, respectively. Loans receivable, net, as of June 30, 2015 and December 31, 2014 were $1.348 billion and $1.179 billion, respectively. Total deposits were $1.216 billion and $1.168 billion as of June 30, 2015 and December 31, 2014, respectively. Total liabilities, consisting of deposits, FHLB advances and other liabilities totaled $1.483 billion and $1.350 billion as of June 30, 2015 and December 31, 2014, respectively. The increases in total assets, loans receivable, net, deposits and liabilities in 2015 were primarily due to organic growth.

Stockholders’ equity was $194.6 million and $186.6 million as of June 30, 2015 and December 31, 2014. The increase in stockholders’ equity was due to $7.9 million of net income earned during the six-month period ended June 30, 2015.

Loans

Our loan portfolio is our primary earning asset. Our strategy is to grow the loan portfolio by originating commercial and consumer loans that we believe to be of high quality, that comply with our credit policies and that produce revenues consistent with our financial objectives. We originate SBA loans which may be sold on the secondary market depending on loan terms and market conditions.

Loans by Portfolio Segment

The following table sets forth the carrying amounts of our loans by portfolio segment as of the dates indicated:

	As of June 30, 2015					As of December 31, 2014
	Amount			% of Total		Amount			% of Total
	(in thousands, except %)

Real estate:
Residential	$	236,708			17.4	$	224,416			18.9
Commercial		809,693			59.5		723,577			60.9
Construction		152,571			11.2		107,436			9.0
Total real estate		1,198,972			88.1		1,055,429			88.8
Commercial		77,746			5.7		75,360			6.3
Consumer		84,741			6.2		57,733			4.9
Total loans		1,361,459			100.0		1,188,522			100.0
Less:
Net deferred loan fees		(5,599	)				(4,142	)
Allowance for loan losses		(7,675	)				(5,324	)
Loans receivable, net	$	1,348,185				$	1,179,056

As of June 30, 2015 and December 31, 2014, 88.1% and 88.8%, respectively, of the total loan portfolio was collateralized by commercial and residential real estate mortgages.

Loan Maturity and Sensitivities

The following tables show the contractual maturities of our loan portfolio at the dates indicated. Loans with scheduled maturities are reported in the maturity category in which the payment is due. Demand loans with no stated maturity and overdrafts are reported in the “due in 1 year or less” category. Loans that have adjustable rates are shown as amortizing to final maturity rather than when the interest rates are next subject to change. The tables do not include prepayment or scheduled principal repayments.

As of June 30, 2015	Due in 1 Year or Less		Due in 1 to 5 Years		Due After 5 Years		Total
	(in thousands)
Real estate:
Residential	$	24,055	$	72,337	$	140,316	$	236,708
Commercial		125,366		384,202		300,125		809,693
Construction		41,029		77,134		34,408		152,571
Total real estate		190,450		533,673		474,849		1,198,972
Commercial		17,098		37,281		23,367		77,746
Consumer		3,747		73,980		7,014		84,741
Total loans	$	211,295	$	644,934	$	505,230	$	1,361,459

As of December 31, 2014	Due in 1 Year or Less		Due in 1 to 5 Years		Due After 5 Years		Total
	(in thousands)
Real estate:
Residential	$	21,030	$	76,262	$	127,124	$	224,416
Commercial		91,071		368,497		264,009		723,577
Construction		22,140		51,022		34,274		107,436
Total real estate		134,241		495,781		425,407		1,055,429
Commercial		20,325		32,425		22,610		75,360
Consumer		1,279		42,108		14,346		57,733
Total loans	$	155,845	$	570,314	$	462,363	$	1,188,522

The following tables present the sensitivities to changes in interest rates of our portfolio at the dates indicated:

As of June 30, 2015	Fixed Interest Rate		Variable Interest Rate		Total
	(in thousands)
Real estate:
Residential	$	62,029	$	174,679	$	236,708
Commercial		314,027		495,666		809,693
Construction		51,808		100,763		152,571
Total real estate		427,864		771,108		1,198,972
Commercial		34,318		43,428		77,746
Consumer		38,167		46,574		84,741
Total loans	$	500,349	$	861,110	$	1,361,459

As of December 31, 2014	Fixed Interest Rate		Variable Interest Rate		Total
	(in thousands)
Real estate:
Residential	$	63,395	$	161,021	$	224,416
Commercial		306,928		416,649		723,577
Construction		31,569		75,867		107,436
Total real estate		401,892		653,537		1,055,429
Commercial		37,312		38,048		75,360
Consumer		10,522		47,211		57,733
Total loans	$	449,726	$	738,796	$	1,188,522

As part of our asset/liability management strategy, we rarely offer fixed-rate loans with maturity above five years. As of June 30, 2015, less than 3.0% of our total loans (and 1.6% of the loans in our originated loan portfolio) are fixed-rate with a maturity over 5 years. As of June 30, 2015, 63.2% of our total loans (and 60.7% of the loans in our originated loan portfolio) is made up of variable-rate loans. The fixed-rate portion of our originated portfolio has a weighted average time to maturity of 3.0 years. The following table presents the contractual maturities of our loan portfolio at the dates indicated, segregated into fixed and variable interest rate loans as of June 30, 2015:

As of June 30, 2015	Fixed Interest Rate		Variable Interest Rate		Total
	(in thousands)
Maturity
One year or less	$	75,350	$	135,945	$	211,295
One to five years		390,308		254,626		644,934
More than five years		34,691		470,539		505,230
Total loans	$	500,349	$	861,110	$	1,361,459

Loan Growth

We monitor new loan production by loan type, borrower type, market and profitability. Our operating strategy focuses on growing assets by originating commercial and consumer loans that we believe to be of high quality. For the six-month period ended June 30, 2015, we originated a total of $353.4 million of new loans, including $303.4 million of real estate loans ($33.6 million, $145.0 million and $124.8 million of which were residential, commercial and construction real estate loans, respectively), $20.3 million of commercial loans, and $29.8 million of consumer loans. As of June 30, 2015, the average loan outstanding size in our originated portfolio was $1.0 million. For the six-month period ended June 30, 2014, we originated a total of $208.2 million of new loans, including $182.3 million of real estate loans ($20.1 million, $96.2 million and $66.0 million of which were residential, commercial and construction real estate loans, respectively), $21.7 million of commercial loans, and $4.2 million of consumer loans.

	Six-Month Period Ended June 30, 2015				Six-Month Period Ended June 30, 2014
	Amount		% of Total		Amount		% of Total
	(in thousands, except %)
New loan originations
Real estate:
Residential	$	33,607		9.5	$	20,108		9.7
Commercial		144,993		41.1		96,229		46.2
Construction		124,807		35.3		66,012		31.7
Total real estate		303,407		85.9		182,349		87.6
Commercial		20,253		5.7		21,650		10.4
Consumer		29,786		8.4		4,223		2.0
Total loans	$	353,446		100.0	$	208,222		100.0

The total loan origination amount in the six-month period ended June 30, 2015 reflected strong organic growth across our markets.

In addition to growing organically, our acquisition strategy, which has focused on acquiring banks in Florida regional markets, has resulted in an increase in the number and balance of loans outstanding after each transaction. Subsequently, these balances decline as these loans mature and are paid down. These acquired loans were recorded at their fair value, such that there was no carryover of the allowance for loan losses. As of June 30, 2015 and December 31, 2014, the breakdown of our portfolio by originating bank was as follows:

	As of June 30, 2015				As of December 31, 2014
	Amount		% of Total		Amount		% of Total
	(in thousands, except %)
Originating Bank
C1 Bank	$	1,046,227		76.9	$	840,275		70.7
Community Bank of Manatee		58,325		4.3		64,121		5.4
First Community Bank of America		124,042		9.1		136,476		11.5
The Palm Bank		21,921		1.6		24,073		2.0
First Community Bank of Southwest Florida		110,944		8.1		123,577		10.4
Total loans	$	1,361,459		100.0	$	1,188,522		100.0

Asset Quality

In order to operate with a sound risk profile, we have focused on originating loans we believe to be of high quality and disposing of nonperforming assets as rapidly as possible.

For certain acquired loans, there was evidence at acquisition of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The unpaid principal balance and carrying amount of these purchased credit impaired loans at June 30, 2015 and December 31, 2014 were as follows:

	June 30, 2015		December 31, 2014
	(in thousands)
Unpaid principal balance	$	36,841	$	38,831
Carrying amount, net of allowance of $53 and $92		25,935		28,081

Accretable yield, or income expected to be collected was $2.1 million and $2.4 million at June 30, 2015 and December 31, 2014, respectively.

Foreign Outstandings

We have made commercial loans to three Brazilian corporations, which at June 30, 2015 and December 31, 2014 exceeded 1% of our total assets. These loans to the three Brazilian borrowers are secured by collateral outside of the U.S., and had aggregate outstanding balances at June 30, 2015 and December 31, 2014, of $41.9 million and $44.0 million, representing 2.5% and 2.9% of our total assets, respectively. Loans to foreign borrowers are made in accordance with our credit policy and procedures. Two of the loans are secured by a first lien on farmland appraised at $56.8 million, of which we are entitled to 50.9%, as the collateral is shared on a first lien basis with another bank. The three main parcels (representing 83% of this collateral pool) were appraised during 2014, and the rest in 2012. Another loan is secured by a first lien on farmland appraised at $50.7 million during 2015 and the final loan is secured by closely held stock. The Brazilian economy is experiencing negative growth, a material decline in the value of its currency, increasing rates of inflation, growing unemployment and higher interest rates; the country is at risk of downgrade by the rating agencies to junk status. These macroeconomic trends coupled with a growing corruption scandal involving the government, state-owned enterprises and some of the largest private corporations have placed significant stress on the Brazilian economy and may affect the ability of our borrowers to repay their loans and the value of our underlying collateral. The substantial size of each of these individual relationships could, if unpaid, materially adversely affect our earnings and capital. These three borrowers are not affiliates of our controlling stockholders and the loans were not made in consideration of our relationship with our controlling stockholders. We are not actively seeking additional loans with collateral in Brazil.

Nonperforming Assets

Our nonperforming loans consist of loans that are on nonaccrual status, including nonperforming troubled debt restructurings. Loans graded as substandard but still accruing, which may include loans restructured as troubled debt restructurings, are considered impaired and classified substandard. Troubled debt restructurings include loans on which we have granted a concession on the interest rate or original repayment terms due to financial difficulties of the borrower.

We generally place loans on nonaccrual status when they become 90 days or more past due, unless they are well secured and in the process of collection. We also place loans on nonaccrual status if they are less than 90 days past due if the collection of principal or interest is in doubt. When a loan is placed on nonaccrual status, any interest previously accrued but not collected, is reversed from income. The interest on these loans is accounted for on the cash-basis or cost-recovery method until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. As of June 30, 2015 and December 31, 2014, there were $17.5 million and $20.9 million, respectively, in nonperforming loans. If such nonperforming loans would have been current during the six-month period ended June 30, 2015, the year ended December 31, 2014 and the six-month period ended June 30, 2014, we would have recorded an additional $478 thousand, $1.1 million and $568 thousand of interest income, respectively. No interest income from nonperforming loans was recognized for the six-month period ended June 30, 2015, the year ended December 31, 2014 and the six-month period ended June 30, 2014.

As of June 30, 2015 and December 31, 2014, we had no accruing loans that were contractually past due 90 days or more as to principal and interest, and as of both of these dates, we had two troubled debt restructurings totaling $891 thousand and $906 thousand, respectively.

Accounting standards require the Bank to identify loans, where full repayment of principal and interest is doubtful, as impaired loans. These standards require that impaired loans be valued at the present value of expected future cash flows, discounted at the loan’s effective interest rate, or using one of the following methods: the observable market price of the loan or the fair value of the underlying collateral if the loan is collateral dependent. We have implemented these standards in our monthly review of the adequacy of the allowance for loan losses, and identify and value impaired loans in accordance with guidance on these standards. As part of the review process, the Bank also identifies loans classified as special mention, which have a potential weakness that deserves management’s close attention. In our loan review process, we seek to identify and address classified and nonperforming loans as early as possible.

