FCNCA_10Q_06.30.2014
Table of Contents

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, 2014
or
 
¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-16715
____________________________________________________
First Citizens BancShares, Inc.
(Exact name of Registrant as specified in its charter)
____________________________________________________
Delaware
56-1528994
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
 
 
4300 Six Forks Road, Raleigh, North Carolina
27609
(Address of principle executive offices)
(Zip code)
(919) 716-7000
(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 twelve 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 ninety 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 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 definition of ‘accelerated filer’ and ‘large accelerated filer’ in Rule 12b-2 of the Exchange Act:
 
Large accelerated filer
x
 
Accelerated filer
¨
Non-accelerated filer
¨
 
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
Class A Common Stock—$1 Par Value—8,586,058 shares
Class B Common Stock—$1 Par Value—1,032,883 shares
(Number of shares outstanding, by class, as of August 8, 2014)

Table of Contents

INDEX
 
 
 
Page(s)
 
 
 
PART I.
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
PART II.
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.

2
Table of Contents

PART I
 
Item 1.
Financial Statements


First Citizens BancShares, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, unaudited)
June 30, 2014
 
December 31, 2013
Assets
 
 
 
Cash and due from banks
$
566,952

 
$
533,599

Overnight investments
1,118,474

 
859,324

Investment securities available for sale
5,538,166

 
5,387,703

Investment securities held to maturity
693

 
907

Loans held for sale
49,851

 
47,271

Loans and leases:
 
 
 
Acquired
1,109,933

 
1,029,426

Originated
12,415,023

 
12,104,298

Allowance for loan and lease losses
(206,246
)
 
(233,394
)
Net loans and leases
13,318,710

 
12,900,330

Premises and equipment
883,303

 
876,522

Other real estate owned:
 
 
 
Covered under loss share agreements
40,136

 
47,081

Not covered under loss share agreements
35,151

 
36,898

Income earned not collected
49,019

 
48,390

FDIC loss share receivable
49,959

 
93,397

Goodwill
127,140

 
102,625

Other intangible assets
3,821

 
1,247

Other assets
281,465

 
263,797

Total assets
$
22,062,840

 
$
21,199,091

Liabilities
 
 
 
Deposits:
 
 
 
Noninterest-bearing
$
5,775,322

 
$
5,241,817

Interest-bearing
12,781,436

 
12,632,249

Total deposits
18,556,758

 
17,874,066

Short-term borrowings
788,540

 
511,418

Long-term obligations
314,529

 
510,769

FDIC loss share payable
114,281

 
109,378

Other liabilities
139,587

 
116,785

Total liabilities
19,913,695

 
19,122,416

Shareholders’ Equity
 
 
 
Common stock:
 
 
 
Class A - $1 par value (11,000,000 shares authorized; 8,586,058 shares issued and outstanding at June 30, 2014 and December 31, 2013)
8,586

 
8,586

Class B - $1 par value (2,000,000 shares authorized; 1,032,883 shares issued and outstanding at June 30, 2014 and December 31, 2013)
1,033

 
1,033

Surplus
143,766

 
143,766

Retained earnings
1,991,703

 
1,948,558

Accumulated other comprehensive income (loss)
4,057

 
(25,268
)
Total shareholders’ equity
2,149,145

 
2,076,675

Total liabilities and shareholders’ equity
$
22,062,840

 
$
21,199,091


See accompanying Notes to Consolidated Financial Statements.

3
Table of Contents

First Citizens BancShares, Inc. and Subsidiaries
Consolidated Statements of Income
 
 
Three months ended June 30
 
Six months ended June 30
(Dollars in thousands, except per share data, unaudited)
2014
 
2013
 
2014
 
2013
Interest income
 
 
 
 
 
 
 
Loans and leases
$
164,108

 
$
185,151

 
$
325,142

 
$
396,914

Investment securities interest and dividend income
12,447

 
8,119

 
24,195

 
16,603

Overnight investments
756

 
656

 
1,368

 
1,013

Total interest income
177,311

 
193,926

 
350,705

 
414,530

Interest expense
 
 
 
 
 
 
 
Deposits
6,006

 
8,997

 
12,831

 
19,310

Short-term borrowings
1,551

 
680

 
2,136

 
1,384

Long-term obligations
4,056

 
4,721

 
9,109

 
9,426

Total interest expense
11,613

 
14,398

 
24,076

 
30,120

Net interest income
165,698

 
179,528

 
326,629

 
384,410

Provision (credit) for loan and lease losses
(7,299
)
 
(13,242
)
 
(9,202
)
 
(31,848
)
Net interest income after provision (credit) for loan and lease losses
172,997

 
192,770

 
335,831

 
416,258

Noninterest income
 
 
 
 
 
 
 
Cardholder services
13,257

 
12,026

 
25,089

 
23,097

Merchant services
15,035

 
15,245

 
28,556

 
27,731

Service charges on deposit accounts
15,265

 
14,883

 
29,705

 
29,882

Wealth management services
15,815

 
15,097

 
30,695

 
29,612

Fees from processing services
5,682

 
5,051

 
10,543

 
10,670

Other service charges and fees
4,250

 
3,966

 
8,194

 
7,732

Mortgage income
1,210

 
3,669

 
2,165

 
7,457

Insurance commissions
2,253

 
2,394

 
5,540

 
5,374

ATM income
1,260

 
1,314

 
2,462

 
2,482

Adjustments to FDIC loss share receivable
(15,295
)
 
(14,439
)
 
(27,644
)
 
(38,492
)
Other
6,650

 
5,789

 
11,258

 
16,963

Total noninterest income
65,382

 
64,995

 
126,563

 
122,508

Noninterest expense
 
 
 
 
 
 
 
