10-Q 1 fcnca_10qx09302015.htm 10-Q
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 September 30, 2015
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—11,005,220 shares
Class B Common Stock—$1 Par Value—1,005,185 shares
(Number of shares outstanding, by class, as of November 3, 2015)

Table of Contents
INDEX

|  | Page No.
PART I. | FINANCIAL INFORMATION |
Item 1. | Financial Statements |
| Consolidated Balance Sheets (Unaudited) | 3
| Consolidated Statements of Income (Unaudited) | 4
| Consolidated Statements of Comprehensive Income (Unaudited) | 5
| Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) | 6
| Consolidated Statements of Cash Flows (Unaudited) | 7
| Notes to Consolidated Financial Statements (Unaudited) | 8
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 45
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 65
Item 4. | Controls and Procedures | 65
PART II. | OTHER INFORMATION |
Item 1. | Legal Proceedings | 66
Item 1A. | Risk Factors | 66
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 67
Item 6. | Exhibits | 67

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PART I

Item 1. | Financial Statements

First Citizens BancShares, Inc. and Subsidiaries
Consolidated Balance Sheets

(Dollars in thousands, unaudited) | September 30, 2015 |  | December 31, 2014
Assets |  |  |
Cash and due from banks | $ | 546,444 |  |  | $ | 604,182 |
Overnight investments | 2,368,132 |  |  | 1,724,919 |
Investment securities available for sale | 6,690,578 |  |  | 7,171,917 |
Investment securities held to maturity | 301 |  |  | 518 |
Loans held for sale | 71,874 |  |  | 63,696 |
Loans and leases | 19,855,806 |  |  | 18,769,465 |
Less allowance for loan and lease losses | (205,463 | ) |  | (204,466 | )
Net loans and leases | 19,650,343 |  |  | 18,564,999 |
Premises and equipment | 1,123,828 |  |  | 1,125,081 |
Other real estate owned: |  |  |
Covered under loss share agreements | 8,152 |  |  | 22,982 |
Not covered under loss share agreements | 61,707 |  |  | 70,454 |
Income earned not collected | 67,368 |  |  | 57,254 |
FDIC loss share receivable | 9,276 |  |  | 28,701 |
Goodwill | 139,773 |  |  | 139,773 |
Other intangible assets | 95,535 |  |  | 106,610 |
Other assets | 616,513 |  |  | 394,027 |
Total assets | $ | 31,449,824 |  |  | $ | 30,075,113 |
Liabilities |  |  |
Deposits: |  |  |
Noninterest-bearing | $ | 9,171,529 |  |  | $ | 8,086,784 |
Interest-bearing | 17,547,846 |  |  | 17,591,793 |
Total deposits | 26,719,375 |  |  | 25,678,577 |
Short-term borrowings | 759,757 |  |  | 987,184 |
Long-term obligations | 705,418 |  |  | 351,320 |
FDIC loss share payable | 124,038 |  |  | 116,535 |
Other liabilities | 278,708 |  |  | 253,903 |
Total liabilities | 28,587,296 |  |  | 27,387,519 |
Shareholders’ equity |  |  |
Common stock: |  |  |
Class A - $1 par value (16,000,000 shares authorized; 11,005,220 shares issued and outstanding at September 30, 2015 and December 31, 2014) | 11,005 |  |  | 11,005 |
Class B - $1 par value (2,000,000 shares authorized; 1,005,185 shares issued and outstanding at September 30, 2015 and December 31, 2014) | 1,005 |  |  | 1,005 |
Surplus | 658,918 |  |  | 658,918 |
Retained earnings | 2,226,476 |  |  | 2,069,647 |
Accumulated other comprehensive loss | (34,876 | ) |  | (52,981 | )
Total shareholders’ equity | 2,862,528 |  |  | 2,687,594 |
Total liabilities and shareholders’ equity | $ | 31,449,824 |  |  | $ | 30,075,113 |

See accompanying Notes to Consolidated Financial Statements.
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First Citizens BancShares, Inc. and Subsidiaries
Consolidated Statements of Income

| Three months ended September 30 |  | Nine months ended September 30
(Dollars in thousands, except per share data, unaudited) | 2015 |  | 2014 |  | 2015 |  | 2014
Interest income |  |  |  |  |  |  |
Loans and leases | $ | 224,631 |  |  | $ | 164,259 |  |  | $ | 658,175 |  |  | $ | 489,401 |
Investment securities and dividend income | 24,020 |  |  | 12,707 |  |  | 65,136 |  |  | 36,902 |
Overnight investments | 1,174 |  |  | 655 |  |  | 4,037 |  |  | 2,023 |
Total interest income | 249,825 |  |  | 177,621 |  |  | 727,348 |  |  | 528,326 |
Interest expense |  |  |  |  |  |  |
Deposits | 5,216 |  |  | 5,703 |  |  | 16,379 |  |  | 18,534 |
Short-term borrowings | 590 |  |  | 2,694 |  |  | 4,182 |  |  | 4,830 |
Long-term obligations | 4,648 |  |  | 3,002 |  |  | 12,601 |  |  | 12,111 |
Total interest expense | 10,454 |  |  | 11,399 |  |  | 33,162 |  |  | 35,475 |
Net interest income | 239,371 |  |  | 166,222 |  |  | 694,186 |  |  | 492,851 |
Provision (credit) for loan and lease losses | 107 |  |  | 1,537 |  |  | 13,618 |  |  | (7,665 | )
Net interest income after provision (credit) for loan and lease losses | 239,264 |  |  | 164,685 |  |  | 680,568 |  |  | 500,516 |
Noninterest income |  |  |  |  |  |  |
Gain on acquisition | — |  |  | — |  |  | 42,930 |  |  | — |
Cardholder services | 19,588 |  |  | 13,248 |  |  | 57,203 |  |  | 38,337 |
Merchant services | 22,005 |  |  | 15,556 |  |  | 62,955 |  |  | 44,112 |
Service charges on deposit accounts | 23,153 |  |  | 15,489 |  |  | 67,572 |  |  | 45,194 |
Wealth management services | 22,223 |  |  | 15,657 |  |  | 64,658 |  |  | 46,352 |
Fees from processing services | 45 |  |  | 7,303 |  |  | 140 |  |  | 17,846 |
Securities gains | 5,564 |  |  | — |  |  | 10,837 |  |  | — |
Other service charges and fees | 6,163 |  |  | 4,001 |  |  | 17,303 |  |  | 12,195 |
Mortgage income | 4,852 |  |  | 1,164 |  |  | 14,972 |  |  | 3,329 |
Insurance commissions | 2,945 |  |  | 2,422 |  |  | 8,698 |  |  | 7,962 |
ATM income | 1,800 |  |  | 1,199 |  |  | 5,289 |  |  | 3,661 |
Adjustments to FDIC loss share receivable | (4,130 | ) |  | (4,386 | ) |  | (9,730 | ) |  | (32,030 | )
Other(1) | 5,542 |  |  | 6,946 |  |  | 25,126 |  |  | 20,544 |
Total noninterest income | 109,750 |  |  | 78,599 |  |  | 367,953 |  |  | 207,502 |
Noninterest expense |  |  |  |  |  |  |
Salaries and wages | 108,992 |  |  | 81,825 |  |  | 324,358 |  |  | 243,017 |
Employee benefits | 27,121 |  |  | 19,797 |  |  | 86,341 |  |  | 59,638 |
Occupancy expense | 22,260 |  |  | 20,265 |  |  | 73,412 |  |  | 60,975 |
Equipment expense | 22,447 |  |  | 18,767 |  |  | 69,284 |  |  | 57,121 |
FDIC insurance expense | 4,933 |  |  | 2,915 |  |  | 13,755 |  |  | 8,191 |
Foreclosure-related expenses | 1,087 |  |  | 4,838 |  |  | 4,663 |  |  | 13,787 |
Merger-related expenses | 3,679 |  |  | 1,505 |  |  | 11,249 |  |  | 7,352 |
Other | 69,653 |  |  | 51,898 |  |  | 199,967 |  |  | 141,779 |
Total noninterest expense | 260,172 |  |  | 201,810 |  |  | 783,029 |  |  | 591,860 |
Income before income taxes | 88,842 |  |  | 41,474 |  |  | 265,492 |  |  | 116,158 |
Income taxes(1) | 32,884 |  |  | 14,973 |  |  | 97,854 |  |  | 40,492 |
Net income(1) | $ | 55,958 |  |  | $ | 26,501 |  |  | $ | 167,638 |  |  | $ | 75,666 |
Average shares outstanding | 12,010,405 |  |  | 9,618,941 |  |  | 12,010,405 |  |  | 9,618,941 |
Net income per share(1) | $ | 4.66 |  |  | $ | 2.76 |  |  | $ | 13.96 |  |  | $ | 7.87 |

(1) Amounts for the 2014 period have been updated to reflect the fourth quarter 2014 adoption of Accounting Standard Update (ASU) 2014-01 related to investments in qualified affordable housing projects.
See accompanying Notes to Consolidated Financial Statements.
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First Citizens BancShares, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income

| Three months ended September 30 |  | Nine months ended September 30
(Dollars in thousands, unaudited) | 2015 |  | 2014 |  | 2015 |  | 2014
Net income(1) | $ | 55,958 |  |  | $ | 26,501 |  |  | $ | 167,638 |  |  | $ | 75,666 |
Other comprehensive income (loss): |  |  |  |  |  |  |
Unrealized gains (losses) on securities: |  |  |  |  |  |  |
Change in unrealized securities gains (losses) arising during period | 28,231 |  |  | (11,444 | ) |  | 29,420 |  |  | 32,006 |
Tax effect | (10,737 | ) |  | 4,444 |  |  | (11,198 | ) |  | (12,425 | )
Reclassification adjustment for net gains realized and included in income before income taxes | (5,564 | ) |  | — |  |  | (10,837 | ) |  | — |
Tax effect | 2,094 |  |  | — |  |  | 4,145 |  |  | — |
Total change in unrealized gains (losses) on securities, net of tax | 14,024 |  |  | (7,000 | ) |  | 11,530 |  |  | 19,581 |
Change in fair value of cash flow hedges: |  |  |  |  |  |  |
Change in unrecognized loss on cash flow hedges | 721 |  |  | 949 |  |  | 2,006 |  |  | 2,236 |
Tax effect | (300 | ) |  | (367 | ) |  | (796 | ) |  | (863 | )
Total change in unrecognized loss on cash flow hedges, net of tax | 421 |  |  | 582 |  |  | 1,210 |  |  | 1,373 |
Change in pension obligation: |  |  |  |  |  |  |
Amortization of actuarial losses and prior service cost | 2,916 |  |  | 822 |  |  | 8,689 |  |  | 4,019 |
Tax effect | (1,078 | ) |  | (319 | ) |  | (3,324 | ) |  | (1,563 | )
Total change in pension obligation, net of tax | 1,838 |  |  | 503 |  |  | 5,365 |  |  | 2,456 |
Other comprehensive income (loss) | 16,283 |  |  | (5,915 | ) |  | 18,105 |  |  | 23,410 |
Total comprehensive income(1) | $ | 72,241 |  |  | $ | 20,586 |  |  | $ | 185,743 |  |  | $ | 99,076 |

(1) Amounts for 2014 period have been updated to reflect the fourth quarter 2014 adoption of ASU 2014-01 related to investments in qualified affordable housing projects.
See accompanying Notes to Consolidated Financial Statements.
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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, 2013 | $ | 8,586 |  |  | $ | 1,033 |  |  | $ | 143,766 |  |  | $ | 1,943,345 |  |  | $ | (25,268 | ) |  | $ | 2,071,462 |
Net income(1) | — |  |  | — |  |  | — |  |  | 75,666 |  |  | — |  |  | 75,666 |
Other comprehensive income, net of tax | — |  |  | — |  |  | — |  |  | — |  |  | 23,410 |  |  | 23,410 |
Cash dividends ($0.90 per share) | — |  |  | — |  |  | — |  |  | (8,657 | ) |  | — |  |  | (8,657 | )
Balance at September 30, 2014 | $ | 8,586 |  |  | $ | 1,033 |  |  | $ | 143,766 |  |  | $ | 2,010,354 |  |  | $ | (1,858 | ) |  | $ | 2,161,881 |
Balance at December 31, 2014 | $ | 11,005 |  |  | $ | 1,005 |  |  | $ | 658,918 |  |  | $ | 2,069,647 |  |  | $ | (52,981 | ) |  | $ | 2,687,594 |
Net income | — |  |  | — |  |  | — |  |  | 167,638 |  |  | — |  |  | 167,638 |
Other comprehensive income, net of tax | — |  |  | — |  |  | — |  |  | — |  |  | 18,105 |  |  | 18,105 |
Cash dividends ($0.90 per share) | — |  |  | — |  |  | — |  |  | (10,809 | ) |  | — |  |  | (10,809 | )
Balance at September 30, 2015 | $ | 11,005 |  |  | $ | 1,005 |  |  | $ | 658,918 |  |  | $ | 2,226,476 |  |  | $ | (34,876 | ) |  | $ | 2,862,528 |

(1) Amount for the 2014 period has been updated to reflect the fourth quarter 2014 adoption of ASU 2014-01 related to investments in qualified affordable housing projects.
See accompanying Notes to Consolidated Financial Statements.
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First Citizens BancShares, Inc. and Subsidiaries
Consolidated Statements of Cash Flows

| Nine months ended September 30
(Dollars in thousands, unaudited) | 2015 |  | 2014
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |
Net income(1) | $ | 167,638 |  |  | $ | 75,666 |
Adjustments to reconcile net income to cash provided by operating activities: |  |  |
Provision (credit) for loan and lease losses | 13,618 |  |  | (7,665 | )
Deferred tax benefit(1) | (3,941 | ) |  | (24,374 | )
Net change in current taxes | (26,195 | ) |  | (24,716 | )
Depreciation | 65,559 |  |  | 53,249 |
Net change in accrued interest payable | (2,244 | ) |  | (1,434 | )
Net increase in income earned not collected | (10,114 | ) |  | (121 | )
Gain on acquisition | (42,930 | ) |  | — |
Securities gains | (10,837 | ) |  | — |
Origination of loans held for sale | (542,836 | ) |  | (198,134 | )
Proceeds from sale of loans | 540,737 |  |  | 206,310 |
Gain on sale of loans | (6,079 | ) |  | (3,334 | )
Net writedowns/losses on other real estate | 4,355 |  |  | 9,770 |
Net amortization of premiums and discounts(1) | (70,150 | ) |  | (33,917 | )
Amortization of intangible assets | 11,765 |  |  | 1,737 |
Reduction in FDIC receivable for loss share agreements | 35,395 |  |  | 16,708 |
Increase in FDIC payable for loss share agreements | 7,503 |  |  | 7,546 |
Net change in other assets(1) | 29,225 |  |  | (37,077 | )
Net change in other liabilities | 37,077 |  |  | 27,327 |
Net cash provided by operating activities | 197,546 |  |  | 67,541 |
CASH FLOWS FROM INVESTING ACTIVITIES |  |  |
Net increase in loans outstanding | (928,132 | ) |  | (329,925 | )
Purchases of investment securities available for sale | (1,887,604 | ) |  | (1,999,666 | )
Proceeds from maturities/calls of investment securities held to maturity | 217 |  |  | 300 |
Proceeds from maturities/calls of investment securities available for sale | 1,139,053 |  |  | 1,993,051 |
Proceeds from sales of investment securities available for sale | 1,036,254 |  |  | — |
Net change in overnight investments | (643,213 | ) |  | 151,972 |
Proceeds from sales of loans | 45,862 |  |  | — |
Cash paid to the FDIC for loss share agreements | (24,805 | ) |  | (5,479 | )
Proceeds from sales of other real estate | 63,446 |  |  | 55,478 |
Additions to premises and equipment | (55,575 | ) |  | (65,763 | )
Business acquisition, net cash acquired | 123,137 |  |  | 18,194 |
Net cash used by investing activities | (1,131,360 | ) |  | (181,838 | )
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |
Net decrease in time deposits | (405,160 | ) |  | (301,849 | )
Net increase in demand and other interest-bearing deposits | 1,179,606 |  |  | 202,853 |
Net change in short-term borrowings | (232,928 | ) |  | 91,345 |
Repayment of long-term obligations | (4,633 | ) |  | (2,001 | )
Origination of long-term obligations | 350,000 |  |  | — |
Cash dividends paid | (10,809 | ) |  | (8,657 | )
Net cash provided (used) by financing activities | 876,076 |  |  | (18,309 | )
Change in cash and due from banks | (57,738 | ) |  | (132,606 | )
Cash and due from banks at beginning of period | 604,182 |  |  | 533,599 |
Cash and due from banks at end of period | $ | 546,444 |  |  | $ | 400,993 |
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: |  |  |
Transfers of loans to other real estate | $ | 44,065 |  |  | $ | 42,136 |
Dividends declared but not paid | 3,603 |  |  | 2,886 |
Unsettled sales of investment securities | 236,617 |  |  | — |

(1) Amounts for the 2014 period have been updated to reflect the fourth quarter 2014 adoption of ASU 2014-01 related to investments in qualified affordable housing projects.
See accompanying Notes to Consolidated Financial Statements.
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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 thereto 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, 2014.
Reclassifications
Prior period financial statements reflect the retrospective application of Accounting Standards Update (ASU) 2014-01, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments Qualified Affordable Housing Projects which was adopted effective in the fourth quarter of 2014 and did not have a material impact on our consolidated financial condition or results of operations.
In certain instances other than the retrospective adoption of ASU 2014-01, 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:

• | Allowance for loan and lease losses

• | Fair value of financial instruments, including acquired assets and assumed liabilities

• | Pension plan assumptions

• | Cash flow estimates on purchased credit-impaired loans

• | Receivable from and payable to the FDIC for loss share agreements

• | Income tax assets, liabilities and expense

Recently Adopted Accounting Pronouncements
Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2015-10, Technical Corrections and Improvements
The amendments in this ASU represent changes to clarify the Codification, correct unintended application of guidance and make minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. Additionally, some of the amendments will make the Codification easier to understand and easier to apply by eliminating inconsistencies, providing needed clarifications, and improving the presentation of guidance in the Codification.
The transition guidance varies based on the amendments in this ASU. The amendments in this ASU that require transition guidance are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December
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15, 2015. Early adoption is permitted, including adoption in an interim period. All other amendments were effective upon issuance. We adopted the amendments effective second quarter of 2015. The adoption did not have an impact on our consolidated financial position or consolidated results of operations.
FASB ASU 2015-08, Business Combinations (Topic 805): Pushdown Accounting - Amendments to Securities and Exchange Commission (SEC) Paragraphs Pursuant to Staff Accounting Bulletin No. 115
The amendments in this ASU remove references to SEC Staff Accounting Bulletin (SAB) Topic 5.J as the SEC staff previously rescinded its guidance with the issuance of SAB No. 115 when the FASB issued its own pushdown accounting guidance in ASU 2014-17, an amendment we adopted effective fourth quarter of 2014. We adopted the amendments in ASU 2015-08 effective second quarter of 2015. The adoption did not have an impact on our consolidated financial position or consolidated results of operations.
FASB ASU 2014-14, Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40): Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure
This ASU requires a reporting entity to derecognize a mortgage loan and recognize a separate other receivable upon foreclosure if the following conditions are met: the loan has a government guarantee that is not separable from the loan before foreclosure; at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim and at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance expected to be recovered from the guarantor.
The amendments in this ASU were effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. We adopted this guidance effective first quarter of 2015. The initial adoption did not have any effect on our consolidated financial position or consolidated results of operations.
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 a 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 were effective for fiscal years beginning after December 15, 2014. In addition, the disclosures for certain transactions accounted for as a sale were effective for the fiscal period beginning after December 15, 2014, while the disclosures for transactions accounted for as secured borrowings were required to be presented for fiscal periods beginning after December 15, 2014, and interim periods beginning after March 15, 2015. We adopted the guidance effective first quarter of 2015. The initial adoption did not have any effect on our consolidated financial position or consolidated results of operations. The new disclosures required by this ASU are included in Note I.
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 were effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. We adopted the guidance effective first quarter of 2015. The initial adoption did not have any effect on our consolidated financial position or consolidated results of operations. The new disclosures required by this ASU are included in Note F.
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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 (LIHTC) 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 Accounting Standards Codification (ASC) 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.
BancShares early adopted the guidance effective in the fourth quarter of 2014. Previously, LIHTC investments were accounted for under the cost or equity method, and the amortization was recorded as a reduction to other noninterest income, with the tax credits and other benefits received recorded as a component of the provision for income taxes. BancShares believes the proportional amortization method better represents the economics of LIHTC investments and provides users with a better understanding of the returns from such investments than the cost or equity method. LIHTC investments were $74.5 million and $57.1 million at September 30, 2015 and December 31, 2014, respectively, and are included in "other assets" on the Consolidated Balance Sheets.
The cumulative effect of the retrospective application of the change in amortization method was a $2.4 million decrease to both "other assets" and "retained earnings" on the Consolidated Balance Sheets as of January 1, 2012. Under the new amortization method of accounting, amortization expense is recognized in income tax expense in the Consolidated Statements of Income and is offset by the tax effect of tax losses and tax credits received from the investments. This change resulted in a reclassification of expense previously recorded as a reduction in other noninterest income to income tax expense along with additional amortization recognized under the new method of accounting in the Consolidated Statements of Income. An additional change resulting from the new amortization method of accounting was that a deferred tax asset or liability no longer exists as a result of these investments, thus in the retrospective application of the new method, the removal of the deferred tax asset previously reported as well as the additional amortization of the investments, both recorded in other assets, reflected in the Consolidated Balance Sheets were removed. We do not believe the impact of this change in accounting principle is material.
Recently Issued Accounting Pronouncements
FASB ASU 2015-03, Interest–Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs
This ASU simplifies the presentation of debt issuance costs by requiring that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update.
This ASU is effective for interim and annual periods beginning after December 15, 2015 for public business entities, and is to be applied retrospectively. Early adoption is permitted. We will adopt the guidance effective in the first quarter of 2016 and do not anticipate any impact on our consolidated financial position or consolidated results of operations as a result of adoption.
FASB ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis
This ASU improves targeted areas of consolidation guidance for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. In addition to reducing the number of consolidation models from four to two, the new standard places more emphasis on risk of loss when determining a controlling financial interest, reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity ("VIE"), and changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or VIEs.
The amendments in this ASU are effective for periods beginning after December 15, 2015 for public business entities. Early adoption is permitted. We will adopt the guidance effective in the first quarter of 2016 and do not anticipate any significant impact 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
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in enhanced disclosures about revenue, provides guidance for transactions that were not previously addressed comprehensively and improves guidance for multiple-element arrangements.
Per ASU 2015-14, Deferral of the Effective Date, this guidance was deferred and is effective for fiscal periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted for fiscal periods beginning after December 15, 2016. We are currently evaluating the impact of the new standard and we will adopt during the first quarter of 2018 using one of two retrospective application methods.
NOTE B - BUSINESS COMBINATIONS
Capitol City Bank & Trust Company
On February 13, 2015, FCB entered into an agreement with the Federal Deposit Insurance Corporation (FDIC), as Receiver, to purchase certain assets and assume certain liabilities of Capitol City Bank & Trust (CCBT). The acquisition expanded FCB's presence in Georgia as CCBT operated eight branch locations in Atlanta, Stone Mountain, Albany, Augusta and Savannah, Georgia. In June of 2015, FCB closed one of the branches in Atlanta.
The CCBT transaction was accounted for under the acquisition method of accounting and, accordingly, assets acquired and liabilities assumed were recorded at their estimated fair values on the acquisition date. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding closing date fair values becomes available.
The fair value of the assets acquired recorded was $211.9 million, including $154.5 million in loans and $690 thousand of identifiable intangible assets. Liabilities assumed were $272.5 million of which $266.4 million were deposits. During the second quarter of 2015, adjustments were made to the acquisition fair values primarily based upon updated collateral valuations resulting in an increase of $5.4 million to the gain on acquisition. These adjustments were applied retroactively to the first quarter of 2015 and brought the total gain on the transaction to $42.9 million which is included in noninterest income in the Consolidated Statements of Income. The total after-tax impact of the gain was $26.4 million.
The following table provides the identifiable assets acquired and liabilities assumed at their estimated fair values as of the acquisition date.

(Dollars in thousands) |  | As recorded by FCB
Assets |  |
Cash and cash equivalents |  | $ | 19,622 |
Investment securities |  | 35,413 |
Loans |  | 154,496 |
Intangible assets |  | 690 |
Other assets |  | 1,714 |
Total assets acquired |  | 211,935 |
Liabilities |  |
Deposits |  | 266,352 |
Short-term borrowings |  | 5,501 |
Other liabilities |  | 667 |
Total liabilities assumed |  | 272,520 |
Fair value of net liabilities assumed |  | (60,585 | )
Cash received from FDIC |  | 103,515 |
Gain on acquisition of CCBT |  | $ | 42,930 |

Merger-related expenses of $525 thousand and $1.8 million were recorded in the Consolidated Statements of Income for the three and nine months ended September 30, 2015, respectively. Loan-related interest income generated from CCBT was approximately $2.3 million for the third quarter of 2015 and $6.0 million since the acquisition date.
All loans resulting from the CCBT transaction were recorded at the acquisition date with a discount attributable, at least in part, to credit quality, and are therefore accounted for as purchased credit-impaired (PCI) loans under ASC 310-30.
First Citizens Bancorporation, Inc. and First Citizens Bank and Trust Company, Inc.
On October 1, 2014, BancShares completed the merger of First Citizens Bancorporation, Inc. (Bancorporation) with and into BancShares pursuant to an Agreement and Plan of Merger dated June 10, 2014, as amended on July 29, 2014. First Citizens Bank and Trust Company, Inc. merged with and into FCB on January 1, 2015.
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Under the terms of the Merger Agreement, each share of Bancorporation common stock was converted into the right to receive 4.00 shares of BancShares' Class A common stock and $50.00 cash, unless the holder elected 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. BancShares issued 2,586,762 Class A common shares at a fair value of $560.4 million and 18,202 Class B common shares at a fair value of $3.9 million to Bancorporation shareholders. Also, cash paid to Bancorporation shareholders was $30.4 million. At the time of the merger, Bancorporation owned 32,042 shares of common stock in Bancorporation with an approximate fair value of $29.6 million. The fair value of common stock owned by BancShares in Bancorporation was considered part of the purchase price, and the shares ceased to exist after completion of the merger.
The Bancorporation transaction was accounted for under the acquisition method of accounting and, accordingly, assets acquired and liabilities assumed were recorded at their estimated fair values on the acquisition date. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition. Assets acquired, excluding goodwill, totaled $8.28 billion, including $4.49 billion in loans and leases, $2.01 billion of investment securities available for sale, $1.28 billion in cash and overnight investments, and $109.4 million of identifiable intangible assets. Liabilities assumed were $7.66 billion, including $7.17 billion of deposits. Goodwill of $4.2 million was recorded equaling the excess purchase price over the estimated fair value of the net assets acquired on the acquisition date.
The following unaudited pro forma financial information reflects the consolidated results of operations of BancShares. These results combine the historical results of Bancorporation in the BancShares' Consolidated Statements of Income and, while certain adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place at the beginning of the period presented. The unaudited pro forma information has been presented for illustrative purposes only and is not necessarily indicative of the consolidated results of operations that would have been achieved or the future results of operations of BancShares.

| Three months ended September 30 |  | Nine months ended September 30
(Dollars in thousands) | 2014 |  | 2014
Total revenue (interest income plus noninterest income) | $ | 341,927 |  |  | $ | 995,704 |
Net loss | $ | (127,768 | ) |  | $ | (50,279 | )

The merger transaction between BancShares and Bancorporation constituted a triggering event for which Bancorporation undertook a goodwill impairment assessment. Based on the analysis performed, Bancorporation determined that its fair value did not support the goodwill recorded; therefore, Bancorporation recorded a $166.8 million goodwill impairment charge to write-off a portion of goodwill prior to the October 1, 2014 effective date of the merger. This goodwill impairment is included in the pro forma financial results for the quarter and nine months ended September 30, 2014.
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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 September 30, 2015 and December 31, 2014, are as follows:

| September 30, 2015
(Dollars in thousands) | Cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value
Investment securities available for sale |  |  |  |  |  |  |
U.S. Treasury | $ | 1,685,794 |  |  | $ | 5,708 |  |  | $ | — |  |  | $ | 1,691,502 |
Government agency | 633,162 |  |  | 1,742 |  |  | — |  |  | 634,904 |
Mortgage-backed securities | 4,343,105 |  |  | 26,375 |  |  | 6,919 |  |  | 4,362,561 |
Equity securities | 1,591 |  |  | 20 |  |  | — |  |  | 1,611 |
Total investment securities available for sale | $ | 6,663,652 |  |  | $ | 33,845 |  |  | $ | 6,919 |  |  | $ | 6,690,578 |
| December 31, 2014
| Cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value
U.S. Treasury | $ | 2,626,900 |  |  | $ | 2,922 |  |  | $ | 152 |  |  | $ | 2,629,670 |
Government agency | 908,362 |  |  | 702 |  |  | 247 |  |  | 908,817 |
Mortgage-backed securities | 3,628,187 |  |  | 16,964 |  |  | 11,847 |  |  | 3,633,304 |
Municipal securities | 125 |  |  | 1 |  |  | — |  |  | 126 |
Total investment securities available for sale | $ | 7,163,574 |  |  | $ | 20,589 |  |  | $ | 12,246 |  |  | $ | 7,171,917 |
| September 30, 2015
| Cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value
Investment securities held to maturity |  |  |  |  |  |  |
Mortgage-backed securities | $ | 301 |  |  | $ | 13 |  |  | $ | — |  |  | $ | 314 |
| December 31, 2014
| Cost |  | Gross unrealized gains |  | Gross unrealized losses |  | Fair value
Mortgage-backed securities | $ | 518 |  |  | $ | 26 |  |  | $ | — |  |  | $ | 544 |

