FCB FINANCIAL HOLDINGS, INC. - FORM 10-Q

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - FCB FINANCIAL HOLDINGS, INC.	a2018q3ex322.htm
EX-32.1 - EXHIBIT 32.1 - FCB FINANCIAL HOLDINGS, INC.	a2018q3ex321.htm
EX-31.2 - EXHIBIT 31.2 - FCB FINANCIAL HOLDINGS, INC.	a2018q3ex312.htm
EX-31.1 - EXHIBIT 31.1 - FCB FINANCIAL HOLDINGS, INC.	a2018q3ex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



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

For the quarterly period ended September 30, 2018



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

For the transition period from to

Commission file number 001-36586

FCB FINANCIAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)



Delaware	001-36586	27-0775699
(State or other jurisdiction of incorporation)	(Commission file number)	(IRS Employer Identification Number)

2500 Weston Road, Suite 300

Weston, Florida 33331

(Address of principal executive offices)

(954) 984-3313

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.



Large accelerated filer	ý	Accelerated filer	¨	Smaller reporting company	¨

Non-accelerated filer (Do not check if a smaller reporting company)	¨			Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

As of November 1, 2018, the registrant had 46,827,114 shares of Class A Common Stock outstanding.

FCB FINANCIAL HOLDINGS, INC.

FORM 10-Q

INDEX




PART I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)
	Consolidated Balance Sheets	2
	Consolidated Statements of Income	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Statements of Changes in Stockholders’ Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	74

Item 4.	Controls and Procedures	74

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	76

Item 1A.	Risk Factors	76

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

Item 3.	Default Upon Senior Securities	76

Item 4.	Mine Safety Disclosures	76

Item 5.	Other Information	76

Item 6.	Exhibits	77

	Signatures	78

PART I. FINANCIAL INFORMATION

FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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



	September 30, 2018			December 31, 2017
Assets:
Cash and due from banks	$	76,633		$	60,787
Interest-earning deposits in other banks	123,876			55,134
Cash and cash equivalents	200,509			115,921
Investment securities:
Available for sale debt securities, at fair value	2,275,703			2,030,696
Preferred stock and other equity securities, at fair value	71,015			90,107
Federal Home Loan Bank and other bank stock, at cost	65,847			56,881
Total investment securities	2,412,565			2,177,684
Loans held for sale	980			12,736
Loans:
New loans	8,629,402			7,661,385
Acquired loans	687,406			316,399
Allowance for loan losses	(53,148		)	(47,145		)
Loans, net	9,263,660			7,930,639
Premises and equipment, net	42,645			36,144
Other real estate owned	10,534			14,906
Goodwill	139,529			81,204
Core deposit intangible	7,213			3,668
Deferred tax assets, net	40,743			27,043
Bank-owned life insurance	215,421			201,069
Other assets	99,557			76,065
Total assets	$	12,433,356		$	10,677,079
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Transaction accounts:
Noninterest-bearing	$	1,577,741		$	1,236,685
Interest-bearing	4,225,178			4,830,525
Total transaction accounts	5,802,919			6,067,210
Time deposits	4,353,196			2,606,717
Total deposits	10,156,115			8,673,927
Borrowings (including FHLB advances of $750,000 and $670,000, respectively)	825,558			749,113
Other liabilities	74,197			74,867
Total liabilities	11,055,870			9,497,907
Commitments and contingencies (Note 13)
Stockholders’ Equity:
Class A common stock, par value $0.001 per share; 100 million shares authorized; 49,537,170; 47,065,593 issued and 46,809,305; 44,371,104 outstanding	50			47
Class B common stock, par value $0.001 per share; 50 million shares authorized; 192,132; 192,132 issued and 0; 0 outstanding	—			—
Additional paid-in capital	1,040,358			933,960
Retained earnings	439,233			313,645
Accumulated other comprehensive income (loss)	(24,782		)	8,893
Treasury stock, at cost; 2,727,865; 2,694,489 Class A and 192,132; 192,132 Class B common shares	(77,373		)	(77,373		)
Total stockholders’ equity	1,377,486			1,179,172
Total liabilities and stockholders’ equity	$	12,433,356		$	10,677,079