Salaries and wages
82,683

 
75,802

 
162,557

 
151,921

Employee benefits
19,772

 
23,228

 
39,872

 
48,247

Occupancy expense
20,937

 
18,464

 
41,362

 
37,273

Equipment expense
19,686

 
18,698

 
38,477

 
37,644

FDIC insurance expense
2,640

 
2,423

 
5,276

 
5,089

Foreclosure-related expenses
3,858

 
3,467

 
9,268

 
7,772

Other
49,444

 
46,485

 
93,238

 
94,976

Total noninterest expense
199,020

 
188,567

 
390,050

 
382,922

Income before income taxes
39,359

 
69,198

 
72,344

 
155,844

Provision for income taxes
12,809

 
25,292

 
23,428

 
56,353

Net income
$
26,550

 
$
43,906

 
$
48,916

 
$
99,491

Average shares outstanding
9,618,941

 
9,618,941

 
9,618,941

 
9,618,963

Net income per share
$
2.76

 
$
4.56

 
$
5.09

 
$
10.34


See accompanying Notes to Consolidated Financial Statements.

4
Table of Contents

First Citizens BancShares, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income


 
Three months ended June 30
 
Six months ended June 30
(Dollars in thousands, unaudited)
2014
 
2013
 
2014
 
2013
Net income
$
26,550

 
$
43,906

 
$
48,916

 
$
99,491

 
 
 
 
 
 
 
 
Other comprehensive income (loss)
 
 
 
 
 
 
 
Unrealized gains (losses) on securities:
 
 
 
 
 
 
 
Change in unrealized securities gains (losses) arising during period
31,550

 
(38,992
)
 
43,449

 
(40,468
)
Tax effect
(12,225
)
 
15,269

 
(16,868
)
 
15,834

Total change in unrealized gains (losses) on securities, net of tax
19,325

 
(23,723
)
 
26,581

 
(24,634
)
 
 
 
 
 
 
 
 
Change in fair value of cash flow hedges:
 
 
 
 
 
 
 
Change in unrecognized gain on cash flow hedges
568

 
1,388

 
1,287

 
2,202

Tax effect
(218
)
 
(548
)
 
(496
)
 
(869
)
Total change in unrecognized gain on cash flow hedges, net of tax
350

 
840

 
791

 
1,333

 
 
 
 
 
 
 
 
Change in pension obligation:
 
 
 
 
 
 
 
Reclassification adjustment for gains included in income before income taxes
1,598

 
4,294

 
3,197

 
8,598

Tax effect
(622
)
 
(1,682
)
 
(1,244
)
 
(3,367
)
Total change in pension obligation, net of tax
976

 
2,612

 
1,953

 
5,231

 
 
 
 
 
 
 
 
Other comprehensive income (loss)
20,651

 
(20,271
)
 
29,325

 
(18,070
)
 
 
 
 
 
 
 
 
Total comprehensive income
$
47,201

 
$
23,635

 
$
78,241

 
$
81,421


See accompanying Notes to Consolidated Financial Statements.


5
Table of Contents

First Citizens BancShares, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity

 
(Dollars in thousands, unaudited)
Class A
Common Stock
 
Class B
Common Stock
 
Surplus
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
(Loss) Income
 
Total
Shareholders’
Equity
Balance at December 31, 2012
$
8,588

 
$
1,033

 
$
143,766

 
$
1,792,726

 
$
(82,106
)
 
$
1,864,007

Net income
—

 
—

 
—

 
99,491

 
—

 
99,491

Other comprehensive loss, net of tax
—

 
—

 
—

 
—

 
(18,070
)
 
(18,070
)
Repurchase of 1,973 shares of Class A common stock
(2
)
 
—

 
—

 
(319
)
 
—

 
(321
)
Cash dividends ($0.60 per share)
—

 
—

 
—

 
(5,777
)
 
—

 
(5,777
)
Balance at June 30, 2013
$
8,586

 
$
1,033

 
$
143,766

 
$
1,886,121

 
$
(100,176
)
 
$
1,939,330

 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013
$
8,586

 
$
1,033

 
$
143,766

 
$
1,948,558

 
$
(25,268
)
 
$
2,076,675

Net income
—

 
—

 
—

 
48,916

 
—

 
48,916

Other comprehensive income, net of tax
—

 
—

 
—

 
—

 
29,325

 
29,325

Cash dividends ($0.60 per share)
—

 
—

 
—

 
(5,771
)
 
—

 
(5,771
)
Balance at June 30, 2014
$
8,586

 
$
1,033

 
$
143,766

 
$
1,991,703

 
$
4,057

 
$
2,149,145

See accompanying Notes to Consolidated Financial Statements.

6
Table of Contents


First Citizens BancShares, Inc. and Subsidiaries
Consolidated Statements of Cash Flows 
 
Six months ended June 30
(Dollars in thousands, unaudited)
2014
 
2013
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
48,916

 
99,491

Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
Provision (credit) for loan and lease losses
(9,202
)
 
(31,848
)
Deferred tax (benefit) expense
(2,744
)
 
2,360

Change in current taxes payable
5,973

 
(20,649
)
Depreciation
35,455

 
35,545

Change in accrued interest payable
560

 
(145
)
Change in income earned not collected
(629
)
 
2,099

Gain on sale of processing services, net
—

 
(4,085
)
Origination of loans held for sale
(123,144
)
 
(223,128
)
Proceeds from sale of loans held for sale
123,967

 
254,087

Gain on sale of loans
(2,220
)
 
(7,123
)
Net writedowns/losses on other real estate
6,993

 
1,480

Net amortization of premiums and discounts
(18,172
)
 
(74,175
)
FDIC receivable for loss share agreements
17,121

 
20,464

FDIC payable for loss share agreements
4,903

 
95

Net change in other assets
(31,249
)
 
68,587

Net change in other liabilities
35,033

 
21,365

Net cash provided by operating activities
91,561

 
144,420

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Net change in loans outstanding
(57,271
)
 
325,057

Purchases of investment securities available for sale
(1,409,878
)
 