Loans totaling $25.2 million were classified substandard under the Bank’s policy at June 30, 2015, while loans totaling $28.3 were classified substandard under the Bank’s policy at December 31, 2014. The decrease in June 30, 2015 when compared to December 31, 2014 was mainly due to the work out of substandard loans as the Bank focuses its efforts in resolving nonperforming assets through foreclosure. The following tables set forth information related to the credit quality of our loan portfolio at June 30, 2015 and December 31, 2014:

As of June 30, 2015	Pass		Special Mention		Substandard		Total
	(in thousands)
Real estate:
Residential	$	228,959	$	2,349	$	5,400	$	236,708
Commercial		776,872		15,415		17,406		809,693
Construction		150,764		1,090		717		152,571
Total real estate		1,156,595		18,854		23,523		1,198,972
Commercial		75,794		403		1,549		77,746
Consumer		84,534		53		154		84,741
Total loans	$	1,316,923	$	19,310	$	25,226	$	1,361,459

As of December 31, 2014	Pass		Special Mention		Substandard		Total
	(in thousands)
Real estate:
Residential	$	215,998	$	2,405	$	6,013	$	224,416
Commercial		686,197		17,960		19,420		723,577
Construction		105,027		1,357		1,052		107,436
Total real estate		1,007,222		21,722		26,485		1,055,429
Commercial		73,321		311		1,728		75,360
Consumer		57,568		61		104		57,733
Total loans	$	1,138,111	$	22,094	$	28,317	$	1,188,522

Real estate we have acquired through bank acquisitions or as a result of foreclosure is classified as OREO until sold. Our policy is to initially record OREO at fair value less estimated costs to sell at the date of foreclosure. After foreclosure, other real estate is carried at the lower of the initial carrying amount (fair value less estimated costs to sell or lease), or at the value determined by subsequent appraisals of the other real estate. Subsequent decreases in value are booked as other real estate owned—valuation allowance expense in the income statement. We held $27.7 million of OREO as of June 30, 2015, a decline of $7.2 million from the $34.9 million as of December 31, 2014, mainly due to sales. Our ratio of total nonperforming assets to total assets improved to 2.69% at June 30, 2015 from 3.63% at December 31, 2014, primarily due to the decline in OREO.

The following table sets forth certain information on nonperforming loans and OREO, the ratio of such loans and OREO to total assets as of the dates indicated, and certain other related information.

	As of
	June 30, 2015			December 31, 2014

Total nonperforming loans	$	17,458		$	20,894
OREO		27,686			34,916
Total nonperforming loans as a percentage of total loans		1.28	%		1.76	%
Total nonperforming assets as a percentage of total assets		2.69	%		3.63	%
Total accruing loans over 90 days delinquent as a percentage of total assets		0.00	%		0.00	%
Loans restructured as troubled debt restructurings	$	891		$	906
Troubled debt restructurings as a percentage of total loans		0.07	%		0.08	%

Allowance for Loan Losses

The provision for loan losses is the amount of expense that, based on our judgment, is required to maintain the allowance for loan losses at an adequate level to absorb probable incurred losses in the loan portfolio at the balance sheet date and that, in management’s judgment, is appropriate under GAAP. The determination of the amount of the allowance is complex and involves a high degree of judgment and subjectivity. Among the material estimates required to establish the allowance are loss exposure at default, the amount and timing of future cash flows on impacted loans, value of collateral, and determination of the loss factors to be applied to the various elements of the portfolio.

Our allowance for loan losses consists of two components. The first component is allocated to individually evaluated loans found to be impaired and is calculated in accordance with ASC 310. The second component is allocated to all other loans that are not individually identified as impaired pursuant to ASC 450 (“nonimpaired loans”). This component is calculated for all nonimpaired loans on a collective basis in accordance with ASC 450. For additional discussion on our calculation of the allowance for loan losses, see “—Critical Accounting Policies and Estimates—Allowance for Loan Losses”.

The nonperforming loans related to acquired banks were marked to market and recorded at fair value at acquisition with no carryover of the allowance for loan losses. Therefore, our allowance for loan losses mainly reflects the general component allowance for performing loans originated by C1 Bank.

Our allowance for loan losses was allocated as follows as of the dates indicated in the table below:

	As of
	June 30, 2015				December 31, 2014
	Amount		% of Loans to Total Loans		Amount		% of Loans to Total Loans

Real estate:
Residential	$	1,319		17.4	$	820		18.9
Commercial		4,477		59.5		3,423		60.9
Construction		800		11.2		416		9.0
Total real estate		6,596		88.1		4,659		88.8
Commercial		530		5.7		373		6.3
Consumer		549		6.2		292		4.9
Total allowance for loan losses	$	7,675		100.0	$	5,324		100.0

The following table sets forth certain information with respect to activity in our allowance for loan losses during the periods indicated:

	Three-Month Periods Ended June 30,						Six-Month Periods Ended June 30,
	2015			2014			2015			2014
Allowance for loan losses at beginning of period	$	5,787		$	3,626		$	5,324		$	3,412
Charge-offs:
Residential real estate		-			(98	)		-			(98	)
Commercial real estate		-			(47	)		(1	)		(204	)
Construction		-			-			-			-
Commercial		(66	)		(4,037	)		(66	)		(4,046	)
Consumer		(3	)		(236	)		(6	)		(238	)
Total charge-offs		(69	)		(4,418	)		(73	)		(4,586	)
Recoveries:
Residential real estate		153			277			222			437
Commercial real estate		33			140			145			229
Construction		69			220			92			303
Commercial		412			162			445			175
Consumer		14			14			53			15
Total recoveries		681			813			957			1,159
Net (charge-offs) recoveries		612			(3,605	)		884			(3,427	)
Provision for loan losses		1,276			4,572			1,467			4,608
Allowance for loan losses at end of period	$	7,675		$	4,593		$	7,675		$	4,593
Ratio of annualized net charge-offs (recoveries) during the period to average loans outstanding during the period		(0.19	)%		1.37	%		(0.14	)%		0.66
Allowance for loan losses as a percentage of total loans at end of period		0.56			0.43			0.56			0.43
Allowance for loan losses as a percentage of nonperforming loans		43.96			21.41			43.96			21.41

As a result of our acquisition strategy, we acquired the right to seek deficiency judgments resulting from defaulted loans from our acquired banks (including loans that defaulted before the acquisitions). We have actively pursued recovery of these deficiency amounts. This strategy has resulted in recoveries of $957 thousand and $1.2 million in the six-month periods ended June 30, 2015 and June 30, 2014, respectively.

Investment Securities

We did not carry any balance of investment securities as of June 30, 2015 and December 31, 2014 due to our decision to sell the entirety of our securities available for sale portfolio in 2013. This decision was based on our assessment that improving economic conditions could begin to put upward pressure on interest rates, which prompted us to redeploy these assets into loans.

Bank-Owned Life Insurance

As of June 30, 2015 and December 31, 2014, we maintained investments in bank-owned life insurance of $42.7 million and $43.9 million, respectively, $35.0 million of which was purchased during December 2014. The purchase allowed us to deploy excess cash, has enhanced noninterest income and offset the rising costs of employee benefits. Included in the balance at June 30, 2015 and December 31, 2014 was $7.5 million and $8.9 million, respectively, relating to policies on former officers of an acquired bank, $1.5 million of which was surrendered in the second quarter of 2015. During the second quarter of 2015, we sent surrender notices for the remaining $7.5 million acquired polices. We expect to receive the proceeds within six to twelve months, at which time we will use these proceeds to increase the investment in the BOLI purchased during December 2014.

Deposits

We monitor deposit growth by account type, market and rate. We seek to fund asset growth primarily with low-cost customer deposits in order to maintain a stable liquidity profile and net interest margin. Total deposits as of June 30, 2015 and December 31, 2014 were $1.216 billion and $1.168 billion, respectively. Our growth in deposits during the first half of 2015 was due primarily to our organic growth efforts by our banking centers and marketing team to expand our client reach, including the opening of our branch in Doral in April 2015.

The following table sets forth the distribution by type of our deposit accounts for the dates indicated.

	As of
	June 30, 2015				December 31, 2014
	Amount		% of Total Deposits		Amount		% of Total Deposits
	(in thousands, except %)
Deposit Type
Noninterest-bearing demand	$	322,173		26.5	$	278,543		23.9
Interest-bearing demand/NOW		148,724		12.2		140,598		12.0
Money market and savings		483,157		39.7		435,105		37.3
Time		261,934		21.6		313,256		26.8
Total deposits	$	1,215,988		100.0	$	1,167,502		100.0
Time Deposits
0.00 - 0.50%	$	44,729		17.1	$	25,294		8.1
0.51 - 1.00%		57,861		22.1		77,480		24.7
1.01 - 1.50%		110,670		42.2		160,808		51.3
1.51 - 2.00%		26,360		10.1		27,813		8.9
2.01 - 2.50%		15,261		5.8		11,160		3.6
Above 2.50%		7,053		2.7		10,701		3.4
Total time deposits	$	261,934		100.0	$	313,256		100.0

The following tables set forth our time deposits segmented by months to maturity and deposit amount:

	As of June 30, 2015
	Time Deposits of $100 and Greater		Time Deposits of Less Than $100		Total
	(dollars in thousands)
Months to maturity:
Three or less	$	9,211	$	27,668	$	36,879
Over Three to Six		16,057		13,710		29,767
Over Six to Twelve		19,593		19,383		38,976
Over Twelve		84,247		72,065		156,312
Total	$	129,108	$	132,826	$	261,934

	As of December 31, 2014
	Time Deposits of $100 and Greater		Time Deposits of Less Than $100		Total
	(dollars in thousands)
Months to maturity:
Three or less	$	48,262	$	22,535	$	70,797
Over Three to Six		33,493		21,831		55,324
Over Six to Twelve		22,783		25,137		47,920
Over Twelve		79,180		60,035		139,215
Total	$	183,718	$	129,538	$	313,256

As of June 30, 2015 and December 31, 2014, we had brokered deposits of $53.7 million and $17.0 million, respectively.

Borrowings

Deposits are the primary source of funds for our lending activities and general business purposes; however, we may obtain advances from the FHLB, purchase federal funds, and engage in overnight borrowing from the Federal Reserve, correspondent banks, or by entering into client purchase agreements. We also use these sources of funds as part of our asset/liability management process to control our long-term interest rate risk exposure, even if it may increase our short-term cost of funds. This may include match funding of fixed-rate loans. Our level of short-term borrowings can fluctuate on a daily basis depending on funding needs and the source of funds to satisfy the needs. As of June 30, 2015, we had $261.0 million outstanding in advances from the FHLB with the following average rates and maturities:

	As of June 30, 2015
	Amount		% of total		Average rate (%)
Maturity year:
2015	$	17,000		6.5		1.07	%
2016		32,000		12.3		1.66	%
2017		12,000		4.6		2.13	%
2018		45,000		17.2		1.52	%
2019		45,000		17.2		1.98	%
2020		85,000		32.7		1.85	%
2023		10,000		3.8		2.70	%
2025		15,000		5.7		2.54	%
Total	$	261,000		100.0		1.83	%

Liquidity and Capital Resources

Liquidity Management

We are expected to maintain adequate liquidity at the Bank. Liquidity refers to our ability to maintain cash flow that is adequate to fund operations and meet present and future financial obligations through either the sale or maturity of existing assets or by obtaining additional funding through liability management. We manage liquidity based upon policy limits set by the board of directors and cash flow modeling. To maintain adequate liquidity, we also monitor indicators of potential liquidity risk, utilize cash flow projection models to forecast liquidity needs, model liquidity stress scenarios and develop contingency plans, and identify alternative back-up sources of liquidity. The liquidity reserve may consist of cash on hand, cash on demand in deposits with correspondent banks, cash equivalents such as federal funds sold, United States securities or securities guaranteed by the United States, and other investments. In addition, we have a fed funds line of $25 million with our correspondent bank and available borrowing capacity with the FHLB based on our collateral position. We believe that the sources of available liquidity are adequate to meet all reasonably immediate short-term and intermediate-term demands.

As of June 30, 2015, we held cash equal to 13.4% of total deposits and borrowings due in less than 12 months, which represented approximately $5.6 million of excess cash above our target.

We intend to use our current excess liquidity and capital for general corporate purposes, including loan growth as well as opportunistic acquisitions.

Capital Management

We manage capital to comply with our internal planning targets and regulatory capital standards. We review capital levels on a monthly basis. We evaluate a number of capital ratios, including regulatory capital ratios required by the federal banking agencies such as Tier 1 capital to risk-weighted assets and Tier 1 capital to average total adjusted assets (the leverage ratio).