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

FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Interest income:
Interest and fees on loans	$	104,137		$	76,465		$	290,352		$	214,570
Interest and dividends on investment securities	24,425			20,215			68,722			57,697
Other interest income	448			136			1,052			344
Total interest income	129,010			96,816			360,126			272,611
Interest expense:
Interest on deposits	33,300			17,134			85,397			46,277
Interest on borrowings	3,072			3,901			9,089			8,996
Total interest expense	36,372			21,035			94,486			55,273
Net interest income	92,638			75,781			265,640			217,338
Provision for loan losses	2,220			2,871			5,801			6,629
Net interest income after provision for loan losses	90,418			72,910			259,839			210,709
Noninterest income:
Service charges and fees	1,266			941			3,503			2,758
Loan and other fees	5,043			2,831			13,261			8,374
Bank-owned life insurance income	1,439			1,422			4,228			4,250
Income from resolution of acquired assets	202			466			603			1,548
Gain (loss) on sales of other real estate owned	(70		)	(143		)	43			(121		)
Gain (loss) on investment securities	(184		)	690			(1,472		)	1,722
Other noninterest income	1,068			2,218			3,775			8,754
Total noninterest income	8,764			8,425			23,941			27,285
Noninterest expense:
Salaries and employee benefits	23,023			20,860			68,700			62,843
Occupancy and equipment expenses	4,012			3,283			11,872			10,016
Loan and other real estate related expenses	545			837			2,950			3,252
Professional services	3,929			1,390			7,335			4,250
Data processing and network	3,911			3,397			11,494			9,452
Regulatory assessments and insurance	2,564			2,330			7,257			6,691
Amortization of intangibles	371			256			1,035			768
Marketing and promotions	1,768			1,130			4,930			3,423
Other operating expenses	2,205			1,756			6,842			4,880
Total noninterest expense	42,328			35,239			122,415			105,575
Income before income tax expense	56,854			46,096			161,365			132,419
Income tax expense	13,374			13,936			35,052			26,189
Net income	$	43,480		$	32,160		$	126,313		$	106,230
Earnings per share:
Basic	$	0.93		$	0.74		$	2.73		$	2.49
Diluted	$	0.89		$	0.70		$	2.61		$	2.31
Weighted average shares outstanding:
Basic	46,693,707			43,333,947			46,213,176			42,580,426
Diluted	48,804,871			46,189,468			48,472,657			45,960,595

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

FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net income	$	43,480		$	32,160		$	126,313		$	106,230
Other comprehensive income (loss):
Unrealized gains (losses) on available for sale debt securities:
Net unrealized holding gains (losses) on investment securities available for sale, net of taxes of $2,768, $369, $12,017, and $(12,131) respectively	(8,327		)	(598		)	(36,146		)	19,519
Reclassification adjustment for realized (gains) losses on investment securities available for sale included in net income, net of taxes of $(418), $540, $(144), and $787, respectively	1,259			(869		)	433			(1,267		)
Cumulative adjustment from adoption of new accounting standards (1)	—			—			725			—
Net change in unrealized gains (losses) on available for sale debt securities	(7,068		)	(1,467		)	(34,988		)	18,252
Unrealized gains (losses) on derivative instruments:
Net unrealized holding gains (losses) on derivative instruments, net of taxes of $(406), $0, $(437), and $0, respectively	1,220			—			1,313			—
Net change in unrealized gains (losses) on derivative instruments	1,220			—			1,313			—
Net change in accumulated other comprehensive income (loss)	(5,848		)	(1,467		)	(33,675		)	18,252
Total comprehensive income (loss)	$	37,632		$	30,693		$	92,638		$	124,482

(1) Includes adjustments from adoption of ASU 2016-01 and ASU 2018-02. See Note 1 for additional information.

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

FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands, except for share data)



	Common Stock Shares Outstanding				Common Stock Issued				Additional Paid-in Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
	Class A		Class B		Class A		Class B		Additional Paid-in Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balance as of January 1, 2017	40,969,097		197,950		$	44	$	—	$	875,314		$	188,451		$	(77,373	)	$	(3,995	)	$	982,441
Net income	—		—		—		—		—			106,230			—			—			106,230
Exchange of B shares to A shares	197,950		(197,950	)	—		—		—			—			—			—			—
Stock-based compensation and warrant expense	—		—		—		—		5,970			—			—			—			5,970
Stock issued in connection with equity awards and warrants	2,561,255		—		2		—		43,221			—			—			—			43,223
Other	—		—		—		—		(43		)	—			—			—			(43		)
Other comprehensive income (loss)	—		—		—		—		—			—			—			18,252			18,252
Balance as of September 30, 2017	43,728,302		—		$	46	$	—	$	924,462		$	294,681		$	(77,373	)	$	14,257		$	1,156,073
Balance as of January 1, 2018	44,371,104		—		$	47	$	—	$	933,960		$	313,645		$	(77,373	)	$	8,893		$	1,179,172
Net income	—		—		—		—		—			126,313			—			—			126,313
Cumulative adjustment from adoption of new accounting standards (1)	—		—		—		—		—			(725		)	—			725			—
Stock issued in connection with acquisition	1,754,362		—		2		—		94,120			—			—			—			94,122
Stock-based compensation and warrant expense	—		—		—		—		6,635			—			—			—			6,635
Stock issued in connection with equity awards and warrants	724,486		—		1		—		8,059			—			—			—			8,060
Shares surrendered for tax withholding obligations	(40,647	)	—		—		—		(2,066		)	—			—			—			(2,066		)
Other	—		—		—		—		(350		)	—			—			—			(350		)
Other comprehensive income (loss)	—		—		—		—		—			—			—			(34,400		)	(34,400		)
Balance as of September 30, 2018	46,809,305		—		$	50	$	—	$	1,040,358		$	439,233		$	(77,373	)	$	(24,782	)	$	1,377,486

(1) Includes $1.0 million from adoption of ASU 2016-01 and $(1.7) million from adoption of ASU 2018-02. See Note 1 for additional information.