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.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.

| September 30, 2015 |  | December 31, 2014
(Dollars in thousands) | Cost |  | Fair value |  | Cost |  | Fair value
Investment securities available for sale |  |  |  |  |  |  |
Non-amortizing securities maturing in: |  |  |  |  |  |  |
One year or less | $ | 673,879 |  |  | $ | 675,164 |  |  | $ | 447,866 |  |  | $ | 447,992 |
One through five years | 1,645,077 |  |  | 1,651,242 |  |  | 3,087,521 |  |  | 3,090,621 |
Mortgage-backed securities | 4,343,105 |  |  | 4,362,561 |  |  | 3,628,187 |  |  | 3,633,304 |
Equity securities | 1,591 |  |  | 1,611 |  |  | — |  |  | — |
Total investment securities available for sale | $ | 6,663,652 |  |  | $ | 6,690,578 |  |  | $ | 7,163,574 |  |  | $ | 7,171,917 |
Investment securities held to maturity |  |  |  |  |  |  |
Mortgage-backed securities held to maturity | $ | 301 |  |  | $ | 314 |  |  | $ | 518 |  |  | $ | 544 |

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For each period presented, securities gains (losses) included the following:

| Three months ended September 30 |  | Nine months ended September 30
(Dollars in thousands) | 2015 |  | 2014 |  | 2015 |  | 2014
Gross gains on sales of investment securities available for sale | $ | 5,564 |  |  | $ | — |  |  | $ | 10,850 |  |  | $ | — |
Gross losses on sales of investment securities available for sale | — |  |  | — |  |  | (13 | ) |  | — |
Total net securities gain | $ | 5,564 |  |  | $ | — |  |  | $ | 10,837 |  |  | $ | — |

The following table provides information regarding securities with unrealized losses as of September 30, 2015 and December 31, 2014.

| September 30, 2015
| 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: |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities | $ | 911,980 |  |  | $ | 3,024 |  |  | $ | 300,157 |  |  | $ | 3,895 |  |  | $ | 1,212,137 |  |  | $ | 6,919 |
Total | $ | 911,980 |  |  | $ | 3,024 |  |  | $ | 300,157 |  |  | $ | 3,895 |  |  | $ | 1,212,137 |  |  | $ | 6,919 |
| December 31, 2014
| 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 | $ | 338,612 |  |  | $ | 151 |  |  | $ | 1,015 |  |  | $ | 1 |  |  | $ | 339,627 |  |  | $ | 152 |
Government agency | 261,288 |  |  | 247 |  |  | — |  |  | — |  |  | 261,288 |  |  | 247 |
Mortgage-backed securities | 573,374 |  |  | 1,805 |  |  | 831,405 |  |  | 10,042 |  |  | 1,404,779 |  |  | 11,847 |
Total | $ | 1,173,274 |  |  | $ | 2,203 |  |  | $ | 832,420 |  |  | $ | 10,043 |  |  | $ | 2,005,694 |  |  | $ | 12,246 |

Investment securities with an aggregate fair value of $300.2 million and $832.4 million had continuous unrealized losses for more than 12 months as of September 30, 2015 and December 31, 2014, respectively, with an aggregate unrealized loss of $3.9 million and $10.0 million, respectively. As of September 30, 2015, all 40 of these investments are government sponsored enterprise-issued mortgage-backed securities. None of the unrealized losses identified as of September 30, 2015 or December 31, 2014 relate to the marketability of the securities or the issuer’s ability to honor redemption obligations. Rather, the unrealized losses relate to changes in interest rates relative to when the investment securities were purchased. 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 $4.75 billion at September 30, 2015 and $4.37 billion at December 31, 2014 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' accounting methods for loans and leases differ depending on whether they are purchased credit-impaired (PCI) or non-PCI. Non-PCI loans and leases include originated commercial, originated noncommercial, purchased revolving, and purchased non-impaired loans. For purchased non-impaired loans to be included as non-PCI, it must be determined that the loans do not have a discount due, at least in part, to credit quality at the time of acquisition. Conversely, loans for which it is probable at acquisition that all required payments will not be collected in accordance with contractual terms are considered PCI loans. PCI loans are evaluated at acquisition and where a discount is required at least in part due to credit quality, the nonrevolving loans are accounted for under the guidance in ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. PCI loans and leases are recorded at fair value at the date of acquisition. No allowance for loan and lease losses is recorded on the acquisition date as the fair value of the acquired assets incorporates assumptions regarding credit risk. An allowance is recorded if there is additional credit deterioration after the acquisition date.
BancShares reports PCI and non-PCI 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 buildings 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 residential farms and other improvements) and multifamily (5 or more) residential properties.
Commercial and industrial – Commercial and industrial consists of loans or 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 for business equipment, vehicles and other assets.
Other – Other 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 consist of residential and revolving mortgage, construction and land development, and consumer loans.
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 included the following at September 30, 2015 and December 31, 2014:

(Dollars in thousands) | September 30, 2015 |  | December 31, 2014
Non-PCI loans and leases: |  |  |
Commercial: |  |  |
Construction and land development | $ | 563,926 |  |  | $ | 493,133 |
Commercial mortgage | 8,076,946 |  |  | 7,552,948 |
Other commercial real estate | 316,924 |  |  | 244,875 |
Commercial and industrial | 2,211,973 |  |  | 1,988,934 |
Lease financing | 691,915 |  |  | 571,916 |
Other | 357,760 |  |  | 353,833 |
Total commercial loans | 12,219,444 |  |  | 11,205,639 |
Noncommercial: |  |  |
Residential mortgage | 2,659,821 |  |  | 2,493,058 |
Revolving mortgage | 2,519,972 |  |  | 2,561,800 |
Construction and land development | 220,493 |  |  | 205,016 |
Consumer | 1,192,012 |  |  | 1,117,454 |
Total noncommercial loans | 6,592,298 |  |  | 6,377,328 |
Total non-PCI loans and leases | 18,811,742 |  |  | 17,582,967 |
PCI loans: |  |  |
Commercial: |  |  |
Construction and land development | 41,582 |  |  | 78,079 |
Commercial mortgage | 568,256 |  |  | 577,518 |
Other commercial real estate | 18,013 |  |  | 40,193 |
Commercial and industrial | 17,023 |  |  | 27,254 |
Other | 2,087 |  |  | 3,079 |
Total commercial loans | 646,961 |  |  | 726,123 |
Noncommercial: |  |  |
Residential mortgage | 334,518 |  |  | 382,340 |
Revolving mortgage | 59,695 |  |  | 74,109 |
Construction and land development | 347 |  |  | 912 |
Consumer | 2,543 |  |  | 3,014 |
Total noncommercial loans | 397,103 |  |  | 460,375 |
Total PCI loans | 1,044,064 |  |  | 1,186,498 |
Total loans and leases | $ | 19,855,806 |  |  | $ | 18,769,465 |

At September 30, 2015, $296.5 million of total loans and leases were covered under loss share agreements, compared to $485.3 million at December 31, 2014. At the beginning of the second quarter of 2015, loss share protection expired for non-single family residential loans acquired from Sun American Bank ("SAB") and all loans acquired from First Regional Bank ("FRB"). The loan balance at September 30, 2015 for the expired agreements from SAB were $29.9 million. FRB loan balances at September 30, 2015 were insignificant. Loss share protection for Williamsburg First National Bank non-single family residential loans with a balance of $7.0 million at September 30, 2015 will expire at the beginning of the fourth quarter of 2015.
At September 30, 2015, $3.69 billion in noncovered loans with a lendable collateral value of $2.59 billion were used to secure $520.3 million in Federal Home Loan Bank ("FHLB") of Atlanta advances, resulting in additional borrowing capacity of $2.07 billion. At December 31, 2014, $3.16 billion in noncovered loans with a lendable collateral value of $2.20 billion were used to secure $240.3 million in FHLB of Atlanta advances, resulting additional borrowing capacity of $1.96 billion.
The unamortized discount related to the non-PCI loans and leases acquired in the Bancorporation merger totaled $45.1 million and $61.2 million at September 30, 2015 and December 31, 2014, respectively. During the three and nine months ended September 30, 2015, accretion income on non-PCI loans equaled $4.5 million and $15.6 million, respectively. There was no accretion income on non-PCI loans recorded for the same periods in 2014.
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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. Commercial and noncommercial loans and leases have different credit quality indicators as a result of the unique characteristics of the loan segment being evaluated. The credit quality indicators for non-PCI and PCI 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 non-PCI and PCI noncommercial loans are based on the delinquency status of the borrower. As the borrower becomes more delinquent, the likelihood of loss increases. 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 not adversely classified because it does not display 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 ungraded loans at September 30, 2015 and December 31, 2014 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 and other commercial real estate loans.
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Non-PCI loans and leases outstanding at September 30, 2015 and December 31, 2014 by credit quality indicator are provided below:

| September 30, 2015
(Dollars in thousands) | Non-PCI commercial loans and leases
Grade: | Construction and land development |  | Commercial mortgage |  | Other commercial real estate |  | Commercial and industrial |  | Lease financing |  | Other |  | Total non-PCI commercial loans and leases
Pass | $ | 555,833 |  |  | $ | 7,821,706 |  |  | $ | 314,171 |  |  | $ | 2,070,568 |  |  | $ | 683,265 |  |  | $ | 354,222 |  |  | $ | 11,799,765 |
Special mention | 5,606 |  |  | 107,790 |  |  | 285 |  |  | 16,812 |  |  | 5,161 |  |  | 1,828 |  |  | 137,482 |
Substandard | 2,487 |  |  | 143,536 |  |  | 1,010 |  |  | 15,241 |  |  | 3,163 |  |  | 1,710 |  |  | 167,147 |
Doubtful | — |  |  | 647 |  |  | — |  |  | 1,544 |  |  | 326 |  |  | — |  |  | 2,517 |
Ungraded | — |  |  | 3,267 |  |  | 1,458 |  |  | 107,808 |  |  | — |  |  | — |  |  | 112,533 |
Total | $ | 563,926 |  |  | $ | 8,076,946 |  |  | $ | 316,924 |  |  | $ | 2,211,973 |  |  | $ | 691,915 |  |  | $ | 357,760 |  |  | $ | 12,219,444 |
| December 31, 2014
| Non-PCI commercial loans and leases
| Construction and land development |  | Commercial mortgage |  | Other commercial real estate |  | Commercial and industrial |  | Lease financing |  | Other |  | Total non-PCI commercial loans and leases
Pass | $ | 474,374 |  |  | $ | 7,284,714 |  |  | $ | 242,053 |  |  | $ | 1,859,415 |  |  | $ | 564,319 |  |  | $ | 349,111 |  |  | $ | 10,773,986 |
Special mention | 13,927 |  |  | 129,247 |  |  | 909 |  |  | 27,683 |  |  | 3,205 |  |  | 1,384 |  |  | 176,355 |
Substandard | 4,720 |  |  | 134,677 |  |  | 1,765 |  |  | 8,878 |  |  | 3,955 |  |  | 3,338 |  |  | 157,333 |
Doubtful | — |  |  | 2,366 |  |  | — |  |  | 164 |  |  | 365 |  |  | — |  |  | 2,895 |
Ungraded | 112 |  |  | 1,944 |  |  | 148 |  |  | 92,794 |  |  | 72 |  |  | — |  |  | 95,070 |
Total | $ | 493,133 |  |  | $ | 7,552,948 |  |  | $ | 244,875 |  |  | $ | 1,988,934 |  |  | $ | 571,916 |  |  | $ | 353,833 |  |  | $ | 11,205,639 |

| September 30, 2015
| Non-PCI noncommercial loans and leases
(Dollars in thousands) | Residential mortgage |  | Revolving mortgage |  | Construction and land development |  | Consumer |  | Total non-PCI noncommercial loans and leases
Current | $ | 2,615,954 |  |  | $ | 2,503,750 |  |  | $ | 216,736 |  |  | $ | 1,181,710 |  |  | $ | 6,518,150 |
30-59 days past due | 24,179 |  |  | 9,936 |  |  | 2,539 |  |  | 6,889 |  |  | 43,543 |
60-89 days past due | 7,640 |  |  | 2,031 |  |  | 642 |  |  | 2,091 |  |  | 12,404 |
90 days or greater past due | 12,048 |  |  | 4,255 |  |  | 576 |  |  | 1,322 |  |  | 18,201 |
Total | $ | 2,659,821 |  |  | $ | 2,519,972 |  |  | $ | 220,493 |  |  | $ | 1,192,012 |  |  | $ | 6,592,298 |
| December 31, 2014
| Non-PCI noncommercial loans and leases
| Residential mortgage |  | Revolving mortgage |  | Construction and land development |  | Consumer |  | Total non-PCI noncommercial loans and leases
Current | $ | 2,454,797 |  |  | $ | 2,542,807 |  |  | $ | 202,344 |  |  | $ | 1,110,153 |  |  | $ | 6,310,101 |
30-59 days past due | 23,288 |  |  | 11,097 |  |  | 1,646 |  |  | 4,577 |  |  | 40,608 |
60-89 days past due | 6,018 |  |  | 2,433 |  |  | 824 |  |  | 1,619 |  |  | 10,894 |
90 days or greater past due | 8,955 |  |  | 5,463 |  |  | 202 |  |  | 1,105 |  |  | 15,725 |
Total | $ | 2,493,058 |  |  | $ | 2,561,800 |  |  | $ | 205,016 |  |  | $ | 1,117,454 |  |  | $ | 6,377,328 |

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PCI loans and leases outstanding at September 30, 2015 and December 31, 2014 by credit quality indicator are provided below:

| September 30, 2015
(Dollars in thousands) | PCI commercial loans
Grade: | Construction and land development |  | Commercial mortgage |  | Other commercial real estate |  | Commercial and industrial |  | Other |  | Total PCI commercial loans
Pass | $ | 18,236 |  |  | $ | 302,848 |  |  | $ | 8,519 |  |  | $ | 10,744 |  |  | $ | 775 |  |  | $ | 341,122 |
Special mention | 2,250 |  |  | 94,955 |  |  | — |  |  | 1,462 |  |  | — |  |  | 98,667 |
Substandard | 16,806 |  |  | 159,148 |  |  | 9,048 |  |  | 4,395 |  |  | 1,312 |  |  | 190,709 |
Doubtful | 4,290 |  |  | 10,967 |  |  | — |  |  | 292 |  |  | — |  |  | 15,549 |
Ungraded | — |  |  | 338 |  |  | 446 |  |  | 130 |  |  | — |  |  | 914 |
Total | $ | 41,582 |  |  | $ | 568,256 |  |  | $ | 18,013 |  |  | $ | 17,023 |  |  | $ | 2,087 |  |  | $ | 646,961 |
| December 31, 2014
| PCI commercial loans
| Construction and land development |  | Commercial mortgage |  | Other commercial real estate |  | Commercial and industrial |  | Other |  | Total PCI commercial loans
Pass | $ | 13,514 |  |  | $ | 300,187 |  |  | $ | 11,033 |  |  | $ | 16,637 |  |  | $ | 801 |  |  | $ | 342,172 |
Special mention | 6,063 |  |  | 98,724 |  |  | 16,271 |  |  | 4,137 |  |  | — |  |  | 125,195 |
Substandard | 53,739 |  |  | 171,920 |  |  | 12,889 |  |  | 6,312 |  |  | 2,278 |  |  | 247,138 |
Doubtful | 2,809 |  |  | 6,302 |  |  | — |  |  | 130 |  |  | — |  |  | 9,241 |
Ungraded | 1,954 |  |  | 385 |  |  | — |  |  | 38 |  |  | — |  |  | 2,377 |
Total | $ | 78,079 |  |  | $ | 577,518 |  |  | $ | 40,193 |  |  | $ | 27,254 |  |  | $ | 3,079 |  |  | $ | 726,123 |

| September 30, 2015
| PCI noncommercial loans
(Dollars in thousands) | Residential mortgage |  | Revolving mortgage |  | Construction and land development |  | Consumer |  | Total PCI noncommercial loans
Current | $ | 286,402 |  |  | $ | 54,594 |  |  | $ | 347 |  |  | $ | 2,322 |  |  | $ | 343,665 |
30-59 days past due | 14,514 |  |  | 1,234 |  |  | — |  |  | 90 |  |  | 15,838 |
60-89 days past due | 6,103 |  |  | 307 |  |  | — |  |  | 131 |  |  | 6,541 |
90 days or greater past due | 27,499 |  |  | 3,560 |  |  | — |  |  | — |  |  | 31,059 |
Total | $ | 334,518 |  |  | $ | 59,695 |  |  | $ | 347 |  |  | $ | 2,543 |  |  | $ | 397,103 |
| December 31, 2014
| PCI noncommercial loans
| Residential mortgage |  | Revolving mortgage |  | Construction and land development |  | Consumer |  | Total PCI noncommercial loans
Current | $ | 326,589 |  |  | $ | 68,548 |  |  | $ | 506 |  |  | $ | 2,582 |  |  | $ | 398,225 |
30-59 days past due | 11,432 |  |  | 1,405 |  |  | — |  |  | 147 |  |  | 12,984 |
60-89 days past due | 10,073 |  |  | 345 |  |  | — |  |  | 25 |  |  | 10,443 |
90 days or greater past due | 34,246 |  |  | 3,811 |  |  | 406 |  |  | 260 |  |  | 38,723 |
Total | $ | 382,340 |  |  | $ | 74,109 |  |  | $ | 912 |  |  | $ | 3,014 |  |  | $ | 460,375 |

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The aging of the outstanding non-PCI loans and leases, by class, at September 30, 2015 and December 31, 2014 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.

| September 30, 2015
(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
Non-PCI loans and leases: |  |  |  |  |  |  |  |  |  |  |
Construction and land development - commercial | $ | 1,319 |  |  | $ | 266 |  |  | $ | 282 |  |  | $ | 1,867 |  |  | $ | 562,059 |  |  | $ | 563,926 |
Commercial mortgage | 14,587 |  |  | 4,897 |  |  | 21,416 |  |  | 40,900 |  |  | 8,036,046 |  |  | 8,076,946 |
Other commercial real estate | 403 |  |  | 290 |  |  | 159 |  |  | 852 |  |  | 316,072 |  |  | 316,924 |
Commercial and industrial | 5,492 |  |  | 961 |  |  | 1,328 |  |  | 7,781 |  |  | 2,204,192 |  |  | 2,211,973 |
Lease financing | 398 |  |  | 169 |  |  | 310 |  |  | 877 |  |  | 691,038 |  |  | 691,915 |
Residential mortgage | 24,179 |  |  | 7,640 |  |  | 12,048 |  |  | 43,867 |  |  | 2,615,954 |  |  | 2,659,821 |
Revolving mortgage | 9,936 |  |  | 2,031 |  |  | 4,255 |  |  | 16,222 |  |  | 2,503,750 |  |  | 2,519,972 |
Construction and land development - noncommercial | 2,539 |  |  | 642 |  |  | 576 |  |  | 3,757 |  |  | 216,736 |  |  | 220,493 |
Consumer | 6,889 |  |  | 2,091 |  |  | 1,322 |  |  | 10,302 |  |  | 1,181,710 |  |  | 1,192,012 |
Other | 11 |  |  | — |  |  | 184 |  |  | 195 |  |  | 357,565 |  |  | 357,760 |
Total non-PCI loans and leases | $ | 65,753 |  |  | $ | 18,987 |  |  | $ | 41,880 |  |  | $ | 126,620 |  |  | $ | 18,685,122 |  |  | $ | 18,811,742 |
| December 31, 2014
| 30-59 days past due |  | 60-89 days past due |  | 90 days or greater |  | Total past due |  | Current |  | Total loans and leases
Non-PCI loans and leases: |  |  |  |  |  |  |  |  |  |  |
Construction and land development - commercial | $ | 520 |  |  | $ | 283 |  |  | $ | 330 |  |  | $ | 1,133 |  |  | $ | 492,000 |  |  | $ | 493,133 |
Commercial mortgage | 11,367 |  |  | 4,782 |  |  | 8,061 |  |  | 24,210 |  |  | 7,528,738 |  |  | 7,552,948 |
Other commercial real estate | 206 |  |  | 70 |  |  | 102 |  |  | 378 |  |  | 244,497 |  |  | 244,875 |
Commercial and industrial | 2,843 |  |  | 1,545 |  |  | 378 |  |  | 4,766 |  |  | 1,984,168 |  |  | 1,988,934 |
Lease financing | 1,631 |  |  | 8 |  |  | 2 |  |  | 1,641 |  |  | 570,275 |  |  | 571,916 |
Residential mortgage | 23,288 |  |  | 6,018 |  |  | 8,955 |  |  | 38,261 |  |  | 2,454,797 |  |  | 2,493,058 |
Revolving mortgage | 11,097 |  |  | 2,433 |  |  | 5,463 |  |  | 18,993 |  |  | 2,542,807 |  |  | 2,561,800 |
Construction and land development - noncommercial | 1,646 |  |  | 824 |  |  | 202 |  |  | 2,672 |  |  | 202,344 |  |  | 205,016 |
Consumer | 4,577 |  |  | 1,619 |  |  | 1,105 |  |  | 7,301 |  |  | 1,110,153 |  |  | 1,117,454 |
Other | 146 |  |  | 1,966 |  |  | — |  |  | 2,112 |  |  | 351,721 |  |  | 353,833 |
Total non-PCI loans and leases | $ | 57,321 |  |  | $ | 19,548 |  |  | $ | 24,598 |  |  | $ | 101,467 |  |  | $ | 17,481,500 |  |  | $ | 17,582,967 |

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The recorded investment, by class, in loans and leases on nonaccrual status, and loans and leases greater than 90 days past due and still accruing at September 30, 2015 and December 31, 2014 for non-PCI loans, were as follows:

| September 30, 2015 |  | December 31, 2014
(Dollars in thousands) | Nonaccrual loans and leases |  | Loans and leases > 90 days and accruing |  | Nonaccrual loans and leases |  | Loans and leases > 90 days and accruing
Non-PCI loans and leases: |  |  |  |  |  |  |
Construction and land development - commercial | $ | 617 |  |  | $ | 45 |  |  | $ | 343 |  |  | $ | 56 |
Commercial mortgage | 41,607 |  |  | 3,353 |  |  | 24,720 |  |  | 1,003 |
Other commercial real estate | 262 |  |  | — |  |  | 619 |  |  | 35 |
Commercial and industrial | 6,633 |  |  | 502 |  |  | 1,741 |  |  | 239 |
Lease financing | 374 |  |  | — |  |  | 374 |  |  | 2 |
Residential mortgage | 24,911 |  |  | 1,444 |  |  | 14,242 |  |  | 3,191 |
Revolving mortgage | 10,856 |  |  | 19 |  |  | — |  |  | 5,463 |
Construction and land development - noncommercial | 875 |  |  | — |  |  | — |  |  | 202 |
Consumer | 1,008 |  |  | 863 |  |  | — |  |  | 1,059 |
Other | 133 |  |  | 51 |  |  | 1,966 |  |  | — |
Total non-PCI loans and leases | $ | 87,276 |  |  | $ | 6,277 |  |  | $ | 44,005 |  |  | $ | 11,250 |

Purchased credit-impaired loans (PCI) loans
The following table relates to PCI loans acquired in the CCBT acquisition and summarizes the contractually required payments, which include principal and interest, expected cash flows to be collected, and the fair value of PCI loans and leases at the acquisition date.

(Dollars in thousands) |
Contractually required payments | $ | 247,812 |
Cash flows expected to be collected | $ | 207,688 |
Fair value of loans at acquisition | $ | 154,496 |

The recorded fair values of PCI loans acquired in the CCBT acquisition as of the acquisition date were as follows:

(Dollars in thousands) |
Commercial: |
Construction and land development | $ | 4,116 |
Commercial mortgage | 129,732 |
Other commercial real estate | 3,202 |
Commercial and industrial | 2,844 |
Total commercial loans | 139,894 |
Noncommercial: |
Residential mortgage | 13,251 |
Consumer | 1,351 |
Total noncommercial loans | 14,602 |
Total PCI loans and leases | $ | 154,496 |

The following table provides changes in the carrying value of all purchased credit-impaired loans during the nine months ended September 30, 2015 and September 30, 2014:

(Dollars in thousands) | 2015 |  | 2014
Balance at January 1 | $ | 1,186,498 |  |  | $ | 1,029,426 |
Fair value of acquired loans | 154,496 |  |  | 316,327 |
Accretion | 91,642 |  |  | 89,775 |
Payments received and other changes, net | (388,572 | ) |  | (439,248 | )
Balance at September 30 | $ | 1,044,064 |  |  | $ | 996,280 |
Unpaid principal balance at September 30 | $ | 1,788,136 |  |  | $ | 1,754,882 |

The carrying value of loans on the cost recovery method was $6.9 million at September 30, 2015 and $33.4 million at December 31, 2014. The cost recovery method is applied to loans when the timing of future cash flows is not reasonably
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estimable due to borrower nonperformance or uncertainty in the ultimate disposition of the asset. The recorded investment of PCI loans on nonaccrual status was $5.3 million and $33.4 million at September 30, 2015 and December 31, 2014, respectively.
For PCI loans, improved cash flow estimates and receipt of unscheduled loan payments result in the reclassification of nonaccretable difference to accretable yield. Accretable yield resulting from the improved ability to estimate future cash flows generally does not represent amounts previously identified as nonaccretable difference.
The following table documents changes to the amount of accretable yield for the first nine months of 2015 and 2014.