As of June 30, 2015 and December 31, 2014, we had an equity-to-assets ratio of 11.60% and 12.15%, respectively. As of June 30, 2015 and December 31, 2014, we had a Tier 1 capital to risk-weighted assets ratio of 13.08% and 14.33%, respectively, and a Tier 1 leverage ratio of 12.01% and 11.95%, respectively. The regulatory capital ratios as of June 30, 2015 were calculated under Interim Final Basel III rules and the regulatory capital ratios as of December 31, 2014 were calculated under Basel I rules. There is no threshold for well-capitalized status for bank holding companies.

As of June 30, 2015 and December 31, 2014, the regulatory capital ratios of the Company and Bank exceeded the required minimums, as seen in the table below:

	Actual					Required for Capital Adequacy Purposes					Well Capitalized Under Prompt Corrective Action Provision
June 30, 2015	Amount		Ratio (%)			Amount		Ratio (%)			Amount		Ratio (%)
	(in thousands, except %)
Total capital to risk-weighted assets
C1 Financial, Inc.	$	201,591		13.60	%	$	118,616		8.00	%	$	N/A		N/A
C1 Bank		200,898		13.55	%		118,608		8.00	%		148,259		10.00	%
Tier 1 capital to risk-weighted assets
C1 Financial, Inc.		193,915		13.08	%		88,962		6.00	%		N/A		N/A
C1 Bank		193,222		13.03	%		88,956		6.00	%		118,608		8.00	%
Common equity tier 1 capital to risk-weighted assets
C1 Financial, Inc.		193,915		13.08	%		66,721		4.50	%		N/A		N/A
C1 Bank		193,222		13.03	%		66,717		4.50	%		96,369		6.50	%
Tier 1 leverage ratio
C1 Financial, Inc.		193,915		12.01	%		64,593		4.00	%		N/A		N/A
C1 Bank		193,222		11.97	%		64,589		4.00	%		80,736		5.00	%

	Actual					Required for Capital Adequacy Purposes					Well Capitalized Under Prompt Corrective Action Provision
December 31, 2014	Amount		Ratio (%)			Amount		Ratio (%)			Amount		Ratio (%)
	(in thousands, except %)
Total capital to risk-weighted assets
C1 Financial, Inc.	$	190,712		14.74	%	$	103,532		8.00	%	$	N/A		N/A
C1 Bank		190,019		14.68	%		103,523		8.00	%		129,404		10.00	%
Tier 1 capital to risk-weighted assets
C1 Financial, Inc.		185,388		14.33	%		51,766		4.00	%		N/A		N/A
C1 Bank		184,695		14.27	%		51,762		4.00	%		77,642		6.00	%
Tier 1 leverage ratio
C1 Financial, Inc.		185,388		11.95	%		62,049		4.00	%		N/A		N/A
C1 Bank		184,695		11.91	%		62,045		4.00	%		77,556		5.00	%

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements and contractual obligations at June 30, 2015 and December 31, 2014 are summarized in the tables that follow:

	Amount of Commitment Expiration Per Period as of June 30, 2015
	Total Amounts Committed		1 Year or Less		Over 1 Through 3 Years		Over 3 Through 5 Years		Over 5 Years
	(in thousands)

Unused lines of credit	$	48,123	$	9,378	$	18,622	$	3,096	$	17,027
Standby letters of credit		2,290		2,116		73		101		-
Commitments to fund loans		187,464		27,139		91,655		29,802		38,868
Total	$	237,877	$	38,633	$	110,350	$	32,999	$	55,895

	Amount of Commitment Expiration Per Period as of December 31, 2014
	Total Amounts Committed		1 Year or Less		Over 1 Through 3 Years		Over 3 Through 5 Years		Over 5 Years
	(in thousands)

Unused lines of credit	$	39,630	$	12,808	$	10,778	$	6,340	$	9,704
Standby letters of credit		1,540		-		1,473		67		-
Commitments to fund loans		147,879		17,080		65,402		26,838		38,559
Total	$	189,049	$	29,888	$	77,653	$	33,245	$	48,263

We are party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments largely include commitments to extend credit and standby letters of credit. Total amounts committed under these financial instruments were $237.9 million and $189.0 million as of June 30, 2015 and December 31, 2014, respectively. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets.

Our exposure to credit loss in the event of nonperformance by the other party to financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of these instruments. We use the same credit policies in making commitments to extend credit and generally use the same credit policies for letters of credit as for on-balance sheet instruments.

Unused lines of credit and commitments to fund loans are legally binding agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since some of these commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. Unused commercial lines of credit, which comprise a substantial portion of these commitments, generally expire within a year from their date of origination. The amount of collateral obtained, if any, by us upon extension of credit is based on management’s credit evaluation of the borrower. Collateral held varies but may include security interests in business assets, mortgages on commercial and residential real estate, deposit accounts with financial institutions, and securities.

We believe the likelihood of our unused lines of credit and standby letters of credit either needing to be totally funded or funded at the same time is low. However, should significant funding requirements occur, we have cash and available borrowing capacity from various sources to meet these requirements.

Generally Accepted Accounting Principles (GAAP) Reconciliation and Explanation of Non-GAAP Financial Measures

(In thousands, except per share and employee data)

Some of the financial measures included in this Quarterly Report on Form 10-Q are not measures of financial performance recognized by GAAP. We believe these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition and results of operations computed in accordance with GAAP; however, we acknowledge that our non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP measures that other companies use. The following tables provide a more detailed analysis of these non-GAAP financial measures.

	Second Quarter			First Quarter			Fourth Quarter			Third Quarter			Second Quarter
	2015			2015			2014			2014			2014 (1)

Loan loss reserves
Allowance for loan losses	$	7,675		$	5,787		$	5,324		$	5,441		$	4,593
Acquired performing loans discount		3,047			3,242			3,532			3,811			4,093
Total	$	10,722		$	9,029		$	8,856		$	9,252		$	8,686
Loans receivable, gross	$	1,361,459		$	1,256,606		$	1,188,522		$	1,134,351		$	1,062,701
Allowance for loan losses to total loans receivable		0.56	%		0.46	%		0.45	%		0.48	%		0.43	%
Allowance plus performing loans discount to total loans receivable		0.79	%		0.72	%		0.75	%		0.82	%		0.82	%

Efficiency ratio
Noninterest expense	$	11,845		$	11,835		$	14,005		$	11,280		$	10,950
Taxable-equivalent net interest income	$	16,811		$	15,575		$	14,919		$	14,022		$	13,597
Noninterest income	$	4,335		$	1,602		$	1,554		$	1,797		$	2,347
Gains on sales of securities		-			-			-			-			(241	)
Adjusted noninterest income	$	4,335		$	1,602		$	1,554		$	1,797		$	2,106
Efficiency ratio		56.0	%		68.9	%		85.0	%		71.3	%		69.7	%

Revenue and average assets per average number of employees
Interest income	$	19,115		$	17,769		$	17,158		$	16,245		$	15,712
Noninterest income		4,335			1,602			1,554			1,797			2,347
Total revenue	$	23,450		$	19,371		$	18,712		$	18,042		$	18,059
Total revenue annualized	$	94,058		$	78,560		$	74,238		$	71,580		$	72,434
Total average assets	$	1,615,468		$	1,576,419		$	1,552,264		$	1,493,667		$	1,426,124
Average number of employees		245			241			242			235			211
Revenue per average number of employees	$	384		$	326		$	307		$	305		$	343
Average assets per average number of employees	$	6,594		$	6,541		$	6,414		$	6,356		$	6,759

Tangible stockholders' equity and Tangible book value per share
Total stockholders' equity	$	194,555		$	189,812		$	186,638		$	185,296		$	140,191
Less: Goodwill		(249	)		(249	)		(249	)		(249	)		(249	)
Other intangible assets		(824	)		(904	)		(987	)		(1,074	)		(1,190	)
Tangible stockholders' equity	$	193,482		$	188,659		$	185,402		$	183,973		$	138,752

Common shares outstanding		16,101			16,101			16,101			16,101			13,340
Book value per share	$	12.08		$	11.79		$	11.59		$	11.51		$	10.51
Tangible book value per share		12.02			11.72			11.51			11.43			10.40

Adjusted yield earned on loans
Reported yield on loans		5.89	%		5.90	%		5.84	%		5.79	%		5.87	%
Effect of accretion income on acquired loans		(0.10	)%		(0.14	)%		(0.19	)%		(0.14	)%		(0.15	)%
Adjusted yield on loans		5.79	%		5.76	%		5.65	%		5.65	%		5.72	%

Adjusted rate paid on total deposits
Reported rate paid on total deposits		0.44	%		0.47	%		0.50	%		0.52	%		0.54	%
Effect of premium amortization on acquired deposits		0.01	%		0.01	%		0.00	%		0.01	%		0.01	%
Adjusted rate paid on total deposits		0.45	%		0.48	%		0.50	%		0.53	%		0.55	%

Adjusted net interest margin
Reported net interest margin		4.71	%		4.56	%		4.24	%		4.18	%		4.29	%
Effect of accretion income on acquired loans		(0.09	)%		(0.12	)%		(0.16	)%		(0.11	)%		(0.13	)%
Effect of premium amortization on acquired deposits and borrowings		(0.02	)%		(0.03	)%		(0.03	)%		(0.04	)%		(0.04	)%
Adjusted net interest margin		4.60	%		4.41	%		4.05	%		4.03	%		4.12	%

Average excess cash
Average total deposits	$	1,185,325		$	1,186,076		$	1,174,001		$	1,147,816		$	1,118,423
Borrowings due in one year or less		17,750			25,189			28,940			34,753			33,750
Total base for liquidity	$	1,203,075		$	1,211,265		$	1,202,941		$	1,182,569		$	1,152,173
Minimum liquidity level (10% of base) (a)	$	120,308		$	121,127		$	120,294		$	118,257		$	115,217
Average cash and cash equivalents (b)		168,740			204,588			271,827			262,617			239,171
Cash above liquidity level (b)-(a)		48,432			83,461			151,533			144,360			123,954
Less estimated short-term deposits		(20,823	)		(11,353	)		(24,421	)		(28,440	)		(24,662	)
Average excess cash	$	27,609		$	72,108		$	127,112		$	115,920		$	99,292

Tangible equity to tangible assets
Total stockholders' equity	$	194,555		$	189,812		$	186,638		$	185,296		$	140,191
Less: Goodwill		(249	)		(249	)		(249	)		(249	)		(249	)
Other intangible assets		(824	)		(904	)		(987	)		(1,074	)		(1,190	)
Tangible stockholders' equity	$	193,482		$	188,659		$	185,402		$	183,973		$	138,752

Total assets	$	1,677,806		$	1,596,739		$	1,536,691		$	1,548,045		$	1,449,214
Less: Goodwill		(249	)		(249	)		(249	)		(249	)		(249	)
Other intangible assets		(824	)		(904	)		(987	)		(1,074	)		(1,190	)
Tangible assets	$	1,676,733		$	1,595,586		$	1,535,455		$	1,546,722		$	1,447,775

Equity/Assets		11.60	%		11.89	%		12.15	%		11.97	%		9.67	%
Tangible Equity/Tangible Assets		11.54	%		11.82	%		12.07	%		11.89	%		9.58	%

(1) Share and per share amounts have been restated to reflect the 7-for-1 reverse stock split completed on August 13, 2014.

Definitions of Non-GAAP financial measures

Allowance for loan losses plus performing loans discount to total loans receivable adds the remaining discount on acquired performing loans to the allowance for loan losses to determine the total reserves and loan discounts established against our loans. Our management believes that this metric provides useful information for investors to analyze the overall level of reserves in banks that have completed acquisitions with no allowance carryover.

Efficiency ratio is defined as total noninterest expense divided by the sum of taxable-equivalent net interest income and noninterest income. Noninterest income is adjusted for nonrecurring gains and losses on sales of securities. This ratio is important to investors looking for a measure of efficiency in the Company's productivity measured by the amount of revenue generated for each dollar spent.

Revenue per average number of employees is annualized total interest income and total noninterest income divided by the average number of employees during the period and measures the Company's productivity by calculating the average amount of revenue generated per employee. Average assets per average number of employees is average assets divided by the average number of employees during the period and measures the average value of assets per employee.