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

FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)



	Nine Months Ended September 30,
	2018			2017
Cash Flows From Operating Activities:
Net income	$	126,313		$	106,230
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses	5,801			6,629
Amortization of intangible assets	1,035			768
Depreciation and amortization of premises and equipment	2,811			2,674
Accretion of discount on loans	(2,051		)	(693		)
Net amortization (accretion) of premium (discount) on investment securities	1,802			1,547
Net amortization (accretion) of premium (discount) on time deposits	(207		)	—
Net amortization (accretion) on FHLB advances and other borrowings	—			(846		)
Impairment of other real estate owned	1,097			437
Impairment of fixed assets HFS	110			—
(Gain) loss on available for sale debt securities	355			(1,722		)
(Gain) loss on sale of loans	(660		)	(3,835		)
(Gain) loss on sale of other real estate owned	(43		)	121
(Gain) loss on sale of premises and equipment	13			(7		)
Unrealized (gain) loss on preferred stock and other equity securities	1,117			—
Stock-based compensation	6,635			5,970
Increase in cash surrender value of BOLI	(4,228		)	(4,250		)
Net change in operating assets and liabilities:
Net change in loans held for sale	1,641			8,353
Net change in other assets	(39		)	(10,164		)
Net change in other liabilities	7,017			25,094
Net cash provided by operating activities	148,519			136,306
Cash Flows From Investing Activities:
Purchase of equity securities	(42		)	—
Purchase of available for sale debt securities	(635,501		)	(656,982		)
Sale of equity securities	18,016			—
Sales of available for sale debt securities	77,705			113,862
Paydown and maturities of available for sale debt securities	259,925			336,303
Purchase of FHLB and other bank stock	(95,966		)	(121,995		)
Sales of FHLB and other bank stock	90,441			111,813
Cash received in acquisition	16,656			—
Net change in loans	(919,001		)	(1,094,190		)
Purchase of loans	(7,382		)	(2,782		)
Proceeds from sale of loans	26,015			234,518
Proceeds from sale of other real estate owned	3,686			2,871
Purchase of premises and equipment	(7,064		)	(1,790		)
Proceeds from the sale of premises and equipment	1,054			34
Proceeds from life insurance	365			3,016
Net cash used in investing activities	(1,171,093		)	(1,075,322		)
Cash Flows From Financing Activities:
Net change in deposits	1,100,062			800,422
Net change in FHLB advances	8,596			195,750
Net change in repurchase agreements	(5,540		)	(71,785		)
Cash paid for withholding taxes on share based payments	(3,666		)	—
Exercise of stock options and warrants	8,060			43,223
Other financing costs	(350		)	(43		)
Net cash provided by financing activities	1,107,162			967,567
Net Change in Cash and Cash Equivalents	84,588			28,551
Cash and Cash Equivalents at Beginning of Period	115,921			83,876
Cash and Cash Equivalents at End of Period	$	200,509		$	112,427

Supplemental Disclosures of Cash Flow Information:
Interest paid	$	92,427		$	55,177
Income taxes paid	24,159			6,122
Supplemental disclosure of noncash investing and financing activities:
Transfer/adjustments of loans to other real estate owned	$	266		$	1,800
Transfers from loans held for sale to portfolio loans	10,683			—
(Purchase) sale of investment securities settled in subsequent period, net	(63,756		)	6,214
See Note 2 regarding non-cash transactions included in the acquisition

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

FCB FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and notes to the consolidated financial statements necessary for a complete presentation of financial position, results of operations, comprehensive income and cash flows in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and should be read in conjunction with the audited consolidated financial statements and the notes thereto for FCB Financial Holdings, Inc. (the “Company”) previously filed with the SEC in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation, have been included. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.

Nature of Operations

The Company is a national bank holding company with two wholly-owned subsidiaries: (i) Florida Community Bank, N.A., a national bank (“Florida Community Bank” or the “Bank”); and (ii) Floridian Custody Services, Inc. ("Custody Services"). Florida Community Bank, headquartered in Weston, Florida, offers a comprehensive range of traditional banking products and services to individual and corporate customers through 51 banking centers located in Florida as of September 30, 2018. Custody Services, headquartered in Davie, Florida, provides clearing and custodian services to deposit brokers and their clients.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, Custody Services and Florida Community Bank, and the Bank’s subsidiaries, which consist of a group of real estate holding companies. Intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The Company’s financial reporting and accounting policies conform to U.S. GAAP. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates subject to significant change include the allowance for loan losses, valuation of and accounting for acquired loans, the carrying value of OREO, the fair value of financial instruments, the valuation of goodwill and other intangible assets, acquisition-related fair value computations, stock-based compensation and deferred taxes.

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which superseded the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific revenue recognition guidance throughout the Accounting Standards Codification. Under ASU No. 2014-09, revenue should be recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the guidance, an entity should 1) identify the contract(s) with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue when the entity satisfies a performance obligation. This guidance should be applied to all contracts with customers except those that are within the scope of other standards. This ASU became effective for the quarter ended March 31, 2018. The Company elected to adopt the new guidance under the modified retrospective approach. Since the Company's revenue is comprised primarily of net interest income from financial instruments that are within the scope of other standards, including loans and securities, the new guidance did not have a material impact upon adoption. In addition, the adoption of this guidance did not result in any material changes to the method of revenue recognition on the components of noninterest income. Accordingly, the adoption of this guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In May 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” The amendments in this ASU do not change the core principle of the guidance in Topic 606. Rather, the amendments in this ASU clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The amendments in this ASU affect the guidance in ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. This ASU became effective for the quarter ended March 31, 2018. The adoption of this guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.” The amendments in this ASU do not change the core principle of the guidance in Topic 606. Rather, the amendments in this ASU clarify the guidance on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. The amendments in this ASU affect the guidance in ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)". This ASU became effective for the quarter ended March 31, 2018. The adoption of this guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” which:


•	Requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.