(Dollars in thousands) | 2015 |  | 2014
Balance at January 1 | $ | 418,160 |  |  | $ | 439,990 |
Additions from acquisitions | 53,192 |  |  | 84,295 |
Accretion | (91,642 | ) |  | (89,775 | )
Reclassifications from nonaccretable difference | 15,687 |  |  | 1,374 |
Changes in expected cash flows that do not affect nonaccretable difference | (53,458 | ) |  | (22,068 | )
Balance at September 30 | $ | 341,939 |  |  | $ | 413,816 |

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NOTE E - ALLOWANCE FOR LOAN AND LEASE LOSSES ("ALLL")
The following tables present the activity in the ALLL for non-PCI loan and lease losses by loan class for the three months ended September 30, 2015 and September 30, 2014:

| Three months ended September 30, 2015
(Dollars in thousands) | Construction and land development - commercial |  | Commercial mortgage |  | Other commercial real estate |  | Commercial and industrial |  | Lease financing |  | Other |  | Residential mortgage |  | Revolving mortgage |  | Construction and land development - non- commercial |  | Consumer |  | Total
Non-PCI Loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan and lease losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at July 1 | $ | 13,079 |  |  | $ | 80,436 |  |  | $ | 804 |  |  | $ | 39,392 |  |  | $ | 4,706 |  |  | $ | 1,188 |  |  | $ | 12,705 |  |  | $ | 17,290 |  |  | $ | 1,133 |  |  | $ | 22,116 |  |  | $ | 192,849 |
Provision | 1,189 |  |  | (5,664 | ) |  | 291 |  |  | (799 | ) |  | 424 |  |  | (58 | ) |  | 520 |  |  | 871 |  |  | 114 |  |  | 450 |  |  | (2,662 | )
Charge-offs | (336 | ) |  | (411 | ) |  | — |  |  | (784 | ) |  | (7 | ) |  | — |  |  | (394 | ) |  | (677 | ) |  | — |  |  | (2,409 | ) |  | (5,018 | )
Recoveries | 129 |  |  | 794 |  |  | 15 |  |  | 296 |  |  | 16 |  |  | 45 |  |  | 314 |  |  | 363 |  |  | 3 |  |  | 762 |  |  | 2,737 |
Balance at September 30 | $ | 14,061 |  |  | $ | 75,155 |  |  | $ | 1,110 |  |  | $ | 38,105 |  |  | $ | 5,139 |  |  | $ | 1,175 |  |  | $ | 13,145 |  |  | $ | 17,847 |  |  | $ | 1,250 |  |  | $ | 20,919 |  |  | $ | 187,906 |
| Three months ended September 30, 2014
| Construction and land development - commercial |  | Commercial mortgage |  | Other commercial real estate |  | Commercial and industrial |  | Lease financing |  | Other |  | Residential mortgage |  | Revolving mortgage |  | Construction and land development - non- commercial |  | Consumer |  | Total
Balance at July 1 | $ | 11,116 |  |  | $ | 92,129 |  |  | $ | 806 |  |  | $ | 26,909 |  |  | $ | 4,365 |  |  | $ | 612 |  |  | $ | 9,301 |  |  | $ | 16,797 |  |  | $ | 905 |  |  | $ | 13,975 |  |  | $ | 176,915 |
Provision | 1,469 |  |  | (8,082 | ) |  | 61 |  |  | 4,361 |  |  | (71 | ) |  | 127 |  |  | 15 |  |  | 2,075 |  |  | 21 |  |  | 1,758 |  |  | 1,734 |
Charge-offs | — |  |  | (277 | ) |  | — |  |  | (1,414 | ) |  | (28 | ) |  | — |  |  | (231 | ) |  | (925 | ) |  | (45 | ) |  | (2,467 | ) |  | (5,387 | )
Recoveries | 15 |  |  | 476 |  |  | 8 |  |  | 227 |  |  | 34 |  |  | — |  |  | 28 |  |  | 174 |  |  | 14 |  |  | 867 |  |  | 1,843 |
Balance at September 30 | $ | 12,600 |  |  | $ | 84,246 |  |  | $ | 875 |  |  | $ | 30,083 |  |  | $ | 4,300 |  |  | $ | 739 |  |  | $ | 9,113 |  |  | $ | 18,121 |  |  | $ | 895 |  |  | $ | 14,133 |  |  | $ | 175,105 |
| Nine months ended September 30, 2015
| Construction and land development - commercial |  | Commercial mortgage |  | Other commercial real estate |  | Commercial and industrial |  | Lease financing |  | Other |  | Residential mortgage |  | Revolving mortgage |  | Construction and land development - non- commercial |  | Consumer |  | Total
Balance at January 1 | $ | 11,961 |  |  | $ | 85,189 |  |  | $ | 732 |  |  | $ | 30,727 |  |  | $ | 4,286 |  |  | $ | 3,184 |  |  | $ | 10,661 |  |  | $ | 18,650 |  |  | $ | 892 |  |  | $ | 16,555 |  |  | $ | 182,837 |
Provision | 2,380 |  |  | (11,221 | ) |  | 522 |  |  | 11,294 |  |  | 843 |  |  | (2,100 | ) |  | 2,495 |  |  | 440 |  |  | 306 |  |  | 10,029 |  |  | 14,988 |
Charge-offs | (575 | ) |  | (691 | ) |  | (178 | ) |  | (4,815 | ) |  | (28 | ) |  | — |  |  | (768 | ) |  | (2,086 | ) |  | (22 | ) |  | (7,935 | ) |  | (17,098 | )
Recoveries | 295 |  |  | 1,878 |  |  | 34 |  |  | 899 |  |  | 38 |  |  | 91 |  |  | 757 |  |  | 843 |  |  | 74 |  |  | 2,270 |  |  | 7,179 |
Balance at September 30 | $ | 14,061 |  |  | $ | 75,155 |  |  | $ | 1,110 |  |  | $ | 38,105 |  |  | $ | 5,139 |  |  | $ | 1,175 |  |  | $ | 13,145 |  |  | $ | 17,847 |  |  | $ | 1,250 |  |  | $ | 20,919 |  |  | $ | 187,906 |
| Nine months ended September 30, 2014
| Construction and land development - commercial |  | Commercial mortgage |  | Other commercial real estate |  | Commercial and industrial |  | Lease financing |  | Other |  | Residential mortgage |  | Revolving mortgage |  | Construction and land development - non- commercial |  | Consumer |  | Total
Balance at January 1 | $ | 10,335 |  |  | $ | 100,257 |  |  | $ | 1,009 |  |  | $ | 22,362 |  |  | $ | 4,749 |  |  | $ | 190 |  |  | $ | 10,511 |  |  | $ | 16,239 |  |  | $ | 681 |  |  | $ | 13,541 |  |  | $ | 179,874 |
Provision | 2,219 |  |  | (17,021 | ) |  | (167 | ) |  | 9,369 |  |  | (420 | ) |  | 562 |  |  | (933 | ) |  | 4,681 |  |  | 274 |  |  | 5,770 |  |  | 4,334 |
Charge-offs | — |  |  | (718 | ) |  | — |  |  | (2,440 | ) |  | (100 | ) |  | (13 | ) |  | (649 | ) |  | (3,249 | ) |  | (138 | ) |  | (7,271 | ) |  | (14,578 | )
Recoveries | 46 |  |  | 1,728 |  |  | 33 |  |  | 792 |  |  | 71 |  |  | — |  |  | 184 |  |  | 450 |  |  | 78 |  |  | 2,093 |  |  | 5,475 |
Balance at September 30 | $ | 12,600 |  |  | $ | 84,246 |  |  | $ | 875 |  |  | $ | 30,083 |  |  | $ | 4,300 |  |  | $ | 739 |  |  | $ | 9,113 |  |  | $ | 18,121 |  |  | $ | 895 |  |  | $ | 14,133 |  |  | $ | 175,105 |

The net provision credits for the commercial mortgage class totaled $5.7 million and $11.2 million for the three and nine months ended September 30, 2015, respectively, compared to net provision credits of $8.1 million and $17.0 million for the same respective periods of 2014. The reduction in the net provision credits was attributable to higher 2015 loan growth compared to the prior year offsetting the impact of continued improvement in credit quality.
Commercial and industrial loans had a net provision credit of $799 thousand and provision expense of $11.3 million for the three and nine months ended September 30, 2015, respectively, compared to provision expense of $4.4 million and $9.4 million for the same respective periods of 2014. The current period quarter net provision credit is driven by a reversal of previously recorded specific reserves on impaired loans. Reserves were released as refinements were made to discount rate assumptions used in estimating cash flows based on annual back testing results.
The other loan class had net provision credits of $58 thousand and $2.1 million for the three and nine months ended September 30, 2015, respectively, compared to provision expense of $127 thousand and $562 thousand for the same respective periods of 2014. The year-to-date
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2015 net provision credit was the result of the reversal of previously identified impairment on individually impaired loans due to credit quality improvement.
The provision expense for the residential mortgage loan class totaled $520 thousand and $2.5 million for the three and nine months ended September 30, 2015, respectively, compared to net provision expense of $15 thousand and a net provision credit of $933 thousand for the same respective periods of 2014. The increases in the provision expense were attributable to newly originated non-PCI loans. In 2014, improved credit quality trends resulted in a release of reserves for the nine months ended September 30, 2014.
The provision expense for the revolving mortgage loan class totaled $871 thousand and $440 thousand for the three and nine months ended September 30, 2015, respectively, compared to provision expense of $2.1 million and $4.7 million for the same respective periods of 2014. The decrease for both periods was due to lower net charge-offs.
The provision expense for the consumer loan class totaled $450 thousand and $10.0 million for the three and nine months ended September 30, 2015, respectively, compared to provision expense of $1.8 million and $5.8 million for the same respective periods of 2014. The reduction in the current period quarter provision expense was due to an adjustment to the loss rate for certain consumer loans originated during 2015. The increase in year-to-date provision expense was primarily due to higher loan growth than the prior year.
The following tables present the allowance for non-PCI loan losses and the recorded investment in loans, by loan class, based on impairment method as of September 30, 2015 and December 31, 2014:

| September 30, 2015
(Dollars in thousands) | Construction and land development - commercial |  | Commercial mortgage |  | Other commercial real estate |  | Commercial and industrial |  | Lease financing |  | Other |  | Residential mortgage |  | Revolving mortgage |  | Construction and land development - non-commercial |  | Consumer |  | Total
Allowance for loan and lease losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ALLL for loans and leases individually evaluated for impairment | $ | 417 |  |  | $ | 4,007 |  |  | $ | 295 |  |  | $ | 1,154 |  |  | $ | 291 |  |  | $ | 67 |  |  | $ | 1,158 |  |  | $ | 526 |  |  | $ | 78 |  |  | $ | 498 |  |  | $ | 8,491 |
ALLL for loans and leases collectively evaluated for impairment | 13,644 |  |  | 71,148 |  |  | 815 |  |  | 36,951 |  |  | 4,848 |  |  | 1,108 |  |  | 11,987 |  |  | 17,321 |  |  | 1,172 |  |  | 20,421 |  |  | 179,415 |
Total allowance for loan and lease losses | $ | 14,061 |  |  | $ | 75,155 |  |  | $ | 1,110 |  |  | $ | 38,105 |  |  | $ | 5,139 |  |  | $ | 1,175 |  |  | $ | 13,145 |  |  | $ | 17,847 |  |  | $ | 1,250 |  |  | $ | 20,919 |  |  | $ | 187,906 |
Loans and leases: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans and leases individually evaluated for impairment | $ | 3,194 |  |  | $ | 92,745 |  |  | $ | 436 |  |  | $ | 16,395 |  |  | $ | 1,908 |  |  | $ | 1,464 |  |  | $ | 19,691 |  |  | $ | 4,986 |  |  | $ | 1,045 |  |  | $ | 1,098 |  |  | $ | 142,962 |
Loans and leases collectively evaluated for impairment | 560,732 |  |  | 7,984,201 |  |  | 316,488 |  |  | 2,195,578 |  |  | 690,007 |  |  | 356,296 |  |  | 2,640,130 |  |  | 2,514,986 |  |  | 219,448 |  |  | 1,190,914 |  |  | 18,668,780 |
Total loan and leases | $ | 563,926 |  |  | $ | 8,076,946 |  |  | $ | 316,924 |  |  | $ | 2,211,973 |  |  | $ | 691,915 |  |  | $ | 357,760 |  |  | $ | 2,659,821 |  |  | $ | 2,519,972 |  |  | $ | 220,493 |  |  | $ | 1,192,012 |  |  | $ | 18,811,742 |
| December 31, 2014
(Dollars in thousands) | Construction and land development - commercial |  | Commercial mortgage |  | Other commercial real estate |  | Commercial and industrial |  | Lease financing |  | Other |  | Residential mortgage |  | Revolving mortgage |  | Construction and land development - non-commercial |  | Consumer |  | Total
Allowance for loan and lease losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ALLL for loans and leases individually evaluated for impairment | $ | 92 |  |  | $ | 8,610 |  |  | $ | 112 |  |  | $ | 1,743 |  |  | $ | 150 |  |  | $ | 1,972 |  |  | $ | 1,360 |  |  | $ | 1,052 |  |  | $ | 71 |  |  | $ | 555 |  |  | $ | 15,717 |
ALLL for loans and leases collectively evaluated for impairment | 11,869 |  |  | 76,579 |  |  | 620 |  |  | 28,984 |  |  | 4,136 |  |  | 1,212 |  |  | 9,301 |  |  | 17,598 |  |  | 821 |  |  | 16,000 |  |  | 167,120 |
Total allowance for loan and lease losses | $ | 11,961 |  |  | $ | 85,189 |  |  | $ | 732 |  |  | $ | 30,727 |  |  | $ | 4,286 |  |  | $ | 3,184 |  |  | $ | 10,661 |  |  | $ | 18,650 |  |  | $ | 892 |  |  | $ | 16,555 |  |  | $ | 182,837 |
Loans and leases: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans and leases individually evaluated for impairment | $ | 1,620 |  |  | $ | 82,803 |  |  | $ | 584 |  |  | $ | 11,040 |  |  | $ | 623 |  |  | $ | 2,000 |  |  | $ | 14,913 |  |  | $ | 3,675 |  |  | $ | 1,340 |  |  | $ | 995 |  |  | $ | 119,593 |
Loans and leases collectively evaluated for impairment | 491,513 |  |  | 7,470,145 |  |  | 244,291 |  |  | 1,977,894 |  |  | 571,293 |  |  | 351,833 |  |  | 2,478,145 |  |  | 2,558,125 |  |  | 203,676 |  |  | 1,116,459 |  |  | 17,463,374 |
Total loan and leases | $ | 493,133 |  |  | $ | 7,552,948 |  |  | $ | 244,875 |  |  | $ | 1,988,934 |  |  | $ | 571,916 |  |  | $ | 353,833 |  |  | $ | 2,493,058 |  |  | $ | 2,561,800 |  |  | $ | 205,016 |  |  | $ | 1,117,454 |  |  | $ | 17,582,967 |

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The following tables show the activity in the allowance for PCI loan and lease losses by loan class for the three months and nine months ended September 30, 2015 and September 30, 2014.

| Three months ended September 30, 2015
(Dollars in thousands) | 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
PCI Loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan and lease losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at July 1 | $ | 569 |  |  | $ | 6,428 |  |  | $ | 69 |  |  | $ | 323 |  |  | $ | 5,842 |  |  | $ | 2,051 |  |  | $ | — |  |  | $ | 186 |  |  | $ | 15,468 |
Provision | 632 |  |  | 2,187 |  |  | 235 |  |  | 118 |  |  | (281 | ) |  | (151 | ) |  | — |  |  | 29 |  |  | 2,769 |
Charge-offs | — |  |  | (48 | ) |  |  |  |  | (39 | ) |  | (15 | ) |  | (577 | ) |  | — |  |  | (1 | ) |  | (680 | )
Recoveries | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Balance at September 30 | $ | 1,201 |  |  | $ | 8,567 |  |  | $ | 304 |  |  | $ | 402 |  |  | $ | 5,546 |  |  | $ | 1,323 |  |  | $ | — |  |  | $ | 214 |  |  | $ | 17,557 |
| Three months ended September 30, 2014
(Dollars in thousands) | 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
Balance at July 1 | $ | 3,803 |  |  | $ | 17,315 |  |  | $ | 407 |  |  | $ | 375 |  |  | $ | 7,093 |  |  | $ | 81 |  |  | $ | — |  |  | $ | 257 |  |  | $ | 29,331 |
Provision | (1,815 | ) |  | (2,374 | ) |  | (435 | ) |  | 182 |  |  | 187 |  |  | 3,899 |  |  | 239 |  |  | (80 | ) |  | (197 | )
Charge-offs | (1,633 | ) |  | (2,357 | ) |  | 106 |  |  | 839 |  |  | (188 | ) |  | (1 | ) |  | (83 | ) |  | (17 | ) |  | (3,334 | )
Recoveries | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Balance at September 30 | $ | 355 |  |  | $ | 12,584 |  |  | $ | 78 |  |  | $ | 1,396 |  |  | $ | 7,092 |  |  | $ | 3,979 |  |  | $ | 156 |  |  | $ | 160 |  |  | $ | 25,800 |
| Nine months ended September 30, 2015
(Dollars in thousands) | 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
Balance at January 1 | $ | 150 |  |  | $ | 10,135 |  |  | $ | 75 |  |  | $ | 1,240 |  |  | $ | 5,820 |  |  | $ | 3,999 |  |  | $ | 183 |  |  | $ | 27 |  |  | $ | 21,629 |
Provision | 1,148 |  |  | (803 | ) |  | 229 |  |  | (514 | ) |  | 21 |  |  | (1,918 | ) |  | (183 | ) |  | 650 |  |  | (1,370 | )
Charge-offs | (97 | ) |  | (765 | ) |  | — |  |  | (324 | ) |  | (295 | ) |  | (758 | ) |  | — |  |  | (463 | ) |  | (2,702 | )
Recoveries | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Balance at September 30 | $ | 1,201 |  |  | $ | 8,567 |  |  | $ | 304 |  |  | $ | 402 |  |  | $ | 5,546 |  |  | $ | 1,323 |  |  | $ | — |  |  | $ | 214 |  |  | $ | 17,557 |
| Nine months ended September 30, 2014
(Dollars in thousands) | 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
Balance at January 1 | $ | 1,320 |  |  | $ | 29,906 |  |  | $ | 1,354 |  |  | $ | 5,275 |  |  | $ | 11,802 |  |  | $ | 2,959 |  |  | $ | 682 |  |  | $ | 222 |  |  | $ | 53,520 |
Provision | 1,463 |  |  | (6,946 | ) |  | (1,382 | ) |  | (1,883 | ) |  | (4,289 | ) |  | 1,502 |  |  | (443 | ) |  | (21 | ) |  | (11,999 | )
Charge-offs | (2,428 | ) |  | (10,376 | ) |  | 106 |  |  | (1,996 | ) |  | (421 | ) |  | (482 | ) |  | (83 | ) |  | (41 | ) |  | (15,721 | )
Recoveries | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Balance at September 30 | $ | 355 |  |  | $ | 12,584 |  |  | $ | 78 |  |  | $ | 1,396 |  |  | $ | 7,092 |  |  | $ | 3,979 |  |  | $ | 156 |  |  | $ | 160 |  |  | $ | 25,800 |

The PCI loan portfolio net provision expense totaled $2.8 million during the third quarter of 2015, compared to a net provision credit of $197 thousand during the same period of 2014. The increase in the current period quarter provision for loan and lease losses on PCI loans resulted from a $3.9 million reclassification increasing provision expense. In the current quarter, $3.9 million was reclassified between accretable yield and the allowance for loan and lease losses that increased both accretion income and provision expense. There was no net impact on earnings as a result of this reclassification.
We recorded PCI loan portfolio net provision credits of $1.4 million and $12.0 million for the nine months ended September 30, 2015 and 2014, respectively. The decrease in the net provision credit was primarily due to lower impairment reversals on the PCI loan portfolio.
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The following tables show the ending balances of PCI loans and leases and related allowance by class of loans as of September 30, 2015 and December 31, 2014:

| September 30, 2015
(Dollars in thousands) | 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
ALLL for loans and leases acquired with deteriorated credit quality | $ | 1,201 |  |  | $ | 8,567 |  |  | $ | 304 |  |  | $ | 402 |  |  | $ | 5,546 |  |  | $ | 1,323 |  |  | $ | — |  |  | $ | 214 |  |  | $ | 17,557 |
Loans and leases acquired with deteriorated credit quality | 41,582 |  |  | 568,256 |  |  | 18,013 |  |  | 17,023 |  |  | 334,518 |  |  | 59,695 |  |  | 347 |  |  | 4,630 |  |  | 1,044,064 |
| December 31, 2014
(Dollars in thousands) | 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
ALLL for loans and leases acquired with deteriorated credit quality | $ | 150 |  |  | $ | 10,135 |  |  | $ | 75 |  |  | $ | 1,240 |  |  | $ | 5,820 |  |  | $ | 3,999 |  |  | $ | 183 |  |  | $ | 27 |  |  | $ | 21,629 |
Loans and leases acquired with deteriorated credit quality | 78,079 |  |  | 577,518 |  |  | 40,193 |  |  | 27,254 |  |  | 382,340 |  |  | 74,109 |  |  | 912 |  |  | 6,093 |  |  | 1,186,498 |

As of September 30, 2015, and December 31, 2014, $514.8 million and $285.6 million, respectively, in PCI loans experienced an adverse change in expected cash flows since the date of acquisition. The corresponding valuation reserve was $17.6 million and $21.6 million, respectively.
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The following tables provide information on non-PCI impaired loans and leases, exclusive of loans and leases evaluated collectively as a homogenous group, as of September 30, 2015 and December 31, 2014 including interest income recognized in the period during which the loans and leases were considered impaired.

| September 30, 2015
(Dollars in thousands) | With a recorded allowance |  | With no recorded allowance |  | Total |  | Unpaid principal balance |  | Related allowance recorded
Non-PCI impaired loans and leases: |  |  |  |  |  |  |  |  |
Construction and land development - commercial | $ | 1,799 |  |  | $ | 1,395 |  |  | $ | 3,194 |  |  | $ | 4,594 |  |  | $ | 417 |
Commercial mortgage | 42,562 |  |  | 50,183 |  |  | 92,745 |  |  | 100,914 |  |  | 4,007 |
Other commercial real estate | 312 |  |  | 124 |  |  | 436 |  |  | 868 |  |  | 295 |
Commercial and industrial | 5,352 |  |  | 11,043 |  |  | 16,395 |  |  | 19,608 |  |  | 1,154 |
Lease financing | 1,610 |  |  | 298 |  |  | 1,908 |  |  | 1,908 |  |  | 291 |
Other | 1,464 |  |  | — |  |  | 1,464 |  |  | 1,540 |  |  | 67 |
Residential mortgage | 9,746 |  |  | 9,945 |  |  | 19,691 |  |  | 21,559 |  |  | 1,158 |
Revolving mortgage | 2,852 |  |  | 2,134 |  |  | 4,986 |  |  | 6,137 |  |  | 526 |
Construction and land development - noncommercial | 1,045 |  |  | — |  |  | 1,045 |  |  | 1,045 |  |  | 78 |
Consumer | 877 |  |  | 221 |  |  | 1,098 |  |  | 1,134 |  |  | 498 |
Total non-PCI impaired loans and leases | $ | 67,619 |  |  | $ | 75,343 |  |  | $ | 142,962 |  |  | $ | 159,307 |  |  | $ | 8,491 |
| December 31, 2014
(Dollars in thousands) | With a recorded allowance |  | With no recorded allowance |  | Total |  | Unpaid principal balance |  | Related allowance recorded
Non-PCI impaired loans and leases: |  |  |  |  |  |  |  |  |
Construction and land development - commercial | $ | 996 |  |  | $ | 624 |  |  | $ | 1,620 |  |  | $ | 6,945 |  |  | $ | 92 |
Commercial mortgage | 57,324 |  |  | 25,479 |  |  | 82,803 |  |  | 87,702 |  |  | 8,610 |
Other commercial real estate | 112 |  |  | 472 |  |  | 584 |  |  | 913 |  |  | 112 |
Commercial and industrial | 10,319 |  |  | 721 |  |  | 11,040 |  |  | 12,197 |  |  | 1,743 |
Lease financing | 319 |  |  | 304 |  |  | 623 |  |  | 623 |  |  | 150 |
Other | 2,000 |  |  | — |  |  | 2,000 |  |  | 2,000 |  |  | 1,972 |
Residential mortgage | 10,198 |  |  | 4,715 |  |  | 14,913 |  |  | 15,746 |  |  | 1,360 |
Revolving mortgage | 3,675 |  |  | — |  |  | 3,675 |  |  | 4,933 |  |  | 1,052 |
Construction and land development - noncommercial | 1,077 |  |  | 263 |  |  | 1,340 |  |  | 1,340 |  |  | 71 |
Consumer | 987 |  |  | 8 |  |  | 995 |  |  | 1,067 |  |  | 555 |
Total non-PCI impaired loans and leases | $ | 87,007 |  |  | $ | 32,586 |  |  | $ | 119,593 |  |  | $ | 133,466 |  |  | $ | 15,717 |

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The following tables show the average non-PCI impaired loan balance and the interest income recognized by loan class for the three and nine months ended September 30, 2015 and September 30, 2014:

| Three months ended September 30, 2015 |  | Three months ended September 30, 2014
(Dollars in thousands) | Average balance |  | Interest income recognized |  | Average balance |  | Interest income recognized
Non-PCI impaired loans and leases: |  |  |  |  |  |  |
Construction and land development - commercial | $ | 3,257 |  |  | $ | 37 |  |  | $ | 2,296 |  |  | $ | 26 |
Commercial mortgage | 99,613 |  |  | 803 |  |  | 90,318 |  |  | 806 |
Other commercial real estate | 539 |  |  | 6 |  |  | 1,980 |  |  | 7 |
Commercial and industrial | 17,005 |  |  | 130 |  |  | 11,699 |  |  | 108 |
Lease financing | 1,939 |  |  | 21 |  |  | 312 |  |  | 5 |
Other | 1,543 |  |  | 20 |  |  | 42 |  |  | 1 |
Residential mortgage | 19,945 |  |  | 141 |  |  | 15,071 |  |  | 111 |
Revolving mortgage | 5,064 |  |  | 29 |  |  | 3,708 |  |  | 29 |
Construction and land development - noncommercial | 1,027 |  |  | 12 |  |  | 1,942 |  |  | 27 |
Consumer | 1,176 |  |  | 19 |  |  | 1,063 |  |  | 19 |
Total non-PCI impaired loans and leases | $ | 151,108 |  |  | $ | 1,218 |  |  | $ | 128,431 |  |  | $ | 1,139 |
| Nine months ended September 30, 2015 |  | Nine months ended September 30, 2014
(Dollars in thousands) | Average balance |  | Interest income recognized |  | Average balance |  | Interest income recognized
Non-PCI impaired loans and leases: |  |  |  |  |  |  |
Construction and land development - commercial | $ | 3,148 |  |  | $ | 107 |  |  | $ | 1,701 |  |  | $ | 57 |
Commercial mortgage | 88,614 |  |  | 2,405 |  |  | 86,131 |  |  | 2,522 |
Other commercial real estate | 498 |  |  | 7 |  |  | 2,474 |  |  | 67 |
Commercial and industrial | 13,815 |  |  | 379 |  |  | 14,227 |  |  | 461 |
Lease financing | 1,664 |  |  | 55 |  |  | 589 |  |  | 26 |
Other | 1,789 |  |  | 20 |  |  | 29 |  |  | 2 |
Residential mortgage | 17,376 |  |  | 401 |  |  | 15,525 |  |  | 395 |
Revolving mortgage | 4,022 |  |  | 68 |  |  | 4,069 |  |  | 105 |
Construction and land development - noncommercial | 821 |  |  | 28 |  |  | 1,902 |  |  | 77 |
Consumer | 1,117 |  |  | 58 |  |  | 1,710 |  |  | 70 |
Total non-PCI impaired loans and leases | $ | 132,864 |  |  | $ | 3,528 |  |  | $ | 128,357 |  |  | $ | 3,782 |

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Troubled Debt Restructurings
BancShares accounts for certain loan modifications or restructurings as troubled debt restructurings ("TDRs"). In general, the modification or restructuring of a loan is considered a TDR if, for economic reasons or legal reasons related to a borrower's financial difficulties, a concession is granted to the borrower that creditors would not otherwise grant. Concessions may relate to the contractual interest rate, maturity date, payment structure or other actions. In accordance with GAAP, acquired loans accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, are not initially considered to be TDRs, but can be classified as such if a modification is made subsequent to acquisition. Subsequent modifications of a PCI loan accounted for in a pool that would otherwise meet the definition of a TDR is not reported, or accounted for, as a TDR since pooled PCI loans are excluded from the scope of TDR accounting.
The following table provides a summary of total TDRs by accrual status.

| September 30, 2015 |  | December 31, 2014
(Dollars in thousands) | Accruing |  | Nonaccruing |  | Total |  | Accruing |  | Nonaccruing |  | Total
Commercial loans |  |  |  |  |  |  |  |  |  |  |
Construction and land development - commercial | $ | 3,479 |  |  | $ | 630 |  |  | $ | 4,109 |  |  | $ | 2,591 |  |  | $ | 446 |  |  | $ | 3,037 |
Commercial mortgage | 71,885 |  |  | 12,884 |  |  | 84,769 |  |  | 92,184 |  |  | 8,937 |  |  | 101,121 |
Other commercial real estate | 1,889 |  |  | 95 |  |  | 1,984 |  |  | 2,374 |  |  | 449 |  |  | 2,823 |
Commercial and industrial | 9,733 |  |  | 4,122 |  |  | 13,855 |  |  | 9,864 |  |  | 664 |  |  | 10,528 |
Lease | 1,082 |  |  | 326 |  |  | 1,408 |  |  | 258 |  |  | 365 |  |  | 623 |
Other | — |  |  | — |  |  | — |  |  | 34 |  |  | — |  |  | 34 |
Total commercial TDRs | 88,068 |  |  | 18,057 |  |  | 106,125 |  |  | 107,305 |  |  | 10,861 |  |  | 118,166 |
Noncommercial |  |  |  |  |  |  |  |  |  |  |
Residential mortgage | 24,103 |  |  | 7,000 |  |  | 31,103 |  |  | 22,597 |  |  | 4,655 |  |  | 27,252 |
Revolving mortgage | 3,592 |  |  | 1,313 |  |  | 4,905 |  |  | 3,675 |  |  | — |  |  | 3,675 |
Construction and land development - noncommercial | 1,045 |  |  | — |  |  | 1,045 |  |  | 1,391 |  |  | — |  |  | 1,391 |
Consumer and other | 2,454 |  |  | 87 |  |  | 2,541 |  |  | 995 |  |  | — |  |  | 995 |
Total noncommercial TDRs | 31,194 |  |  | 8,400 |  |  | 39,594 |  |  | 28,658 |  |  | 4,655 |  |  | 33,313 |
Total TDRs | $ | 119,262 |  |  | $ | 26,457 |  |  | $ | 145,719 |  |  | $ | 135,963 |  |  | $ | 15,516 |  |  | $ | 151,479 |

The majority of TDRs are included in the special mention, substandard or doubtful grading categories. When a restructured loan subsequently defaults, it is evaluated and downgraded if appropriate. The more severely graded the loan, the lower the estimated expected cash flows and the greater the allowance recorded. Further, TDRs over $500,000 and graded substandard or lower are evaluated individually for impairment through a review of collateral values or analysis of cash flow.
The following table shows the accrual status of non-PCI and PCI TDRs.