Tangible stockholders' equity is defined as total equity reduced by goodwill and other intangible assets. Tangible book value per share is tangible stockholders' equity divided by total common shares outstanding. This measure is important to investors interested in changes from period-to-period in book value per share exclusive of changes in intangible assets. We have not considered loan servicing rights as an intangible asset for purposes of this calculation.

Adjusted yield earned on loans is our yield on loans after excluding loan accretion from our acquired loan portfolio. Our management uses this metric to better assess the impact of purchase accounting on yield on loans, as the effect of loan discounts accretion is expected to decrease as the acquired loans mature or roll off of our balance sheet.

Adjusted rate paid on total deposits is our cost of deposits after excluding amortization of premiums for acquired time deposits. Our management uses this metric to better assess the impact of purchase accounting on cost of deposits, as the effect of amortization of premiums related to deposits is expected to decrease as the acquired deposits mature or roll off of our balance sheet.

Adjusted net interest margin is net interest margin after excluding loan accretion from the acquired loan portfolio and amortization of premiums for acquired time deposits and Federal Home Loan Bank advances. Our management uses this metric to better assess the impact of purchase accounting on net interest margin, as the effect of loan discounts accretion and amortization of premiums related to deposits or borrowings is expected to decrease as the acquired loans and deposits mature or roll off of our balance sheet.

Average excess cash represents the cash and cash equivalents in excess of our minimum liquidity level (defined as 10% of average total deposits plus borrowings due in one year or less), minus Company estimated short-term deposits. In 2015, based on an historical analysis, we changed our methodology for estimating short-term deposits, which reduced the results beginning in the first quarter of 2015.

Tangible equity to tangible assets is defined as total equity reduced by goodwill and other intangible assets, divided by total assets reduced by goodwill and other intangible assets. This measure is important to investors interested in relative changes from period-to-period in equity and total assets, each exclusive of changes in intangible assets. We have not considered loan servicing rights as an intangible asset for purposes of this calculation.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Interest Rate Risk Management

Interest rate risk management is carried out through our directors’ asset/liability committee (“ALCO”) & investments committee, which consists of certain directors and our Chief Executive Officer, supported by our Chief Financial Officer, business unit heads and certain other officers. To manage interest rate risk, our board of directors has established quantitative and qualitative guidelines with respect to our net interest income exposure and how interest rate shocks affect our financial performance. Consistent with industry practice, we measure interest rate risk by utilizing the concept of economic value of equity, which is the intrinsic value of assets, less the intrinsic value of liabilities. Economic value of equity does not take into account management intervention and assumes the change is instantaneous. Further, economic value of equity only evaluates risk to the current balance sheet. Therefore, in addition to this measurement, we also evaluate and consider the impact of interest rate shocks on other business factors, such as forecasted net interest income for subsequent years. In both cases, sensitivity is measured versus a base case, which assumes the forward curve for interest rates as of the balance sheet date.

Management continually reviews and refines its interest rate risk management process in response to the changing economic climate. Currently, our model projects minus 400, minus 300, minus 200, minus 100, 0, plus 100, plus 200, plus 300 and plus 400 basis point changes to evaluate our interest rate sensitivity and to determine whether specific action is needed to improve the current structure, either through economic hedges and matching strategies or by utilizing derivative instruments. In the current interest rate environment, management believes the minus 200, minus 300 and minus 400 basis point scenarios are highly unlikely.

Based upon the current interest rate environment, as of June 30, 2015 and December 31, 2014, our sensitivity to interest rate risk based on a static scenario, assuming no change in asset and liability balances, was as follows:

As of June 30, 2015
	Next 12 Months
Interest Rate	Net Interest Income						Economic Value of Equity
Change in Basis Points	$ Change			% Change			$ Change			% Change
(in millions, except %)
(400)	$	(7.4	)		(10.5	)	$	(43.7	)		(18.4	)
(300)		(6.5	)		(9.2	)		(32.6	)		(13.7	)
(200)		(4.0	)		(5.7	)		(19.7	)		(8.3	)
(100)		(1.7	)		(2.4	)		(7.2	)		(3.0	)
0		-			-			-			-
100		3.2			4.6			7.1			3.0
200		6.9			9.9			12.9			5.4
300		10.7			15.2			17.9			7.5
400		14.5			20.6			22.1			9.3

As of December 31, 2014
	Next 12 Months
Interest Rate	Net Interest Income						Economic Value of Equity
Change in Basis Points	$ Change			% Change			$ Change			% Change
(in millions, except %)
(400)	$	(5.3	)		(8.6	)	$	(38.5	)		(18.5	)
(300)		(4.7	)		(7.7	)		(35.2	)		(16.9	)
(200)		(2.6	)		(4.2	)		(25.1	)		(12.1	)
(100)		(0.4	)		(0.7	)		(9.6	)		(4.6	)
0		-			-			-			-
100		2.2			3.6			4.5			2.2
200		4.6			7.5			7.4			3.5
300		7.1			11.5			9.9			4.7
400		9.5			15.5			11.7			5.6

We used many assumptions to calculate the impact of changes in interest rates on our portfolio, and actual results may not be similar to projections due to several factors, including the timing and frequency of rate changes, market conditions and the shape of the yield curve. Actual results may also differ due to our actions, if any, in response to the changing rates.

In the event the model indicates an unacceptable level of risk, we may take a number of actions to reduce this risk, including adjusting the maturity and/or rate sensitivity of our borrowings, changing our loan portfolio strategy or entering into hedging transactions, among others. As of June 30, 2015, we were in compliance with all of the limits and policies established by management.

Item 4. Controls and Procedures.

Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures, as defined in Rule 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), as of June 30, 2015, and have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II

Other Information

Item 1. Legal Proceedings

We are currently involved in various claims and lawsuits incidental to the conduct of our business in the ordinary course. We carry insurance coverage in such amounts as we believe to be reasonable under the circumstances, although insurance may or may not cover any or all of our liabilities in respect of claims and lawsuits. We do not believe that the ultimate resolution of these matters will have a material adverse effect on our consolidated financial position, cash flows or operating results.

Item 1A. Risk Factors

You should carefully consider the following risks set forth below before deciding to invest in shares of our common stock. If any of the following risks actually occurs, our business, financial condition or results of operations would likely suffer. In such case, the trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.

Risks Relating to Our Business

The geographic concentration of our markets makes our business highly susceptible to downturns in the local economies and depressed banking markets, which could be detrimental to our financial condition.

Unlike larger financial institutions that are more geographically diversified, we are a banking franchise concentrated in the state of Florida. As of June 30, 2015, approximately 93% of the loans in our loan portfolio were made to borrowers who live and/or conduct business in Florida. Deterioration in local economic conditions in the loan market or in the commercial or industrial real estate market could have a material adverse effect on the quality of our portfolio by eroding the loan-to-value ratio of our portfolio, the demand for our products and services, the ability of borrowers to timely repay loans, the value of the collateral securing loans and our financial condition, results of operations and future prospects. In addition, if the population or income growth in the region is slower than projected, income levels, deposits and real estate development could be adversely affected and could result in the curtailment of our expansion, growth and profitability. If any of these developments were to result in losses that materially and adversely affected the Bank’s capital, we might be subject to regulatory restrictions on operations and growth and to a requirement to raise additional capital.

We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.

We are a community bank, and our reputation is one of the most valuable components of our business. As such, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and associates. If our reputation is negatively affected, by the actions of our employees or otherwise, our business and, therefore, our operating results may be materially adversely affected.

A return of recessionary conditions could result in increases in our level of nonperforming loans and/or reduced demand for our products and services, which could have an adverse effect on our results of operations.

Economic growth has been slow and uneven, and unemployment levels remain high. Recovery by many businesses has been impaired by lower consumer spending. A return to prolonged deteriorating economic conditions and/or continued negative developments in the domestic and international credit markets could significantly affect the ability of our customers to operate, the markets in which we do business, the value of our loans and investments, and our ongoing operations, costs and profitability. These events may cause us to incur losses and may adversely affect our financial condition and results of operations.

Our allowance for loan losses and fair value adjustments may prove to be insufficient to absorb losses for our loans that we originated or acquired.

Lending money is a substantial part of our business and each loan carries a certain risk that it will not be repaid in accordance with its terms or that any underlying collateral will not be sufficient to assure repayment. This risk is affected by, among other things:

cash flow of the borrower and/or the project being financed;

the changes and uncertainties as to the future value of the collateral, in the case of a collateralized loan;

the duration of the loan;

the discount on the loan at the time of acquisition, if acquired;

the credit history of a particular borrower; and

changes in economic and industry conditions.

As of June 30, 2015, the allowance for loan losses was $7.7 million while total nonperforming loans was $17.5 million. The total nonperforming amount is large for a bank of our size and is primarily the result of our acquisition of several troubled banks. The amount of our allowance for loan losses for these non-performing loans is determined by our management team through periodic reviews. As most non-performing loans are related to acquired banks, they were marked to market and recorded at fair value at acquisition with no carryover of the allowance for loan losses. Therefore, our allowance for loan losses mainly reflects the general component allowance for performing loans.

Like all banks, we have developed and applied a methodology for determining, based upon a number of factors—including, for example, historical loss rates and assumptions regarding future losses—the appropriate level of allowance to maintain in respect of possible loan losses. In applying this methodology and determining the appropriate level of the allowance, we inherently face a high degree of subjectivity and are required to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans that we originate, identification of additional problem loans originated by us and other factors, both within and outside of our control, may require an increase in the allowance for loan losses. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for probable loan losses or the recognition of further loan charge-offs, based on judgments different than those of management. In addition, if charge-offs in future periods exceed the allowance for loan losses, we will need additional provisions to increase the allowance for loan losses. Any increases in the allowance for loan losses will result in a decrease in net income and capital and may have a material adverse effect on our financial condition and results of operations. Furthermore, if our methodology or assumptions in determining our allowance for loan losses are not sound, then our allowance for loan losses will not be sufficient to cover our loan losses.

Our financial performance may be negatively affected if our loans are not repaid as expected.

Given our limited history and significant portfolio growth, many of the loans originated by C1 Bank may be unseasoned, meaning that many of the loans were originated relatively recently. In particular, approximately 77% of our loans outstanding at June 30, 2015, had been originated by C1 Bank since 2010. Our limited experience with these loans does not provide us with a significant payment history pattern with which to judge future collectability. As a result, it may be difficult to predict the future performance of our loan portfolio. These loans may have delinquency or charge-off levels above our expectations, which could negatively affect our performance.

If we are unable to manage our rapid growth, our business could be disrupted and the price of our common stock could go down.

Since we began our activities, we have experienced rapid growth. We expect to continue to implement a strategy of aggressive growth in our loans and deposits. Our growth is expected to place significant demands on our management and other resources and will require us to continue to develop and improve our operational, credit, financial and other internal risk controls. Rapid growth may also lead to deterioration on underwriting standards and puts pressure on internal systems. This growth will also provide challenges in our effort to maintain and improve the quality of our assets. Our inability to manage our growth effectively could have a material adverse effect on our business, our future financial performance and the price of our common stock.

Our financial performance will be negatively impacted if we are unable to execute our growth strategy.

Our current growth strategy is to grow organically and supplement that growth with select acquisitions. Our ability to grow organically depends primarily on generating loans and deposits of acceptable risk and expense, and we may not be successful in continuing this organic growth. Our ability to identify appropriate markets for expansion, recruit and retain qualified personnel, and fund growth at a reasonable cost, depends upon prevailing economic conditions, maintenance of sufficient capital, competitive factors and changes in banking laws, among other factors. Conversely, if we grow too quickly and are unable to control costs and maintain asset quality, such growth, whether organic or through select acquisitions, could materially and adversely affect our financial condition and results of operations.

The institutions we have acquired, and may acquire in the future, have high levels of distressed assets and we may not be able to realize the value we predict from these assets or accurately estimate the future write-downs taken in respect of these assets.