•	Simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value.


•	Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.


•	Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.


•	Requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.


•	Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.


•	Clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.

An entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption of the ASU. This ASU became effective the for the quarter ended March 31, 2018. As of January 1, 2018, the Company had equity securities in a net pre-tax unrealized gain position of $1.6 million for which $1.0 million, the tax effected balance, was reclassified from other comprehensive income to beginning retained earnings at adoption.

In August 2016, the FASB issued ASU No. 2016-15, "Statement of cash flows (Topic 230): Classification of certain cash receipts and cash payments." The objective of this guidance is to reduce the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. This ASU addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. This ASU became effective for the quarter ended March 31, 2018. The adoption of this guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory." The objective of issuing this ASU is to improve the accounting for the income tax consequences of intra-entity

transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in GAAP. As such, the Board decided that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Consequently, the amendments in this guidance eliminate the exception for an intra-entity transfer of an asset other than inventory. This ASU became effective for the quarter ended March 31, 2018. The adoption of this guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)." The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this ASU do not provide a definition of restricted cash or restricted cash equivalents. This ASU became effective for the quarter ended March 31, 2018. The adoption of this guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In February 2017, the FASB issued ASU No. 2017-05, "Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets." The FASB is issuing this ASU to clarify the scope of Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets, and to add guidance for partial sales of nonfinancial assets. The amendments in this ASU will require all entities to account for the derecognition of a business or nonprofit activity in accordance with Topic 810. The amendments also eliminate several accounting differences between transactions involving assets and transactions involving businesses. This ASU became effective for the quarter ended March 31, 2018. The adoption of this guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In May 2017, the FASB issued ASU No. 2017-09, "Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting." This ASU provides clarity when applying the guidance in Topic 718, specifically relating to a modification of a share-based payment award. Entities should treat changes as modifications unless the fair value, vesting conditions, and classification of the modified awards are unchanged from the conditions immediately before the change. This ASU became effective for the quarter ended March 31, 2018. The adoption of this guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In August 2017, the FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." This ASU improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and makes certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The amendments in this update better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and presentation of hedge results. The Company early adopted ASU 2017-12 during the quarter ended March 31, 2018. The adoption of this guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.

In February 2018, the FASB issued ASU 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This ASU seeks to help entities reclassify certain stranded income tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of 2017 (Tax Reform Act), enacted on December 22, 2017. ASU 2018-02 was issued in response to concerns regarding current guidance in GAAP that requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date, even in situations in which the related income tax effects of items in accumulated other comprehensive income were originally recognized in other comprehensive income, rather than net income, and as a result the stranded tax effects would not reflect the appropriate tax rate. ASU 2018-02 allows an entity to make a reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects, which is the difference between the historical corporate income tax rate of 35.0% and the newly enacted corporate income tax rate of 21.0%. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 31, 2018; however, public business entities are allowed to early adopt ASU 2018-02 in any interim period for which the financial statements have not yet been issued. ASU 2018-02 may be applied either at the beginning of the period (annual or interim) of adoption or retrospectively to each of the period(s) in which the effect of the change in the U.S. federal corporate tax rate in the Tax Reform Act is recognized. As a result of the re-measurement of the Company's deferred tax assets following the enactment of the Tax Reform Act, accumulated other

comprehensive income included $1.7 million of stranded tax effects at December 31, 2017. The Company early adopted ASU 2018-02 during the quarter ended March 31, 2018 and made the election to reclassify the stranded tax effects from accumulated other comprehensive income to retained earnings at the beginning of the period of adoption.

Recently Issued Accounting Pronouncements

In January 2018, the FASB issued ASU No. 2018-01, "Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842." This ASU provides an optional transition practical expedient to not evaluate under Topic 842, existing or expired land easements that were not previously accounted for as leases under the current leases guidance in Topic 840. An entity that elects this practical expedient should evaluate new or modified land easements under Topic 842 beginning at the date that the entity adopts Topic 842. An entity that does not elect this practical expedient should evaluate all existing or expired land easements in connection with the adoption of the new lease requirements in Topic 842 to assess whether they meet the definition of a lease. The amendments in this guidance affect the amendments in ASU 2016-02, which are not yet effective but may be early adopted. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in ASU 2016-02. An entity that early adopted Topic 842 should apply the amendments in this ASU upon issuance. Management does not intend to early adopt this guidance. The Company does not believe the adoption of this guidance will have a material impact on its consolidated financial position, results of operations or cash flows.

In June 2018, the FASB issued ASU 2018-07, "Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting." The amendments of this ASU expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The amendments are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company does not believe the adoption of this guidance will have a material impact on its consolidated financial position, results of operations or cash flows.