(Dollars in thousands) | September 30, 2015 |  | December 31, 2014
Accruing TDRs: |  |  |
PCI | $ | 32,370 |  |  | $ | 44,647 |
Non-PCI | 86,892 |  |  | 91,316 |
Total accruing TDRs | 119,262 |  |  | 135,963 |
Nonaccruing TDRs: |  |  |
PCI | 717 |  |  | 2,225 |
Non-PCI | 25,740 |  |  | 13,291 |
Total nonaccruing TDRs | 26,457 |  |  | 15,516 |
All TDRs: |  |  |
PCI | 33,087 |  |  | 46,872 |
Non-PCI | 112,632 |  |  | 104,607 |
Total TDRs | $ | 145,719 |  |  | $ | 151,479 |

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The following tables provide the types of TDRs made during the three and nine months ended September 30, 2015 and September 30, 2014, as well as a summary of loans that were modified as a TDR during the twelve months ended September 30, 2015 and September 30, 2014 that subsequently defaulted during the three and nine months ended September 30, 2015 and September 30, 2014. BancShares defines payment default as movement of the TDR to nonaccrual status, which is generally 90 days past due for TDRs, foreclosure or charge-off, whichever occurs first.

| Three months ended September 30, 2015 |  | Three months ended September 30, 2014
| All restructurings |  | Restructurings with payment default |  | All restructurings |  | Restructurings with payment default
(Dollars in thousands) | Number of Loans | Recorded investment at period end |  | Number of Loans | Recorded investment at period end |  | Number of Loans | Recorded investment at period end |  | Number of Loans | Recorded investment at period end
Non-PCI loans and leases |  |  |  |  |  |  |  |  |  |  |
Interest only period provided |  |  |  |  |  |  |  |  |  |  |
Construction and land development - noncommercial | 1 |  | $ | 92 |  |  | — | $ | — |  |  | — |  | $ | — |  |  | — |  | $ | — |
Total interest only | 1 |  | 92 |  |  | — |  | — |  |  | — |  | — |  |  | — |  | — |
Loan term extension |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage | 1 |  | 75 |  |  | — |  | — |  |  | 1 |  | 462 |  |  | — |  | — |
Commercial and industrial | 3 |  | 1,445 |  |  | — |  | — |  |  | — |  | — |  |  | — |  | — |
Residential mortgage | — |  | — |  |  | — |  | — |  |  | 3 |  | 80 |  |  | — |  | — |
Construction and land development - noncommercial | — |  | — |  |  | — |  | — |  |  | 2 |  | 141 |  |  | — |  | — |
Consumer | — |  | — |  |  | — |  | — |  |  | 2 |  | 81 |  |  | — |  | — |
Total loan term extension | 4 |  | 1,520 |  |  | — |  | — |  |  | 8 |  | 764 |  |  | — |  | — |
Below market interest rate |  |  |  |  |  |  |  |  |  |  |
Construction and land development - commercial | 4 |  | 193 |  |  | — |  | — |  |  | — |  | — |  |  | — |  | — |
Commercial mortgage | 8 |  | 1,248 |  |  | — |  | — |  |  | 6 |  | 3,062 |  |  | 1 |  | 176 |
Commercial and industrial | 3 |  | 1,797 |  |  | 1 |  | 1,757 |  |  | 3 |  | 462 |  |  | — |  | — |
Other commercial real estate | 2 |  | 124 |  |  | — |  | — |  |  | — |  | — |  |  | — |  | — |
Residential mortgage | 25 |  | 1,592 |  |  | 4 |  | 158 |  |  | 11 |  | 609 |  |  | 1 |  | 45 |
Revolving mortgage | 1 |  | 37 |  |  | — |  | — |  |  | — |  | — |  |  | — |  | — |
Construction and land development - noncommercial | — |  | — |  |  | — |  | — |  |  | 3 |  | 173 |  |  | — |  | — |
Consumer | 2 |  | 17 |  |  | — |  | — |  |  | 5 |  | 162 |  |  | — |  | — |
Total below market interest rate | 45 |  | 5,008 |  |  | 5 |  | 1,915 |  |  | 28 |  | 4,468 |  |  | 2 |  | 221 |
Discharged from bankruptcy |  |  |  |  |  |  |  |  |  |  |
Construction and land development - commercial | 2 |  | 21 |  |  | — |  | — |  |  | — |  | — |  |  | — |  | — |
Commercial mortgage | 2 |  | 965 |  |  | 1 |  | 275 |  |  | 1 |  | — |  |  | 1 |  | — |
Commercial and industrial | 2 |  | 148 |  |  | — |  | — |  |  | — |  | — |  |  | — |  | —
Residential mortgage | 6 |  | 395 |  |  | — |  | — |  |  | — |  | — |  |  | — |  | — |
Revolving mortgage | 9 |  | 666 |  |  | 2 |  | 162 |  |  | 2 |  | 99 |  |  | 1 |  | — |
Construction and land development-noncommercial | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | 1 |  | 62 |
Consumer | 6 |  | 91 |  |  | 2 |  | 39 |  |  | 1 |  | 13 |  |  | — |  | — |
Total discharged from bankruptcy | 27 |  | 2,286 |  |  | 5 |  | 476 |  |  | 4 |  | 112 |  |  | 3 |  | 62 |
Total non-PCI restructurings | 77 |  | $ | 8,906 |  |  | 10 |  | $ | 2,391 |  |  | 40 |  | $ | 5,344 |  |  | 5 |  | $ | 283 |

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| Nine months ended September 30, 2015 |  | Nine months ended September 30, 2014
| All restructurings |  | Restructurings with payment default |  | All restructurings |  | Restructurings with payment default
(Dollars in thousands) | Number of Loans | Recorded investment at period end |  | Number of Loans | Recorded investment at period end |  | Number of Loans | Recorded investment at period end |  | Number of Loans | Recorded investment at period end
Non-PCI loans and leases |  |  |  |  |  |  |  |  |  |  |
Interest only period provided |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage | 2 |  | $ | 68 |  |  | — |  | $ | — |  |  | 6 |  | $ | 2,449 |  |  | 2 |  | $ | 592 |
Commercial and industrial | 2 |  | 1,112 |  |  | 1 |  | — |  |  | 2 |  | 375 |  |  | — |  | — |
Construction and land development - noncommercial | 1 |  | 92 |  |  | — |  | — |  |  | — |  | — |  |  | — |  | — |
Lease financing | — |  | — |  |  | — |  | — |  |  | 2 |  | 131 |  |  | — |  | — |
Other | — |  | — |  |  | — |  | — |  |  | 1 |  | 40 |  |  | — |  | — |
Total interest only | 5 |  | 1,272 |  |  | 1 |  | — |  |  | 11 |  | 2,995 |  |  | 2 |  | 592 |
Loan term extension |  |  |  |  |  |  |  |  |  |  |
Construction and land development - commercial | 1 |  | 204 |  |  | 1 |  | 204 |  |  | 2 |  | 189 |  |  | — |  | — |
Commercial mortgage | 7 |  | 1,406 |  |  | — |  | — |  |  | 11 |  | 4,072 |  |  | — |  | — |
Commercial and industrial | 4 |  | 1,473 |  |  | — |  | — |  |  | 4 |  | 2,040 |  |  | — |  | — |
Lease financing | — |  | — |  |  | — |  | — |  |  | 2 |  | 144 |  |  | — |  | — |
Residential mortgage | — |  | — |  |  | — |  | — |  |  | 15 |  | 532 |  |  | — |  | — |
Revolving mortgage | 1 |  | 9 |  |  | — |  | — |  |  | — |  | — |  |  | — |  | — |
Construction and land development - noncommercial | — |  | — |  |  | — |  | — |  |  | 3 |  | 175 |  |  | — |  | — |
Consumer | 1 |  | 5 |  |  | — |  | — |  |  | 5 |  | 122 |  |  | — |  | — |
Total loan term extension | 14 |  | 3,097 |  |  | 1 |  | 204 |  |  | 42 |  | 7,274 |  |  | — |  | — |
Below market interest rate |  |  |  |  |  |  |  |  |  |  |
Construction and land development - commercial | 14 |  | 626 |  |  | — |  | — |  |  | 10 |  | 371 |  |  | — |  | — |
Commercial mortgage | 31 |  | 7,880 |  |  | 1 |  | 1,757 |  |  | 29 |  | 11,399 |  |  | 3 |  | 1,276 |
Commercial and industrial | 13 |  | 2,476 |  |  | — |  | — |  |  | 11 |  | 772 |  |  | — |  | — |
Other commercial real estate | 2 |  | 124 |  |  | — |  | — |  |  | 1 |  | 347 |  |  | — |  | — |
Residential mortgage | 90 |  | 4,946 |  |  | 7 |  | 213 |  |  | 29 |  | 1,402 |  |  | 2 |  | 95 |
Revolving mortgage | 6 |  | 140 |  |  | — |  | — |  |  | 5 |  | 270 |  |  | — |  | — |
Construction & land development - noncommercial | 2 |  | 253 |  |  | — |  | — |  |  | 11 |  | 590 |  |  | — |  | — |
Consumer | 13 |  | 120 |  |  | — |  | — |  |  | 5 |  | 162 |  |  | — |  | — |
Other | 1 |  | 1,464 |  |  | — |  | — |  |  | — |  | — |  |  | — |  | — |
Total below market interest rate | 172 |  | 18,029 |  |  | 8 |  | 1,970 |  |  | 101 |  | 15,313 |  |  | 5 |  | 1,371 |
Discharged from bankruptcy |  |  |  |  |  |  |  |  |  |  |
Construction and land development - commercial | 2 |  | 21 |  |  | — |  | — |  |  | — |  | — |  |  | — |  | — |
Commercial mortgage | 3 |  | 1,562 |  |  | 1 |  | 275 |  |  | 2 |  | 970 |  |  | 1 |  | — |
Commercial and industrial | 3 |  | 148 |  |  | — |  | — |  |  | — |  | — |  |  | — |  | — |
Residential mortgage | 20 |  | 938 |  |  | — |  | — |  |  | 9 |  | 691 |  |  | 2 |  | 288 |
Revolving mortgage | 47 |  | 2,230 |  |  | 6 |  | 320 |  |  | 10 |  | 420 |  |  | 1 |  | — |
Construction & land development - noncommercial | — |  | — |  |  | — |  | — |  |  | 1 |  | 62 |  |  | 1 |  | 62 |
Consumer | 16 |  | 187 |  |  | 2 |  | 39 |  |  | 4 |  | 18 |  |  | — |  | — |
Total discharged from bankruptcy | 91 |  | 5,086 |  |  | 9 |  | 634 |  |  | 26 |  | 2,161 |  |  | 5 |  | 350 |
Total non-PCI restructurings | 282 |  | $ | 27,484 |  |  | 19 |  | $ | 2,808 |  |  | 180 |  | $ | 27,743 |  |  | 12 |  | $ | 2,313 |

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| Three months ended September 30, 2015 |  | Three months ended September 30, 2014
| All restructurings |  | Restructurings with payment default |  | All restructurings |  | Restructurings with payment default
(Dollars in thousands) | Number of loans | Recorded investment at period end |  | Number of loans | Recorded investment at period end |  | Number of loans | Recorded investment at period end |  | Number of loans | Recorded investment at period end
PCI loans |  |  |  |  |  |  |  |  |  |  |
Loan term extension |  |  |  |  |  |  |  |  |  |  |
Construction and land development - commercial | — |  | $ | — |  |  | — |  | $ | — |  |  | 1 |  | $ | 348 |  |  | — |  | $ | — |
Residential mortgage | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | 3 |  | 381 |
Total loan term extension | — |  | — |  |  | — |  | — |  |  | 1 |  | 348 |  |  | 3 |  | 381 |
Below market interest rate |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage | — |  | — |  |  | — |  | — |  |  | 6 |  | 3,377 |  |  | 1 |  | 67 |
Residential mortgage | 3 |  | 223 |  |  | 1 |  | 47 |  |  | 3 |  | 227 |  |  | — |  | — |
Total below market interest rate | 3 |  | 223 |  |  | 1 |  | 47 |  |  | 9 |  | 3,604 |  |  | 1 |  | 67 |
Discharged from bankruptcy |  |  |  |  |  |  |  |  |  |  |
Revolving mortgage | 1 |  | 105 |  |  | — |  | — |  |  | — |  | — |  |  | — |  | — |
Total discharged from bankruptcy | 1 |  | 105 |  |  | — |  | — |  |  | — |  | — |  |  | — |  | — |
Total PCI restructurings | 4 |  | $ | 328 |  |  | 1 |  | $ | 47 |  |  | 10 |  | $ | 3,952 |  |  | 4 |  | $ | 448 |

| Nine months ended September 30, 2015 |  | Nine months ended September 30, 2014
| All restructurings |  | Restructurings with payment default |  | All restructurings |  | Restructurings with payment default
(Dollars in thousands) | Number of loans | Recorded investment at period end |  | Number of loans | Recorded investment at period end |  | Number of loans | Recorded investment at period end |  | Number of loans | Recorded investment at period end
PCI loans |  |  |  |  |  |  |  |  |  |  |
Interest only period provided |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage | — |  | $ | — |  |  | — |  | $ | — |  |  | 2 |  | $ | 44 |  |  | 2 |  | $ | 44 |
Total interest only | — |  | — |  |  | — |  | — |  |  | 2 |  | 44 |  |  | 2 |  | 44 |
Loan term extension |  |  |  |  |  |  |  |  |  |  |
Construction and land development - commercial | — |  | — |  |  | — |  | — |  |  | 2 |  | 348 |  |  | — |  | — |
Residential mortgage | — |  | — |  |  | — |  | — |  |  | 1 |  | 322 |  |  | 4 |  | 381 |
Total loan term extension | — |  | — |  |  | — |  | — |  |  | 3 |  | 670 |  |  | 4 |  | 381 |
Below market interest rate |  |  |  |  |  |  |  |  |  |  |
Construction and land development - commercial | — |  | — |  |  | — |  | — |  |  | 2 |  | 308 |  |  | — |  | — |
Commercial mortgage | — |  | — |  |  | — |  | — |  |  | 15 |  | 5,539 |  |  | 2 |  | 94 |
Residential mortgage | 11 |  | 766 |  |  | 1 |  | 47 |  |  | 29 |  | 3,994 |  |  | 2 |  | — |
Total below market interest rate | 11 |  | 766 |  |  | 1 |  | 47 |  |  | 46 |  | 9,841 |  |  | 4 |  | 94 |
Discharged from bankruptcy |  |  |  |  |  |  |  |  |  |  |
Residential mortgage | 1 |  | 78 |  |  | — |  | — |  |  | 26 |  | 1,673 |  |  | 2 |  | — |
Revolving mortgage | 1 |  | 105 |  |  | — |  | — |  |  | — |  | — |  |  | — |  | — |
Total discharged from bankruptcy | 2 |  | 183 |  |  | — |  | — |  |  | 26 |  | 1,673 |  |  | 2 |  | — |
Total PCI restructurings | 13 |  | $ | 949 |  |  | 1 |  | $ | 47 |  |  | 77 |  | $ | 12,228 |  |  | 12 |  | $ | 519 |

For the three and nine months ended September 30, 2015 and September 30, 2014, the recorded investment in TDRs subsequent to modification was not materially impacted by the modification since forgiveness of principal is not a restructuring option frequently used by BancShares.
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NOTE F - OTHER REAL ESTATE OWNED (OREO)
The following table explains changes in other real estate owned during the nine months ended September 30, 2015 and September 30, 2014.

(Dollars in thousands) | Covered |  | Noncovered |  | Total
Balance at December 31, 2013 | $ | 47,081 |  |  | $ | 36,898 |  |  | $ | 83,979 |
Additions | 25,235 |  |  | 16,901 |  |  | 42,136 |
Additions acquired in the 1st Financial merger | — |  |  | 11,591 |  |  | 11,591 |
Sales | (27,756 | ) |  | (23,526 | ) |  | (51,282 | )
Writedowns | (9,751 | ) |  | (4,215 | ) |  | (13,966 | )
Transfers (1) | (5,537 | ) |  | 5,537 |  |  | — |
Balance at September 30, 2014 | $ | 29,272 |  |  | $ | 43,186 |  |  | $ | 72,458 |
Balance at December 31, 2014 | $ | 22,982 |  |  | $ | 70,454 |  |  | $ | 93,436 |
Additions | 6,202 |  |  | 38,022 |  |  | 44,224 |
Sales | (17,539 | ) |  | (46,612 | ) |  | (64,151 | )
Writedowns | (1,387 | ) |  | (2,263 | ) |  | (3,650 | )
Transfers (1) | (2,106 | ) |  | 2,106 |  |  | — |
Balance at September 30, 2015 | $ | 8,152 |  |  | $ | 61,707 |  |  | $ | 69,859 |

(1) Transfers include OREO balances associated with expired loss share agreements.
At September 30, 2015 and December 31, 2014, BancShares had $15.8 million and $29.0 million, respectively, of foreclosed residential real estate property in OREO. The recorded investment in consumer mortgage loans collateralized by residential real estate property in the process of foreclosure totaled $18.9 million and $24.8 million at September 30, 2015 and December 31, 2014, respectively.
NOTE G - FDIC LOSS SHARE RECEIVABLE
The following table provides changes in the receivable from the FDIC for the three and nine months ended September 30, 2015 and September 30, 2014.

| Three months ended September 30 |  | Nine months ended September 30
(Dollars in thousands) | 2015 |  | 2014 |  | 2015 |  | 2014
Beginning balance | $ | 5,808 |  |  | $ | 49,959 |  |  | $ | 28,701 |  |  | $ | 93,397 |
Amortization | (2,343 | ) |  | (6,362 | ) |  | (8,835 | ) |  | (37,028 | )
Net cash payments to FDIC | 13,915 |  |  | 1,130 |  |  | 24,805 |  |  | 5,479 |
Post-acquisition adjustments | (8,104 | ) |  | 413 |  |  | (35,395 | ) |  | (16,708 | )
Ending balance | $ | 9,276 |  |  | $ | 45,140 |  |  | $ | 9,276 |  |  | $ | 45,140 |

The receivable from the FDIC for loss share agreements is measured separately from the related covered assets and is recorded at fair value at the acquisition date using projected cash flows based on the expected reimbursements for losses and the applicable loss share percentages. See Note L for information related to FCB's recorded payable to the FDIC for loss share agreements.
Amortization reflects changes in the FDIC loss share receivable due to improvements in expected cash flows that are being recognized over the remaining term of the loss share agreement. Cash payments to FDIC represent the net impact of loss share loan recoveries, charge-offs and related expenses as calculated and reported in FDIC loss share certificates. Post-acquisition adjustments represent the net change in loss estimates related to acquired loans and covered OREO as a result of changes in expected cash flows and the ALLL related to those covered loans. For loans covered by loss share agreements, subsequent decreases in the amount expected to be collected from the borrower or collateral liquidation result in a provision for loan and lease losses, an increase in the ALLL and a proportional adjustment to the receivable from the FDIC for the estimated amount to be reimbursed. Subsequent increases in the amount expected to be collected from the borrower or collateral liquidation result in the reversal of some or all previously recorded provision for loan and lease losses, a decrease in the related ALLL and a proportional adjustment to the receivable from the FDIC, or prospective adjustment to the accretable yield and the related receivable from the FDIC if no provision for loan and lease losses had been recorded previously. The loss share agreements for FRB and non-single family residential loans acquired from SAB expired at the beginning of the second quarter of 2015. The loss share agreement for non-single family residential loans for Williamsburg First National Bank will expire at the beginning of the fourth quarter of 2015.
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NOTE H - MORTGAGE SERVICING RIGHTS
Our portfolio of residential mortgage loans serviced for third parties was $2.10 billion and $1.95 billion as of September 30, 2015 and December 31, 2014, respectively. These loans were originated by BancShares and sold to third parties on a non-recourse basis with servicing rights retained. These retained servicing rights are recorded as a servicing asset on the Consolidated Balance Sheets and are initially recorded at fair value.
The activity of the servicing asset for the three and nine months ended September 30, 2015 and 2014 is presented in the following table:

| Three months ended September 30 |  | Nine months ended September 30
(Dollars in thousands) | 2015 |  | 2014 |  | 2015 |  | 2014
Beginning balance | $ | 18,162 |  |  | $ | — |  |  | $ | 16,688 |  |  | $ | 16 |
Servicing rights originated | 1,857 |  |  | — |  |  | 4,446 |  |  | — |
Amortization | (695 | ) |  | — |  |  | (2,657 | ) |  | (164 | )
Servicing rights acquired in the 1st Financial merger | — |  |  | — |  |  | — |  |  | 148 |
Valuation allowance reversal | 3 |  |  | — |  |  | 850 |  |  | — |
Ending balance | $ | 19,327 |  |  | $ | — |  |  | $ | 19,327 |  |  | $ | — |

The following table presents the activity in the servicing asset valuation allowance for the three and nine months ended September 30, 2015 and 2014:

| Three months ended September 30 |  | Nine months ended September 30
(Dollars in thousands) | 2015 |  | 2014 |  | 2015 |  | 2014
Beginning balance | $ | 3 |  |  | $ | — |  |  | $ | 850 |  |  | $ | — |
Valuation allowance reversal | (3 | ) |  | — |  |  | (850 | ) |  | — |
Ending balance | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |

As of September 30, 2015, the carrying value of BancShares' mortgage servicing rights was $19.3 million. Contractually specified mortgage servicing fees, late fees, and ancillary fees earned for the three and nine months ended September 30, 2015 were $2.8 million and $8.9 million, respectively, and are included in mortgage income in the Consolidated Statements of Income. Mortgage servicing fees, late fees or ancillary fees earned for the three and nine months ended September 30, 2014 were insignificant since the majority of the mortgage servicing rights were acquired in the Bancorporation merger on October 1, 2014.
The amortization expense related to mortgage servicing rights, included as a reduction of mortgage income in the Consolidated Statements of Income, was $695 thousand for the three months ended September 30, 2015. For the nine months ended September 30, 2015 and 2014 the amortization expense related to mortgage servicing rights was $2.7 million and $164 thousand, respectively. Amortization expense included an impairment reversal of $3 thousand and $850 thousand for the three and nine months ended September 30, 2015. No net valuation allowance impairment was recorded for the three and nine months ended September 30, 2014.
Valuation of mortgage servicing rights is performed using a pooling methodology. Similar loans are pooled together and evaluated on a discounted earnings basis to determine the present value of future earnings. Key economic assumptions used to value mortgage servicing rights as of September 30, 2015 and December 31, 2014 were as follows:

| September 30, 2015 |  | December 31, 2014
Discount rate - conventional fixed loans | 7.05 | % |  | 7.20 | %
Discount rate - all loans excluding conventional fixed loans | 9.05 | % |  | 9.20 | %
Weighted average constant prepayment rate | 10.41 | % |  | 14.25 | %
Weighted average cost to service a loan | $ | 56.61 |  |  | $ | 56.02 |

NOTE I - REPURCHASE AGREEMENTS
We utilize securities sold under agreements to repurchase to facilitate the needs of our customers and secure long-term funding needs. Repurchase agreements are transactions whereby we offer to sell to a counterparty an undivided interest in an eligible security at an agreed upon purchase price, and which obligates BancShares to repurchase the security on an agreed upon date at an agreed upon repurchase price plus interest at an agreed upon rate. Securities sold under agreements to repurchase are recorded
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at the amount of cash received in connection with the transaction and are reflected as short-term borrowings on the Consolidated Balance Sheets.
We monitor collateral levels on a continuous basis and maintain records of each transaction specifically describing the applicable security and the counterparty’s fractional interest in that security, and we segregate the security from its general assets in accordance with regulations governing custodial holdings of securities. The primary risk with our repurchase agreements is market risk associated with the investments securing the transactions, as we may be required to provide additional collateral based on fair value changes of the underlying investments. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agents. The carrying value of available for sale investment securities pledged as collateral under repurchase agreements totaled $825.6 million and $418.3 million at September 30, 2015 and December 31, 2014, respectively.
The remaining contractual maturity of the securities sold under agreements to repurchase by class of collateral pledged included in short-term borrowings in the Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014 is presented in the following tables.

| September 30, 2015
| Remaining Contractual Maturity of the Agreements
(Dollars in thousands) | Overnight and continuous |  | Up to 30 Days |  | 30-90 Days |  | Greater than 90 Days |  | Total
Repurchase agreements |  |  |  |  |  |  |  |  |
U.S. Treasury | $ | 747,206 |  |  | $ | — |  |  | $ | — |  |  | $ | 23,092 |  |  | $ | 770,298 |
Government agency | — |  |  | — |  |  | — |  |  | 6,908 |  |  | 6,908 |
Total borrowings | $ | 747,206 |  |  | $ | — |  |  | $ | — |  |  | $ | 30,000 |  |  | $ | 777,206 |
Gross amount of recognized liabilities for repurchase agreements |  | $ | 777,206 |
| December 31, 2014
| Remaining Contractual Maturity of the Agreements
| Overnight and continuous |  | Up to 30 Days |  | 30-90 Days |  | Greater than 90 Days |  | Total
Repurchase agreements |  |  |  |  |  |  |  |  |
U.S. Treasury | $ | 162,924 |  |  | $ | — |  |  | $ | — |  |  | $ | 23,086 |  |  | $ | 186,010 |
Government agency | — |  |  | — |  |  | — |  |  | 6,914 |  |  | 6,914 |
Mortgage-backed securities | 131,501 |  |  | — |  |  | — |  |  | — |  |  | 131,501 |
Total borrowings | $ | 294,425 |  |  | $ | — |  |  | $ | — |  |  | $ | 30,000 |  |  | $ | 324,425 |
Gross amount of recognized liabilities for repurchase agreements |  | $ | 324,425 |

NOTE J - ESTIMATED FAIR VALUES
Fair value estimates are intended to represent the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. Where there is no active market for a financial instrument, BancShares has made estimates using discounted cash flows or other valuation techniques. Inputs to these valuation methods are subjective in nature, involve uncertainties and require significant judgment and therefore cannot be determined with precision. Accordingly, the derived fair value estimates presented below are not necessarily indicative of the amounts BancShares could realize in a current market exchange.
ASC 820, Fair Value Measurements and Disclosures, indicates that assets and liabilities are recorded at fair value according to a fair value hierarchy comprised of three levels. The levels are based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The level within the fair value hierarchy for an asset or liability is based on the highest level of input that is significant to the fair value measurement (with level 1 considered highest and level 3 considered lowest). A brief description of each level follows:

• | Level 1 values are based on quoted prices for identical instruments in active markets.

• | Level 2 values are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.

• | Level 3 values are generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates that market participants would use in pricing the asset or liability. Valuation techniques include the use of discounted cash flow models and similar techniques.

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Valuation adjustments, such as those pertaining to counterparty and BancShares' own credit quality and liquidity, may be necessary to ensure that assets and liabilities are recorded at fair value. Credit valuation adjustments are made when market pricing does not accurately reflect the counterparty's credit quality. As determined by BancShares management, liquidity valuation adjustments may be made to the fair value of certain assets to reflect the uncertainty in the pricing and trading of the instruments when we are unable to observe recent market transactions for identical or similar instruments.
BancShares management reviews any changes to its valuation methodologies to ensure they are appropriate and justified, and refines valuation methodologies as more market-based data becomes available. Transfers between levels of the fair value hierarchy are recognized at the end of the reporting period.
The methodologies used to estimate the fair value of financial assets and financial liabilities are discussed below:
Investment securities available for sale. U.S.Treasury, government agency, mortgage-backed securities, municipal securities and trust preferred securities are generally measured at fair value using a third party pricing service or recent comparable market transactions in similar or identical securities and are classified as level 2 instruments. Equity securities are measured at fair value using observable closing prices. Principal active markets for equity prices include published exchanges such as Nasdaq composite and New York Stock Exchange. The inputs used to calculate fair value of equity securities are considered level 1 inputs.
Loans held for sale. Certain residential real estate loans are originated to be sold to investors, which are carried at fair value as BancShares elected the fair value option on loans held for sale in 2014. The fair value is based on quoted market prices for similar types of loans. Accordingly, the inputs used to calculate fair value of residential real estate loans held for sale are classified as level 2 inputs.
Net loans and leases (PCI and Non-PCI). Fair value is estimated based on discounted future cash flows using the current interest rates at which loans with similar terms would be made to borrowers of similar credit quality. An additional valuation adjustment is made for liquidity. The inputs used in the fair value measurements for loans and leases are considered level 3 inputs.
FHLB stock. The carrying amount of FHLB stock is a reasonable estimate of fair value as these securities are not readily marketable and are evaluated for impairment based on the ultimate recoverability of the par value. BancShares considers positive and negative evidence, including the profitability and asset quality of the issuer, dividend payment history and recent redemption experience, when determining the ultimate recoverability of the par value. BancShares believes its investment in FHLB stock is ultimately recoverable at par. The inputs used in the fair value measurement for the FHLB stock are considered level 2 inputs.
Mortgage servicing rights. Mortgage servicing rights are carried at the lower of amortized cost or market and are, therefore, carried at fair value only when fair value is less than the asset cost. The fair value of mortgage servicing rights is performed using a pooling methodology. Similar loans are pooled together and a model that relies on discount rates, estimates of prepayment rates and the weighted average cost to service the loans is used to determine the fair value. The inputs used in the fair value measurement for mortgage servicing rights are considered level 3 inputs.
Deposits. For non-time deposits, carrying value is a reasonable estimate of fair value. The fair value of time deposits is estimated by discounting future cash flows using the interest rates currently offered for deposits of similar remaining maturities. The inputs used in the fair value measurement for deposits are considered level 2 inputs.
Long-term obligations. For fixed rate trust preferred securities, the fair values are determined based on recent trades of the actual security if available. For other long-term obligations, fair values are estimated by discounting future cash flows using current interest rates for similar financial instruments. The inputs used in the fair value measurement for long-term obligations are considered level 2 inputs.
Payable to the FDIC for loss share agreements. The fair value of the payable to the FDIC for loss share agreements is determined by the projected cash flows based on expected payments to the FDIC in accordance with the loss share agreements. Cash flows are discounted using current discount rates to reflect the timing of the estimated amounts due to the FDIC. The inputs used in the fair value measurement for the payable to the FDIC are considered level 3 inputs.
Interest rate swap. Under the terms of the existing cash flow hedge, BancShares pays a fixed payment to the counterparty in exchange for receipt of a variable payment that is determined based on the three-month LIBOR rate. The fair value of the cash
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flow hedge is, therefore, based on projected LIBOR rates for the duration of the hedge, values that, while observable in the market, are subject to adjustment due to pricing considerations for the specific instrument. The inputs used in the fair value measurement of the interest rate swap are considered level 2 inputs.
Off-balance-sheet commitments and contingencies. Carrying amounts are reasonable estimates of the fair values for such financial instruments. Carrying amounts include unamortized fee income and, in some cases, reserves for any credit losses from those financial instruments. These amounts are not material to BancShares' financial position.
For all other financial assets and financial liabilities, the carrying value is a reasonable estimate of the fair value as of September 30, 2015 and December 31, 2014. The carrying value and fair value for these assets and liabilities are equivalent because they are relatively short term in nature and there is no interest rate or credit risk that would cause the fair value to differ from the carrying value.