(1,375,766
)
Proceeds from maturities/calls of investment securities held to maturity
214

 
212

Proceeds from maturities/calls of investment securities available for sale
1,529,687

 
1,365,287

Net change in overnight investments
(259,150
)
 
(596,745
)
Cash (paid to) received from the FDIC for loss share agreements
(4,350
)
 
46,534

Proceeds from sale of other real estate
38,370

 
80,010

Additions to premises and equipment
(39,550
)
 
(26,696
)
Business acquisition, net of cash acquired
18,194

 
—

Net cash used by investing activities
(183,734
)
 
(182,107
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Net change in time deposits
(219,297
)
 
(390,329
)
Net change in demand and other interest-bearing deposits
270,118

 
322,319

Net change in short-term borrowings
81,716

 
13,432

Repayment of long-term obligations
(1,240
)
 
(1,608
)
Repurchase of common stock
—

 
(321
)
Cash dividends paid
(5,771
)
 
(2,891
)
Net cash provided (used) by financing activities
125,526

 
(59,398
)
Change in cash and due from banks
33,353

 
(97,085
)
Cash and due from banks at beginning of period
533,599

 
639,730

Cash and due from banks at end of period
$
566,952

 
$
542,645

CASH PAYMENTS FOR:
 
 
 
Interest
$
23,516

 
$
30,265

Income taxes
47,962

 
75,917

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
 
 
 
Transfers of loans to other real estate
25,080

 
57,175

Dividends declared but not paid
2,886

 
2,886

Reclassification of long-term obligations to short-term borrowings
195,000

 
—


See accompanying Notes to Consolidated Financial Statements.

7
Table of Contents

First Citizens BancShares, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements


NOTE A - ACCOUNTING POLICIES AND BASIS OF PRESENTATION

First Citizens BancShares, Inc. (BancShares) is a financial holding company organized under the laws of Delaware and conducts operations through its banking subsidiary, First-Citizens Bank & Trust Company (FCB), which is headquartered in Raleigh, North Carolina.

General

These consolidated financial statements and notes are presented in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with accounting principles generally accepted in the United States of America (GAAP). In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the consolidated financial position and consolidated results of operations have been made. The unaudited interim consolidated financial statements included in this Form 10-Q should be read in conjunction with the consolidated financial statements and footnotes included in BancShares' Annual Report on Form 10-K for the year ended December 31, 2013.

Reclassifications

In certain instances, amounts reported in prior years' consolidated financial statements have been reclassified to conform to the current financial statement presentation. Such reclassifications had no effect on previously reported shareholders' equity or net income.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates, and different assumptions in the application of these policies could result in material changes in BancShares' consolidated financial position, the consolidated results of its operations or related disclosures. Material estimates that are particularly susceptible to significant change include the determination of the allowance for loan and lease losses; determination of the fair value of financial instruments; pension plan assumptions; cash flow estimates on acquired loans; the receivable from and payable to the Federal Deposit Insurance Corporation (FDIC) for loss share agreements; purchase accounting-related adjustments; and income tax assets, liabilities and expense.

Recent Accounting Pronouncements
Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2014-12, “Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period)”
This ASU requires a reporting entity to treat a performance target that affects vesting and that could be achieved after the requisite service period as a performance condition. A reporting entity should apply FASB ASC Topic 718, Compensation—Stock Compensation, to awards with performance conditions that affect vesting.
The guidance in this ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. This update may be adopted either prospectively for share-based payment awards granted or modified on or after the effective date, or retrospectively, using a modified retrospective approach. The modified retrospective approach would apply to share-based payment awards outstanding as of the beginning of the earliest annual period presented in the financial statements on adoption, and to all new or modified awards thereafter. BancShares will adopt the standard effective the first quarter of 2016. Since BancShares does not currently have any share-based stock compensation plans, adoption of Topic 718 is not projected to have an impact on BancShares' consolidated financial position or consolidated results of operations.



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FASB ASU 2014-11, “Transfers and Servicing (Topic 860)”
This ASU aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements. Going forward, these transactions would all be accounted for as secured borrowings. The guidance eliminates sale accounting for repurchase-to-maturity transactions and supersedes the guidance under which a transfer of financial asset and a contemporaneous repurchase financing could be accounted for on a combined basis as a forward agreement, which has resulted in outcomes referred to as off-balance-sheet accounting. The ASU requires a new disclosure for transactions economically similar to repurchase agreements in which the transferor retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction. The ASU also requires expanded disclosures about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings.
The accounting changes in this ASU are effective for fiscal years beginning after December 15, 2014. In addition, the disclosure for certain transactions accounted for as a sale is effective for the fiscal period beginning after December 15, 2014, the disclosure for transactions accounted for as secured borrowings is required to be presented for fiscal periods beginning after December 15, 2014, and interim periods beginning after March 15, 2015. Early adoption is not permitted. We will adopt the guidance effective in the first quarter of 2015, and we do not anticipate any effect on our consolidated financial position or consolidated results of operations as a result of adoption.
FASB ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”
In May 2014, the FASB issued a standard on the recognition of revenue from contracts with customers with the core principle being for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also results in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively and improve guidance for multiple-element arrangements.
The guidance in this ASU is effective for fiscal periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Early adoption is not permitted. We are currently evaluating the impact of the new standard and we will adopt during the first quarter of 2017.
FASB ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”
This ASU limits presentation of discontinued operations and disclosure of disposals to disposals representing a strategic shift in operations in which the strategic shifts should have a major effect on the organization's operations and financial results. Additionally, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new guidance also requires disclosure of pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting.
The new standard is effective in the first quarter of 2015 for public companies with a calendar year end. We will adopt the standard effective in the first quarter of 2015, and we do not anticipate any effect on our consolidated financial position or consolidated results of operations as a result of adoption.
FASB ASU 2014-04, “Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40)”
This ASU clarifies that an in-substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction.