Delinquencies and losses in the loan portfolios and other assets of financial institutions that we have acquired, and may acquire in the future, may exceed our initial forecasts developed during the due diligence investigation prior to acquiring those institutions. Even if we conduct extensive due diligence on an entity we decide to acquire, this diligence may not reveal all material issues that may affect that particular entity. The diligence process in FDIC-assisted transactions is also expedited due to the short acquisition timeline that is typical for these depository institutions. If, during the diligence process, we fail to identify issues specific to an entity or the environment in which the entity operates, we may be forced to later write down or write off assets, restructure our operations, or incur impairment or other charges that could result in other reporting losses. Moreover, the process of resolving the problem assets that we have acquired takes a significant amount of time. Throughout this process, such problem assets are subject to regular reappraisals, which could lead to write-offs or require us to establish additional allowance for loan losses. Any of these events could adversely affect the financial condition, liquidity, capital position and value of institutions we acquire and of the Company as a whole.

Changes in interest rates could have significant adverse effects on our financial condition and results of operations.

Fluctuations in interest rates could have significant adverse effects on our financial condition and results of operations. We are unable to predict changes in market interest rates, which are affected by many factors beyond our control, including inflation, recession, unemployment, money supply, domestic and international events and changes in financial markets in the United States and in other countries. Our net interest income is affected not only by the level and direction of interest rates, but also by the shape of the yield curve and relationships between interest-sensitive instruments and key driver rates, as well as balance sheet growth, client loan and deposit preferences and the timing of changes in these variables. In an environment in which interest rates are increasing, our interest costs on liabilities may increase more rapidly than our income on interest-earning assets. This could result in a deterioration of our net interest margin.

Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.

Liquidity is essential to our business. Our loan-to-deposit ratio, calculated by dividing our total loans by our total deposits, exceeded 110% at June 30, 2015. A higher loan-to-deposit ratio generally means that a financial institution might not have enough liquidity to cover any unforeseen requirements or that the institution is more reliant on borrowings that may no longer be available.

An inability to raise funds through deposits, borrowings, and other sources could have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities on terms that are acceptable to us could be impaired by factors that affect us specifically, the financial services industry, or economy in general. Factors that could negatively impact our access to liquidity sources include a decrease of our business activity as a result of a downturn in the markets in which our loans are concentrated, adverse regulatory action against us, or our inability to attract and retain deposits. The loss of any single large depositor could have a negative effect on our liquidity. Our ability to borrow could be impaired by factors that are not specific to us, such as a disruption in the financial markets and diminished expectations or growth in the financial services industry.

Our funding sources may prove insufficient to replace deposits and support our future growth.

We rely on customer deposits, advances from the FHLB, nationally marketed CDs, brokered CDs and lines of credit at other financial institutions to fund our operations. Although we have historically been able to replace maturing deposits and advances if desired, we may not be able to replace such funds in the future if our financial condition, the financial condition of the FHLB or market conditions were to change. Our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. Finally, if we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs. In this case, our profitability would be adversely affected.

FHLB borrowings and other current sources of liquidity may not be available or, if available, sufficient to provide adequate funding for operations. Furthermore, our own actions could result in a loss of adequate funding. For example, our availability at the FHLB could be reduced if we are deemed to have poor documentation or processes. Accordingly, we may seek additional higher-cost debt in the future to achieve our long-term business objectives. Additional borrowings, if sought, may not be available to us or, if available, may not be available on favorable terms. If additional financing sources are unavailable or are not available on reasonable terms, our growth and future prospects could be adversely affected.

Our loan portfolio includes unsecured, commercial, real estate, consumer and other loans that may have higher risks, and we currently exceed the regulatory guidelines for commercial real estate loans.

Our commercial real estate, residential real estate, construction, commercial, and consumer loans at June 30, 2015, were $809.7 million, $236.7 million, $152.6 million, $77.7 million, and $84.7 million, respectively, or 59.5%, 17.4%, 11.2%, 5.7%, and 6.2%, respectively, of our total loans. We have a high concentration of commercial real estate loans, which at December 31, 2013 and June 30, 2015 exceeded the guidance of bank regulators. At June 30, 2015, December 31, 2014 and December 31, 2013, our ratio for construction, development and other land loans to total capital was 76%, 57% and 73%, respectively, compared to the FDIC guideline of 100%, while the ratio for commercial real estate loans (including construction, development and other land loans and loans secured by multifamily and nonowner occupied nonfarm nonresidential property) to total capital was 336%, 284% and 365%, respectively, compared to the FDIC guideline of 300%. The lower ratios at December 31, 2014 when compared to December 31, 2013, resulted from the impact of the initial public offering. In 2013, our board of directors authorized us to operate up to 400% of total risk based capital for commercial real estate loans until December 2014. Our directors extended their authorization until December 2015.

Commercial loans and commercial real estate loans generally carry larger balances and can involve a greater degree of financial and credit risk than other loans. As a result, banking regulators continue to give greater scrutiny to lenders with a high concentration of commercial real estate loans in their portfolios, such as us, and such lenders are expected to implement stricter underwriting standards, internal controls, risk management policies, and portfolio stress testing, as well as higher capital levels and loss allowances. The increased financial and credit risk associated with these types of loans are a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the size of loan balances, the effects of general economic conditions on income-producing properties, and the increased difficulty of evaluating and monitoring these types of loans. During the recent economic downturn, financial institutions with high commercial real estate loan concentrations were more susceptible to failure. If we cannot effectively manage the risk associated with our high concentration of commercial real estate loans, our financial condition and results of operations may be adversely affected.

The nature of our commercial loan portfolio may expose us to increased lending risks.

We make both secured and unsecured commercial loans. Secured commercial loans are generally collateralized by real estate, accounts receivable, inventory, equipment or other assets owned by the borrower and include a personal guaranty of the business owner. Unsecured loans generally involve a higher degree of risk of loss than do secured loans because, without collateral, repayment is wholly dependent upon the success of the borrowers’ businesses. Because of this lack of collateral, we are limited in our ability to collect on defaulted unsecured loans.

We may not be able to gain the expected benefits of our partnership with CenterState.

On March 4, 2015, we entered into a partnership with CenterState Bank of Florida, N.A., or CenterState, pursuant to which CenterState will provide analytics, launch and market C1 Lab's Smart Loan Express to financial institutions across the country. Our lender incentive program is linked to the Smart Loan Express output so that the incentive structure favors those loans with a higher risk-adjusted incremental return on equity. If we are not able to gain the expected benefits of our partnership with CenterState, our results of operations may be negatively affected.

We are subject to risks associated with loans to Brazilian companies.

We have made commercial loans to three Brazilian corporations, with aggregate outstanding balances at June 30, 2015, December 31, 2014 and December 31, 2013 of $41.9 million, $44.0 million and $44.8 million, respectively. The collateral for these loans is held in Brazil and consists primarily of real estate. Two of the loans are secured by a first lien on farmland appraised at $56.8 million, of which we are entitled to 50.9%, as the collateral is shared on a first lien basis with another bank. The three main parcels (representing 83% of this collateral pool) were appraised during 2014, and the rest in 2012. Another loan is secured by a first lien on farmland appraised at $50.7 million during 2015 and the final loan is secured by closely held stock. There is inherent country risk associated with this international business. International trade laws, U.S. relations with Brazil, foreign exchange volatility, the foreign nature of the Brazilian legal system and government policy, and regulatory changes may inhibit our ability to collect payment, or claim collateral (if any) located in Brazil. Furthermore, we may experience loss due to unforeseen economic, social or weather conditions that affect Brazilian markets and in particular the market for Brazilian agriculture products. The expense of collecting on defaulted loans may be higher than in the United States, which may reduce the size of any recovery. We are also subject to the risk that the value of any real estate collateral could decline, further harming our ability to fully collect on any defaulted loan. The Brazilian economy is experiencing negative growth, a material decline in the value of its currency, increasing rates of inflation, growing unemployment and higher interest rates; the country is at risk of downgrade by the rating agencies to junk status. These macroeconomic trends coupled with a growing corruption scandal involving the government, state-owned enterprises and some of the largest private corporations have placed significant stress on the Brazilian economy and may affect the ability of our borrowers to repay their loans and the value of our underlying collateral. The substantial size of each of these individual relationships could, if unpaid, materially adversely affect our earnings and capital.

Our largest loan relationships currently make up a material percentage of our total loan portfolio.

As of June 30, 2015, our ten largest loan relationships totaled over $285 million in loan exposure or 17.8% of the total loan portfolio and unfunded commitments. The concentration risk associated with having a small number of extremely large loan relationships is that if one or more of these relationships were to become delinquent or suffer default, we could be at serious risk of material losses. The allowance for loan losses may not be adequate to cover losses associated with any of these relationships and any loss or increase in the allowance would negatively affect our earnings and capital. Even if the loans are collateralized, the large increase in classified assets could harm our reputation with our regulators and inhibit our ability to execute our business plan. The repayment of any of these relationships could harm our interest income.

Many of our investments are focused on long-term returns, are expensive and may not yield the expected returns to justify their cost.

Part of our business plan has been to make material investments into our infrastructure, technology, banking centers and personnel, with a focus on long-term results. However, many of these investments are expensive in the short term and rely heavily on their future success to remain financially justifiable. Examples include (i) we spend materially more than an average bank our size on sports marketing, the results of which are hard to measure and may not justify the cost; (ii) our management-training program is expensive and the graduates from this program may not produce superior results to employees from less expensive forms of hiring and training; (iii) our strategy to fund our liabilities with longer-duration, higher-cost funds that will only pay off if interest rates increase during their term; and (iv) we invest heavily in technology to increase our productivity and our relationships with our clients, yet the products are new and may not yield the desired results. These investments, especially if not successful, reduce earnings, capital and financial flexibility and if not successful in the long term will have not produced the desired returns.

We may realize future losses if (i) our levels of nonperforming assets increase and if the proceeds we receive upon liquidation of assets are less than the carrying value of such assets or (ii) we are unable to sell our OREO assets within the holding periods established by Federal and State regulators.

Non-performing assets (including non-accrual loans and other real estate owned, or OREO) totaled $45.1 million at June 30, 2015. These non-performing assets can adversely affect net income through reduced interest income, increased operating expenses incurred to maintain such assets or loss charges related to subsequent declines in the estimated fair value of foreclosed assets. Any decrease in real estate market prices may lead to OREO write-downs, with a corresponding expense in our income statement. We evaluate OREO properties periodically and write down the carrying value of the properties if the results of our evaluation require it. Holding OREO properties is expensive and negatively impacts our earnings and results of operations. The expenses associated with OREO and any further property write-downs, both expected and unexpected, could have a material adverse effect on our financial condition and results of operations.

Furthermore, federal and state regulators place limits on the total amount of time that we may hold foreclosed upon real estate. If we are unable to sell such real estate within the prescribed time frames (or if our regulators are unwilling to grant us extensions to the holding period), we may be required to charge off OREO balances, which could have a material adverse effect on our financial condition and results of operations.

The Bank currently invests in bank-owned life insurance (“BOLI”) and may continue to do so in the future. Investing in BOLI exposes us to liquidity, credit and interest rate risk, which could adversely affect our results of operations and financial condition.

The Bank had $42.7 million in general and separate account BOLI contracts at June 30, 2015. BOLI is an illiquid long-term asset that provides tax savings because cash value growth and life insurance proceeds are not taxable. However, if the Bank needed additional liquidity and converted the BOLI to cash, any cash value gain above basis would be subject to ordinary income tax and applicable penalties. The Bank is also exposed to the credit risk of the underlying securities in the investment portfolio, and to the insurance carrier provider credit risk (in a general account contract). If BOLI was exchanged to another carrier, additional fees would be incurred and a tax-free exchange could only be done for insureds that were still actively employed by the Bank at that time. There is interest rate risk relating to the market value of the underlying investment securities associated with the BOLI in that there is no assurance that the market value of these securities will not decline.

Certain of our activities are restricted due to commitments entered into with the Federal Reserve by us and certain of our foreign national controlling stockholders.

Certain of our controlling stockholders are foreign nationals, and we and these controlling stockholders have entered into commitments with the Federal Reserve that restrict some of our activities. In particular, we are restricted from engaging in certain transactions with these controlling stockholders, their immediate family, any company controlled by the controlling stockholders, and any executive officer, director, or principal stockholder of a company controlled by these controlling stockholders. Such transactions include (i) extensions of credit, (ii) covered transactions described in sections 23A and 23B of the Federal Reserve Act and the Federal Reserve’s Regulation W, (iii) any other business transaction or relationship, without approval of the Federal Reserve, with any company controlled by such controlling stockholder, and (iv) restrictions on the amount of deposits held by the Bank of any company controlled by such controlling stockholders. We are also prohibited from incurring additional debt to any third party without prior approval from the Federal Reserve. Finally, we are restricted from directly accepting wires from or sending wires to foreign accounts, and we must instead use a correspondent bank when our clients need to send or receive such foreign wires. This makes the wire process more difficult for our clients and as a result may result in a loss of business from these clients.