In July 2018, the FASB issued ASU 2018-11, "Leases (Topic 842): Targeted Improvements." The amendments of this ASU provide another transition method for the adoption of the new leases standard. Currently, entities are required to adopt the new leases standard using a modified retrospective transition method. The amendments of this ASU provide another transition method by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Additionally, this ASU also provides lessors a practical expedient to not separate nonlease components from the associated lease component, similar to the expedient provided for lessees. The amendments related to separating components of a contract affect the amendments in ASU 2016-02, which are not yet effective but can be early adopted. For entities that have not adopted Topic 842 before the issuance of this ASU, the effective date and transition requirements for the amendments in this ASU related to separating components of a contract are the same as the effective date and transition requirements in ASU 2016-02. Management does not intend to early adopt this guidance. The Company does not believe the adoption of this guidance will have a material impact on its consolidated financial position, results of operations or cash flows.

In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement." The amendments of this ASU modify the disclosure requirements about recurring or nonrecurring fair value measurements required under Topic 820, Fair Value Measurement, and require additional disclosures related to unrealized gains and losses included in other comprehensive income. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this ASU. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. The Company does not believe the adoption of this guidance will have a material impact on its consolidated financial position, results of operations or cash flows.

In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is

a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendments in this ASU is permitted, including adoption in any interim period, for all entities. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company does not believe the adoption of this guidance will have a material impact on its consolidated financial position, results of operations or cash flows.

NOTE 2. BUSINESS ACQUISITIONS

On March 1, 2018, the Company acquired 100% of the outstanding common stock of Floridian Community Holdings, Inc., ("Floridian") the parent company of Floridian Community Bank and Floridian Custody Services, Inc. Under the terms of the acquisition, each share of Floridian common stock was converted into 0.4584 shares of FCB Class A common stock at the effective date. A total of 1,754,362 shares of FCB Class A common stock were issued to holders of Floridian common stock. The Company also paid cash of $7 thousand for fractional shares resulting from the application of the exchange ratio. In addition, the Company incurred a liability of $5.2 million related to Floridian's outstanding stock options that were settled in cash subsequent to the acquisition. The Floridian acquisition will (i) expand the Company's business within demographically attractive markets in southeast Florida; (ii) increase the Company's core deposit base, an important funding source; and (iii) provide the opportunity to sell the Company's broad array of products to Floridians' client base, among other benefits. The results of operations were included in the Company's results beginning on March 1, 2018, the date of acquisition. The fair value of the common shares issued as part of the consideration paid for Floridian was determined using the closing price of the Company's common shares on February 28, 2018. Floridian had total assets of $506.8 million, total liabilities of $465.8 million and operated 5 full-service branches in South Florida as of March 1, 2018. Goodwill of $58.3 million was recognized in the transaction. None of the goodwill recognized is expected to be deductible for income tax purposes.

The Company determined that the acquisition of Floridian constituted a business combination as defined by ASC Topic 805, “Business Combinations”. The acquisition was not considered to be a significant business combination. The assets acquired and liabilities assumed were recorded at their fair values on the date of acquisition. Fair values were determined in accordance with the guidance provided in ASC Topic 820, “Fair Value Measurements”. In many cases, the determination of fair value required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. The Company utilized the assistance of third-party advisors in the determination of fair value for loans, deposits, other real estate owned and deferred tax assets acquired. The Company may incur losses on the acquired loans that are materially different from losses the Company originally projected.

The Company recorded adjustments to the preliminary fair value estimates in the reporting period in which the adjustments were determined. During the nine months ended September 30, 2018, the Company recorded adjustments to the preliminary fair value estimates resulting in a decrease in assets acquired of $858 thousand, liabilities assumed of $1.1 million, and goodwill of $255 thousand. The adjustments were primarily related to a reduction in the estimated fair value of an assumed liability and other receivables. As of September 30, 2018, the Company has finalized its valuation of the Floridian acquisition.

The following table presents a summary of the assets acquired and liabilities assumed in the Floridian acquisition recorded at fair value:



	Acquisition Date Fair Value		Measurement Period Adjustments			Adjusted Acquisition Date Fair Value
	(Dollars in thousands)
Consideration transferred:
Common stock issued	$	94,122	$	—		$	94,122
Liability incurred related to settlement of outstanding stock options	5,198		—			5,198
Total consideration transferred	99,320		—			99,320
Fair value of assets acquired:
Cash and cash equivalents	16,699		(43		)	16,656
Investment securities	38,772		—			38,772
Loans	425,894		—			425,894
Other real estate owned	113		(2		)	111
Core deposit intangible	4,580		—			4,580
Fixed assets	3,425		—			3,425
Deferred tax asset, net	5,043		(239		)	4,804
Bank-owned life insurance	10,489		—			10,489
Other assets	2,678		(574		)	2,104
Total identifiable assets acquired	507,693		(858		)	506,835
Fair value of liabilities assumed:
Deposits	382,333		—			382,333
FHLB advances and other borrowings	73,389		—			73,389
Other liabilities	11,231		(1,113		)	10,118
Total liabilities assumed	466,953		(1,113		)	465,840
Fair value of net assets acquired	40,740		255			40,995
Goodwill resulting from acquisition	$	58,580	$	(255	)	$	58,325

On July 24, 2018, the Company announced the entry into a definitive merger agreement under which it will be acquired by Columbus, Georgia based Synovus Financial Corp. ("Synovus"). Under the terms of the merger agreement, the Company’s shareholders will receive a fixed ratio of 1.055 shares of Synovus common stock for each common share of the Company in an all-stock transaction. The merger agreement has been unanimously approved by both companies’ Boards of Directors and is subject to customary closing conditions, including approval by the shareholders of both companies and by state and federal bank regulators. The Company and Synovus filed notices and applications to obtain the necessary regulatory approvals on August 22, 2018. The Georgia Department of Banking and Finance approvals were received on September 25, 2018.