The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. BancShares will adopt the guidance effective in the first quarter of 2015, and is currently evaluating the impact of the new standard on the financial statement disclosures. BancShares does not anticipate any effect on our consolidated financial position or consolidated results of operations as a result of adoption.

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FASB ASU 2014-01 "Investments - Equity Method and Joint Ventures (Topic 323) - Accounting for Investments in Qualified Affordable Housing Projects”
This ASU permits an accounting policy election to account for investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, the initial cost of the investment is amortized in proportion to the tax credits and other tax benefits received and recognize the net investment performance in the income statement as a component of income tax expense (benefit).
For those investments in qualified affordable housing projects not accounted for using the proportional amortization method, the investment should be accounted for as an equity method investment or a cost method investment in accordance with Subtopic 970-323.
The decision to apply the proportional amortization method of accounting will be applied consistently to all qualifying affordable housing project investments rather than a decision to be applied to individual investments.
The amendments in this ASU should be applied retrospectively to all periods presented and are effective for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2014. Early adoption is permitted.
BancShares is currently evaluating the impact of the new standard and is targeting a December 31, 2014, adoption and implementation for qualifying affordable housing project investments.
FASB ASU 2013-11, “Income Taxes (Topic 740)”
This ASU states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows: to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require BancShares to use, and BancShares does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date.
The provisions of this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. BancShares adopted the guidance effective in the first quarter of 2014. The initial adoption had no effect on our consolidated financial position or consolidated results of operations.
FASB ASU 2013-04, “Liabilities”
This ASU provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this ASU is fixed at the reporting date, except for obligations addressed within existing guidance in GAAP.
The amendments in this update are effective for fiscal years beginning after December 31, 2013. BancShares adopted the guidance effective first quarter of 2014. The initial adoption did not have any effect on our consolidated financial position or consolidated results of operations.

NOTE B - BUSINESS COMBINATIONS

Merger Agreement with First Citizens Bancorporation, Inc.

On June 10, 2014, BancShares and First Citizens Bancorporation, Inc. (Bancorporation) entered into an Agreement and Plan of Merger (the Merger Agreement). Pursuant to the Merger Agreement, Bancorporation will merge with and into BancShares, whereupon the separate corporate existence of Bancorporation will cease and BancShares will continue (the Merger). The Merger is expected to be completed during the fourth quarter of 2014. Sometime thereafter, First Citizens Bank and Trust Company, Inc. (FCB-SC), a wholly-owned subsidiary of Bancorporation, will merge with and into FCB, whereupon the separate corporate existence of FCB-SC will cease and FCB will continue.

Under the terms of the Merger Agreement, each share of Bancorporation common stock will be converted into the right to receive 4.00 shares of BancShares' Class A common stock and $50.00 cash, unless the holder elects for each share to be converted into the right to receive 3.58 shares of BancShares' Class A common stock and 0.42 shares of BancShares' Class B common stock.

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Consummation of the Merger is subject to customary conditions, including, among others, approval of the shareholders of each company and receipt of regulatory approvals.

The Merger Agreement includes certain termination rights for both BancShares and Bancorporation and under specified circumstances Bancorporation may be required to pay BancShares a termination fee equal to $6.5 million, $10.0 million or $22.6 million, depending on the circumstances of the termination.

1st Financial Services Corporation Merger

On January 1, 2014, FCB completed its merger with 1st Financial Services Corporation (1st Financial) of Hendersonville, NC and its wholly-owned subsidiary, Mountain 1st Bank & Trust Company (Mountain 1st). The merger allowed FCB to expand its presence in Western North Carolina. Mountain 1st had twelve branches located in Asheville, Brevard, Columbus, Etowah, Fletcher, Forest City, Hendersonville, Hickory, Marion, Shelby and Waynesville. FCB requested and received approval from the North Carolina Commissioner of Banks and the FDIC to close seven Mountain 1st branches due to their proximity to legacy FCB branches. The branches in Asheville, Brevard, Fletcher, Forest City, Hendersonville, Hickory and Marion were closed in May. All customer relationships assigned to those branches were transferred to the nearest FCB branch.

FCB paid $10.0 million to acquire 1st Financial, including payments of $8.0 million to the U.S. Treasury to acquire and subsequently retire 1st Financial's Troubled Asset Relief Program (TARP) obligation and $2.0 million paid to the shareholders of 1st Financial. As a result of the merger, FCB recorded $24.5 million in goodwill and $3.8 million in core deposit intangibles.

The 1st Financial transaction was accounted for under the acquisition method of accounting, and the purchased assets, assumed liabilities and identifiable intangible assets were recorded at their estimated fair values as of the acquisition date. Fair values are subject to refinement for up to one year after the closing date of the transaction as additional information regarding closing date fair values becomes available. During the second quarter of 2014, no adjustments were deemed necessary.

The following table provides the carrying value of acquired assets and assumed liabilities, as recorded by 1st Financial, the fair value adjustments calculated at the time of the merger and the resulting fair value recorded by FCB.
 