The loss of any member of our management team and our inability to make up for such loss with a qualified replacement could harm our business.

Our success and future growth depend upon the continued success of our management team, in particular our Chief Executive Officer, Trevor Burgess, and other key employees. Competition for qualified management in our industry is intense. Many of the companies with which we compete for management personnel have greater financial and other resources than we do or are located in geographic areas which may be considered by some to be more desirable places to live. If we are not able to retain any of our key management personnel, our business could be harmed.

Our business is highly competitive. If we are unable to successfully implement our business strategy, we risk losing market share to current and future competitors.

Commercial and consumer banking is highly competitive. Our market contains not only a large number of community and regional banks, but also a significant presence of the country’s largest commercial banks. We compete with other state and national financial institutions as well as savings and loan associations, savings banks and credit unions for deposits and loans. In addition, we compete with financial intermediaries, such as consumer finance companies, mortgage banking companies, insurance companies, securities firms, mutual funds and several government agencies as well as major retailers, all actively engaged in providing various types of loans and other financial services. Some of these competitors may have a long history of successful operations in our markets, greater ties to local businesses and more expansive banking relationships, as well as better established depositor bases. Competitors with greater resources may possess an advantage by attracting our clients through very aggressive product pricing that we are unable to match, maintaining numerous banking locations in more convenient sites, operating more ATMs and conducting extensive promotional and advertising campaigns or operating a more developed Internet platform.

The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. Increased competition among financial services companies due to the recent consolidation of certain competing financial institutions may adversely affect our ability to market our products and services. Also, technology has lowered barriers to entry and made it possible for banks to compete in our market without a retail footprint by offering competitive rates, as well making it possible for non-banks to offer products and services traditionally provided by banks. Many of our competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may offer a broader range of products and services as well as better pricing for certain products and services than we can offer. For example, in the current low interest rate environment, competitors with lower costs of capital may solicit our customers to refinance their loans with a lower interest rate.

Our ability to compete successfully depends on a number of factors, including:

our ability to develop, maintain and build upon long-term customer relationships based on quality service and high ethical standards;

our ability to attract and retain qualified employees to operate our business effectively;

our ability to expand our market position;

the scope, relevance and pricing of products and services that we offer to meet customer needs and demands;

the rate at which we introduce new products and services relative to our competitors;

customer satisfaction with our level of service; and

industry and general economic trends.

Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could harm our business, financial condition and results of operations.

The Bank’s lending limit per borrower will continue to be lower than many of our competitors, which may discourage potential clients and limit our loan growth.

The Bank’s legally mandated lending limit per borrower is lower than that of many of our larger competitors because we have less capital. At June 30, 2015, the Bank’s legal lending limit for loans was approximately $48 million to any one borrower on a secured basis and $29 million on an unsecured basis. The Bank’s lower lending limit may discourage potential borrowers with loan needs that exceed our limit from doing business with us, which may restrict our ability to grow. In addition, in July 2014, we established a $30.0 million “house limit” guideline for future relationships that may further impact our ability to lend to large borrowers and discourage these large borrowers from doing business with us.

We may be adversely affected by the lack of soundness of other financial institutions or market utilities.

Our ability to engage in routine funding and other transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial institutions are interrelated as a result of trading, clearing, counterparty or other relationships. Defaults by, or even rumors or questions about, one or more financial institutions or market utilities, or the financial services industry generally, may lead to market-wide liquidity problems and losses of depositor, creditor and counterparty confidence and could lead to losses or defaults by us or by other institutions.

Changes in accounting standards could materially impact our financial statements.

From time to time, the Financial Accounting Standards Board or the Securities and Exchange Commission, or the SEC, may change the financial accounting and reporting standards that govern the preparation of our financial statements. Such changes may result in us being subject to new or changing accounting and reporting standards. In addition, the bodies that interpret the accounting standards (such as banking regulators or outside auditors) may change their interpretations or positions on how these standards should be applied. These changes may be beyond our control, can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retrospectively, or apply an existing standard differently, also retrospectively, in each case resulting in our needing to revise or restate prior period financial statements.

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

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information furnished to us by or on behalf of customers and counterparties, including financial statements and other financial information. We also may rely on representations of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. In deciding whether to extend credit, we may rely upon our customers’ representations that their financial statements conform to GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. We also may rely on customer representations and certifications, or other audit or accountants’ reports, with respect to the business and financial condition of our clients. Our financial condition, results of operations, financial reporting and reputation could be negatively affected if we rely on materially misleading, false, inaccurate or fraudulent information.

Our small to medium-sized business and entrepreneurial customers may have fewer financial resources than larger entities to weather a downturn in the economy, which may impair a borrower’s ability to repay a loan, and such impairment could adversely affect our results of operations and financial condition.

We focus our business development and marketing strategy primarily to serve the banking and financial services needs of small to medium-sized businesses and entrepreneurs. These small to medium-sized businesses and entrepreneurs may have fewer financial resources in terms of capital or borrowing capacity than larger entities. In general, if economic conditions negatively impact the Florida market generally and small to medium-sized businesses are adversely affected, our results of operations and financial condition may be negatively affected.

Our risk management framework may not be effective in mitigating risks and/or losses to us.

Our risk management framework is comprised of various processes, systems and strategies, and is designed to manage the types of risk to which we are subject, including, among others, credit, market, liquidity, interest rate and compliance. Our framework also includes financial or other modeling methodologies that involve management assumptions and judgment. Our risk management framework may not be effective under all circumstances or that it will adequately mitigate any risk or loss to us. If our framework is not effective, we could suffer unexpected losses and our business, financial condition, results of operations or prospects could be materially and adversely affected. We may also be subject to potentially adverse regulatory consequences.

If third parties infringe upon our intellectual property or if we were to infringe upon the intellectual property of third parties, we may expend significant resources enforcing or defending our rights or suffer competitive injury.

We rely on a combination of patent, copyright, trademark, trade secret laws and confidentiality provisions to establish and protect our proprietary rights, including those created by C1 Labs. If we fail to successfully maintain, protect and enforce our intellectual property rights, our competitive position could suffer. Similarly, if we were to infringe on the intellectual property rights of others, our competitive position could suffer. Third parties may challenge, invalidate, circumvent, infringe or misappropriate our intellectual property, or such intellectual property may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive advantages, which could result in costly redesign efforts, discontinuance of certain product or service offerings or other competitive harm. We may also be required to spend significant resources to monitor and police our intellectual property rights. Others, including our competitors may independently develop similar technology, duplicate our products or services or design around our intellectual property, and in such cases we could not assert our intellectual property rights against such parties. Further, our contractual arrangements may not effectively prevent disclosure of our confidential information or provide an adequate remedy in the event of unauthorized disclosure of our confidential or proprietary information. We may have to litigate to enforce or determine the scope and enforceability of our intellectual property rights, trade secrets and know-how, which could be time-consuming and expensive, could cause a diversion of resources and may not prove successful. The loss of intellectual property protection or the inability to obtain rights with respect to third-party intellectual property could harm our business and ability to compete. In addition, because of the rapid pace of technological change in our industry, aspects of our business and our products and services rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms or at all.

In some instances, litigation may be necessary to enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties that our products, services or technology infringe or otherwise violate their intellectual property or proprietary rights. Third parties may have, or may eventually be issued, patents that could be infringed by our products, services or technology. Any of these third parties could bring an infringement claim against us with respect to our products, services or technology. We may also be subject to third-party infringement, misappropriation, breach or other claims with respect to copyright, trademark, license usage or other intellectual property rights. In addition, in recent years, individuals and groups, including patent holding companies have been purchasing intellectual property assets in order to make claims of infringement and attempt to extract settlements from companies in the banking and financial services industry. Any litigation or claims brought by or against us, whether with or without merit, could result in substantial costs to us and divert the attention of our management, which could harm our business and results of operations. In addition, any intellectual property litigation or claims against us could result in the loss or compromise of our intellectual property and proprietary rights, subject us to significant liabilities including damage awards, result in an injunction prohibiting us from marketing or selling certain of our services, require us to redesign affected products or services, or require us to seek licenses which may only be available on unfavorable terms, if at all, any of which could harm our business and results of operations.

We are dependent on our information technology and telecommunications systems and third-party servicers, and systems failures, interruptions and security breaches could result in serious reputational harm to our business and have an adverse effect on our financial condition and results of operations.

Our business is highly dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems and third-party servicers. We outsource many of our major systems, such as data processing, loan servicing and deposit processing systems. In particular, we rely almost exclusively on FiServ, Inc. for our information management systems. The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt our operations. Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions. If sustained or repeated, a system failure or service denial could result in a deterioration of our ability to process new and renewal loans or gather deposits and provide customer service, compromise our ability to operate effectively, result in potential noncompliance with applicable laws or regulations, damage our reputation, result in a loss of customer business and/or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

Failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers, including as a result of cyber-attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses. As a financial institution, we depend on our ability to process, record and monitor a large number of customer transactions on a continuous basis. As customer, public and regulatory expectations regarding operational and information security have increased, our operational systems and infrastructure must continue to be safeguarded and monitored for potential failures, disruptions and breakdowns. Our business, financial, accounting, data processing systems or other operating systems and facilities may stop operating properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control. For example, there could be sudden increases in customer transaction volume, electrical or telecommunications outages, natural disasters such as earthquakes, tornadoes and hurricanes, disease pandemics, events arising from local or larger scale political or social matters, including terrorist acts and, as described below, cyber-attacks. Although we have business continuity plans and other safeguards in place, our business operations may be adversely affected by significant and widespread disruption to our physical infrastructure or operating systems that support our businesses and customers.

Information security risks for financial institutions have generally increased in recent years in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists, and other external parties. As noted above, our operations rely on the secure processing, transmission and storage of confidential information in our computer systems and networks. In addition, to access our products and services, our customers may use personal smartphones, tablet PCs, and other mobile devices that are beyond our control systems. Our technologies, systems, networks, and our customers’ devices may become the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our customers’ confidential, proprietary and other information, or otherwise disrupt our or our customers’ or other third parties’ business operations. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

We are under continuous threat of loss due to hacking and cyber-attacks, especially as we continue to expand customer capabilities to utilize internet and other remote channels to transact business. Two of the most significant cyber-attack risks that we face are e-fraud and loss of sensitive customer data. Loss from e-fraud occurs when cybercriminals breach and extract funds directly from customer or our accounts. The attempts to breach sensitive customer data, such as account numbers and social security numbers, are less frequent but could present significant reputational, legal and/or regulatory costs to us if successful. Our risk and exposure to these matters remains heightened because of the evolving nature and complexity of these threats from cybercriminals and hackers, our plans to continue to provide internet banking and mobile banking channels, and our plans to develop additional remote connectivity solutions to serve our customers. While we have not experienced any material losses relating to cyber-attacks or other information security breaches to date, we may suffer such losses in the future. The occurrence of any cyber-attack or information security breach could result in potential liability to clients, reputational damage, damage to our competitive position and the disruption of our operations, all of which could adversely affect our business, financial condition or results of operations.

We are subject to certain operational risks, including customer or employee fraud.

Employee error and employee and customer misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of our customers or improper use of confidential information. It is not always possible to prevent employee error and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Employee error could also subject us to financial claims for negligence.

If our internal controls fail to prevent or detect an occurrence, or if any resulting loss is not insured, exceeds applicable insurance limits or if insurance coverage is denied or not available, it could have a material adverse effect on our business, financial condition and results of operations.

We are subject to environmental liability risk associated with lending activities.

A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we may foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Although we have policies and procedures to perform an environmental review before initiating any foreclosure action on nonresidential real property, these reviews may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our financial condition and results of operations.

We may make future acquisitions, which may be restricted by applicable regulation, difficult to integrate, divert management resources, result in unanticipated costs, or dilute our stockholders.

Part of our continuing business strategy is to make acquisitions of, or investments in, companies that complement our current position or offer growth opportunities.