(Dollars in thousands) | September 30, 2015 |  | December 31, 2014
Carrying value |  | Fair value |  | Carrying value |  | Fair value
Cash and due from banks | $ | 546,444 |  |  | $ | 546,444 |  |  | $ | 604,182 |  |  | $ | 604,182 |
Overnight investments | 2,368,132 |  |  | 2,368,132 |  |  | 1,724,919 |  |  | 1,724,919 |
Investment securities available for sale | 6,690,578 |  |  | 6,690,578 |  |  | 7,171,917 |  |  | 7,171,917 |
Investment securities held to maturity | 301 |  |  | 314 |  |  | 518 |  |  | 544 |
Loans held for sale | 71,874 |  |  | 71,874 |  |  | 63,696 |  |  | 63,696 |
Net loans and leases | 19,650,343 |  |  | 19,038,274 |  |  | 18,564,999 |  |  | 18,046,497 |
Receivable from the FDIC for loss share agreements (1) | 9,276 |  |  | 9,276 |  |  | 28,701 |  |  | 18,218 |
Income earned not collected | 67,368 |  |  | 67,368 |  |  | 57,254 |  |  | 57,254 |
Federal Home Loan Bank stock | 37,511 |  |  | 37,511 |  |  | 39,113 |  |  | 39,113 |
Mortgage servicing rights | 19,327 |  |  | 22,358 |  |  | 16,688 |  |  | 16,736 |
Deposits | 26,719,375 |  |  | 26,050,802 |  |  | 25,678,577 |  |  | 25,164,683 |
Short-term borrowings | 759,757 |  |  | 759,757 |  |  | 987,184 |  |  | 987,184 |
Long-term obligations | 705,418 |  |  | 722,180 |  |  | 351,320 |  |  | 367,732 |
Payable to the FDIC for loss share agreements | 124,038 |  |  | 131,711 |  |  | 116,535 |  |  | 122,168 |
Accrued interest payable | 5,950 |  |  | 5,950 |  |  | 8,194 |  |  | 8,194 |
Interest rate swap | 2,331 |  |  | 2,331 |  |  | 4,337 |  |  | 4,337 |

(1) At September 30, 2015, the carrying value of the FDIC receivable approximates the fair value due to the short term nature of the majority of loss share agreements. At December 31, 2014, the fair value of the FDIC receivable is estimated based on discounted future cash flows using current discount rates and excludes receivable related to accretable yield to be amortized in prospective periods.
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Among BancShares' assets and liabilities, investment securities available for sale, loans held for sale and interest rates swaps accounted for as cash flow hedges are reported at their fair values on a recurring basis. For assets and liabilities carried at fair value on a recurring basis, the following table provides fair value information as of September 30, 2015 and December 31, 2014.

| September 30, 2015
|  |  | Fair value measurements using:
(Dollars in thousands) | Fair value |  | Level 1 inputs |  | Level 2 inputs |  | Level 3 inputs
Assets measured at fair value |  |  |  |  |  |  |
Investment securities available for sale |  |  |  |  |  |  |
U.S. Treasury | $ | 1,691,502 |  |  | $ | — |  |  | $ | 1,691,502 |  |  | $ | — |
Government agency | 634,904 |  |  | — |  |  | 634,904 |  |  | — |
Mortgage-backed securities | 4,362,561 |  |  | — |  |  | 4,362,561 |  |  | — |
Equity securities | 1,611 |  |  | 1,611 |  |  | — |  |  | — |
Total investment securities available for sale | $ | 6,690,578 |  |  | $ | 1,611 |  |  | $ | 6,688,967 |  |  | $ | — |
Loans held for sale | $ | 71,874 |  |  | $ | — |  |  | $ | 71,874 |  |  | $ | — |
Liabilities measured at fair value |  |  |  |  |  |  |
Interest rate swaps accounted for as cash flow hedges | $ | 2,331 |  |  | $ | — |  |  | $ | 2,331 |  |  | $ | — |
| December 31, 2014
|  |  | Fair value measurements using:
| Fair value |  | Level 1 inputs |  | Level 2 inputs |  | Level 3 inputs
Assets measured at fair value |  |  |  |  |  |  |
Investment securities available for sale |  |  |  |  |  |  |
U.S. Treasury | $ | 2,629,670 |  |  | $ | — |  |  | $ | 2,629,670 |  |  | $ | — |
Government agency | 908,817 |  |  | — |  |  | 908,817 |  |  | — |
Mortgage-backed securities | 3,633,304 |  |  | — |  |  | 3,633,304 |  |  | — |
Municipal securities | 126 |  |  | — |  |  | 126 |  |  | — |
Total investment securities available for sale | $ | 7,171,917 |  |  | $ | — |  |  | $ | 7,171,917 |  |  | $ | — |
Loans held for sale | $ | 63,696 |  |  | $ | — |  |  | $ | 63,696 |  |  | $ | — |
Liabilities measured at fair value |  |  |  |  |  |  |
Interest rate swaps accounted for as cash flow hedges | $ | 4,337 |  |  | $ | — |  |  | $ | 4,337 |  |  | $ | — |

There were no transfers between levels during the nine months ended September 30, 2015.
Fair Value Option
Beginning in the fourth quarter of 2014, BancShares elected the fair value option for residential real estate loans held for sale. This election reduces certain timing differences in the Consolidated Statement of Income and better aligns with the management of the portfolio from a business perspective.
The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for residential real estate loans held for sale measured at fair value as of September 30, 2015 and December 31, 2014.

| September 30, 2015
(Dollars in thousands) | Fair Value |  | Aggregate Unpaid Principal Balance |  | Difference
Loans held for sale | $ | 71,874 |  |  | $ | 69,858 |  |  | $ | 2,016 |
| December 31, 2014
| Fair Value |  | Aggregate Unpaid Principal Balance |  | Difference
Loans held for sale | $ | 63,696 |  |  | $ | 62,996 |  |  | $ | 700 |

No loans held for sale were 90 or more days past due or on nonaccrual status as of September 30, 2015 or December 31, 2014.
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The changes in fair value for residential real estate loans held for sale for which we elected the fair value option are included in the table below for the three and nine months ended September 30, 2015.

| Three months ended September 30, 2015 |  | Nine months ended September 30, 2015
(Dollars in thousands) | Gains(Losses) From Fair Value Changes |  | Gains(Losses) From Fair Value Changes
Loans held for sale | $ | 1,347 |  |  | $ | 1,316 |

The changes in fair value in the table above are recorded as a component of mortgage income on the Consolidated Statements of Income.
Certain other assets are adjusted to their fair value on a nonrecurring basis, including impaired loans, OREO, goodwill, which are periodically tested for impairment, and mortgage servicing rights, which are carried at the lower of amortized cost or market. Non-impaired loans held for investment, deposits, short-term borrowings and long-term obligations are not reported at fair value.
Impaired loans are deemed to be at fair value if an associated allowance or current period charge-off has been recorded. The value of impaired loans is determined by either collateral valuations or discounted present value of the expected cash flow calculations. Collateral values are determined using appraisals or other third-party value estimates of the subject property with discounts generally between 10 and 14 percent applied for estimated holding and selling costs and other external factors that may impact the marketability of the property. Impaired loans are assigned to an asset manager and monitored monthly for significant changes since the last valuation date. If significant changes are noted, the asset manager orders a new valuation or adjusts the valuation accordingly. Expected cash flows are determined using expected payment information at the individual loan level, discounted using the effective interest rate. The effective interest rate generally ranges between 2 and 16 percent.
OREO is measured and reported at fair value using collateral valuations. Collateral values are determined using appraisals or other third-party value estimates of the subject property with discounts generally between 10 and 14 percent applied for estimated holding and selling costs and other external factors that may impact the marketability of the property. Changes to the value of the assets between scheduled valuation dates are monitored through continued communication with brokers and monthly reviews by the asset manager assigned to each asset. The asset manager uses the information gathered from brokers and other market sources to identify any significant changes in the market or the subject property as they occur. Valuations are then adjusted or new appraisals are ordered to ensure the reported values reflect the most current information. OREO that has been acquired or written down in the current year is deemed to be at fair value and included in the table below.
Mortgage servicing rights are carried at the lower of cost or market and are, therefore, carried at fair value only when fair value is less than the amortized asset cost. The fair value of mortgage servicing rights is performed using a pooling methodology. Similar loans are pooled together and a discounted cash flow model, which takes into consideration discount rates, prepayment rates, and the weighted average cost to service the loans, is used to determine the fair value. See Note H for further information on the discount rates, prepayment rates and the weighted average cost to service the loans.
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For financial assets and liabilities carried at fair value on a nonrecurring basis, the following table provides fair value information as of September 30, 2015 and December 31, 2014.

| September 30, 2015
|  |  | Fair value measurements using:
(Dollars in thousands) | Fair value |  | Level 1 inputs |  | Level 2 inputs |  | Level 3 inputs
Impaired loans | $ | 61,621 |  |  | $ | — |  |  | $ | — |  |  | $ | 61,621 |
Other real estate not covered under loss share agreements remeasured during current year | 39,996 |  |  | — |  |  | — |  |  | 39,996 |
Other real estate covered under loss share agreements remeasured during current year | 3,250 |  |  | — |  |  | — |  |  | 3,250 |
| December 31, 2014
|  |  | Fair value measurements using:
| Fair value |  | Level 1 inputs |  | Level 2 inputs |  | Level 3 inputs
Impaired loans | $ | 73,170 |  |  | $ | — |  |  | $ | — |  |  | $ | 73,170 |
Other real estate not covered under loss share agreements remeasured during current year | 40,714 |  |  | — |  |  | — |  |  | 40,714 |
Other real estate covered under loss share agreements remeasured during current year | 17,664 |  |  | — |  |  | — |  |  | 17,664 |
Mortgage servicing rights | 13,562 |  |  | — |  |  | — |  |  | 13,562 |

No financial liabilities were carried at fair value on a nonrecurring basis as of September 30, 2015 and December 31, 2014.
NOTE K - EMPLOYEE BENEFIT PLANS
BancShares sponsors noncontributory defined benefit pension plans for its qualifying employees (BancShares Plan) and legacy Bancorporation employees (Bancorporation Plan). Net periodic benefit cost is a component of employee benefits expense.
BancShares Plan
For the three and nine months ended September 30, 2015 and 2014, the components of net periodic benefit cost are as follows:

| Three months ended September 30 |  | Nine months ended September 30
(Dollars in thousands) | 2015 |  | 2014 |  | 2015 |  | 2014
Service cost | $ | 3,358 |  |  | $ | 3,081 |  |  | $ | 10,561 |  |  | $ | 9,247 |
Interest cost | 6,732 |  |  | 6,402 |  |  | 20,230 |  |  | 19,209 |
Expected return on assets | (8,302 | ) |  | (7,296 | ) |  | (24,896 | ) |  | (23,448 | )
Amortization of prior service cost | 53 |  |  | 53 |  |  | 158 |  |  | 158 |
Amortization of net actuarial loss | 2,863 |  |  | 769 |  |  | 8,531 |  |  | 3,861 |
Net periodic benefit cost | $ | 4,704 |  |  | $ | 3,009 |  |  | $ | 14,584 |  |  | $ | 9,027 |

Bancorporation Plan
For the three and nine months ended September 30, 2015, the components of net periodic benefit cost are as follows:

| Three months ended September 30 |  | Nine months ended September 30
(Dollars in thousands) | 2015 |  | 2015
Service cost | $ | 641 |  |  | $ | 2,506 |
Interest cost | 1,540 |  |  | 4,795 |
Expected return on assets | (2,873 | ) |  | (8,612 | )
Amortization of prior service cost | — |  |  | — |
Amortization of net actuarial loss | — |  |  | — |
Net periodic benefit cost | $ | (692 | ) |  | $ | (1,311 | )

No contributions were made during the three and nine months ended September 30, 2015 to the BancShares or Bancorporation pension plans. BancShares does not expect to make any contributions to either of the defined benefit pension plans during 2015.
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NOTE L - COMMITMENTS AND CONTINGENCIES
To meet the financing needs of its customers, BancShares and its subsidiaries have financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit, standby letters of credit and recourse obligations on mortgage loans sold. These instruments involve elements of credit, interest rate or liquidity risk.
Commitments to extend credit are legally binding agreements to lend to customers. Commitments generally have fixed expiration dates or other termination clauses and may require payment of fees. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future liquidity requirements. Established credit standards control the credit risk exposure associated with these commitments. In some cases, BancShares requires that collateral be pledged to secure the commitment, including cash deposits, securities and other assets. At September 30, 2015, BancShares had unused commitments totaling $7.76 billion, compared to $7.19 billion at December 31, 2014. Total unfunded commitments relating to investments in affordable housing projects totaled $32.0 million and $16.8 million at September 30, 2015 and December 31, 2014, respectively, and are included in other liabilities on BancShares' Consolidated Balance Sheets.
Standby letters of credit are commitments guaranteeing performance of a customer to a third party. Those commitments are primarily issued to support public and private borrowing arrangements. To mitigate its risk, BancShares’ follows its credit policies in the issuance of standby letters of credit. At September 30, 2015 and December 31, 2014, BancShares had standby letters of credit amounting to $85.2 million and $77.4 million, respectively. The credit risk related to the issuance of these letters of credit is essentially the same as that involved in extending loans to clients and, therefore, these letters of credit are collateralized when necessary.
Pursuant to standard representations and warranties relating to residential mortgage loan sales, contingent obligations exist for various events that may occur following the loan sale. If underwriting or documentation deficiencies are discovered at any point in the life of the loan or if the loan becomes nonperforming within 120 days of its sale, the investor may require BancShares to repurchase the loan or to repay a portion of the sale proceeds. Other liabilities included reserves of $3.1 million and $3.2 million as of September 30, 2015 and December 31, 2014, respectively, for estimated losses arising from these standard representation and warranty provisions.
BancShares has recorded a receivable from the FDIC totaling $9.3 million and $28.7 million as of September 30, 2015 and December 31, 2014, respectively, for the expected reimbursement of losses on assets covered under the various loss share agreements. These loss share agreements impose certain obligations on us that, in the event of noncompliance, could result in the delay or disallowance of some or all of our rights under those agreements. Requests for reimbursement are subject to FDIC review and may be delayed or disallowed for noncompliance. The loss share agreements are subject to interpretation by both the FDIC and BancShares, and disagreements may arise regarding coverage of losses, expenses and contingencies.
The loss share agreements for five FDIC-assisted transactions include provisions related to payments that may be owed to the FDIC at the termination of the agreements (clawback liability).The clawback liability represents a payment by BancShares to the FDIC if actual cumulative losses on acquired covered assets are lower than the cumulative losses originally estimated by the FDIC at the time of acquisition. The clawback liability is estimated by discounting estimated future payments and is recorded in the Consolidated Balance Sheets as a payable to the FDIC under the relevant loss share agreements. As of September 30, 2015 and December 31, 2014, the estimated clawback liability was $124.0 million and $116.5 million, respectively.
BancShares and various subsidiaries have been named as defendants in legal actions arising from their normal business activities in which damages in various amounts are claimed. BancShares is also exposed to litigation risk relating to the prior business activities of banks from which assets were acquired and liabilities assumed in the various FDIC-assisted transactions. Although the amount of any ultimate liability with respect to such matters cannot be determined, in the opinion of management, any such liability will not have a material effect on BancShares’ consolidated financial statements.
NOTE M - TRANSACTIONS WITH RELATED PERSONS
BancShares had, and expects to have in the future, banking transactions in the ordinary course of business with directors, officers and their associates (Related Persons) and entities that are controlled by Related Persons.
On September 4, 2015, FCB signed a definitive agreement to sell certain assets and liabilities of its branch office located at 800 South Lafayette in Shelby, North Carolina to The Fidelity Bank, a financial institution controlled by Related Persons. The branch sale is anticipated to close on December 4, 2015. In connection with the sale, FCB will receive a 1 percent premium on deposits sold. The premium is not expected to be material.
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NOTE N - DERIVATIVES
At September 30, 2015, BancShares had an interest rate swap entered into during 2011 that qualifies as a cash flow hedge under GAAP. For all periods presented, the fair value of the outstanding derivative is included in other liabilities in the consolidated balance sheets, and the net change in fair value is included in the consolidated statements of cash flows under the caption net change in other liabilities.
The following table provides the notional amount of the interest rate swap and the fair value of the liability as of September 30, 2015 and December 31, 2014.

| September 30, 2015 |  | December 31, 2014
(Dollars in thousands) | Notional amount |  | Estimated fair value of liability |  | Notional amount |  | Estimated fair value of liability
2011 interest rate swap hedging variable rate exposure on trust preferred securities 2011-2016 | $ | 93,500 |  |  | $ | 2,331 |  |  | $ | 93,500 |  |  | $ | 4,337 |

The interest rate swap is used for interest rate risk management purposes and converts variable-rate exposure on outstanding debt to a fixed rate. The interest rate swap has a notional amount of $93.5 million, representing the amount of variable rate trust preferred capital securities issued during 2006 and still outstanding at the swap inception date. The interest rate swap hedges interest payments through June 2016 and requires fixed-rate payments by BancShares at 5.50 percent in exchange for variable-rate payments of 175 basis points above the three-month LIBOR, which is equal to the interest paid to the holders of the trust preferred capital securities. Settlement of the swap occurs quarterly. As of September 30, 2015 and December 31, 2014, collateral with a fair value of $2.0 million and $7.0 million, respectively, was pledged to secure the existing obligation under the interest rate swap.
For cash flow hedges, the effective portion of the gain or loss due to changes in the fair value of the derivative hedging instrument is included in other comprehensive income, while the ineffective portion, representing the excess of the cumulative change in the fair value of the derivative over the cumulative change in expected future discounted cash flows on the hedged transaction, is recorded in the consolidated statement of income. BancShares’ interest rate swap has been fully effective since inception. Therefore, changes in the fair value of the interest rate swap have had no impact on net income. For the three months ended September 30, 2015 and 2014, BancShares recognized interest expense of $829 thousand and $840 thousand, respectively, resulting from incremental interest paid to the interest rate swap counterparty, none of which related to ineffectiveness. For the nine months ended September 30, 2015 and 2014, BancShares recognized interest expense of $2.5 million during both periods, resulting from incremental interest paid to the interest swap counterparty, none of which related to ineffectiveness.
BancShares monitors the credit risk of the interest rate swap counterparty.
NOTE O - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) included the following as of September 30, 2015 and December 31, 2014:

| September 30, 2015 |  | December 31, 2014
(Dollars in thousands) | Accumulated other comprehensive income (loss) |  | Deferred tax expense (benefit) |  | Accumulated other comprehensive income (loss), net of tax |  | Accumulated other comprehensive income (loss) |  | Deferred tax expense (benefit) |  | Accumulated other comprehensive income (loss), net of tax
Unrealized gains on investment securities available for sale, net | $ | 26,926 |  |  | $ | 10,298 |  |  | $ | 16,628 |  |  | $ | 8,343 |  |  | $ | 3,245 |  |  | $ | 5,098 |
Unrealized loss on cash flow hedge | (2,331 | ) |  | (877 | ) |  | (1,454 | ) |  | (4,337 | ) |  | (1,673 | ) |  | (2,664 | )
Funded status of defined benefit plans | (82,007 | ) |  | (31,957 | ) |  | (50,050 | ) |  | (90,696 | ) |  | (35,281 | ) |  | (55,415 | )
Total | $ | (57,412 | ) |  | $ | (22,536 | ) |  | $ | (34,876 | ) |  | $ | (86,690 | ) |  | $ | (33,709 | ) |  | $ | (52,981 | )

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The following table highlights changes in accumulated other comprehensive income (loss) by component for the three and nine months ended September 30, 2015 and September 30, 2014:

| Three months ended September 30, 2015
(Dollars in thousands) | Unrealized gains (losses) on available for sale securities 1 |  | Gains (losses) on cash flow hedges 1 |  | Defined benefit pension items 1 |  | Total
Beginning balance | $ | 2,604 |  |  | $ | (1,875 | ) |  | $ | (51,888 | ) |  | $ | (51,159 | )
Other comprehensive income (loss) before reclassifications | 17,494 |  |  | 421 |  |  | — |  |  | 17,915 |
Amounts reclassified from accumulated other comprehensive (loss) income | (3,470 | ) |  | — |  |  | 1,838 |  |  | (1,632 | )
Net current period other comprehensive income | 14,024 |  |  | 421 |  |  | 1,838 |  |  | 16,283 |
Ending balance | $ | 16,628 |  |  | $ | (1,454 | ) |  | $ | (50,050 | ) |  | $ | (34,876 | )
| Three months ended September 30, 2014
| Unrealized gains (losses) on available for sale securities 1 |  | Gains (losses) on cash flow hedges 1 |  | Defined benefit pension items 1 |  | Total
Beginning balance | $ | 16,490 |  |  | $ | (3,643 | ) |  | $ | (8,790 | ) |  | $ | 4,057 |
Other comprehensive (loss) income before reclassifications | (7,000 | ) |  | 582 |  |  | — |  |  | (6,418 | )
Amounts reclassified from accumulated other comprehensive income (loss) | — |  |  | — |  |  | 503 |  |  | 503 |
Net current period other comprehensive (loss) income | (7,000 | ) |  | 582 |  |  | 503 |  |  | (5,915 | )
Ending balance | $ | 9,490 |  |  | $ | (3,061 | ) |  | $ | (8,287 | ) |  | $ | (1,858 | )
| Nine months ended September 30, 2015
| Unrealized gains (losses) on available for sale securities 1 |  | Gains (losses) on cash flow hedges 1 |  | Defined benefit pension items 1 |  | Total
Beginning balance | $ | 5,098 |  |  | $ | (2,664 | ) |  | $ | (55,415 | ) |  | $ | (52,981 | )
Other comprehensive income before reclassifications | 18,222 |  |  | 1,210 |  |  | — |  |  | 19,432 |
Amounts reclassified from accumulated other comprehensive (loss) income | (6,692 | ) |  | — |  |  | 5,365 |  |  | (1,327 | )
Net current period other comprehensive income | 11,530 |  |  | 1,210 |  |  | 5,365 |  |  | 18,105 |
Ending balance | $ | 16,628 |  |  | $ | (1,454 | ) |  | $ | (50,050 | ) |  | $ | (34,876 | )
| Nine months ended September 30, 2014
| Unrealized gains (losses) on available for sale securities 1 |  | Gains (losses) on cash flow hedges 1 |  | Defined benefit pension items 1 |  | Total
Beginning balance | $ | (10,091 | ) |  | $ | (4,434 | ) |  | $ | (10,743 | ) |  | $ | (25,268 | )
Other comprehensive income before reclassifications | 19,581 |  |  | 1,373 |  |  | — |  |  | 20,954 |
Amounts reclassified from accumulated other comprehensive loss | — |  |  | — |  |  | 2,456 |  |  | 2,456 |
Net current period other comprehensive income | 19,581 |  |  | 1,373 |  |  | 2,456 |  |  | 23,410 |
Ending balance | $ | 9,490 |  |  | $ | (3,061 | ) |  | $ | (8,287 | ) |  | $ | (1,858 | )

1 All amounts are net of tax. Amounts in parentheses indicate debits.
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The following table presents the amounts reclassified from accumulated other comprehensive income (loss) and the line item affected in the statement where net income is presented for the nine months ended September 30, 2015 and September 30, 2014:

(Dollars in thousands) |  | Three months ended September 30, 2015
Details about accumulated other comprehensive income (loss) |  | Amount reclassified from accumulated other comprehensive income (loss)1 |  | Affected line item in the statement where net income is presented
Unrealized gains and losses on available for sale securities |  | $ | 5,564 |  |  | Securities gains
|  | (2,094 | ) |  | Income taxes
|  | $ | 3,470 |  |  | Net income
Amortization of defined benefit pension items |  |  |  |
Prior service costs |  | $ | (53 | ) |  | Employee benefits
Actuarial losses |  | (2,863 | ) |  | Employee benefits
|  | (2,916 | ) |  | Employee benefits
|  | 1,078 |  |  | Income taxes
|  | $ | (1,838 | ) |  | Net income
Total reclassifications for the period |  | $ | 1,632 |  |  |
|  | Three months ended September 30, 2014
Details about accumulated other comprehensive income (loss) |  | Amount reclassified from accumulated other comprehensive income (loss)1 |  | Affected line item in the statement where net income is presented
Amortization of defined benefit pension items |  |  |  |
Prior service costs |  | $ | (53 | ) |  | Employee benefits
Actuarial losses |  | (769 | ) |  | Employee benefits
|  | (822 | ) |  | Employee benefits
|  | 319 |  |  | Income taxes
|  | $ | (503 | ) |  | Net income
Total reclassifications for the period |  | $ | (503 | ) |  |
|  | Nine months ended September 30, 2015
Details about accumulated other comprehensive income (loss) |  | Amount reclassified from accumulated other comprehensive income (loss)1 |  | Affected line item in the statement where net income is presented
Unrealized gains and losses on available for sale securities |  | $ | 10,837 |  |  | Securities gains
|  | (4,145 | ) |  | Income taxes
|  | $ | 6,692 |  |  | Net income
Amortization of defined benefit pension items |  |  |  |
Prior service costs |  | $ | (158 | ) |  | Employee benefits
Actuarial losses |  | (8,531 | ) |  | Employee benefits
|  | (8,689 | ) |  | Employee benefits
|  | 3,324 |  |  | Income taxes
|  | $ | (5,365 | ) |  | Net income
Total reclassifications for the period |  | $ | 1,327 |  |  |
|  | Nine months ended September 30, 2014
Details about accumulated other comprehensive icnome (loss) |  | Amount reclassified from accumulated other comprehensive income (loss)1 |  | Affected line item in the statement where net income is presented
Amortization of defined benefit pension items |  |  |  |
Prior service costs |  | $ | (158 | ) |  | Employee benefits
Actuarial losses |  | (3,861 | ) |  | Employee benefits
|  | (4,019 | ) |  | Employee benefits
|  | 1,563 |  |  | Income taxes
|  | $ | (2,456 | ) |  | Net income
Total reclassifications for the period |  | $ | (2,456 | ) |  |

1 Amounts in parentheses indicate debits to profit/loss.
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION
Management’s discussion and analysis ("MD&A") of earnings and related financial data are presented to assist in understanding the financial condition and results of operations of First Citizens BancShares, Inc. and Subsidiaries (BancShares). This discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and related notes presented within this report along with our financial statements and related MD&A of financial condition and results of operations included in our 2014 Annual Report on Form 10-K. In the MD&A, asset yields and net interest margin are presented on a fully taxable equivalent ("FTE") basis. Intercompany accounts and transactions have been eliminated. Although certain amounts for prior years have been reclassified to conform to statement presentations for 2015, the reclassifications had no material effect on shareholders’ equity or net income as previously reported. Unless otherwise noted, the terms "we," "us" and "BancShares" refer to the consolidated financial position and consolidated results of operations for BancShares.
BancShares is a financial holding company headquartered in Raleigh, North Carolina, that offers full-service banking through its wholly-owned banking subsidiary, First-Citizens Bank & Trust Company ("FCB"). FCB is a state-chartered bank organized under the laws of the state of North Carolina. As of November 4, 2015, FCB operated 564 branches in North Carolina, South Carolina, Virginia, West Virginia, Maryland, Tennessee, Washington, California, Florida, Georgia, Texas, Arizona, New Mexico, Oregon, Colorado, Oklahoma, Kansas, Missouri, and Washington, DC.
BancShares’ earnings and cash flows are primarily derived from its commercial banking activities. We gather deposits from retail and commercial customers and also secure funding through various non-deposit sources. We invest the liquidity generated from these funding sources in interest-earning assets, including loans and leases, investment securities and overnight investments. We also invest in bank premises, hardware, software, furniture and equipment used to conduct our commercial banking business. We provide treasury services products, cardholder and merchant services, wealth management services and various other products and services typically offered by commercial banks.
EXECUTIVE OVERVIEW
Recent Economic and Industry Developments
Various external factors influence the focus of our business efforts, and the results of our operations can change significantly based on those external factors. Third quarter 2015 results indicate continuing job growth as the unemployment rate fell to 5.1 percent, the lowest rate since April 2008. According to the U.S. Department of Labor, the economy added approximately 501,000 new nonfarm payroll jobs during the third quarter of 2015 while the labor force participation rate dropped. Housing activity continues to improve as a result of increased demand fueled by historically low mortgage rates and job growth. Purchases of homes increased to a seasonally adjusted annual rate of 468,000 homes in September 2015, in comparison to the September 2014 estimate of 459,000 homes.
The Federal Reserve’s Federal Open Market Committee ("FOMC") indicated in the third quarter that economic activity has been expanding at a moderate pace with household spending and business fixed investment rising moderately and the housing sector showing further improvement, while net exports have been soft. The FOMC anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2.0 percent objective over the medium term. The FOMC anticipates that, even after employment and inflation are near its target objectives, economic conditions may warrant keeping the target federal funds rate below levels the FOMC views as normal in the longer run.
The trends in the banking industry are similar to those of the broader economy as shown in the latest national banking results from the second quarter of 2015. Strengthening loan growth helped increase revenues at most banks, as aggregate industry net income increased 7.3 percent compared to the second quarter of 2014. Growth in interest-earning assets contributed to an increase in net interest income compared to a year earlier, while higher income from sales and servicing of residential real estate loans contributed to an increase in noninterest income from the prior year. Across the industry, bank average net interest margin declined to 3.06 percent in the second quarter 2015 from 3.15 percent in the second quarter of 2014, but increased slightly from the 30-year low of 3.02 percent in the first quarter of 2015. Despite the net interest margin decline, 58.9 percent of banks reported year-over-year growth in quarterly earnings. Credit improvement remains key to earnings growth. Net charge-offs and delinquent loans and lease balances continue to decline, with reductions across all major loan categories except loans to commercial and industrial borrowers and automotive loans.
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Financial Performance Highlights for Third Quarter 2015
BancShares' consolidated net income during the third quarter of 2015 was $56.0 million, or $4.66 per share, compared to $44.5 million, or $3.71 per share, in the second quarter of 2015 and $26.5 million, or $2.76 per share in the third quarter of 2014. The annualized returns on average assets and equity were 0.71 percent and 7.86 percent, respectively, during the third quarter of 2015, compared to 0.58 percent and 6.42 percent during the second quarter of 2015, and 0.48 percent and 4.89 percent during the third quarter of 2014. Net interest margin for the third quarter of 2015 was 3.29 percent, compared to 3.31 percent for the second quarter of 2015 and 3.26 percent for the third quarter of the prior year. The impact of strategic initiatives in our lending and continued economic stability have contributed to organic loan growth and continued improvement in charge-offs in comparison to the second quarter of 2015 and third quarter of 2014.
For the nine months ended September 30, 2015, net income was $167.6 million, or $13.96 per share, compared to $75.7 million, or $7.87 per share, reported for the same period of 2014. Annualized returns on average assets and average equity for the nine months ended September 30, 2015 were 0.73 percent and 8.07 percent, respectively, compared to 0.46 percent and 4.77 percent, respectively, for the same period a year earlier. Year-to-date 2015 earnings include an acquisition gain of $42.9 million recognized in the first quarter in connection with the FDIC-assisted acquisition of Capitol City Bank & Trust (CCBT) of Atlanta, Georgia.
When comparing net income for the quarter and nine months ended September 30, 2015 to the same periods of 2014, the increases were primarily driven by the impact of the First Citizens Bancorporation, Inc. (Bancorporation) merger and the FDIC-assisted acquisition of CCBT, which occurred on October 1, 2014 and February 13, 2015, respectively. The Bancorporation acquisition added $2.01 billion of investment securities, $4.49 billion of loans and leases, and $7.17 billion of deposits as of the acquisition date. The impacts of the acquisitions are reflected in Bancshares' financial results from the respective acquisition dates. As such, the following discussion will focus on sequential quarter comparisons between the third quarter of 2015 and the second quarter of 2015, both of which include operating results from the Bancorporation and CCBT acquisitions.
Key highlights in the third quarter of 2015 include:

• | Loan growth continued during the third quarter of 2015 as balances increased $335.6 million to $19.86 billion, reflecting strong originated portfolio growth.