January 1, 2014
(Dollars in thousands)
As recorded by
1st Financial
 
Fair value adjustments
 
As recorded by FCB
Assets
 
 
 
 
 
Cash and cash equivalents
$
28,194

 
$
—

 
$
28,194

Investment securities
246,890

 
(9,452
)
 
237,438

Loans held for sale
1,183

 
—

 
1,183

Restricted equity securities
3,105

 
671

 
3,776

Loans
338,170

 
(21,843
)
 
316,327

Less: allowance for loan losses
(7,796
)
 
7,796

 
—

Premises and equipment
3,871

 
(1,185
)
 
2,686

Other real estate owned
12,896

 
(1,305
)
 
11,591

Intangible asset
—

 
3,780

 
3,780

Other assets
16,811

 
(465
)
 
16,346

Total assets acquired
$
643,324

 
$
(22,003
)
 
$
621,321

Liabilities
 
 
 
 
 
Deposits:
 
 
 
 
 
Noninterest-bearing
$
152,444

 
$
—

 
$
152,444

Interest-bearing
477,881

 
1,546

 
479,427

Total deposits
630,325

 
1,546

 
631,871

Short-term borrowings
406

 
—

 
406

Other liabilities
3,392

 
167

 
3,559

Total liabilities assumed
$
634,123

 
$
1,713

 
635,836

Fair value of net liabilities assumed

 

 
14,515

Cash paid to shareholders
 
 
 
 
2,000

Cash paid to acquire TARP securities
 
 
 
 
8,000

Goodwill recorded for 1st Financial
 
 
 
 
$
24,515



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Goodwill recorded for 1st Financial represents future revenues to be derived from the existing customer base, including efficiencies that will result from combining operations and other non-identifiable intangible assets. The 1st Financial transaction is a taxable asset acquisition, and goodwill resulting from the transaction is deductible for income tax purposes.

Merger costs related to the 1st Financial transaction are estimated to be between $5.5 million and $6.0 million. Loan related interest income generated from 1st Financial was approximately $4.2 million for the second quarter of 2014 and $8.6 million for the year to date.

All loans acquired with the 1st Financial transaction are accounted for under the expected cash flow method (ASC 310-30).

For loans acquired from 1st Financial, the contractually required payments including principal and interest, cash flows expected to be collected and fair values as of the merger date were:
(Dollars in thousands)
January 1, 2014
Contractually required payments
$
414,233

Cash flows expected to be collected
400,622

Fair value at acquisition date
316,327


The recorded fair values of loans acquired in the 1st Financial transaction as of the merger date were as follows:
(Dollars in thousands)
January 1, 2014
Commercial:
 
Construction and land development
$
41,516

Commercial mortgage
123,925

Other commercial real estate
6,698

Commercial and industrial
29,126

Total commercial loans
201,265

Noncommercial:
 
Residential mortgage
113,177

Consumer
1,885

Total noncommercial loans
115,062

Total loans acquired from 1st Financial
$
316,327




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NOTE C - INVESTMENTS
The amortized cost and fair value of investment securities classified as available for sale and held to maturity at June 30, 2014 and December 31, 2013, are as follows:
 
June 30, 2014
(Dollars in thousands)
Cost
 
Gross
unrealized
gains
 
Gross unrealized
losses
 
Fair
value
Investment securities available for sale
 
 
 
 
 
 
 
U.S. Treasury
$
1,623,564

 
$
2,084

 
$
18

 
$
1,625,630

Government agency
1,281,724

 
2,020

 
178

 
1,283,566

Mortgage-backed securities
2,605,333

 
8,251

 
17,298

 
2,596,286

Equity securities
543

 
31,955

 
—

 
32,498

Municipal securities
185

 
1

 
—

 
186

Total investment securities available for sale
$
5,511,349

 
$
44,311

 
$
17,494

 
$
5,538,166

 
 
 
 
 
 
 
 
 
December 31, 2013
 
Cost
 
Gross
unrealized
gains
 
Gross unrealized
losses
 
Fair
value
U.S. Treasury
$
373,223

 
$
259

 
$
45

 
$
373,437

Government agency
2,543,223

 
1,798

 
792

 
2,544,229

Mortgage-backed securities
2,486,297

 
4,526

 
43,950

 
2,446,873

Equity securities
543

 
21,604

 
—

 
22,147

Municipal securities
186

 
1

 
—

 
187

Other
863

 
—

 
33

 
830

Total investment securities available for sale
$
5,404,335

 
$
28,188

 
$
44,820

 
$
5,387,703

 
 
 
 
 
 
 
 
 
June 30, 2014
 
Cost
 
Gross
unrealized
gains
 
Gross unrealized
losses
 
Fair
value
Investment securities held to maturity
 
 
 
 
 
 
 
Mortgage-backed securities
$
693

 
$
36

 
$
—

 
$
729

 
 
 
 
 
 
 
 
 
December 31, 2013
 
Cost
 
Gross
unrealized
gains
 
Gross unrealized
losses
 
Fair
value
Mortgage-backed securities
$
907

 
$
67

 
$
—

 
$
974


A single subordinated debt security, previously classified within other, was called during the second quarter of 2014.

Investments in mortgage-backed securities primarily represent securities issued by the Government National Mortgage Association, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation.


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The following table provides the amortized cost and fair value by contractual maturity. Expected maturities will differ from contractual maturities on certain securities because borrowers and issuers may have the right to call or prepay obligations with or without prepayment penalties. Repayments of mortgage-backed securities are dependent on the repayments of the underlying loan balances. Equity securities do not have a stated maturity date.
 
June 30, 2014
 
December 31, 2013
(Dollars in thousands)
Cost
 
Fair
value
 
Cost
 
Fair
value
Investment securities available for sale
 
 
 
 
 
 
 
Non-amortizing securities maturing in:
 
 
 
 
 
 
 
One year or less
$
683,598

 
$
684,265

 
$
839,956

 
$
840,883

One through five years
2,221,875

 
2,225,117

 
2,077,539

 
2,077,800

Mortgage-backed securities
2,605,333

 
2,596,286

 
2,486,297

 
2,446,873

Equity securities
543

 
32,498

 
543

 
22,147

Total investment securities available for sale
$
5,511,349

 
$
5,538,166

 
$
5,404,335

 
$
5,387,703

Investment securities held to maturity
 
 
 
 
 
 
 
Mortgage-backed securities held to maturity
$
693

 
$
729

 
$
907

 
$
974

There were no realized securities gains (losses) during any period presented.  
 
 
 
 
The following table provides information regarding securities with unrealized losses as of June 30, 2014 and December 31, 2013.
 