On October 9, 2018, an action captioned Stephen Bushansky v. FCB Financial Holdings, Inc. et al., Case 1:18-cv-62399-BB, was filed in the United States District Court, Southern District of Florida on behalf of a purported class of FCB’s stockholders against FCB and its current directors. This complaint alleges violations of Sections 14(a) and 20(a) of the Exchange Act. The action seeks, among other things, to enjoin the defendants from consummating the merger until additional information is disclosed to FCB’s stockholders in advance of the FCB special meeting or to rescind the merger or recover damages to the extent the merger is completed.

On October 11, 2018, an action captioned Paul Parshall v. FCB Financial Holdings, Inc. et al., Case 1:18-cv-01570-LPS, was filed in the United States District Court for the District of Delaware on behalf of a purported class of FCB’s stockholders against FCB, its current directors, Synovus and Merger Sub, alleging violations of Sections 14(a) and 20(a) of the Exchange Act. The action seeks, among other things, to cause defendants to disseminate adequate disclosures, to enjoin defendants from consummating the merger, and to rescind the merger or recover damages to the extent the merger is completed. The court has not acted on either of these complaints, and no relief has been granted as of this time.

NOTE 3. INVESTMENT SECURITIES

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



	Amortized Cost		Unrealized				Fair Value
September 30, 2018	Amortized Cost		Gains		Losses		Fair Value
	(Dollars in thousands)
Available for sale debt securities:
U.S. Government agencies and sponsored enterprises obligations	$	86,941	$	—	$	2,709	$	84,232
U.S. Government agencies and sponsored enterprises mortgage-backed securities	627,668		9		23,519		604,158
State and municipal obligations	24,485		66		1,669		22,882
Asset-backed securities	780,250		330		2,258		778,322
Corporate bonds and other debt securities	791,130		7,609		12,630		786,109
Total available for sale debt securities	$	2,310,474	$	8,014	$	42,785	$	2,275,703

	Amortized Cost		Unrealized				Fair Value
December 31, 2017	Amortized Cost		Gains		Losses		Fair Value
	(Dollars in thousands)
Available for sale debt securities: (1)
U.S. Government agencies and sponsored enterprises obligations	$	43,471	$	38	$	671	$	42,838
U.S. Government agencies and sponsored enterprises mortgage-backed securities	600,310		1,716		6,789		595,237
State and municipal obligations	26,766		125		719		26,172
Asset-backed securities	608,340		2,306		100		610,546
Corporate bonds and other debt securities	738,994		18,222		1,313		755,903
Total available for sale debt securities	$	2,017,881	$	22,407	$	9,592	$	2,030,696

(1) To allow for improved comparability, prior year presentation has been modified to remove preferred stock and other equity securities in connection with the adoption of ASU 2016-01.

As part of the Company’s liquidity management strategy, the Company pledges loans and securities to secure borrowings from the Federal Home Loan Bank of Atlanta ("FHLB") and the Federal Reserve Bank of Atlanta ("FRB"). The Company also pledges securities to collateralize public deposits, repurchase agreements and interest rate swaps. The carrying value of all pledged securities totaled $950.4 million and $834.9 million at September 30, 2018 and December 31, 2017, respectively.

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



September 30, 2018	Amortized Cost		Fair Value
	(Dollars in thousands)
Available for sale debt securities:
Due in one year or less	$	57,430	$	57,475
Due after one year through five years	290,655		287,076
Due after five years through ten years	138,696		135,574
Due after ten years	328,834		328,866
U.S. Government agencies and sponsored enterprises obligations, mortgage-backed securities and asset-backed securities	1,494,859		1,466,712
Total available for sale debt securities	$	2,310,474	$	2,275,703

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

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



	Less than 12 Months				12 Months or More				Total
September 30, 2018	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(Dollars in thousands)
Available for sale debt securities:
U.S. Government agencies and sponsored enterprises obligations	$	51,529	$	906	$	32,703	$	1,803	$	84,232	$	2,709
U.S. Government agencies and sponsored enterprises mortgage-backed securities	279,436		8,128		300,994		15,391		580,430		23,519
State and municipal obligations	—		—		20,772		1,669		20,772		1,669
Asset-backed securities	348,117		2,196		7,002		62		355,119		2,258
Corporate bonds and other debt securities	391,610		8,486		91,574		4,144		483,184		12,630
Total available for sale debt securities	$	1,070,692	$	19,716	$	453,045	$	23,069	$	1,523,737	$	42,785



	Less than 12 Months				12 Months or More				Total
December 31, 2017	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(Dollars in thousands)
Available for sale debt securities: (1)
U.S. Government agencies and sponsored enterprises obligations	$	31,518	$	268	$	7,157	$	403	$	38,675	$	671
U.S. Government agencies and sponsored enterprises mortgage-backed securities	207,735		1,836		175,810		4,953		383,545		6,789
State and municipal obligations	192		2		23,813		717		24,005		719
Asset-backed securities	36,542		100		—		—		36,542		100
Corporate bonds and other debt securities	186,052		1,240		10,842		73		196,894		1,313
Total available for sale debt securities	$	462,039	$	3,446	$	217,622	$	6,146	$	679,661	$	9,592

(1) To allow for improved comparability, prior year presentation has been modified to remove preferred stock and other equity securities in connection with the adoption of ASU 2016-01.