• | Net charge-offs totaled $3.0 million, or 0.06 percent of average loans and leases on an annualized basis, compared to $5.0 million, or 0.10 percent on an annualized basis, during the second quarter of 2015.

• | Provision expense decreased $7.6 million to $107 thousand as a result of a $4.1 million reversal of previously recorded specific reserves on impaired non-PCI loans due to refined loss estimates, improved credit quality in the commercial loan portfolio, and lower net charge-offs.

• | Investment securities gains totaled $5.6 million for the third quarter of 2015.

• | BancShares remained well-capitalized under Basel III capital requirements with a leverage capital ratio of 8.97 percent, Tier 1 risk-based capital ratio of 12.77 percent, common equity Tier 1 ratio of 12.63 percent and total risk-based capital ratio of 14.18 percent at September 30, 2015.

• | The conversion of systems and customer accounts acquired from Bancorporation was completed in the third quarter. The conversion included the systems integration of 172 branches in South Carolina and Georgia.

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Table 1
Selected Quarterly Data

| 2015 |  | 2014 |  | Nine months ended September 30 |
| Third |  | Second |  | First |  | Fourth |  | Third |  |
(Dollars in thousands, except share data) | Quarter |  | Quarter |  | Quarter |  | Quarter |  | Quarter |  | 2015 |  | 2014 |
SUMMARY OF OPERATIONS |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income | $ | 249,825 |  |  | $ | 246,013 |  |  | $ | 231,510 |  |  | $ | 232,122 |  |  | $ | 177,621 |  |  | $ | 727,348 |  |  | $ | 528,326 |  |
Interest expense | 10,454 |  |  | 11,363 |  |  | 11,345 |  |  | 14,876 |  |  | 11,399 |  |  | 33,162 |  |  | 35,475 |  |
Net interest income | 239,371 |  |  | 234,650 |  |  | 220,165 |  |  | 217,246 |  |  | 166,222 |  |  | 694,186 |  |  | 492,851 |  |
Provision (credit) for loan and lease losses | 107 |  |  | 7,719 |  |  | 5,792 |  |  | 8,305 |  |  | 1,537 |  |  | 13,618 |  |  | (7,665 | ) |
Net interest income after provision (credit) for loan and lease losses | 239,264 |  |  | 226,931 |  |  | 214,373 |  |  | 208,941 |  |  | 164,685 |  |  | 680,568 |  |  | 500,516 |  |
Gains on acquisitions | — |  |  | — |  |  | 42,930 |  |  | — |  |  | — |  |  | 42,930 |  |  | — |  |
Noninterest income excluding gains on acquisitions(1) | 109,750 |  |  | 107,450 |  |  | 107,823 |  |  | 132,924 |  |  | 78,599 |  |  | 325,023 |  |  | 207,502 |  |
Noninterest expense | 260,172 |  |  | 264,691 |  |  | 258,166 |  |  | 254,429 |  |  | 201,810 |  |  | 783,029 |  |  | 591,860 |  |
Income before income taxes(1) | 88,842 |  |  | 69,690 |  |  | 106,960 |  |  | 87,436 |  |  | 41,474 |  |  | 265,492 |  |  | 116,158 |  |
Income taxes(1) | 32,884 |  |  | 25,168 |  |  | 39,802 |  |  | 24,540 |  |  | 14,973 |  |  | 97,854 |  |  | 40,492 |  |
Net income(1) | $ | 55,958 |  |  | $ | 44,522 |  |  | $ | 67,158 |  |  | $ | 62,896 |  |  | $ | 26,501 |  |  | $ | 167,638 |  |  | $ | 75,666 |  |
Net interest income, taxable equivalent | $ | 240,930 |  |  | $ | 236,456 |  |  | $ | 221,452 |  |  | $ | 218,436 |  |  | $ | 167,150 |  |  | $ | 698,836 |  |  | $ | 495,414 |  |
PER SHARE DATA |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income(1) | $ | 4.66 |  |  | $ | 3.71 |  |  | $ | 5.59 |  |  | $ | 5.24 |  |  | $ | 2.76 |  |  | $ | 13.96 |  |  | $ | 7.87 |  |
Cash dividends | 0.30 |  |  | 0.30 |  |  | 0.30 |  |  | 0.30 |  |  | 0.30 |  |  | 0.90 |  |  | 0.90 |  |
Market price at period end (Class A) | 226.00 |  |  | 263.04 |  |  | 259.69 |  |  | 252.79 |  |  | 216.63 |  |  | 226.00 |  |  | 216.63 |  |
Book value at period end(1) | 238.34 |  |  | 232.62 |  |  | 230.53 |  |  | 223.77 |  |  | 224.75 |  |  | 238.34 |  |  | 224.75 |  |
SELECTED PERIOD AVERAGE BALANCES |  |  |  |  |  |  |  |  |  |  |  |  |
Total assets(1) | $ | 31,268,774 |  |  | $ | 30,835,749 |  |  | $ | 30,414,322 |  |  | $ | 30,376,207 |  |  | $ | 22,092,940 |  |  | $ | 30,842,745 |  |  | $ | 21,993,583 |  |
Investment securities | 7,275,290 |  |  | 7,149,691 |  |  | 6,889,752 |  |  | 7,110,799 |  |  | 5,616,730 |  |  | 7,106,322 |  |  | 5,617,734 |  |
Loans and leases (PCI and non-PCI) | 19,761,145 |  |  | 19,354,823 |  |  | 18,922,028 |  |  | 18,538,553 |  |  | 13,670,217 |  |  | 19,349,072 |  |  | 13,567,030 |  |
Interest-earning assets | 29,097,839 |  |  | 28,660,246 |  |  | 28,231,922 |  |  | 28,064,279 |  |  | 20,351,369 |  |  | 28,666,506 |  |  | 20,266,596 |  |
Deposits | 26,719,713 |  |  | 26,342,821 |  |  | 25,833,068 |  |  | 25,851,672 |  |  | 18,506,778 |  |  | 26,301,783 |  |  | 18,520,391 |  |
Long-term obligations | 548,214 |  |  | 473,434 |  |  | 460,713 |  |  | 404,363 |  |  | 313,695 |  |  | 494,441 |  |  | 403,777 |  |
Interest-bearing liabilities | 18,911,455 |  |  | 18,933,611 |  |  | 19,171,958 |  |  | 19,011,554 |  |  | 13,836,025 |  |  | 19,004,721 |  |  | 14,013,950 |  |
Shareholders' equity(1) | $ | 2,823,967 |  |  | $ | 2,781,648 |  |  | $ | 2,724,719 |  |  | $ | 2,712,905 |  |  | $ | 2,150,119 |  |  | $ | 2,775,873 |  |  | $ | 2,119,548 |  |
Shares outstanding | 12,010,405 |  |  | 12,010,405 |  |  | 12,010,405 |  |  | 12,010,405 |  |  | 9,618,941 |  |  | 12,010,405 |  |  | 9,618,941 |  |
SELECTED PERIOD-END BALANCES |  |  |  |  |  |  |  |  |  |  |  |  |
Total assets(1) | $ | 31,449,824 |  |  | $ | 30,896,855 |  |  | $ | 30,862,932 |  |  | $ | 30,075,113 |  |  | $ | 21,937,665 |  |  | $ | 31,449,824 |  |  | $ | 21,937,665 |  |
Investment securities | 6,690,879 |  |  | 7,350,545 |  |  | 7,045,550 |  |  | 7,172,435 |  |  | 5,648,701 |  |  | 6,690,879 |  |  | 5,648,701 |  |
Loans and leases: |  |  |  |  |  |  |  |  |  |  |  |  |  |
PCI | 1,044,064 |  |  | 1,123,239 |  |  | 1,252,545 |  |  | 1,186,498 |  |  | 996,280 |  |  | 1,044,064 |  |  | 996,280 |  |
Non-PCI | 18,811,742 |  |  | 18,396,946 |  |  | 17,844,414 |  |  | 17,582,967 |  |  | 12,806,511 |  |  | 18,811,742 |  |  | 12,806,511 |  |
Deposits | 26,719,375 |  |  | 26,511,896 |  |  | 26,300,830 |  |  | 25,678,577 |  |  | 18,406,941 |  |  | 26,719,375 |  |  | 18,406,941 |  |
Long-term obligations | 705,418 |  |  | 475,568 |  |  | 468,180 |  |  | 351,320 |  |  | 313,768 |  |  | 705,418 |  |  | 313,768 |  |
Shareholders' equity(1) | $ | 2,862,528 |  |  | $ | 2,793,890 |  |  | $ | 2,768,719 |  |  | $ | 2,687,594 |  |  | $ | 2,161,881 |  |  | $ | 2,862,528 |  |  | $ | 2,161,881 |  |
Shares outstanding | 12,010,405 |  |  | 12,010,405 |  |  | 12,010,405 |  |  | 12,010,405 |  |  | 9,618,941 |  |  | 12,010,405 |  |  | 9,618,941 |  |
SELECTED RATIOS AND OTHER DATA |  |  |  |  |  |  |  |  |  |  |  |  |
Rate of return on average assets (annualized)(1) | 0.71 |  | % | 0.58 |  | % | 0.90 |  | % | 0.82 |  | % | 0.48 |  | % | 0.73 |  | % | 0.46 |  | %
Rate of return on average shareholders' equity (annualized)(1) | 7.86 |  |  | 6.42 |  |  | 10.00 |  |  | 9.20 |  |  | 4.89 |  |  | 8.07 |  |  | 4.77 |  |
Net yield on interest-earning assets (taxable equivalent) | 3.29 |  |  | 3.31 |  |  | 3.18 |  |  | 3.09 |  |  | 3.26 |  |  | 3.26 |  |  | 3.27 |  |
Allowance for loan and lease losses to total loans and leases: |  |  |  |  |  |  |  |  |  |  |  |  |  |
PCI | 1.68 |  |  | 1.38 |  |  | 1.41 |  |  | 1.82 |  |  | 2.59 |  |  | 1.68 |  |  | 2.59 |  |
Non-PCI | 1.00 |  |  | 1.05 |  |  | 1.05 |  |  | 1.04 |  |  | 1.37 |  |  | 1.00 |  |  | 1.37 |  |
Nonperforming assets to total loans and leases and other real estate at period end: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Covered | 3.72 |  |  | 4.70 |  |  | 8.42 |  |  | 9.84 |  |  | 11.98 |  |  | 3.72 |  |  | 11.98 |  |
Noncovered | 0.77 |  |  | 0.73 |  |  | 0.77 |  |  | 0.66 |  |  | 0.73 |  |  | 0.77 |  |  | 0.73 |  |
Total | 0.82 |  |  | 0.79 |  |  | 0.95 |  |  | 0.91 |  |  | 1.13 |  |  | 0.82 |  |  | 1.13 |  |
Tier 1 risk-based capital ratio(1) | 12.77 |  |  | 12.66 |  |  | 12.92 |  |  | 13.61 |  |  | 14.23 |  |  | 12.77 |  |  | 14.23 |  |
Common equity Tier 1 ratio | 12.63 |  |  | 12.52 |  |  | 12.77 |  |  | N/A |  |  | N/A |  |  | 12.63 |  |  | N/A |  |
Total risk-based capital ratio(1) | 14.18 |  |  | 14.10 |  |  | 14.42 |  |  | 14.69 |  |  | 15.57 |  |  | 14.18 |  |  | 15.57 |  |
Leverage capital ratio(1) | 8.97 |  |  | 8.92 |  |  | 8.90 |  |  | 8.91 |  |  | 9.77 |  |  | 8.97 |  |  | 9.77 |  |
Dividend payout ratio(1) | 6.44 |  |  | 8.09 |  |  | 5.37 |  |  | 5.73 |  |  | 10.87 |  |  | 6.45 |  |  | 11.44 |  |
Average loans and leases to average deposits | 73.96 |  |  | 73.47 |  |  | 73.25 |  |  | 71.71 |  |  | 73.87 |  |  | 73.57 |  |  | 73.25 |  |

(1) Amounts for 2014 periods have been updated to reflect the fourth quarter 2014 adoption of Accounting Standard Update (ASU) 2014-01 related to investments in qualified affordable housing projects.
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BUSINESS COMBINATIONS
Capitol City Bank & Trust Company
In February 2015, FCB entered into an agreement with the FDIC to purchase certain assets and assume certain liabilities of Capitol City Bank & Trust Company of Atlanta, Georgia (CCBT). The transaction allowed FCB to expand its presence in Georgia as CCBT operated eight branches in Atlanta, Stone Mountain, Albany, Augusta and Savannah. In June of 2015, FCB closed one of the branches in Atlanta. This is an FDIC-assisted transaction; however, it has no loss share agreement.
The CCBT transaction was accounted for under the acquisition method of accounting and, accordingly, assets acquired and liabilities assumed were recorded at their estimated fair values on the acquisition date. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding closing date fair values becomes available.
During the second quarter of 2015, adjustments were made to the acquisition fair values primarily based upon updated collateral valuations resulting in an increase of $5.4 million to the gain on acquisition. These adjustments were applied retroactively to the first quarter of 2015 and brought the total gain on the transaction to $42.9 million which is included in noninterest income on the Consolidated Statements of Income. The total after-tax impact of the gain was $26.4 million.
The following table provides the identifiable assets acquired and liabilities assumed at their estimated fair values as of the acquisition date.
Table 2
Capitol City Bank & Trust Company

(Dollars in thousands) | As recorded by FCB
Assets |
Cash and cash equivalents | $ | 19,622 |
Investment securities | 35,413 |
Loans | 154,496 |
Intangible assets | 690 |
Other assets | 1,714 |
Total assets acquired | 211,935 |
Liabilities |
Deposits | 266,352 |
Short-term borrowings | 5,501 |
Other liabilities | 667 |
Total liabilities assumed | 272,520 |
Fair value of net liabilities assumed | (60,585 | )
Cash received from FDIC | 103,515 |
Gain on acquisition of CCBT | $ | 42,930 |

Merger-related expenses of $525 thousand and $1.8 million were recorded in the Consolidated Statements of Income for the three and nine months ended September 30, 2015. Loan-related interest income generated from CCBT was approximately $2.3 million for the third quarter of 2015 and $6.0 million since the acquisition date.
All loans resulting from the CCBT transaction were recognized upon acquisition date with a discount attributable, at least in part, to credit quality, and are therefore accounted for as PCI loans.
First Citizens Bancorporation, Inc and First Citizens Bank and Trust Company, Inc.
On October 1, 2014, BancShares completed the merger of Bancorporation with and into BancShares pursuant to an Agreement and Plan of Merger dated June 10, 2014, as amended on July 29, 2014. First Citizens Bank and Trust Company, Inc. merged with and into FCB on January 1, 2015. The conversion of systems and customer accounts acquired from Bancorporation was completed in the third quarter of 2015 which included the systems integration of 172 branches in South Carolina and Georgia.
The Bancorporation transaction was accounted for under the acquisition method of accounting and, accordingly, assets acquired and liabilities assumed were recorded at estimated fair value on the acquisition date. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition. Assets acquired, excluding goodwill, totaled $8.28 billion, including $4.49 billion in loans and leases, $2.01 billion of investment securities available for sale, $1.28 billion in cash and overnight investments, and $109.4 million of identifiable intangible assets. Liabilities assumed were $7.66 billion, including $7.17 billion of deposits. Goodwill of $4.2 million was recorded as result of the excess purchase price over the estimated fair value of the net assets acquired.
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BancShares incurred merger-related expenses of $3.2 million and $9.4 million, respectively, for the three and nine months ended September 30, 2015, and $1.2 million and $2.4 million, respectively, for the three and nine months ended September 30, 2014. We have completed a significant amount of the integration efforts, however, there are still some remaining steps and events to be completed to achieve all the anticipated benefits of the merger. As such, total estimated merger-related costs for the Bancorporation transaction have been updated and reflect a reduction from previous estimates primarily due to lower system conversion and workforce related costs. Total merger-related costs are expected to be approximately $20.0 million of which $17.5 million has been incurred as of September 30, 2015.
FDIC-Assisted Transactions with Loss Share Agreements
We participated in six FDIC-assisted transactions that included loss share agreements between 2009 and 2011 that provided significant growth opportunities and continue to provide significant contributions to our results of operations. These transactions allowed us to increase our presence in existing markets and to expand our banking presence into adjacent markets. Also, as a result of the merger with Bancorporation, BancShares assumed three additional FDIC loss share agreements. The loss share agreements protect us from a substantial portion of the credit and asset quality risk we would otherwise incur.
Generally, losses on single family residential loans are covered for ten years. All other loans are generally covered for five years. At September 30, 2015, $296.5 million of total loans and leases remain covered under loss share agreements. The loss share protection expired for non-single family residential loans acquired from Temecula Valley Bank, Venture Bank and Georgian Bank in 2014. At the beginning of the second quarter of 2015, the loss share protection expired for non-single family residential loans acquired from Sun American Bank (SAB) and all loans acquired from First Regional Bank (FRB). The loan balance at September 30, 2015 for the expired agreements from SAB were $29.9 million. FRB loan balances at September 30, 2015 were insignificant. The loss share protection for non-single family residential loans, with a balance of $7.0 million at September 30, 2015, will expire at the beginning of the fourth quarter of 2015 for Williamsburg First National Bank. Protection for all other covered assets extends beyond December 31, 2015. We will process all necessary filings in accordance with the agreements before expiration to collect the earned loss share receivables. Going forward, we will continue to manage these loans and loan relationships for which loss share has expired in accordance with our standard credit administration policies and procedures.

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Table 3
Consolidated Quarter-to-Date Average Taxable-Equivalent Balance Sheets

| Three months ended |
| September 30, 2015 |  | June 30, 2015 |  | September 30, 2014 |
|  |  | Interest |  |  |  |  |  | Interest |  |  |  |  |  | Interest |  |  |
| Average |  | Income/ |  | Yield/ |  | Average |  | Income/ |  | Yield/ |  | Average |  | Income/ |  | Yield/ |
(Dollars in thousands) | Balance |  | Expense |  | Rate |  | Balance |  | Expense |  | Rate |  | Balance |  | Expense |  | Rate |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans and leases | $ | 19,761,145 |  |  | $ | 225,955 |  |  | 4.54 |  | % | $ | 19,354,823 |  |  | $ | 224,235 |  |  | 4.65 |  | % | $ | 13,670,217 |  |  | $ | 164,989 |  |  | 4.79 |  | %
Investment securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U. S. Treasury | 2,004,586 |  |  | 3,887 |  |  | 0.77 |  |  | 2,224,933 |  |  | 4,346 |  |  | 0.78 |  |  | 1,795,627 |  |  | 3,213 |  |  | 0.71 |  |
Government agency | 756,474 |  |  | 1,922 |  |  | 1.02 |  |  | 915,976 |  |  | 2,195 |  |  | 0.96 |  |  | 1,205,397 |  |  | 1,695 |  |  | 0.56 |  |
Mortgage-backed securities | 4,514,212 |  |  | 18,446 |  |  | 1.63 |  |  | 4,008,782 |  |  | 15,518 |  |  | 1.55 |  |  | 2,567,796 |  |  | 7,793 |  |  | 1.21 |  |
State, county and municipal | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 181 |  |  | 4 |  |  | 8.84 |  |
Other | 18 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 47,729 |  |  | 200 |  |  | 1.66 |  |
Total investment securities | 7,275,290 |  |  | 24,255 |  |  | 1.33 |  |  | 7,149,691 |  |  | 22,059 |  |  | 1.23 |  |  | 5,616,730 |  |  | 12,905 |  |  | 0.92 |  |
Overnight investments | 2,061,404 |  |  | 1,174 |  |  | 0.23 |  |  | 2,155,732 |  |  | 1,525 |  |  | 0.28 |  |  | 1,064,422 |  |  | 655 |  |  | 0.24 |  |
Total interest-earning assets | 29,097,839 |  |  | $ | 251,384 |  |  | 3.43 |  | % | 28,660,246 |  |  | $ | 247,819 |  |  | 3.47 |  | % | 20,351,369 |  |  | $ | 178,549 |  |  | 3.48 |  | %
Cash and due from banks | 466,996 |  |  |  |  |  |  | 453,347 |  |  |  |  |  |  | 469,966 |  |  |  |  |  |
Premises and equipment | 1,125,654 |  |  |  |  |  |  | 1,121,776 |  |  |  |  |  |  | 889,613 |  |  |  |  |  |
FDIC loss share receivable | 13,801 |  |  |  |  |  |  | 20,779 |  |  |  |  |  |  | 45,946 |  |  |  |  |  |
Allowance for loan and lease losses | (209,578 | ) |  |  |  |  |  | (206,463 | ) |  |  |  |  |  | (203,723 | ) |  |  |  |  |
Other real estate owned | 66,951 |  |  |  |  |  |  | 84,057 |  |  |  |  |  |  | 75,698 |  |  |  |  |  |
Other assets (1) | 707,111 |  |  |  |  |  |  | 702,007 |  |  |  |  |  |  | 464,071 |  |  |  |  |  |
Total assets (1) | $ | 31,268,774 |  |  |  |  |  |  | $ | 30,835,749 |  |  |  |  |  |  | $ | 22,092,940 |  |  |  |  |  |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing deposits: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Checking with interest | $ | 4,180,364 |  |  | $ | 225 |  |  | 0.02 |  | % | $ | 4,712,074 |  |  | $ | 428 |  |  | 0.04 |  | % | $ | 2,556,653 |  |  | $ | 123 |  |  | 0.02 |  | %
Savings | 1,866,161 |  |  | 119 |  |  | 0.03 |  |  | 1,833,259 |  |  | 98 |  |  | 0.02 |  |  | 1,196,835 |  |  | 90 |  |  | 0.03 |  |
Money market accounts | 8,229,793 |  |  | 1,788 |  |  | 0.09 |  |  | 7,666,121 |  |  | 1,629 |  |  | 0.09 |  |  | 6,050,528 |  |  | 1,377 |  |  | 0.09 |  |
Time deposits | 3,312,291 |  |  | 3,084 |  |  | 0.37 |  |  | 3,414,991 |  |  | 3,379 |  |  | 0.40 |  |  | 2,872,279 |  |  | 4,113 |  |  | 0.57 |  |
Total interest-bearing deposits | 17,588,609 |  |  | 5,216 |  |  | 0.12 |  |  | 17,626,445 |  |  | 5,534 |  |  | 0.13 |  |  | 12,676,295 |  |  | 5,703 |  |  | 0.18 |  |
Repurchase agreements | 762,081 |  |  | 502 |  |  | 0.26 |  |  | 622,547 |  |  | 387 |  |  | 0.25 |  |  | 109,075 |  |  | 72 |  |  | 0.26 |  |
Other short-term borrowings | 12,551 |  |  | 88 |  |  | 2.84 |  |  | 211,185 |  |  | 1,271 |  |  | 2.41 |  |  | 736,690 |  |  | 2,622 |  |  | 1.41 |  |
Long-term obligations | 548,214 |  |  | 4,648 |  |  | 3.39 |  |  | 473,434 |  |  | 4,171 |  |  | 3.52 |  |  | 313,965 |  |  | 3,002 |  |  | 3.82 |  |
Total interest-bearing liabilities | 18,911,455 |  |  | $ | 10,454 |  |  | 0.22 |  | % | 18,933,611 |  |  | $ | 11,363 |  |  | 0.24 |  | % | 13,836,025 |  |  | $ | 11,399 |  |  | 0.33 |  | %
Demand deposits | 9,131,104 |  |  |  |  |  |  | 8,716,376 |  |  |  |  |  |  | 5,830,483 |  |  |  |  |  |
Other liabilities | 402,248 |  |  |  |  |  |  | 404,114 |  |  |  |  |  |  | 276,313 |  |  |  |  |  |
Shareholders' equity (1) | 2,823,967 |  |  |  |  |  |  | 2,781,648 |  |  |  |  |  |  | 2,150,119 |  |  |  |  |  |
Total liabilities and shareholders' equity (1) | $ | 31,268,774 |  |  |  |  |  |  | $ | 30,835,749 |  |  |  |  |  |  | $ | 22,092,940 |  |  |  |  |  |
Interest rate spread |  |  |  |  | 3.21 |  | % |  |  |  |  | 3.23 |  | % |  |  |  |  | 3.16 |  | %
Net interest income and net yield on interest-earning assets |  |  | $ | 240,930 |  |  | 3.29 |  | % |  |  | $ | 236,456 |  |  | 3.31 |  | % |  |  | $ | 167,150 |  |  | 3.26 |  | %