June 30, 2014
 
Less than 12 months
 
12 months or more
 
Total
(Dollars in thousands)
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
Investment securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury
$
135,712

 
$
18

 
$
—

 
$
—

 
$
135,712

 
$
18

Government agency
242,563

 
178

 
—

 
—

 
242,563

 
178

Mortgage-backed securities
728,997

 
2,163

 
1,109,829

 
15,135

 
1,838,826

 
17,298

Total
$
1,107,272

 
$
2,359

 
$
1,109,829

 
$
15,135

 
$
2,217,101

 
$
17,494

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 
Less than 12 months
 
12 months or more
 
Total
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
Investment securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury
$
102,105

 
$
45

 
$
—

 
$
—

 
$
102,105

 
$
45

Government agency
780,552

 
761

 
29,969

 
31

 
810,521

 
792

Mortgage-backed securities
2,221,213

 
42,876

 
26,861

 
1,074

 
2,248,074

 
43,950

Other
830

 
33

 
—

 
—

 
830

 
33

Total
$
3,104,700

 
$
43,715

 
$
56,830

 
$
1,105

 
$
3,161,530

 
$
44,820

Investment securities with an aggregate fair value of $1.11 billion and $56.8 million have had continuous unrealized losses for more than 12 months as of June 30, 2014 and December 31, 2013, with an aggregate unrealized loss of $15.1 million and $1.1 million, respectively. As of June 30, 2014, all 104 of these investments are U.S. government agency and government sponsored enterprise-issued mortgage-backed securities. None of the unrealized losses identified as of June 30, 2014 or December 31, 2013 relate to the marketability of the securities or the issuer’s ability to honor redemption obligations. For all periods presented, BancShares had the ability and intent to retain these securities for a period of time sufficient to recover all unrealized losses. Therefore, none of the securities were deemed to be other than temporarily impaired.
Investment securities having an aggregate carrying value of $2.85 billion at June 30, 2014 and $2.75 billion at December 31, 2013 were pledged as collateral to secure public funds on deposit and certain short-term borrowings, and for other purposes as required by law.


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NOTE D - LOANS AND LEASES

BancShares reports acquired and originated loan portfolios separately, and each portfolio is further divided into commercial and non-commercial based on the type of borrower, purpose, collateral, and/or our underlying credit management processes. Additionally, loans are assigned to loan classes, which further disaggregate loans based upon common risk characteristics.
Commercial – Commercial loans include construction and land development, mortgage, other commercial real estate, commercial and industrial, lease financing and other.

Construction and land development – Construction and land development consists of loans to finance land for development, investment, and use in a commercial business enterprise, multifamily apartments and other commercial building that may be owner-occupied or income generating investments for the owner.

Commercial mortgage – Commercial mortgage consists of loans to purchase or refinance owner-occupied nonresidential and investment properties. Investment properties include office buildings and other facilities that are rented or leased to unrelated parties.

Other commercial real estate – Other commercial real estate consists of loans secured by farmland (including farm residential and other improvements) and multifamily (5 or more) residential properties.

Commercial and industrial – Commercial and industrial loans consists of lines of credit to finance corporate credit cards, accounts receivable, inventory and other general business purposes.

Lease financing – Lease financing consists solely of lease financing agreements.

Other – Other loans consists of all other commercial loans not classified in one of the preceding classes. These typically include loans to non-profit organizations such as churches, hospitals, educational and charitable organizations.

Noncommercial – Noncommercial loans consist of residential and revolving mortgage, construction and land development, and consumer.

Residential mortgage – Residential real estate consists of loans to purchase, construct or refinance the borrower's primary dwelling, second residence or vacation home.

Revolving mortgage – Revolving mortgage consists of home equity lines of credit that are secured by first or second liens on the borrower's primary residence.

Construction and land development – Construction and land development consists of loans to construct the borrower's primary or secondary residence or vacant land upon which the owner intends to construct a dwelling at a future date.

Consumer – Consumer loans consist of installment loans to finance purchases of vehicles, unsecured home improvements and revolving lines of credit that can be secured or unsecured, including personal credit cards.


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Loans and leases outstanding include the following at June 30, 2014 and December 31, 2013:
 
(Dollars in thousands)
June 30, 2014
 
December 31, 2013
Acquired loans
 
 
 
Commercial:
 
 
 
Construction and land development
$
80,827

 
$
78,915

Commercial mortgage
637,481

 
642,891

Other commercial real estate
34,688

 
41,381

Commercial and industrial
33,851

 
17,254

Other
1,270

 
866

Total commercial loans
788,117

 
781,307

Noncommercial:
 
 
 
Residential mortgage
270,688

 
213,851

Revolving mortgage
20,129

 
30,834

Construction and land development
28,759

 
2,583

Consumer
2,240

 
851

Total noncommercial loans
321,816

 
248,119

Total acquired loans
1,109,933

 
1,029,426

Originated loans and leases:
 
 
 
Commercial:
 
 
 
Construction and land development
342,021

 
319,847

Commercial mortgage
6,367,096

 
6,362,490

Other commercial real estate
178,899

 
178,754

Commercial and industrial
1,292,213

 
1,081,158

Lease financing
413,422

 
381,763

Other
131,051

 
175,336

Total commercial loans
8,724,702

 
8,499,348

Noncommercial:
 
 
 
Residential mortgage
1,071,089

 
982,421

Revolving mortgage
2,122,675

 
2,113,285

Construction and land development
119,420

 
122,792

Consumer
377,137

 
386,452

Total noncommercial loans
3,690,321

 
3,604,950

Total originated loans and leases
12,415,023

 
12,104,298

Total loans and leases
$
13,524,956

 
$
13,133,724


At June 30, 2014, $816.3 million in acquired loans were covered under loss share agreements, compared to $1.03 billion at December 31, 2013. The remaining acquired loans as of June 30, 2014 are primarily from the 1st Financial merger. The loss share protection will expire for non-single family residential loans acquired from Temecula Valley Bank (TVB) and Venture Bank (VB) during the third quarter of 2014. The acquired loan balance at June 30, 2014 for the expiring agreements from TVB and VB is $195.4 million and $73.3 million, respectively.