The Bank Holding Company Act of 1956, as amended, or the BHCA and federal and Florida state banking laws restrict the activities that the Company and the Bank may lawfully conduct, whether directly or indirectly through acquisitions, subsidiaries and certain interests in other companies. These laws also affect the ability to effect a change of control of the Company or another bank holding company. Certain acquisitions may be subject to regulatory approval, and we may not receive timely regulatory approval for future acquisitions. Changes in the number or scope of permissible activities under applicable law could have an adverse effect on our ability to realize our strategic goals.

Furthermore, future acquisitions could pose numerous risks to our operations, including:

we may have difficulty integrating the purchased operations;

we may incur substantial unanticipated integration costs;

assimilating the acquired businesses may divert significant management attention and financial resources from our other operations and could disrupt our ongoing business;

acquisitions could result in the loss of key employees, particularly those of the acquired operations;

we may have difficulty retaining or developing the acquired businesses’ customers;

acquisitions could adversely affect our existing business relationships with customers;

we may be unable to effectively compete in the markets serviced by the acquired bank;

we may fail to realize the potential cost savings or other financial benefits and/or the strategic benefits of the acquisitions; and

we may incur liabilities from the acquired businesses and we may not be successful in seeking indemnification for such liabilities or claims.

In connection with these acquisitions or investments, we could incur debt, amortization expenses related to intangible assets or large and immediate write-offs, assume liabilities, or issue stock that would dilute our current stockholders’ percentage of ownership. We may not be able to complete acquisitions or integrate the operations, products or personnel gained through any such acquisition without a material adverse effect on our business, financial condition and results of operations.

The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business, particularly after we are no longer an “emerging growth company.”

We are required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory requirements is time-consuming and results in increased costs to us and could have a negative effect on our business, financial condition and results of operations.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and requirements of the Sarbanes-Oxley Act. We are inexperienced with these reporting and accounting requirements, and as such these requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we have committed significant resources, hired additional staff and provided additional management oversight. We have implemented additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. Sustaining our growth also will require us to commit additional management, operational and financial resources to identify new professionals to join our firm and to maintain appropriate operational and financial systems to adequately support expansion. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations.

As an “emerging growth company” as defined in the JOBS Act, we take advantage of certain temporary exemptions from various reporting requirements including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. While at June 30, 2015, December 31, 2014 and December 31, 2013 we had adopted all new accounting standards that could affect the comparability of our financial statements to those of other public entities, we may elect to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies.

When these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring compliance with them. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.

Hurricanes or other adverse weather events would negatively affect our local economies or disrupt our operations, which would have an adverse effect on our business or results of operations.

Our market area is susceptible to natural disasters, such as hurricanes, tropical storms, other severe weather events and related flooding and wind damage. These natural disasters could negatively impact regional economic conditions, disrupt operations, cause a decline in the value or destruction of mortgaged properties and an increase in the risk of delinquencies, foreclosures or loss on loans originated by us, damage our banking facilities and offices, result in a decline in local loan demand and our loan originations and negatively impact our growth strategy. We cannot predict whether or to what extent damage that may be caused by future natural disasters will affect our operations or the economies in our current or future market areas. Our business or results of operations may be adversely affected by these and other negative effects of natural disasters.

We are or may become involved from time to time in suits, legal proceedings, information-gathering requests, investigations and proceedings by governmental and self-regulatory agencies that may lead to adverse consequences.

Many aspects of our business involve substantial risk of legal liability. We have been named or threatened to be named as defendants in various lawsuits arising from our business activities (and in some cases from the activities of companies we have acquired). In addition, from time to time, we are, or may become, the subject of governmental and self-regulatory agency information-gathering requests, reviews, investigations and proceedings and other forms of regulatory inquiry, including by bank regulatory agencies, the SEC and law enforcement authorities. The results of such proceedings could lead to significant civil or criminal penalties, including monetary penalties, damages, adverse judgments, settlements, fines, injunctions, restrictions on the way in which we conduct our business, or reputational harm.

Although we establish accruals for legal proceedings when information related to the loss contingencies represented by those matters indicates both that a loss is probable and that the amount of loss can be reasonably estimated, we do not have accruals for all legal proceedings where we face a risk of loss. In addition, due to the inherent subjectivity of the assessments and unpredictability of the outcome of legal proceedings, amounts accrued may not represent the ultimate loss to us from the legal proceedings in question. Thus, our ultimate losses may be higher, and possibly significantly so, than the amounts accrued for legal loss contingencies, which could adversely affect our financial condition and results of operations.

Risks Related to Our Regulatory Environment

We are subject to regulation, which increases the cost and expense of regulatory compliance and therefore reduces our net income and may restrict our growth and ability to acquire other financial institutions.

As a bank holding company under federal law, we are subject to regulation under the BHCA, and the examination and reporting requirements of the Federal Reserve. In addition to supervising and examining us, the Federal Reserve, through its adoption of regulations implementing the BHCA, places certain restrictions on the activities that are deemed permissible for bank holding companies to engage in. Changes in the number or scope of permissible activities could have an adverse effect on our ability to realize our strategic goals.

As a Florida state-chartered bank that is not a member of the Federal Reserve System, the Bank is separately subject to regulation by both the FDIC and the Florida Office of Financial Regulation, or OFR. The FDIC and OFR regulate numerous aspects of the Bank’s operations, including adequate capital and financial condition, permissible types and amounts of extensions of credit and investments, permissible non-banking activities and restrictions on dividend payments. The Bank may undergo periodic examinations by the FDIC and OFR. Following such examinations, the Bank may be required, among other things, to change its asset valuations or the amounts of required loan loss allowances or to restrict its operations, which could adversely affect our results of operations.

Supervision, regulation, and examination of the Company and the Bank by the bank regulatory agencies are intended primarily for the protection of consumers, bank depositors and the Deposit Insurance Fund of the FDIC, rather than holders of our common stock.

Particularly as a result of new regulations and regulatory agencies under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, we may be required to invest significant management attention and resources to evaluate and make any changes necessary to comply with applicable laws and regulations. This allocation of resources, as well as any failure to comply with applicable requirements, may negatively impact our results of operations and financial condition.

Changes in laws, government regulation and monetary policy may have a material effect on our results of operations.

Financial institutions have been the subject of significant legislative and regulatory changes and may be the subject of further significant legislation or regulation in the future, none of which is within our control. Significant new laws or regulations or changes in, or repeals of, existing laws or regulations, including those with respect to federal and state taxation, may cause our results of operations to differ materially. In addition, the costs and burden of compliance could adversely affect our ability to operate profitably. Further, federal monetary policy significantly affects our credit conditions, as well as for our borrowers, particularly as implemented through the Federal Reserve System, primarily through open market operations in U.S. government securities, the discount rate for bank borrowings and reserve requirements. A material change in any of these conditions could have a material impact on us or our borrowers, and therefore on our results of operations.

The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 may have a material effect on our operations.

On July 21, 2010, President Obama signed into law the Dodd-Frank Act, which imposes significant regulatory and compliance changes. The key effects of the Dodd-Frank Act on our business are, or may include:

increases in regulatory capital requirements and additional restrictions on the types of instruments that may satisfy such requirements;

creation of new government regulatory agencies (particularly the Consumer Financial Protection Bureau, which will develop and enforce rules for bank and non-bank providers of consumer financial products);

changes to deposit insurance assessments;

regulation of debit interchange fees we earn;

changes in retail banking regulations, including potential limitations on certain fees we may charge;

changes in regulation of consumer mortgage loan origination and risk retention; and

changes in corporate governance requirements for public companies.

In addition, the Dodd-Frank Act restricts the ability of banks to engage in certain proprietary trading or to sponsor or invest in private equity or hedge funds. The Dodd-Frank Act also contains provisions designed to limit the ability of insured depository institutions, their holding companies and their affiliates to conduct certain swaps and derivatives activities and to take certain principal positions in financial instruments.

Some provisions of the Dodd-Frank Act became effective immediately upon its enactment. Many provisions, however, required or will require regulations to be promulgated by various federal agencies in order to be implemented, some of which have been enacted or proposed by the applicable federal agencies. The changes resulting from the Dodd-Frank Act may impact the profitability of our business activities, require changes to certain of our business practices, impose upon us more stringent capital, liquidity and leverage requirements or otherwise adversely affect our business. These changes may also require us to invest significant management attention and resources to evaluate and make any changes necessary to comply with new statutory and regulatory requirements. Failure to comply with the new requirements may negatively impact our results of operations and financial condition. While we cannot predict what effect any presently contemplated or future changes in the laws or regulations or their interpretations would have on us, these changes could be materially adverse to investors in our common stock.

As a result of the Dodd-Frank Act and recent rulemaking, we will become subject to more stringent capital requirements.

Pursuant to the Dodd-Frank Act, in July 2013, the federal banking agencies adopted final rules, or the U.S. Basel III Capital Rules, to update their general risk-based capital and leverage capital requirements to incorporate agreements reflected in the Third Basel Accord adopted by the Basel Committee on Banking Supervision, or Basel III Capital Standards, as well as the requirements of the Dodd-Frank Act. While we are continuing to prepare for the impact of the U.S. Basel III Capital Rules, the U.S. Basel III Capital Rules may still have a material impact on our business, financial condition and results of operations. In addition, the failure to meet the established capital requirements could result in one or more of our regulators placing limitations or conditions on our activities or restricting the commencement of new activities, and such failure could subject us to a variety of enforcement remedies available to the federal regulatory authorities, including limiting our ability to pay dividends, issuing a directive to increase our capital and terminating our FDIC deposit insurance.

Our ability to raise additional capital, when and if needed, will depend on conditions in the capital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry and market condition, and governmental activities, many of which are outside our control, and on our financial condition and performance. Accordingly, we may not be able to raise additional capital if needed or on terms acceptable to us. If we fail to meet these capital and other regulatory requirements, our financial condition, liquidity and results of operations would be materially and adversely affected.

Our failure to meet applicable regulatory capital requirements, or to maintain appropriate capital levels in general, could affect customer and investor confidence, our ability to grow, our costs of funds and FDIC insurance costs, our ability to pay dividends on common stock, our ability to make acquisitions, and our business, results of operations and financial conditions, generally.

We may be required to contribute capital or assets to the Bank that could otherwise be invested or deployed more profitably elsewhere.

Federal law and regulatory policy impose a number of obligations on bank holding companies that are designed to reduce potential loss exposure to the depositors of insured depository subsidiaries and to the FDIC’s deposit insurance fund. For example, a bank holding company is required to serve as a source of financial strength to its insured depository subsidiaries and to commit financial resources to support such institutions where it might not do so otherwise, even if we would not ordinarily do so and even if such contribution is to our detriment or the detriment of our stockholders. These situations include guaranteeing the compliance of an “undercapitalized” bank with its obligations under a capital restoration plan.

A capital injection may be required at times when we do not have the resources to provide it, and therefore we may be required to issue common stock or debt. Issuing additional shares of common stock would dilute our current stockholders’ percentage of ownership and could cause the price of our common stock to decline. If we are required to issue debt, and in the event of a bankruptcy by the Company, the bankruptcy trustee would assume any commitment by the Company to a federal bank regulatory agency to maintain the capital of the Bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the Company’s general unsecured creditors, including the holders of any note obligations. Thus, any borrowing that must be done by the Company in order to make the required capital injection becomes more difficult and expensive and would adversely impact the Company’s cash flows, financial condition, results of operations and prospects.

New and future rulemaking by the Consumer Financial Protection Bureau and other regulators, as well as enforcement of existing consumer protection laws, may have a material effect on our operations and operating costs.

The Consumer Financial Protection Bureau, or the CFPB, has the authority to implement and enforce a variety of existing federal consumer protection statutes and to issue new regulations and, with respect to institutions of our size, has exclusive examination and primary enforcement authority with respect to such laws and regulations. In some cases, regulators such as the FTC and the Department of Justice also retain certain rulemaking or enforcement authority, and we also remain subject to certain state consumer protection laws. As an independent bureau within the Federal Reserve, the CFPB may impose requirements more severe than the previous bank regulatory agencies. The CFPB has placed significant emphasis on consumer complaint management and has established a public consumer complaint database to encourage consumers to file complaints they may have against financial institutions. We are expected to monitor and respond to these complaints, including those that we deem frivolous, and doing so may require management to reallocate resources away from more profitable endeavors.