At September 30, 2018, the Company’s security portfolio consisted of 355 securities, of which 245 securities were in an unrealized loss position. A total of 137 were in an unrealized loss position for less than 12 months. The unrealized losses for these securities resulted primarily from changes in interest rates and spreads.

The Company monitors its investment securities for other-than-temporary-impairment ("OTTI"). Impairment is evaluated on an individual security basis considering numerous factors, and their relative significance. The Company has evaluated the nature of unrealized losses in the investment securities portfolio to determine if OTTI exists. The unrealized losses relate to changes in market interest rates and market conditions that do not represent credit-related impairments. Furthermore, the Company does not intend to sell nor is it more likely than not that it will be required to sell these investments before the recovery of their amortized cost basis. Management has completed an assessment of each security in an unrealized loss position for credit impairment and has determined that no individual security was other-than-temporarily impaired at September 30, 2018. The following describes the basis under which the Company has evaluated OTTI:

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

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

Asset-Backed Securities and Corporate Bonds & Other Debt Securities:

Securities were generally underwritten in accordance with the Company’s investment standards prior to the decision to purchase, without relying on a bond issuer’s guarantee in making the investment decision. These investments were investment grade as of September 30, 2018 and December 31, 2017 and will continue to be monitored as part of the Company’s ongoing impairment analysis, but are expected to perform in accordance with their terms.

Preferred Stock and Other Equity Securities:

The unrealized losses associated with preferred stock and other equity securities in large U.S. financial institutions are primarily driven by changes in interest rates and spreads. These securities were generally underwritten in accordance with the Company’s investment standards prior to the decision to purchase.

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars in thousands)
Gross realized gains	$	2		$	1,251		$	147		$	1,945
Gross realized losses	(1,248		)	(1,533		)	(1,254		)	(2,739		)
Net realized gains (losses)	$	(1,246	)	$	(282	)	$	(1,107	)	$	(794	)

The Company adopted ASU 2016-01 as of January 1, 2018. This guidance requires investments in equity securities with readily determinable fair values to be measured at fair value, with changes in the fair value recognized as a component of noninterest income in the Company's Consolidated Statements of Income. The Company recognized $1.1 million of unrealized gain and $1.1 million of unrealized loss in noninterest income during the three and nine months ended September 30, 2018, respectively, related to equity securities still held at the end of the period.

NOTE 4. LOANS, NET

The Company’s loan portfolio consists of New and Acquired loans. The Company classifies originated loans and purchased loans not acquired through business combinations that did not show evidence of credit deterioration as New loans. The Company classifies loans acquired through business combinations and purchased loans acquired outside of a business combination that show evidence of credit deterioration as Acquired loans. Loans acquired with deteriorated credit quality since origination are accounted for under ASC 310-30, unless specifically excluded from the scope of ASC 310-30. The remaining portfolio of Acquired loans and those loans excluded from the scope of ASC 310-30 are accounted for under ASC 310-20 and are classified as Non-ASC 310-30 loans.

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



September 30, 2018	ASC 310-30 Loans		Non-ASC 310-30 Loans		New Loans (1)		Total
	(Dollars in thousands)
Real estate loans:
Commercial real estate	$	133,778	$	104,364	$	2,528,748	$	2,766,890
Owner-occupied commercial real estate	—		81,408		1,134,793		1,216,201
1-4 single family residential	32,240		148,659		2,245,139		2,426,038
Construction, land and development	28,590		36,881		754,972		820,443
Home equity loans and lines of credit	—		40,131		59,729		99,860
Total real estate loans	194,608		411,443		6,723,381		7,329,432
Other loans:
Commercial and industrial	19,503		46,643		1,902,045		1,968,191
Consumer	1,259		13,950		3,976		19,185
Total other loans	20,762		60,593		1,906,021		1,987,376
Total loans held in portfolio	$	215,370	$	472,036	$	8,629,402	$	9,316,808
Allowance for loan losses							(53,148		)
Loans held in portfolio, net							$	9,263,660



December 31, 2017	ASC 310-30 Loans		Non-ASC 310-30 Loans		New Loans (1)		Total
	(Dollars in thousands)
Real estate loans:
Commercial real estate	$	104,335	$	37,736	$	2,103,788	$	2,245,859
Owner-occupied commercial real estate	—		16,100		987,781		1,003,881
1-4 single family residential	27,513		57,695		2,185,362		2,270,570
Construction, land and development	13,167		5,889		684,462		703,518
Home equity loans and lines of credit	—		34,589		59,636		94,225
Total real estate loans	145,015		152,009		6,021,029		6,318,053
Other loans:
Commercial and industrial	12,631		5,062		1,634,372		1,652,065
Consumer	1,423		259		5,984		7,666
Total other loans	14,054		5,321		1,640,356		1,659,731
Total loans held in portfolio	$	159,069	$	157,330	$	7,661,385	$	7,977,784
Allowance for loan losses							(47,145		)
Loans held in portfolio, net							$	7,930,639


(1)	Balance includes $(9.2) million and $(6.6) million of net deferred fees, costs, and premium and discount as of September 30, 2018 and December 31, 2017, respectively.