At June 30, 2014, $2.65 billion in originated loans were pledged to secure debt obligations, compared to $2.56 billion at December 31, 2013.

Credit quality indicators

Loans and leases are monitored for credit quality on a recurring basis. The credit quality indicators used are dependent on the portfolio segment to which the loan relates. Originated commercial loans and leases, originated noncommercial loans and leases and acquired loans have different credit quality indicators as a result of the unique characteristics relative to each loan segment being evaluated.

The credit quality indicators for commercial loans and leases are developed through a review of individual borrowers on an ongoing basis. Each commercial loan is evaluated annually with more frequent evaluation of more severely criticized loans or leases. The credit quality indicators for noncommercial loans are based on the delinquency status of the borrower. As the

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borrower becomes more delinquent, the likelihood of loss increases. Acquired loans are bifurcated into commercial and noncommercial segments and credit quality indicators are assigned in the same manner as the originated portfolio. The indicators represent the rating for loans or leases as of the date presented based on the most recent assessment performed. These credit quality indicators are defined as follows:

Pass – A pass rated asset is one in which repayment is considered highly likely and there are no observable weaknesses in the asset. Such an asset does not meet any of the characteristics for adverse classification.

Special mention – A special mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention assets are not adversely classified and do not warrant adverse classification.

Substandard – A substandard asset is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Assets classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These assets are characterized by the distinct possibility of loss if the deficiencies are not corrected.

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

Loss – Assets classified as loss are considered uncollectible and of such little value that it is inappropriate to be carried as an asset. This classification is not necessarily equivalent to no potential for recovery or salvage value, but rather that it is not appropriate to defer a full charge-off even though partial recovery may be effected in the future.

Ungraded – Ungraded loans represent loans that are not included in the individual credit grading process due to their relatively small balances or borrower type. The majority of originated, ungraded loans at June 30, 2014 and December 31, 2013 relate to business credit cards. Business credit card loans are subject to automatic charge-off when they become 120 days past due in the same manner as unsecured consumer lines of credit. The remaining balance is comprised of a small amount of commercial mortgage loans and other commercial real estate loans. As of December 31, 2013, ungraded loans also included tobacco buyout loans classified as commercial and industrial loans. Final payment from the Commodity Credit Corporation was received during January 2014 for tobacco buyout loans held by FCB. As of June 30, 2014, ungraded also includes $94.7 million of loans resulting from the 1st Financial merger.


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Originated loans and leases outstanding at June 30, 2014 and December 31, 2013 by credit quality indicator are provided below:
 
 
June 30, 2014
(Dollars in thousands)
Originated commercial loans and leases
Grade:
Construction  and land
development
 
Commercial
mortgage
 
Other
commercial real estate
 
Commercial  and
industrial
 
Lease financing
 
Other
 
Total originated commercial loans and leases
Pass
$
330,946

 
$
6,102,219

 
$
175,413

 
$
1,178,124

 
$
405,495

 
$
130,997

 
$
8,323,194

Special mention
7,901

 
121,824

 
1,370

 
25,606

 
4,324

 
8

 
161,033

Substandard
3,174

 
138,451

 
1,966

 
6,474

 
3,122

 
46

 
153,233

Doubtful
—

 
3,296

 
—

 
460

 
481

 
—

 
4,237

Ungraded
—

 
1,306

 
150

 
81,549

 
—

 
—

 
83,005

Total
$
342,021

 
$
6,367,096

 
$
178,899

 
$
1,292,213

 
$
413,422

 
$
131,051

 
$
8,724,702

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 
Originated commercial loans and leases
 
Construction  and land
development
 
Commercial
mortgage
 
Other
commercial real estate
 
Commercial  and
industrial
 
Lease financing
 
Other
 
Total originated commercial loans and leases
Pass
$
308,231

 
$
6,094,505

 
$
174,913

 
$
964,840

 
$
375,371

 
$
174,314

 
$
8,092,174

Special mention
8,620

 
119,515

 
1,362

 
14,686

 
2,160

 
982

 
147,325

Substandard
2,944

 
141,913

 
2,216

 
6,352

 
3,491

 
40

 
156,956

Doubtful
52

 
5,159

 
75

 
144

 
592

 
—

 
6,022

Ungraded
—

 
1,398

 
188

 
95,136

 
149

 
—

 
96,871

Total
$
319,847

 
$
6,362,490

 
$
178,754

 
$
1,081,158

 
$
381,763

 
$
175,336

 
$
8,499,348


 
June 30, 2014
 
Originated noncommercial loans and leases
(Dollars in thousands)
Residential
mortgage
 
Revolving
mortgage
 
Construction
and land
development
 
Consumer
 
Total originated noncommercial
loans
Current
$
1,047,270

 
$
2,107,889

 
$
118,078

 
$
373,579

 
$
3,646,816

30-59 days past due
11,219

 
7,690

 
949

 
1,949

 
21,807

60-89 days past due
4,693

 
2,434

 
229

 
843

 
8,199

90 days or greater past due
7,907

 
4,662

 
164

 
766

 
13,499

Total
$
1,071,089

 
$
2,122,675

 
$
119,420

 
$
377,137

 
$
3,690,321

 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 
Originated noncommercial loans and leases
 