Pursuant to the Dodd-Frank Act, the CFPB issued a series of final rules in January 2013 related to mortgage loan origination and mortgage loan servicing. These final rules, most provisions of which became effective January 10, 2014, prohibit creditors, such as the Bank, from extending mortgage loans without regard for the consumer’s ability to repay and add restrictions and requirements to mortgage origination and servicing practices. In addition, these rules restrict the application of prepayment penalties and compensation practices relating to mortgage loan underwriting. Compliance with these rules will likely increase our overall regulatory compliance costs and require us to change our underwriting practices. Moreover, these rules may adversely affect the volume of mortgage loans that we underwrite and may subject the Bank to increased potential liability related to its residential loan origination activities.

Banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions to which we become subject as a result of such examinations could materially and adversely affect us.

Florida and federal banking agencies periodically conduct examinations of our business, including compliance with laws and regulations. Accommodating such examinations may require management to reallocate resources, which would otherwise be used in the day-to-day operation of other aspects of our business. If, as a result of an examination, a Florida or federal banking agency were to determine that the financial condition, capital resources, allowance for loan and lease losses, asset quality, earnings prospects, management, liquidity or other aspects of our operations had become unsatisfactory, or that the Company or its management was in violation of any law or regulation, it may take a number of different remedial actions as it deems appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to assess civil monetary penalties against us, our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance. If we become subject to such regulatory actions, we could be materially and adversely affected.

Florida financial institutions face a higher risk of noncompliance and enforcement actions with respect to the Bank Secrecy Act and other anti-money laundering statutes and regulations.

Like all U.S. financial institutions, we are subject to monitoring requirements under federal law, including anti-money laundering, or AML, and Bank Secrecy Act, or BSA, matters. Since September 11, 2001, banking regulators have intensified their focus on AML and BSA compliance requirements, particularly the AML provisions of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the USA PATRIOT Act. There is also increased scrutiny of compliance with the rules enforced by the U.S. Treasury Department’s Office of Foreign Assets Control, or OFAC. Moreover, we operate in areas designated as High Intensity Financial Crime Areas and High Intensity Drug Trafficking Areas. Since 2004, federal banking regulators and examiners have been extremely aggressive in their supervision and examination of financial institutions located in the state of Florida with respect to institutions’ BSA and AML compliance. Consequently, a number of formal enforcement actions have been issued against Florida financial institutions. Although we have adopted policies, procedures and controls to comply with the BSA and other AML statutes and regulations, this aggressive supervision and examination and increased likelihood of enforcement actions may increase our operating costs, which could negatively affect our results of operation and reputation.

We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties.

Federal and state fair lending laws and regulations, such as the Equal Credit Opportunity Act and the Fair Housing Act, impose nondiscriminatory lending requirements on financial institutions. The Department of Justice, Consumer Financial Protection Bureau and other federal and state agencies are responsible for enforcing these laws and regulations. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. A successful challenge to our performance under the fair lending laws and regulations could adversely impact our rating under the Community Reinvestment Act, or CRA, and result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief and imposition of restrictions on merger and acquisition activity and restrictions on expansion activity, which could negatively impact our reputation, business, financial condition and results of operations.

Risks Related to Our Common Stock

We expect that our stock price will fluctuate significantly, and you may not be able to resell your shares at or above the price of your investment.

The trading price of our common stock is likely to be volatile and subject to wide price fluctuations in response to various factors, including:

market conditions in the broader stock market in general, or in our industry in particular;

actual or anticipated fluctuations in our quarterly financial and operating results;

introduction of new products and services by us or our competitors;

issuance of new or changed securities analysts’ reports or recommendations;

sales of large blocks of our stock;

additions or departures of key personnel;

regulatory developments;

litigation and governmental investigations; and

economic and political conditions or events.

These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business.

The trading market for our common stock will also be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, our stock price could decline

If a substantial number of shares become available for sale and are sold in a short period of time, the market price of our common stock could decline.

If substantial amounts of our common stock are sold in a short period of time, the market price of our common stock could decrease significantly. The perception that our principal stockholders (Marcelo Faria de Lima, Erwin Russel, Marcio Camargo and Trevor Burgess), who collectively own approximately 57.9% of the outstanding shares of our common stock, might sell shares of common stock could also depress our market price. The market price of shares of our common stock may drop significantly because the restrictions on resale by our existing stockholders have lapsed. A decline in the price of shares of our common stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity securities.

Our principal stockholders have historically controlled, and in the future will continue to control us.

Our principal stockholders (Marcelo Faria de Lima, Erwin Russel, Marcio Camargo and Trevor Burgess) collectively own approximately 57.9% of the outstanding shares of our common stock. As a result, these stockholders, acting together, are able to influence or control matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other extraordinary transactions. Our principal stockholders are also business partners in business ventures in addition to our company. They may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. In addition, a dispute among these individuals in connection with the Company or another business venture could impact their relationship at the Company and, because of their prominence within the Company, the Company itself. The concentration of ownership may also have the effect of delaying, preventing or deterring a change of control of the Company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.

There are substantial regulatory limitations on changes of control of bank holding companies.

With certain limited exceptions, federal regulations prohibit a person or company or a group of persons deemed to be “acting in concert” from, directly or indirectly, acquiring more than 10% (5% if the acquirer is a bank holding company) of any class of our voting stock or obtaining the ability to control in any manner the election of a majority of our directors or otherwise direct the management or policies of our company without prior notice or application to and the approval of the Federal Reserve. Accordingly, prospective investors need to be aware of and comply with these requirements, if applicable, in connection with any purchase of shares of our common stock. These provisions effectively inhibit certain mergers or other business combinations, which, in turn, could adversely affect the market price of our common stock.

We are currently exempt from certain corporate governance requirements since we are a “controlled company” within the meaning of NYSE rules and, as a result, you will not have the protections afforded by these corporate governance requirements.

Our principal stockholders (Marcelo Faria de Lima, Erwin Russel, Marcio Camargo and Trevor Burgess) collectively hold a majority of our common stock. As a result, we are considered a “controlled company” for the purposes of the listing requirements of the NYSE. Under these rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements of the NYSE, including the requirements that our board of directors, our executive compensation committee and our directors’ nominating and corporate governance committee meet the standard of independence established by those corporate governance requirements. We intend to continue to avail ourselves of certain of these exemptions. The independence standards are intended to ensure that directors who meet the independence standard are free of any conflicting interest that could influence their actions as directors. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the exchange on which our common stock is listed.

We have the ability to incur debt and pledge our assets, including our stock in the Bank, to secure that debt.

We have the ability to incur debt and pledge our assets to secure that debt. Absent special and unusual circumstances, a holder of indebtedness for borrowed money has rights that are superior to those of holders of common stock. For example, interest must be paid to the lender before dividends can be paid to the stockholders, and loans must be paid off before any assets can be distributed to stockholders if we were to liquidate. Furthermore, we would have to make principal and interest payments on our indebtedness, which could reduce our profitability or result in net losses on a consolidated basis even if the Bank were profitable.

Shares of the Company’s common stock are not insured deposits and may lose value.

The shares of the Company’s common stock are not bank deposits and will not be insured or guaranteed by the FDIC or any other government agency.

The laws that regulate our operations are designed for the protection of depositors and the public, not our stockholders.

The federal and state laws and regulations applicable to our operations give regulatory authorities extensive discretion in connection with their supervisory and enforcement responsibilities, and generally have been promulgated to protect depositors and the FDIC’s Deposit Insurance Fund and not for the purpose of protecting stockholders. These laws and regulations can materially affect our future business. Laws and regulations now affecting us may be changed at any time, and the interpretation of such laws and regulations by bank regulatory authorities is also subject to change.

Future changes in laws and regulations or changes in their interpretation may also adversely affect our business. Legislative and regulatory changes may increase our cost of doing business or otherwise adversely affect us and create competitive advantages for non-bank competitors.

Applicable laws and regulations restrict both the ability of the Bank to pay dividends to the Company and the ability of the Company to pay dividends to our stockholders.

Both the Company and the Bank are subject to various regulatory restrictions relating to the payment of dividends. In addition, the Federal Reserve has the authority to prohibit bank holding companies from engaging in unsafe or unsound practices in conducting their business. These federal and state laws, regulations and policies generally look to factors such as previous results and net income, capital needs, asset quality, existence of enforcement or remediation proceedings, and overall financial condition.

For the foreseeable future, the majority, if not all, of the Company’s revenue will be from any dividends paid to the Company by the Bank. Accordingly, our ability to pay dividends also depends on the ability of the Bank to pay dividends to us. Furthermore, the present and future dividend policy of the Bank is subject to the discretion of its board of directors.

We cannot guarantee that the Company or the Bank will be permitted by financial condition or applicable regulatory restrictions to pay dividends, that the board of directors of the Bank will elect to pay dividends to us, nor can we guarantee the timing or amount of any dividend actually paid.

Anti-takeover protections under the Florida Business Corporation Act, or the FBCA, and other factors will make it more difficult to realize the value of an investment in the Company.

In general, the three principal ways that the stockholders of any company can realize a return on their investment are (i) to receive distributions (i.e., dividends) from the Company, (ii) to sell their individual ownership interests to a third party, or (iii) to participate in a company-wide transaction in which they are able to sell their ownership interests, or an “exit event,” regardless of whether the exit event is voluntary (such as a friendly merger) or involuntary (such as a hostile takeover). There are significant impediments to the ability of a stockholder of the Company to realize a return on his or her investment in any of those ways. We do not intend to declare or pay dividends in the foreseeable future.

We do not anticipate paying any cash dividends in the foreseeable future.

We currently intend to retain our future earnings, if any, for the foreseeable future, to repay indebtedness and to fund the development and growth of our business. We do not intend to pay any dividends to holders of our common stock. As a result, capital appreciation in the price of our common stock, if any, will be your only source of gain on an investment in our common stock.

Future equity issuances could result in dilution, which could cause our common stock price to decline.

We are generally not restricted from issuing additional shares of our common stock up to the 100 million shares authorized in our certificate of formation. We may issue additional shares of our common stock in the future pursuant to current or future employee stock option plans, upon exercise of warrants or in connection with future acquisitions or financings. If we choose to raise capital by selling shares of our common stock or securities convertible into common stock for any reason, the issuance would have a dilutive effect on the holders of our common stock and could have a material negative effect on the market price of our common stock.

Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.

We are not currently required to comply with SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal controls over financial reporting for that purpose. We will be required to comply with these rules upon ceasing to be an “emerging growth company” as defined in the JOBS Act. However, we are required to perform our own assessment of the effectiveness of our internal controls over financial reporting and prepare a report on this assessment beginning with our Form 10-K for the year ended December 31, 2015.

When evaluating our internal controls over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. We cannot be certain as to the timing of completion of our evaluation, testing and any remediation actions or the impact of the same on our operations. If we are not able to implement the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or with adequate compliance, our independent registered public accounting firm may issue an adverse opinion due to ineffective internal controls over financial reporting, and we may be subject to sanctions or investigation by regulatory authorities, such as the SEC. As a result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, we may be required to incur costs in improving our internal control system and the hiring of additional personnel. Any such action could negatively affect our results of operations and cash flows.

We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

As an “emerging growth company,” as defined in the JOBS Act, we have elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make our financial statements not comparable with those of another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period because of the potential differences in accounting standards used.

We cannot predict if investors will find our common stock less attractive as a result of our election to rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits filed or furnished with this quarterly report are shown on the Exhibit List that follows the signatures to this report, which list is incorporated herein by reference.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

C1 FINANCIAL, INC.

Signature	Title	Date

/s/ Cristian A. Melej	Chief Financial Officer	July 24, 2015
Cristian A. Melej	(Principal Financial Officer)

Exhibit Index***

Number		Exhibit Title

31.1*		Certification Statement of Chief Executive Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification Statement of Chief Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**		Certification Statement of Chief Executive Officer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**		Certification Statement of Chief Financial Officer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101*		Interactive Data Files

*		Filed herewith.

**		Furnished herewith.

***		Reports filed under the Securities Exchange Act (Form 10-K, Form 10-Q and Form 8-K) are under File No. 001-36595.

C1 Financial, Inc. - FORM 10-Q - July 24, 2015

Attached files

C1 Financial, Inc. Reports