At September 30, 2018 and December 31, 2017, the unpaid principal balances of ASC 310-30 loans were $274.3 million and $183.9 million, respectively. At September 30, 2018 and December 31, 2017, the Company had pledged loans as collateral for FHLB advances of $3.44 billion and $3.36 billion, respectively. The recorded investment of consumer mortgage loans, secured by 1-4 family residential real estate properties, for which formal foreclosure proceedings are in process as of September 30, 2018 totaled $4.2 million. The Company held $288.5 million and $289.1 million of syndicated national loans as of September 30, 2018 and December 31, 2017, respectively.

During the three months ended September 30, 2018, the Company purchased no loans from third parties. During the nine months ended September 30, 2018, the Company purchased approximately $7.4 million of loans from third parties. During the three and nine months ended September 30, 2017, the Company purchased $2.8 million loans from third parties.

During the three and nine months ended September 30, 2018, the Company sold approximately $6.2 million and $26.0 million of held-to-maturity portfolio loans to third parties, respectively. During the three and nine months ended September 30, 2017, the Company sold approximately $73.4 million and $232.3 million of held-to-maturity portfolio loans to third parties, respectively.

The accretable discount on ASC 310-30 loans represents the amount by which the undiscounted expected cash flows on such loans exceed their carrying value. The change in expected cash flows for certain ASC 310-30 loan pools resulted in the reclassification of $3,417 thousand and $(2.7) million between non-accretable and accretable discount during the nine months ended September 30, 2018 and 2017, respectively.

Changes in accretable discount for ASC 310-30 loans for the nine months ended September 30, 2018 and 2017, were as follows:



	Nine Months Ended September 30,
	2018			2017
	(Dollars in thousands)
Balance at January 1,	$	41,162		$	60,990
Additions to accretable discount from FLCB acquisition	14,393			—
Accretion	(10,857		)	(13,965		)
Reclassifications from (to) non-accretable difference	3,417			(2,747		)
Balance at September 30,	$	48,115		$	44,278

NOTE 5. ALLOWANCE FOR LOAN LOSSES

The Company’s accounting method for loans and the corresponding allowance for loan losses (“ALL”) differs depending on whether the loans are New or Acquired. The Company assesses and monitors credit risk and portfolio performance using distinct methodologies for Acquired loans, both ASC 310-30 Loans and Non-ASC 310-30 Loans, and New loans. Within each of these portfolios, the Company further disaggregates the portfolios into the following segments: Commercial real estate, Owner-occupied commercial real estate, 1-4 single family residential, Construction, land and development, Home equity loans and lines of credit, Commercial and industrial and Consumer. The ALL reflects management’s estimate of probable credit losses inherent in each of the segments. During the second quarter 2018, the Company released an unallocated allowance for loan loss of $1.5 million, which was recorded in prior year in response to Hurricane Irma.

The following tables present information related to the ALL for the periods presented:



	Commercial Real Estate			Owner- Occupied Commercial Real Estate			1-4 Single Family Residential			Construction, Land and Development			Home Equity Loans and Lines of Credit			Commercial and Industrial			Consumer			Total
	(Dollars in thousands)
Balance at July 1, 2018	$	15,381		$	3,946		$	7,310		$	4,076		$	704		$	18,934		$	219		$	50,570
Provision (credit) for ASC 310-30 loans	(26		)	(3		)	14			(115		)	—			(66		)	(16		)	(212		)
Provision (credit) for non-ASC 310-30 loans	(8		)	(3		)	(35		)	71			2			129			—			156
Provision (credit) for New loans	560			(141		)	(333		)	1,228			(24		)	994			(8		)	2,276
Provision (credit) for Unallocated	—			—			—			—			—			—			—			—
Total provision	526			(147		)	(354		)	1,184			(22		)	1,057			(24		)	2,220
Charge-offs for ASC 310-30 loans	(1		)	—			(22		)	—			—			—			(4		)	(27		)
Charge-offs for non-ASC 310-30 loans	(118		)	—			—			—			—			—			—			(118		)
Charge-offs for New loans	—			—			—			—			—			—			—			—
Total charge-offs	(119		)	—			(22		)	—			—			—			(4		)	(145		)
Recoveries for ASC 310-30 loans	366			3			1			93			—			7			—			470
Recoveries for non-ASC 310-30 loans	—			—			23			—			—			—			—			23
Recoveries for New loans	—			9			—			—			—			—			—			9
Total recoveries	366			12			24			93			—			7			—			502
Ending ALL balance
ASC 310-30 loans	1,556			—			8			103			—			80			119			1,866
Non-ASC 310-30 loans	188			51			144			130			204			447			3			1,167
New loans	14,410			3,760			6,806			5,121			478			19,471			69			50,115
Unallocated	—			—			—			—			—			—			—			—
Balance at September 30, 2018

FCB FINANCIAL HOLDINGS, INC. - FORM 10-Q - November 7, 2018

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