Residential
mortgage
 
Revolving
mortgage
 
Construction
and land
development
 
Consumer
 
Total originated noncommercial
loans
Current
$
955,300

 
$
2,095,480

 
$
121,026

 
$
382,710

 
$
3,554,516

30-59 days past due
12,885

 
10,977

 
1,193

 
2,114

 
27,169

60-89 days past due
4,658

 
2,378

 
317

 
955

 
8,308

90 days or greater past due
9,578

 
4,450

 
256

 
673

 
14,957

Total
$
982,421

 
$
2,113,285

 
$
122,792

 
$
386,452

 
$
3,604,950


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Acquired loans and leases outstanding at June 30, 2014 and December 31, 2013 by credit quality indicator are provided below:

 
June 30, 2014
(Dollars in thousands)
Acquired loans
Grade:
Construction
and land
development -
commercial
 
Commercial
mortgage
 
Other
commercial
real estate
 
Commercial
and
industrial
 
Residential
mortgage
 
Revolving
mortgage
 
Construction
and land
development -
noncommercial
 
Consumer
and other
 
Total acquired
loans
Pass
$
14,193

 
$
349,009

 
$
11,422

 
$
26,313

 
$
138,836

 
$
15,238

 
$
112

 
$
1,469

 
$
556,592

Special mention
10,957

 
106,582

 
16,014

 
3,869

 
5,543

 
2,375

 
—

 
—

 
145,340

Substandard
49,746

 
148,880

 
7,252

 
3,221

 
44,396

 
1,696

 
1,237

 
2

 
256,430

Doubtful
2,214

 
32,503

 
—

 
431

 
1,401

 
612

 
295

 
—

 
37,456

Ungraded
3,717

 
507

 
—

 
17

 
80,512

 
208

 
27,115

 
2,039

 
114,115

Total
$
80,827

 
$
637,481

 
$
34,688

 
$
33,851

 
$
270,688

 
$
20,129

 
$
28,759

 
$
3,510

 
$
1,109,933

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 
Acquired loans
 
Construction
and land
development -
commercial
 
Commercial
mortgage
 
Other
commercial
real estate
 
Commercial
and
industrial
 
Residential
mortgage
 
Revolving
mortgage
 
Construction
and land
development -
noncommercial
 
Consumer
and other
 
Total acquired
loans
Pass
$
2,619

 
$
296,824

 
$
22,225

 
$
8,021

 
$
135,326

 
$
26,322

 
$
149

 
$
1,345

 
$
492,831

Special mention
15,530

 
125,295

 
3,431

 
2,585

 
6,301

 
2,608

 
—

 
—

 
155,750

Substandard
52,228

 
179,657

 
7,012

 
5,225

 
52,774

 
1,013

 
2,139

 
—

 
300,048

Doubtful
7,436

 
40,471

 
8,713

 
1,257

 
2,058

 
891

 
295

 
—

 
61,121

Ungraded
1,102

 
644

 
—

 
166

 
17,392

 
—

 
—

 
372

 
19,676

Total
$
78,915

 
$
642,891

 
$
41,381

 
$
17,254

 
$
213,851

 
$
30,834

 
$
2,583

 
$
1,717

 
$
1,029,426



19
Table of Contents

The aging of the outstanding loans and leases, by class, at June 30, 2014 and December 31, 2013 (excluding loans and leases acquired with deteriorated credit quality) is provided in the table below.

The calculation of days past due begins on the day after payment is due and includes all days through which all required interest or principal has not been paid. Loans and leases 30 days or less past due are considered current as various grace periods allow borrowers to make payments within a stated period after the due date and still remain in compliance with the loan agreement.

 
June 30, 2014
(Dollars in thousands)
30-59 days
past due
 
60-89 days
past due
 
90 days or greater
 
Total past
due
 
Current
 
Total loans
and leases
Originated loans and leases:
 
 
 
 
 
 
 
 
 
 
 
Construction and land development - commercial
$
657

 
$
40

 
$
462

 
$
1,159

 
$
340,862

 
$
342,021

Commercial mortgage
11,755

 
3,089

 
10,501

 
25,345

 
6,341,751

 
6,367,096

Other commercial real estate
149

 
—

 
52

 
201

 
178,698

 
178,899

Commercial and industrial
5,459

 
805

 
593

 
6,857

 
1,285,356

 
1,292,213

Lease financing
1,110

 
8

 
97

 
1,215

 
412,207

 
413,422

Other
343

 
—

 
—

 
343

 
130,708

 
131,051

Residential mortgage
11,219

 
4,693

 
7,907

 
23,819

 
1,047,270

 
1,071,089

Revolving mortgage
7,690

 
2,434

 
4,662

 
14,786

 
2,107,889

 
2,122,675

Construction and land development - noncommercial
949

 
229

 
164

 
1,342

 
118,078

 
119,420

Consumer
1,949

 
843

 
766

 
3,558

 
373,579

 
377,137

Total originated loans and leases
$
41,280

 
$
12,141

 
$
25,204

 
$
78,625

 
$
12,336,398

 
$
12,415,023

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 
30-59 days
past due
 
60-89 days
past due
 
90 days or greater
 
Total past
due
 
Current
 
Total loans
and leases
Originated loans and leases:
 
 
 
 
 
 
 
 
 
 
 
Construction and land development - commercial
$
1,603

 
$
9

 
$
457

 
$
2,069

 
$
317,778

 
$
319,847

Commercial mortgage
11,131

 
3,601

 
14,407

 
29,139

 
6,333,351

 
6,362,490

Other commercial real estate
139

 
210

 
470

 
819

 
177,935

 
178,754

Commercial and industrial
3,336

 
682

 
436

 
4,454

 
1,076,704

 
1,081,158

Lease financing
789

 
1,341

 
101

 
2,231

 
379,532

 
381,763

Other
—

 
85

 
—

 
85

 
175,251

 
175,336

Residential mortgage
12,885

 
4,658

 
9,578

 
27,121

 
955,300

 
982,421

Revolving mortgage
10,977

 
2,378

 
4,450

 
17,805

 
2,095,480

 
2,113,285

Construction and land development - noncommercial
1,193

 
317

 
256

 
1,766

 
121,026

 
122,792