(1) Amounts for 2014 have been updated to reflect the fourth quarter 2014 adoption of ASU 2014-01 related to investments in qualified affordable housing projects.
Loans and leases include PCI loans, non-PCI loans, nonaccrual loans and loans held for sale. Yields related to loans, leases and securities exempt from both federal and state income taxes, federal income taxes only, or state income taxes only are stated on a taxable-equivalent basis assuming statutory federal income tax rates of 35.0 percent for each period and state income tax rates of 6.0 percent, 6.0 percent and 6.2 percent for the three months ended September 30, 2015, June 30, 2015 and September 30, 2014, respectively. The taxable-equivalent adjustment was $1,559, $1,806 and $928 for the three months ended September 30, 2015, June 30, 2015 and September 30, 2014, respectively. The rate/volume variance is allocated equally between the changes in volume and rate.
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Table 4
Consolidated Year-to-Date Average Taxable-Equivalent Balance Sheets

| Nine months ended |
| September 30, 2015 |  | September 30, 2014 |
|  |  | Interest |  |  |  |  |  | Interest |  |  |
| Average |  | Income/ |  | Yield/ |  | Average |  | Income/ |  | Yield/ |
(Dollars in thousands) | Balance |  | Expense |  | Rate |  | Balance |  | Expense |  | Rate |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Loans and leases | $ | 19,349,072 |  |  | $ | 662,085 |  |  | 4.57 |  | % | $ | 13,567,030 |  |  | $ | 491,421 |  |  | 4.84 |  | %
Investment securities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury | 2,193,633 |  |  | 12,826 |  |  | 0.78 |  |  | 1,355,335 |  |  | 6,734 |  |  | 0.66 |  |
Government agency | 869,602 |  |  | 5,813 |  |  | 0.89 |  |  | 1,677,633 |  |  | 6,816 |  |  | 0.54 |  |
Mortgage-backed securities | 4,041,874 |  |  | 47,184 |  |  | 1.56 |  |  | 2,552,985 |  |  | 23,370 |  |  | 1.22 |  |
State, county and municipal | 1,207 |  |  | 53 |  |  | 5.84 |  |  | 184 |  |  | 11 |  |  | 7.97 |  |
Other | 6 |  |  | — |  |  | — |  |  | 31,597 |  |  | 514 |  |  | 2.17 |  |
Total investment securities | 7,106,322 |  |  | 65,876 |  |  | 1.24 |  |  | 5,617,734 |  |  | 37,445 |  |  | 0.89 |  |
Overnight investments | 2,211,112 |  |  | 4,037 |  |  | 0.24 |  |  | 1,081,832 |  |  | 2,023 |  |  | 0.25 |  |
Total interest-earning assets | 28,666,506 |  |  | $ | 731,998 |  |  | 3.41 |  | % | 20,266,596 |  |  | $ | 530,889 |  |  | 3.50 |  | %
Cash and due from banks | 461,387 |  |  |  |  |  |  | 470,933 |  |  |  |  |  |
Premises and equipment | 1,123,593 |  |  |  |  |  |  | 883,139 |  |  |  |  |  |
FDIC loss share receivable | 20,950 |  |  |  |  |  |  | 66,871 |  |  |  |  |  |
Allowance for loan and lease losses | (206,500 | ) |  |  |  |  |  | (214,988 | ) |  |  |  |  |
Other real estate owned | 80,822 |  |  |  |  |  |  | 82,502 |  |  |  |  |  |
Other assets (1) | 695,987 |  |  |  |  |  |  | 438,530 |  |  |  |  |  |
Total assets (1) | $ | 30,842,745 |  |  |  |  |  |  | $ | 21,993,583 |  |  |  |  |  |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing deposits: |  |  |  |  |  |  |  |  |  |  |  |
Checking with interest | $ | 4,149,182 |  |  | $ | 652 |  |  | 0.02 |  | % | $ | 2,535,318 |  |  | $ | 400 |  |  | 0.02 |  | %
Savings | 1,822,022 |  |  | 336 |  |  | 0.02 |  |  | 1,192,469 |  |  | 533 |  |  | 0.06 |  |
Money market accounts | 8,256,694 |  |  | 5,446 |  |  | 0.09 |  |  | 6,195,284 |  |  | 4,806 |  |  | 0.10 |  |
Time deposits | 3,413,525 |  |  | 9,945 |  |  | 0.39 |  |  | 2,994,283 |  |  | 12,795 |  |  | 0.57 |  |
Total interest-bearing deposits | 17,641,423 |  |  | 16,379 |  |  | 0.12 |  |  | 12,917,354 |  |  | 18,534 |  |  | 0.19 |  |
Repurchase agreements | 565,186 |  |  | 1,010 |  |  | 0.24 |  |  | 102,820 |  |  | 211 |  |  | 0.27 |  |
Other short-term borrowings | 303,671 |  |  | 3,172 |  |  | 1.39 |  |  | 589,999 |  |  | 4,619 |  |  | 1.05 |  |
Long-term obligations | 494,441 |  |  | 12,601 |  |  | 3.40 |  |  | 403,777 |  |  | 12,111 |  |  | 4.00 |  |
Total interest-bearing liabilities | 19,004,721 |  |  | $ | 33,162 |  |  | 0.23 |  | % | 14,013,950 |  |  | $ | 35,475 |  |  | 0.34 |  | %
Demand deposits | 8,660,360 |  |  |  |  |  |  | 5,603,037 |  |  |  |  |  |
Other liabilities | 401,791 |  |  |  |  |  |  | 257,048 |  |  |  |  |  |
Shareholders' equity (1) | 2,775,873 |  |  |  |  |  |  | 2,119,548 |  |  |  |  |  |
Total liabilities and shareholders' equity (1) | $ | 30,842,745 |  |  |  |  |  |  | $ | 21,993,583 |  |  |  |  |  |
Interest rate spread |  |  |  |  | 3.18 |  | % |  |  |  |  | 3.16 |  | %
Net interest income and net yield on interest-earning assets |  |  | $ | 698,836 |  |  | 3.26 |  | % |  |  | $ | 495,414 |  |  | 3.27 |  | %

(1) Amounts for 2014 have been updated to reflect the fourth quarter 2014 adoption of ASU 2014-01 related to investments in qualified affordable housing projects.
Loans and leases include PCI loans, non-PCI loans, nonaccrual loans and loans held for sale. Yields related to loans, leases and securities exempt from both federal and state income taxes, federal income taxes only, or state income taxes only are stated on a taxable-equivalent basis assuming statutory federal income tax rates of 35.0 percent for each period and state income tax rates of 6.0 percent and 6.2 percent for the nine months ended September 30, 2015 and September 30, 2014, respectively. The taxable-equivalent adjustment was $4,650 and $2,563 for the nine months ended September 30, 2015 and September 30, 2014, respectively. The rate/volume variance is allocated equally between the changes in volume and rate.
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Table 5
Changes in Consolidated Taxable Equivalent Net Interest Income

| Three months ended September 30, 2015 |  | Nine months ended September 30, 2015 |
| Change from prior year period due to: |  | Change from prior year period due to: |
(Dollars in thousands) | Volume |  | Yield/Rate |  | Total Change |  | Volume |  | Yield/Rate |  | Total Change |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Loans and leases | $ | 71,559 |  |  | $ | (10,593 | ) |  | $ | 60,966 |  |  | $ | 203,688 |  |  | $ | (33,024 | ) |  | $ | 170,664 |  |
Investment securities: |  |  |  |  |  |  |  |  |  |  |  |
U. S. Treasury | 388 |  |  | 286 |  |  | 674 |  |  | 4,507 |  |  | 1,585 |  |  | 6,092 |  |
Government agency | (894 | ) |  | 1,121 |  |  | 227 |  |  | (4,340 | ) |  | 3,337 |  |  | (1,003 | ) |
Mortgage-backed securities | 6,922 |  |  | 3,731 |  |  | 10,653 |  |  | 15,464 |  |  | 8,350 |  |  | 23,814 |  |
State, county and municipal | (2 | ) |  | (2 | ) |  | (4 | ) |  | 53 |  |  | (11 | ) |  | 42 |  |
Other | (100 | ) |  | (100 | ) |  | (200 | ) |  | (257 | ) |  | (257 | ) |  | (514 | ) |
Total investment securities | 6,314 |  |  | 5,036 |  |  | 11,350 |  |  | 15,427 |  |  | 13,004 |  |  | 28,431 |  |
Overnight investments | 574 |  |  | (55 | ) |  | 519 |  |  | 2,103 |  |  | (89 | ) |  | 2,014 |  |
Total interest-earning assets | $ | 78,447 |  |  | $ | (5,612 | ) |  | $ | 72,835 |  |  | $ | 221,218 |  |  | $ | (20,109 | ) |  | $ | 201,109 |  |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing deposits: |  |  |  |  |  |  |  |  |  |  |  |
Checking with interest | $ | 92 |  |  | $ | 10 |  |  | $ | 102 |  |  | $ | 247 |  |  | $ | 5 |  |  | $ | 252 |  |
Savings | 40 |  |  | (11 | ) |  | 29 |  |  | 221 |  |  | (418 | ) |  | (197 | ) |
Money market accounts | 453 |  |  | (42 | ) |  | 411 |  |  | 1,323 |  |  | (683 | ) |  | 640 |  |
Time deposits | 526 |  |  | (1,555 | ) |  | (1,029 | ) |  | 1,484 |  |  | (4,334 | ) |  | (2,850 | ) |
Total interest-bearing deposits | 1,111 |  |  | (1,598 | ) |  | (487 | ) |  | 3,275 |  |  | (5,430 | ) |  | (2,155 | ) |
Repurchase agreements | 429 |  |  | 1 |  |  | 430 |  |  | 878 |  |  | (79 | ) |  | 799 |  |
Other short-term borrowings | (3,881 | ) |  | 1,347 |  |  | (2,534 | ) |  | (2,598 | ) |  | 1,151 |  |  | (1,447 | ) |
Long-term obligations | 2,110 |  |  | (464 | ) |  | 1,646 |  |  | 2,513 |  |  | (2,023 | ) |  | 490 |  |
Total interest-bearing liabilities | (231 | ) |  | (714 | ) |  | (945 | ) |  | 4,068 |  |  | (6,381 | ) |  | (2,313 | ) |
Change in net interest income | $ | 78,678 |  |  | $ | (4,898 | ) |  | $ | 73,780 |  |  | $ | 217,150 |  |  | $ | (13,728 | ) |  | $ | 203,422 |  |

Loans and leases include PCI loans, non-PCI loans, nonaccrual loans and loans held for sale.
RESULTS OF OPERATIONS
Net Interest Income and Margin
Third Quarter 2015
The third quarter results reflect notable differences in net interest income, net interest margin and average-asset yields compared to the same quarter of 2014. The most significant impact from the same quarter of 2014 resulted from the October 1, 2014 acquisition of Bancorporation, adding $2.01 billion of investment securities, $4.49 billion of loans and leases, and $7.17 billion of deposits as of the acquisition date. Other significant drivers for quarterly changes are specifically noted below.
Compared to the second quarter of 2015, net interest income increased $4.7 million, or by 2.0 percent, to $239.4 million in the third quarter. Loan interest income was up $1.9 million as a result of higher interest income from originated loan growth, investment securities interest income improved $2.2 million as matured cash flows were reinvested into higher yielding investments, and interest expense decreased by $909 thousand due to reduced borrowing and deposit funding costs. Net interest income increased $73.1 million, or by 44.0 percent, during the third quarter of 2015, compared to the same quarter of 2014, primarily as a result of the Bancorporation merger.
PCI loan accretion income, which is included in interest income, may be accelerated in the event of unscheduled repayments and various other post-acquisition events. During the three months ended September 30, 2015, accretion income on PCI loans equaled $32.5 million compared to $34.1 million and $29.1 million during the second quarter of 2015 and third quarter of 2014, respectively. PCI loans increased by $3.9 million in the third quarter of 2015 due to a reclassification between accretable yield and the allowance for loan and lease losses. Both accretion income and provision expense increased by $3.9 million due to this reclassification, which resulted in no net impact on earnings. Accretion income decreased $1.6 million since the second quarter of 2015 due to significant paydowns on the PCI loan portfolio which accelerated income recognition during the second quarter, offset by the $3.9 million reclassification to accretion income in the third quarter of 2015.
The taxable-equivalent net interest margin decreased by 2 basis points to 3.29 percent. The margin decline was due to larger paydowns in the PCI loan portfolio in the second quarter which accelerated income recognition and continued PCI loan portfolio runoff. These decreases were offset by the $3.9 million reclassification to accretion income, continued originated loan
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growth, improvement in investment yields and lower borrowing and deposit funding rates. The margin increase from third quarter of 2014 was due to higher investment yields, higher interest income from originated loan growth, and lower borrowing and deposit funding costs, offset by loan yield compression. Loan yields continued to be impacted by low interest rates and competitive loan pricing. The improvement in the yield on investment securities was due to reinvesting matured invesments and proceeds from investment securities sales into higher yielding investments.
Average quarter-to-date interest earning assets increased by $437.6 million, since the second quarter of 2015, reflecting a $406.3 million increase in average outstanding loans due to continued originated loan growth and a $125.6 million increase in average investment securities, partially offset by a decline in overnight investments of $94.3 million. Investment securities purchases at the beginning of the quarter offset with investment sales near the end of the quarter resulted in an increase in total average investment securities. Average quarter-to-date interest earning assets increased by $8.75 billion, compared to the same quarter in the prior year, primarily as a result of the Bancorporation merger and organic loan growth.
The taxable-equivalent yield on interest-earning assets decreased 4 basis points to 3.43 percent for the third quarter of 2015, compared to 3.47 percent for the second quarter of 2015 as improvement in the investment yield was offset by a decline in the yield earned on loans. Improvement in the investment yield is driven by a shift in the mix of the portfolio to higher yielding securities, while the decline in the loan yield was due to continued low interest rates and competitive loan pricing. The taxable-equivalent yield on interest-earning assets declined by 5 basis points from 3.48 percent for the same period of 2014 as the PCI portfolio yield was replaced with higher quality, lower yielding loans, offset by improvement in the investment yield.
Average interest-bearing liabilities decreased by $22.2 million during the third quarter of 2015 when compared to the second quarter of 2015, due to a $37.8 million decline in interest-bearing deposits, a $59.1 million decline in short-term borrowings and a $74.8 million increase in long-term obligations. The decline in short-term borrowings was due to subordinated debt maturities totaling $200.0 million during the second quarter, while the increase in long-term obligations was due to the addition of $230.0 million Federal Home Loan Bank ("FHLB") advances in the third quarter of 2015. The rate on interest-bearing liabilities of 0.22 percent decreased 2 basis points from 0.24 percent in the second quarter of 2015 due to the subordinated debt maturities, lower borrowing costs and a reduction in deposit funding costs. Average interest-bearing liabilities increased $5.08 billion during the third quarter of 2015 from the same quarter in the prior year, primarily reflecting the impact of the Bancorporation merger. The rate on interest-bearing liabilities declined by 11 basis points from 0.33 percent in the third quarter of 2014 due to lower borrowing costs and a 6 basis point reduction in the cost of funding deposits.
Year-to-date 2015
Similar to the quarter over quarter comparison, the year-to-date 2015 results show notable differences when compared to the same period of 2014 due to the October 1, 2014 Bancorporation merger. Other significant drivers for changes during the period are specifically noted below.
Net interest income for the first nine months of 2015 totaled $694.2 million, an increase of $201.3 million, or 40.9 percent, compared to the same period of 2014. The increase was primarily due to a $168.8 million increase in loan interest income as a result of organic loan growth and the impact of the Bancorporation merger, coupled with a $28.2 million increase in investment securities interest income as a result of reinvesting matured investments and investment securities sales proceeds into higher yielding investments and investment securities acquired in the Bancorporation merger. Accretion income on PCI loans for the first nine months of 2015 totaled $91.6 million compared to $89.8 million during the same period of 2014. Net interest income also benefited from decreased interest expense of $2.3 million in comparison to the same nine-month period of the prior year. Additional interest expense from the Bancorporation merger was offset by lower deposit funding costs as balance shifted from time deposits to demand and lower interest bearing deposit products.
The taxable-equivalent net interest margin totaled 3.26 percent, compared to 3.27 percent for the same nine-month period in 2014. Improvements in investment yields and a reduction in funding costs were offset by a reduction in the loan portfolio yields due to continued low interest rates and competitive loan pricing.
Interest-earning assets averaged $28.67 billion, an increase of $8.40 billion in comparison to the same period of 2014 primarily as a result of the Bancorporation merger and organic loan growth. Average loans and leases increased $5.78 billion in comparison to the first nine months of 2014 as a result of organic loan growth and loans acquired in the CCBT and Bancorporation acquisitions, offset by reductions in the remaining PCI loan portfolio. Average investment securities increased $1.49 billion in comparison to the first nine months of 2014, with a 35 basis point increase in the taxable-equivalent yield. The increase in average investments is primarily driven by the Bancorporation merger. Average overnight investments increased $1.13 billion compared to the year-to-date average in the prior year due to the Bancorporation merger and excess cash.
Average interest-bearing liabilities totaled $19.00 billion, an increase of $4.99 billion when compared to the same period of 2014. The year-to-date 2015 rate on interest-bearing liabilities decreased to 0.23 percent, or an 11 basis point decrease when compared to year-to-date 2014 primarily due to lower borrowing costs and a reduction in deposit funding costs. Average
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interest-bearing deposits totaled $17.64 billion, an increase of $4.72 billion from the same period of 2014. This increase includes deposits acquired in the Bancorporation and CCBT acquisitions. The year-to-date 2015 rate on interest-bearing deposits decreased to 0.12 percent, or a 7 basis point decline when compared to the first nine months of 2014.
Noninterest Income
Noninterest income is an essential component of our total revenue and is critical to our ability to sustain adequate profitability levels. The primary sources of noninterest income have traditionally consisted of cardholder services income, merchant services income, service charges on deposit accounts and revenues derived from wealth management services. Recoveries on PCI loans that have been previously charged-off are additional sources of noninterest income. BancShares records these recoveries as noninterest income rather than as an adjustment to the allowance for loan and lease losses since charge-offs on PCI loans are primarily recorded through the nonaccretable difference.
Table 6
Noninterest Income

| Three months ended |  | Nine months ended
(Dollars in thousands) | September 30, 2015 |  | June 30, 2015 |  | September 30, 2014 |  | September 30, 2015 |  | September 30, 2014
Gain on acquisition | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 42,930 |  |  | $ | — |
Cardholder services | 19,588 |  |  | 19,214 |  |  | 13,248 |  |  | 57,203 |  |  | 38,337 |
Merchant services | 22,005 |  |  | 22,070 |  |  | 15,556 |  |  | 62,955 |  |  | 44,112 |
Service charges on deposit accounts | 23,153 |  |  | 22,361 |  |  | 15,489 |  |  | 67,572 |  |  | 45,194 |
Wealth management services | 22,223 |  |  | 21,555 |  |  | 15,657 |  |  | 64,658 |  |  | 46,352 |
Fees from processing services | 45 |  |  | 45 |  |  | 7,303 |  |  | 140 |  |  | 17,846 |
Securities gains | 5,564 |  |  | 147 |  |  | — |  |  | 10,837 |  |  | — |
Other service charges and fees | 6,163 |  |  | 5,685 |  |  | 4,001 |  |  | 17,303 |  |  | 12,195 |
Mortgage income | 4,852 |  |  | 5,571 |  |  | 1,164 |  |  | 14,972 |  |  | 3,329 |
Insurance commissions | 2,945 |  |  | 2,456 |  |  | 2,422 |  |  | 8,698 |  |  | 7,962 |
ATM income | 1,800 |  |  | 1,825 |  |  | 1,199 |  |  | 5,289 |  |  | 3,661 |
Adjustments to FDIC receivable for loss share agreements | (4,130 | ) |  | (4,553 | ) |  | (4,386 | ) |  | (9,730 | ) |  | (32,030 | )
Recoveries of PCI loans previously charged off | 2,584 |  |  | 6,321 |  |  | 3,628 |  |  | 13,241 |  |  | 12,523 |
Other (1) | 2,958 |  |  | 4,753 |  |  | 3,318 |  |  | 11,885 |  |  | 8,021 |
Total noninterest income (1) | $ | 109,750 |  |  | $ | 107,450 |  |  | $ | 78,599 |  |  | $ | 367,953 |  |  | $ | 207,502 |

(1) Amounts for the 2014 periods have been updated to reflect the fourth quarter 2014 adoption of ASU 2014-01 related to investments in qualified affordable housing projects.
Noninterest income totaled $109.8 million for the third quarter of 2015, an increase of $2.3 million from the second quarter of 2015 primarily as a result of a $5.4 million increase in securities gains and higher service charges on deposit accounts of $792 thousand. These increases were partially offset by a $3.7 million decrease in recoveries of PCI loans previously charged off, a $719 thousand decrease in mortgage income due to a reversal of the mortgage servicing rights valuation allowance in the second quarter of 2015, and a decrease in other income primarily due to a $1.2 million gain on the redemption of preferred stock in the second quarter.
Noninterest income for the third quarter of 2015 and the first nine months of 2015 totaled $109.8 million and $368.0 million, respectively, compared to $78.6 million and $207.5 million for the same periods of 2014. The increase for both periods was primarily driven by the impact of the Bancorporation merger and favorable reductions in adjustments to the FDIC receivable resulting from lower amortization expense as five loss share agreements have expired. The year-to-date increase was also attributable to the $42.9 million acquisition gain recognized as a result of the CCBT acquisition during 2015 and $10.8 million in securities gains. The quarter-to-date and year-to-date increases were partially offset by $7.3 million and $17.7 million respective declines in fees from processing services, as substantially all fees recorded in 2014 related to payments received from Bancorporation prior to the merger.
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Noninterest Expense
The primary components of noninterest expense are salaries and related employee benefits, occupancy costs, facilities and equipment expense and merchant processing expenses.
Table 7
Noninterest Expense

| Three months ended |  | Nine months ended
(Dollars in thousands) | September 30, 2015 |  | June 30, 2015 |  | September 30, 2014 |  | September 30, 2015 |  | September 30, 2014
Salaries and wages | $ | 108,992 |  |  | 109,895 |  |  | $ | 81,825 |  |  | $ | 324,358 |  |  | $ | 243,017 |
Employee benefits | 27,121 |  |  | 28,002 |  |  | 19,797 |  |  | 86,341 |  |  | 59,638 |
Occupancy expense | 22,260 |  |  | 25,532 |  |  | 20,265 |  |  | 73,412 |  |  | 60,975 |
Equipment expense | 22,447 |  |  | 23,296 |  |  | 18,767 |  |  | 69,284 |  |  | 57,121 |
FDIC insurance expense | 4,933 |  |  | 4,551 |  |  | 2,915 |  |  | 13,755 |  |  | 8,191 |
Foreclosure-related expenses | 1,087 |  |  | 1,019 |  |  | 4,838 |  |  | 4,663 |  |  | 13,787 |
Merger-related expenses | 3,679 |  |  | 4,573 |  |  | 1,505 |  |  | 11,249 |  |  | 7,352 |
Merchant processing | 15,103 |  |  | 15,132 |  |  | 10,884 |  |  | 44,091 |  |  | 29,120 |
Processing fees paid to third parties | 4,338 |  |  | 4,777 |  |  | 3,796 |  |  | 14,510 |  |  | 11,777 |
Card processing | 3,847 |  |  | 4,078 |  |  | 2,075 |  |  | 11,738 |  |  | 7,705 |
Consultant | 2,048 |  |  | 2,248 |  |  | 2,046 |  |  | 6,424 |  |  | 7,614 |
Collection | 2,242 |  |  | 2,585 |  |  | 3,717 |  |  | 7,127 |  |  | 8,199 |
Advertising | 3,438 |  |  | 2,324 |  |  | 4,481 |  |  | 7,675 |  |  | 7,145 |
Other | 38,637 |  |  | 36,679 |  |  | 24,899 |  |  | 108,402 |  |  | 70,219 |
Total noninterest expense | $ | 260,172 |  |  | $ | 264,691 |  |  | $ | 201,810 |  |  | $ | 783,029 |  |  | $ | 591,860 |

Noninterest expense decreased by $4.5 million in the third quarter of 2015 compared to the second quarter of 2015 to $260.2 million. The decrease was due to a $2.5 million depreciation adjustment resulting from the conversion of Bancorporation systems, a $617 thousand reduction in pension expense, and lower merger-related expenses, partially offset by an increase in advertising expenses of $1.1 million.
Noninterest expense for the third quarter of 2015 and the first nine months of 2015 totaled $260.2 million and $783.0 million, respectively, compared to $201.8 million and $591.9 million for the same periods of 2014. The quarter-to-date and year-to-date respective increases of $58.4 million and $191.2 million were primarily driven by the impact of the Bancorporation merger. Excluding the impact of the Bancorporation merger, several expense categories experienced fluctuations when comparing third quarter of 2015 and the first nine months of 2015 to the same periods of 2014. Benefits expense increased due to higher pension costs as the discount rate used to estimate the pension liability declined in 2015. Equipment expense also increased due to depreciation of recent upgrades of our technology systems placed in service at the beginning of 2015. Foreclosure-related expenses and collection costs declined resulting from lower losses on the sale of OREO and managing fewer nonperforming assets.
Income Taxes
Income tax expense totaled $32.9 million, $25.2 million and $15.0 million for the third quarter of 2015, second quarter of 2015 and third quarter of 2014, respectively, representing effective tax rates of 37.0 percent, 36.1 percent and 36.1 percent during the respective periods. Income tax expense totaled $97.9 million and $40.5 million for the nine months ended September 30, 2015 and 2014, respectively, representing effective tax rates of 36.9 percent and 34.9 percent for the respective nine month periods. The increased effective tax rate in 2015 was primarily attributable to higher pre-tax earnings. In addition, during the third quarter of 2015, BancShares adjusted its net deferred tax asset as a result of a reduction in the North Carolina corporate income tax rate that will become effective January 1, 2016. The lower state corporate income tax rate did not have a material impact on tax expense for the quarter.
We monitor and evaluate the potential impact of current events on the estimates used to establish income tax expenses and income tax liabilities. On a periodic basis, we evaluate our income tax positions based on current tax law, positions taken by various tax auditors within the jurisdictions where BancShares is required to file income tax returns, as well as potential or pending audits or assessments by tax auditors.
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BALANCE SHEET ANALYSIS
BancShares focuses on maintaining high asset quality, which results in a loan and lease portfolio subjected to strenuous underwriting and monitoring procedures, and corresponding tighter margins. We avoid high-risk industry concentrations, but we do maintain a concentration of owner-occupied real estate loans to borrowers in medical and medical-related fields. The credit department actively monitors all loan concentrations to ensure potential risks are identified timely and managed accordingly. Our focus on asset quality also influences the composition of our investment securities portfolio. At September 30, 2015, mortgage-backed securities represented 65.2 percent of investment securities available for sale, compared to U.S. Treasury and government agency securities, which represented 25.3 percent and 9.5 percent, respectively, of the portfolio. Investments in mortgage-backed securities primarily represent securities issued by government or government-sponsored entities. Overnight investments include interest-bearing deposits at the Federal Reserve Bank and other financial institutions, and federal funds sold.
Investment Securities
Investment securities available for sale equaled $6.69 billion at September 30, 2015, compared to $7.17 billion and $5.65 billion at December 31, 2014 and September 30, 2014, respectively. The $1.04 billion increase in the portfolio from September 30, 2014 to September 30, 2015 was primarily due to the Bancorporation merger. Available for sale securities are reported at their aggregate fair value, and unrealized gains and losses are included as a component of other comprehensive income, net of deferred taxes. As of September 30, 2015, investment securities available for sale had a net unrealized gain of $26.9 million, compared to a net unrealized gain of $8.3 million and $15.4 million as of December 31, 2014 and September 30, 2014, respectively. In determining whether we had any other than temporary impairment for securities with unrealized losses we consider the amount and duration of the impairment, whether the impairment is industry-wide or specific to the financial condition of the issuer, our ability to hold the investment for recovery, adverse actions by rating agencies and deferred interest payments on debt securities. Management concluded that no other than temporary impairment existed as of September 30, 2015.
Changes in the amount of our investment securities portfolio result from changes in our liquidity position. When inflows arising from deposit and treasury services products exceed loan and lease demand, we generally invest excess funds in the securities portfolio. Conversely, when loan demand exceeds growth in deposits and short-term borrowings, we generally allow overnight investments to decline and use proceeds from maturing securities to fund loan demand.
Table 8
Investment Securities

| September 30, 2015 |  | December 31, 2014 |  | September 30, 2014
(Dollars in thousands) | Cost |  | Fair value |  | Cost |  | Fair value |  | Cost |  | Fair Value
Investment securities available for sale: |  |  |  |  |
U.S. Treasury | $ | 1,685,794 |  |  | $ | 1,691,502 |  |  | $ | 2,626,900 |  |  | $ | 2,629,670 |  |  | $ | 1,888,647 |  |  | $ | 1,887,810 |
Government agency | 633,162 |  |  | 634,904 |  |  | 908,362 |  |  | 908,817 |  |  | 1,128,752 |  |  | 1,129,653 |
Mortgage-backed securities | 4,343,105 |  |  | 4,362,561 |  |  | 3,628,187 |  |  | 3,633,304 |  |  | 2,591,641 |  |  | 2,577,465 |
Equity securities | 1,591 |  |  | 1,611 |  |  | — |  |  | — |  |  | 543 |  |  | 30,028 |
Municipal securities | — |  |  | — |  |  | 125 |  |  | 126 |  |  | 125 |  |  | 126 |
Other | — |  |  | — |  |  | — |  |  | — |  |  | 23,012 |  |  | 23,012 |
Total investment securities available for sale | 6,663,652 |  |  | 6,690,578 |  |  | 7,163,574 |  |  | 7,171,917 |  |  | 5,632,720 |  |  | 5,648,094 |
Investment securities held to maturity: |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities | 301 |  |  | 314 |  |  | 518 |  |  | 544 |  |  | 607 |  |  | 638 |
Total investment securities | $ | 6,663,953 |  |  | $ | 6,690,892 |  |  | $ | 7,164,092 |  |  | $ | 7,172,461 |  |  | $ | 5,633,327 |  |  | $ | 5,648,732 |

Since December 31, 2014, proceeds from the sales, maturities and calls of U.S. Treasury and government agency securities were primarily reinvested into mortgage-backed securities at higher-yielding rates and overnight investments.
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Loans and Leases
BancShares' accounting methods for loans and leases differ depending on whether they are purchased credit-impaired (PCI) or non-PCI. Non-PCI loans and leases include originated commercial, originated noncommercial, purchased revolving, and purchased non-impaired loans. For purchased non-impaired loans to be included as non-PCI, it must be determined that the loans do not have a discount due, at least in part, to credit quality at the time of acquisition. Conversely, loans for which it is probable at acquisition that all required payments will not be collected in accordance with contractual terms are considered PCI loans. PCI loans are evaluated at acquisition and where a discount is required at least in part due to credit quality, the nonrevolving loans are accounted for under the guidance in ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. PCI loans and leases are recorded at fair value at the date of acquisition. No allowance for loan and lease losses is recorded on the acquisition date as the fair value of the acquired assets incorporates assumptions regarding credit risk. An allowance is recorded if there is additional credit deterioration after the acquisition date.
We report our PCI and non-PCI 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, such as commercial and industrial or residential mortgage. See Note D to the Consolidated Financial Statements, "Loans and Leases," for definitions of each loan class.
Table 9
Loans and Leases

(Dollars in thousands) | September 30, 2015 |  | December 31, 2014 |  | September 30, 2014
Non-PCI loans and leases: |  |  |  |  |
Commercial: |  |  |  |  |
Construction and land development | $ | 563,926 |  |  | $ | 493,133 |  |  | $ | 382,775 |
Commercial mortgage | 8,076,946 |  |  | 7,552,948 |  |  | 6,475,366 |
Other commercial real estate | 316,924 |  |  | 244,875 |  |  | 177,681 |
Commercial and industrial | 2,211,973 |  |  | 1,988,934 |  |  | 1,359,945 |
Lease financing | 691,915 |  |  | 571,916 |  |  | 443,318 |
Other | 357,760 |  |  | 353,833 |  |  | 213,224 |
Total commercial loans | 12,219,444 |  |  | 11,205,639 |  |  | 9,052,309 |
Noncommercial: |  |  |  |  |
Residential mortgage | 2,659,821 |  |  | 2,493,058 |  |  | 1,141,049 |
Revolving mortgage | 2,519,972 |  |  | 2,561,800 |  |  | 2,120,167 |
Construction and land development | 220,493 |  |  | 205,016 |  |  | 117,209 |
Consumer | 1,192,012 |  |  | 1,117,454 |  |  | 375,777 |
Total noncommercial loans | 6,592,298 |  |  | 6,377,328 |  |  | 3,754,202 |
Total non-PCI loans and leases | 18,811,742 |  |  | 17,582,967 |  |  | 12,806,511 |
PCI loans: |  |  |  |  |
Commercial: |  |  |  |  |
Construction and land development | $ | 41,582 |  |  | $ | 78,079 |  |  | $ | 59,808 |
Commercial mortgage | 568,256 |  |  | 577,518 |  |  | 579,435 |
Other commercial real estate | 18,013 |  |  | 40,193 |  |  | 36,043 |
Commercial and industrial | 17,023 |  |  | 27,254 |  |  | 25,813 |
Other | 2,087 |  |  | 3,079 |  |  | 1,662 |
Total commercial loans | 646,961 |  |  | 726,123 |  |  | 702,761 |
Noncommercial: |  |  |  |  |
Residential mortgage | 334,518 |  |  | 382,340 |  |  | 240,681 |
Revolving mortgage | 59,695 |  |  | 74,109 |  |  | 50,048 |
Construction and land development | 347 |  |  | 912 |  |  | 1,144 |
Consumer | 2,543 |  |  | 3,014 |  |  | 1,646 |
Total noncommercial loans | 397,103 |  |  | 460,375 |  |  | 293,519 |
Total PCI loans | 1,044,064 |  |  | 1,186,498 |  |  | 996,280 |
Total loans and leases | $ | 19,855,806 |  |  | $ | 18,769,465 |  |  | $ | 13,802,791 |

Loan balances increased by a net $1.09 billion, or 7.7 percent annualized, since December 31, 2014, primarily the result of $1.23 billion of organic growth in the non-PCI portfolio, partially offset by the sale of certain residential mortgage loans
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totaling $45.9 million, which were sold at par. The PCI portfolio declined over this period by $142.4 million reflecting continued loan run-off of $284.0 million offset by net loans acquired from CCBT which totaled $141.5 million at September 30, 2015.
Non-PCI loans increased by $6.01 billion, compared to the third quarter of 2014, reflecting originated loan growth and the Bancorporation contribution of $4.49 billion in loans at fair value as of the acquisition date. PCI loans increased by $47.8 million from the third quarter of 2014, due to PCI loans acquired through the Bancorporation and CCBT acquisitions of $215.4 million and $141.5 million at September 30, 2015, respectively, offset by the continued pay downs in the PCI loan portfolio.
Allowance for Loan and Lease Losses ("ALLL")
The ALLL totaled $205.5 million at September 30, 2015, representing an increase of $1.0 million since December 31, 2014 as the increase in the ALLL for non-PCI loans, primarily due to loan growth, offset the continued reduction in the ALLL for PCI loans. The ALLL as a percentage of total loans at September 30, 2015 was 1.03 percent, compared to 1.09 percent at December 31, 2014. Credit quality improvements in the originated commercial loan portfolio and a $7.2 million reversal of previously recorded specific reserves on impaired non-PCI loans resulted in the decline in the allowance ratio. Impaired non-PCI loan reserves were released in 2015 due to credit quality improvements and refinements made to discounted cash flow rate assumptions based on actual historical experience.
At September 30, 2015, the ALLL allocated to non-PCI loans totaled $187.9 million, or 1.00 percent of non-PCI loans and leases, compared to $182.8 million, or 1.04 percent, at December 31, 2014. An additional ALLL of $17.6 million relates to PCI loans at September 30, 2015, compared to $21.6 million at December 31, 2014. The ALLL on the PCI loan portfolio continues to decline consistent with the actual run-off of this portfolio.
The ALLL allocated to originated non-PCI loans and leases was 1.18 percent of originated non-PCI loans and leases at September 30, 2015, compared to 1.33 percent at December 31, 2014. The decline in the allowance ratio was related to credit improvement in the commercial originated non-PCI loan portfolio, continued low charge-off trends and the release of impaired loan reserves of $7.2 million as discussed above. Originated non-PCI loans totaled $15.89 billion and $13.72 billion at September 30, 2015 and December 31, 2014, respectively, and do not include purchased revolving, purchased non-PCI loans or PCI loans.
We recorded $13.6 million net provision expense for loan and lease losses for the nine months ended September 30, 2015, compared to a net provision credit of $7.7 million for the same period of 2014. The increase in provision expense was due primarily to originated non-PCI loan growth and lower impairment reversals on the PCI loan portfolio.
BancShares recorded $107 thousand net provision expense for loan and lease losses during the third quarter of 2015, compared to net provision expense of $1.5 million in the third quarter of 2014. The decrease in provision expense was due primarily to the reversal of previously recorded specific reserves on impaired non-PCI loans, as well as lower net charge-offs and improved credit quality in the commercial loan portfolio. These improvements were offset by the $3.9 million reclassification, which increased PCI provision expense and interest income as previously discussed. On an annualized basis, total net charge-offs as a percentage of total average loans and leases decreased during the third quarter of 2015 to 0.06 percent, compared to 0.20 percent in the third quarter of 2014.
Non-PCI loan provision credit totaled $2.7 million during the third quarter of 2015, compared to a $1.7 million provision expense for the third quarter of 2014, due to the reversal of previously recorded specific reserves on non-PCI loans, credit quality improvements within the commercial portfolio and lower net charge-offs. Net charge-offs for non-PCI loans totaled $2.3 million during the third quarter of 2015, compared to $3.5 million during the third quarter of 2014. On an annualized basis, non-PCI net charge-offs as a percentage of non-PCI average loans and leases decreased during the third quarter of 2015 to 0.05 percent, compared to 0.11 percent in the third quarter of 2014.
The PCI loan net provision expense totaled $2.8 million during the third quarter of 2015, compared to a net provision credit of $197 thousand for the third quarter of 2014. The current quarter provision expense resulted from the $3.9 million reclassification impacting provision expense and interest income as previously discussed, which had no net impact on earnings.
Compared to the second quarter of 2015, provision expense in the third quarter of 2015 decreased $7.6 million due to a $4.1 million reversal of previously recorded specific reserves on impaired non-PCI loans due primarily to refined loss estimates, as well as lower net charge-offs and improved credit quality in the commercial loan portfolio.
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Management considers the ALLL adequate to absorb estimated inherent losses that relate to loans and leases outstanding at September 30, 2015, although future adjustments may be necessary based on changes in economic conditions and other factors. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the ALLL. Such agencies may require adjustments to the ALLL based on information available to them at the time of their examination.
Table 10
Allowance for Loan and Lease Losses

| 2015 |  | 2014 |  | Nine months ended September 30 |
| Third |  | Second |  | First |  | Fourth |  | Third |  |
(Dollars in thousands) | Quarter |  | Quarter |  | Quarter |  | Quarter |  | Quarter |  | 2015 |  | 2014 |
ALLL at beginning of period | $ | 208,317 |  |  | $ | 205,553 |  |  | $ | 204,466 |  |  | $ | 200,905 |  |  | $ | 206,246 |  |  | $ | 204,466 |  |  | $ | 233,394 |  |
Provision (credit) for loan and lease losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |
PCI loans | 2,769 |  |  | (1,275 | ) |  | (2,864 | ) |  | (2,622 | ) |  | (197 | ) |  | (1,370 | ) |  | (11,999 | ) |
Non-PCI loans | (2,662 | ) |  | 8,994 |  |  | 8,656 |  |  | 10,927 |  |  | 1,734 |  |  | 14,988 |  |  | 4,334 |  |
Net charge-offs of loans and leases: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Charge-offs | (5,698 | ) |  | (6,926 | ) |  | (7,176 | ) |  | (7,469 | ) |  | (8,721 | ) |  | (19,800 | ) |  | (30,299 | ) |
Recoveries | 2,737 |  |  | 1,971 |  |  | 2,471 |  |  | 2,725 |  |  | 1,843 |  |  | 7,179 |  |  | 5,475 |  |
Net charge-offs of loans and leases | (2,961 | ) |  | (4,955 | ) |  | (4,705 | ) |  | (4,744 | ) |  | (6,878 | ) |  | (12,621 | ) |  | (24,824 | ) |
ALLL at end of period | $ | 205,463 |  |  | $ | 208,317 |  |  | $ | 205,553 |  |  | $ | 204,466 |  |  | $ | 200,905 |  |  | $ | 205,463 |  |  | $ | 200,905 |  |
ALLL at end of period allocated to loans and leases: |  |  |  |  |  |  |  |  |  |  |  |  |  |
PCI | $ | 17,557 |  |  | $ | 15,468 |  |  | $ | 17,619 |  |  | $ | 21,629 |  |  | $ | 25,800 |  |  | $ | 17,557 |  |  | $ | 25,800 |  |
Non-PCI | 187,906 |  |  | 192,849 |  |  | 187,934 |  |  | 182,837 |  |  | 175,105 |  |  | 187,906 |  |  | 175,105 |  |
ALLL at end of period | $ | 205,463 |  |  | $ | 208,317 |  |  | $ | 205,553 |  |  | $ | 204,466 |  |  | $ | 200,905 |  |  | $ | 205,463 |  |  | $ | 200,905 |  |
Net charge-offs of loans and leases: |  |  |  |  |  |  |  |  |  |  |  |  |  |
PCI | $ | 680 |  |  | $ | 876 |  |  | $ | 1,146 |  |  | $ | 1,549 |  |  | $ | 3,334 |  |  | $ | 2,702 |  |  | $ | 15,721 |  |
Non-PCI | 2,281 |  |  | 4,079 |  |  | 3,559 |  |  | 3,195 |  |  | 3,544 |  |  | 9,919 |  |  | 9,103 |  |
Total net charge-offs | $ | 2,961 |  |  | $ | 4,955 |  |  | $ | 4,705 |  |  | $ | 4,744 |  |  | $ | 6,878 |  |  | $ | 12,621 |  |  | $ | 24,824 |  |
Reserve for unfunded commitments | $ | 411 |  |  | $ | 389 |  |  | $ | 404 |  |  | $ | 333 |  |  | $ | 328 |  |  | $ | 411 |  |  | $ | 328 |  |
Average loans and leases: |  |  |  |  |  |  |  |  |  |  |  |  |  |
PCI | $ | 1,081,497 |  |  | $ | 1,173,105 |  |  | $ | 1,200,484 |  |  | $ | 1,244,910 |  |  | $ | 1,005,045 |  |  | $ | 1,151,259 |  |  | $ | 1,181,664 |  |
Non-PCI | 18,679,648 |  |  | 18,181,718 |  |  | 17,721,544 |  |  | 17,293,643 |  |  | 12,665,172 |  |  | 18,197,813 |  |  | 12,385,366 |  |
Loans and leases at period-end: |  |  |  |  |  |  |  |  |  |  |  |  |  |
PCI | 1,044,064 |  |  | 1,123,239 |  |  | 1,252,545 |  |  | 1,186,498 |  |  | 996,280 |  |  | 1,044,064 |  |  | 996,280 |  |
Non-PCI | 18,811,742 |  |  | 18,396,946 |  |  | 17,844,414 |  |  | 17,582,967 |  |  | 12,806,511 |  |  | 18,811,742 |  |  | 12,806,511 |  |

Ratios |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net charge-offs (annualized) to average loans and leases: |  |  |  |  |  |  |  |  |  |  |  |  |  |
PCI | 0.25 | % |  | 0.30 | % |  | 0.39 | % |  | 0.49 | % |  | 1.32 | % |  | 0.31 | % |  | 1.78 | % |
Non-PCI | 0.05 |  |  | 0.09 |  |  | 0.08 |  |  | 0.07 |  |  | 0.11 |  |  | 0.07 |  |  | 0.10 |  |
Total | 0.06 |  |  | 0.10 |  |  | 0.10 |  |  | 0.10 |  |  | 0.20 |  |  | 0.09 |  |  | 0.24 |  |
ALLL to total loans and leases: |  |  |  |  |  |  |  |  |  |  |  |  |  |
PCI | 1.68 |  |  | 1.38 |  |  | 1.41 |  |  | 1.82 |  |  | 2.59 |  |  | 1.68 |  |  | 2.59 |  |
Non-PCI | 1.00 |  |  | 1.05 |  |  | 1.05 |  |  | 1.04 |  |  | 1.37 |  |  | 1.00 |  |  | 1.37 |  |
Total | 1.03 |  |  | 1.07 |  |  | 1.08 |  |  | 1.09 |  |  | 1.46 |  |  | 1.03 |  |  | 1.46 |  |

Asset Quality
Asset quality continues to be strong due to prudent underwriting standards and management of nonperforming assets. Nonperforming assets include nonaccrual loans and leases and OREO resulting from both PCI and non-PCI loans.
Nonperforming assets as a percentage of total loans and leases plus OREO was 0.82 percent at September 30, 2015, compared to 0.91 percent and 1.13 percent at December 31, 2014 and September 30, 2014, respectively. At September 30, 2015, BancShares’ nonperforming assets totaled $162.5 million, a decrease of $8.4 million from December 31, 2014 related to an overall reduction in OREO balances and PCI nonaccrual loans, offset by an increase in non-PCI nonaccrual loans and leases. Compared to the same quarter a year ago, nonperforming assets are up $5.4 million from $157.1 million at September 30, 2014 due to an increase in nonaccrual loans, offset by reductions in OREO balances.
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OREO balances have decreased $23.6 million and $2.6 million at September 30, 2015 since December 31, 2014 and September 30, 2014, respectively, primarily due to sales outpacing new additions. Nonaccrual PCI loans and leases at September 30, 2015 are down $28.1 million and $31.5 million from December 31, 2014 and September 30, 2014, respectively, due to resolutions of impaired loans, while nonaccrual non-PCI loans and leases at September 30, 2015 are up $43.3 million and $39.5 million for the same respective periods. The increase in nonaccrual non-PCI loans and leases was due to the downgrade of a few large commercial loan relationships and an increase in residential mortgage loans on nonaccrual status. Additionally, certain residential and revolving mortgage loans moved to nonaccrual status from past due resulting from system enhancements as previously disclosed in the first quarter of 2015.
Accruing loans and leases 90 days or more past due decreased $35.9 million from December 31, 2014 due to loan resolutions and certain residential and revolving mortgage loans moving to nonaccrual status from past due resulting from system enhancements. Accruing loans and leases 90 days or more past due increased $4.6 million from September 30, 2014 primarily as a result of loans acquired in the Bancorporation and CCBT acquisitions, offset by loan resolutions and certain residential and revolving mortgage loans moving to nonaccrual status from past due as previously discussed.
Of the $162.5 million in nonperforming assets at September 30, 2015, $11.3 million related to loans and OREO covered by loss share agreements. Covered nonperforming assets continue to decline due to the expiration of FDIC loss share agreements, loan resolutions and OREO dispositions.
Table 11
Nonperforming Assets

| 2015 |  | 2014
| Third |  | Second |  | First |  | Fourth |  | Third
(Dollars in thousands) | Quarter |  | Quarter |  | Quarter |  | Quarter |  | Quarter
Risk Elements |  |  |  |  |  |  |  |  |
Nonaccrual loans and leases: |  |  |  |  |  |  |  |  |
Non-PCI | $ | 87,276 |  |  | $ | 73,435 |  |  | $ | 66,046 |  |  | $ | 44,005 |  |  | $ | 47,778 |
PCI | 5,329 |  |  | 8,672 |  |  | 26,930 |  |  | 33,422 |  |  | 36,840 |
Other real estate | 69,859 |  |  | 73,248 |  |  | 89,992 |  |  | 93,436 |  |  | 72,458 |
Total nonperforming assets | $ | 162,464 |  |  | $ | 155,355 |  |  | $ | 182,968 |  |  | $ | 170,863 |  |  | $ | 157,076 |
Nonaccrual loans and leases: |  |  |  |  |  |  |  |  |
Covered under loss share agreements | $ | 3,171 |  |  | $ | 2,732 |  |  | $ | 21,440 |  |  | $ | 27,020 |  |  | $ | 30,415 |
Not covered under loss share agreements | 89,434 |  |  | 79,375 |  |  | 71,536 |  |  | 50,407 |  |  | 54,203 |
Other real estate: |  |  |  |  |  |  |  |  |
Covered | 8,152 |  |  | 12,890 |  |  | 17,302 |  |  | 22,982 |  |  | 29,272 |
Noncovered | 61,707 |  |  | 60,358 |  |  | 72,690 |  |  | 70,454 |  |  | 43,186 |
Total nonperforming assets | $ | 162,464 |  |  | $ | 155,355 |  |  | $ | 182,968 |  |  | $ | 170,863 |  |  | $ | 157,076 |
Loans and leases: |  |  |  |  |  |  |  |  |
Covered | $ | 296,476 |  |  | $ | 319,665 |  |  | $ | 443,055 |  |  | $ | 485,308 |  |  | $ | 469,038 |
Noncovered | 19,559,330 |  |  | 19,200,520 |  |  | 18,653,904 |  |  | 18,284,157 |  |  | 13,333,753 |
Accruing loans and leases 90 days or more past due | 79,816 |  |  | 86,015 |  |  | 99,130 |  |  | 115,680 |  |  | 75,227 |
Ratio of nonperforming assets to total loans, leases and other real estate owned: |  |  |  |  |  |  |  |  |
Covered | 3.72 | % |  | 4.70 | % |  | 8.42 | % |  | 9.84 | % |  | 11.98 | %
Noncovered | 0.77 |  |  | 0.73 |  |  | 0.77 |  |  | 0.66 |  |  | 0.73 |
Total | 0.82 |  |  | 0.79 |  |  | 0.95 |  |  | 0.91 |  |  | 1.13 |

Troubled Debt Restructurings
Troubled debt restructurings ("TDRs") are selectively made to provide relief to customers experiencing liquidity challenges or other circumstances that could affect their ability to meet their debt obligations. Typical modifications include short-term deferral of interest or modification of payment terms. Nonperforming TDRs are not accruing interest and are included as nonperforming assets within nonaccrual loans and leases. TDRs which are accruing at the time of restructure and continue to perform based on the restructured terms are considered performing.
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At September 30, 2015, accruing TDRs totaled $119.3 million, a decrease of $16.7 million and $28.3 million, from $136.0 million and $147.6 million at December 31, 2014 and September 30, 2014, respectively. At September 30, 2015, nonaccruing TDRs totaled $26.5 million, an increase of $10.9 million and $3.6 million from December 31, 2014 and September 30, 2014, respectively. The increase in nonaccruing TDRs from December 31, 2014 was primarily related to a few significant loan relationships restructured and placed on nonaccrual status in the current year.
Table 12
Troubled Debt Restructurings

(Dollars in thousands) | September 30, 2015 |  | December 31, 2014 |  | September 30, 2014
Accruing TDRs: |  |  |  |  |
PCI | $ | 32,370 |  |  | $ | 44,647 |  |  | $ | 54,670 |
Non-PCI | 86,892 |  |  | 91,316 |  |  | 92,928 |
Total accruing TDRs | 119,262 |  |  | 135,963 |  |  | 147,598 |
Nonaccruing TDRs: |  |  |  |  |
PCI | 717 |  |  | 2,225 |  |  | 5,073 |
Non-PCI | 25,740 |  |  | 13,291 |  |  | 17,817 |
Total nonaccruing TDRs | 26,457 |  |  | 15,516 |  |  | 22,890 |
All TDRs: |  |  |  |  |
PCI | 33,087 |  |  | 46,872 |  |  | 59,743 |
Non-PCI | 112,632 |  |  | 104,607 |  |  | 110,745 |
Total TDRs | $ | 145,719 |  |  | $ | 151,479 |  |  | $ | 170,488 |

Interest-Bearing Liabilities
Interest-bearing liabilities include interest-bearing deposits, short-term borrowings and long-term obligations. Interest-bearing liabilities totaled $19.01 billion and $18.93 billion at September 30, 2015 and December 31, 2014, respectively. The $82.7 million increase from December 31, 2014 was primarily due to an increase in long-term obligations as a result of $350.0 million new FHLB borrowings in 2015, offset by a decrease in short term borrowings due to maturities of $200.0 million in subordinated debt and $70.0 million of FHLB borrowings during 2015. Interest-bearing liabilities totaled $19.01 billion at September 30, 2015, an increase of $5.34 billion from September 30, 2014 primarily due to the Bancorporation merger.
Deposits
At September 30, 2015, total deposits equaled $26.72 billion, an increase of $1.04 billion, or 4.05 percent, when compared to December 31, 2014 resulting from organic growth in demand, savings and checking with interest. Deposits increased $8.31 billion, or by 45.2 percent, when compared to September 30, 2014, primarily as a result of the Bancorporation merger and organic growth.
Due to our focus on maintaining a strong liquidity position, core deposit retention remains a key business objective. We believe that traditional bank deposit products remain an attractive option for many customers, but as economic conditions improve, we recognize that our liquidity position could be adversely affected as bank deposits are withdrawn and invested elsewhere. Our ability to fund future loan growth is dependent on our success at retaining existing deposits and generating new deposits at a reasonable cost.
Short-Term Borrowings
At September 30, 2015, short-term borrowings totaled $759.8 million compared to $987.2 million and $798.2 million at December 31, 2014 and September 30, 2014, respectively. The $227.4 million decline from December 31, 2014 was due to maturities of $70.0 million in FHLB borrowings and $200.0 million in subordinated debt during 2015. Additionally, master notes declined $410.3 million while repurchase agreements increased by $452.8 million, resulting from a migration from master notes to customer repurchasing products as the master notes product was discontinued in the second quarter of 2015. The $38.4 million decrease from September 30, 2014 was due to maturities of FHLB borrowings and subordinated debt of $195.0 million, FHLB borrowings of $10.0 million with maturities less than one year being reclassified from long-term obligations, and the migration from master notes to customer repurchasing products. Master notes decreased $487.4 million and repurchase agreements increased $634.0 million from September 30, 2014 as a result of the discontinuation of the master notes product, coupled with the Bancorporation merger contribution of $218.4 million in repurchase agreements as of the October 1, 2014 acquisition date.
Long-Term Obligations
Long-term obligations equaled $705.4 million at September 30, 2015, up $354.1 million from December 31, 2014 primarily as a result of the incremental FHLB borrowings of $350.0 million during 2015. Long-term obligations were up $391.7 million
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from September 30, 2014 due to $124.9 million in long-term obligations added as a result of the October 1, 2014 Bancorporation merger and new $350.0 million FHLB borrowings in 2015, partially offset by the redemption of $75.0 million trust preferred debt acquired in the Bancorporation merger and FHLB borrowings of $10.0 million with maturities less than one year being reclassified to short-term borrowings.
At September 30, 2015 and December 31, 2014, long-term obligations included $132.5 million and $132.9 million, respectively, in junior subordinated debentures representing obligations to FCB/NC Capital Trust III, FCB/SC Capital Trust II, and SCB Capital Trust I, special purpose entities and grantor trusts for $128.5 million of trust preferred securities. At September 30, 2014 long-term obligations included $96.4 million in junior subordinated debentures representing obligations to FCB/NC Capital Trust III, a special purpose entity and grantor trust for $93.5 million of trust preferred securities. FCB/NC Capital Trust III, FCB/SC Capital Trust II, and SCB Capital Trust I's ("the Trusts") trust preferred securities mature in 2036, 2034, and 2034, respectively, and may be redeemed at par in whole or in part at any time. FCB/SC Capital Trust II, and SCB Capital Trust I were former capital trust subsidiaries of Bancorporation. BancShares has guaranteed all obligations of the Trusts.
Shareholders' Equity and Capital Adequacy
BancShares and FCB are required to meet minimum requirements imposed by regulatory authorities. Failure to meet certain capital requirements may result in actions by regulatory agencies that could have a material impact on our consolidated financial statements.
In accordance with accounting principles generally accepted in the United States of America (GAAP), unrealized gains and losses on certain assets and liabilities, net of deferred taxes, are included in accumulated other comprehensive income (AOCI)within shareholder's equity. These amounts are excluded from shareholders' equity in the calculation of our capital ratios. In the aggregate, these items represented a net decrease in shareholders' equity of $34.9 million at September 30, 2015, compared to a net reduction of $53.0 million at December 31, 2014 and a net reduction of $1.9 million at September 30, 2014. The $18.1 million increase in AOCI from December 31, 2014 reflects the amortization of prior service cost and the net actuarial losses of the defined benefit plans and an increase in unrealized gains on investment securities available for sale. The $33.0 million reduction in AOCI from September 30, 2014 primarily reflects the change in the funded status of the defined benefit plans.
Table 13
Analysis of Capital Adequacy

| September 30, 2015 (1) |  | December 31, 2014 |  | September 30, 2014 |  | Regulatory minimum (2) |  | Well-capitalized requirement (2)
BancShares |  |  |  |  |  |  |  |  |
Risk-based capital ratios(3) |  |  |  |  |  |  |  |  |
Tier 1 risk-based capital | 12.77 | % |  | 13.61 | % |  | 14.23 | % |  | 6.00 | % |  | 8.00 | %
Common equity Tier 1(4) | 12.63 |  |  | N/A |  |  | N/A |  |  | 4.50 |  |  | 6.50 |
Total risk-based capital | 14.18 |  |  | 14.69 |  |  | 15.57 |  |  | 8.00 |  |  | 10.00 |
Tier 1 leverage ratio(3) | 8.97 |  |  | 8.91 |  |  | 9.77 |  |  | 4.00 |  |  | 5.00 |
Bank |  |  |  |  |  |  |  |  |
Risk-based capital ratios(3) |  |  |  |  |  |  |  |  |
Tier 1 risk-based capital | 12.73 | % |  | 13.12 | % |  | 13.40 | % |  | 6.00 | % |  | 8.00 | %
Common equity Tier 1(4) | 12.73 |  |  | N/A |  |  | N/A |  |  | 4.50 |  |  | 6.50 |
Total risk-based capital | 13.72 |  |  | 14.37 |  |  | 14.65 |  |  | 8.00 |  |  | 10.00 |
Tier 1 leverage ratio(3) | 8.95 |  |  | 9.30 |  |  | 9.24 |  |  | 4.00 |  |  | 5.00 |

(1) September 30, 2015 calculated under Basel III guidelines, which became effective January 1, 2015.
(2) Regulatory minimum and well-capitalized requirements are based on 2015 Basel III regulatory capital guidelines.
(3) Amounts for the September 30, 2014 period have been updated to reflect the fourth quarter 2014 adoption of Accounting Standard Update (ASU) 2014-01 related to investments for qualified affordable housing projects.
(4) Common equity Tier 1 ratio requirements were established under Basel III guidelines; therefore, this ratio is not applicable for periods prior to January 1, 2015.
Bank regulatory agencies approved regulatory capital guidelines ("Basel III") aimed at strengthening existing capital requirements for banking organizations. Under the final rules, minimum requirements increase for both the quantity and quality of capital held by BancShares. The rules include a new common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.50 percent, raise the minimum ratio of Tier 1 capital to risk-weighted assets from 4.00 percent to 6.00 percent, require a
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minimum ratio of total capital to risk-weighted assets of 8.00 percent, and require a minimum Tier 1 leverage ratio of 4.00 percent. A new capital conservation buffer, comprised of common equity Tier 1 capital, was also established above the regulatory minimum capital requirements. This capital conservation buffer will be phased in beginning January 1, 2016 at 0.625 percent of risk-weighted assets and increase each subsequent year by an additional 0.625 percent until reaching its final level of 2.50 percent on January 1, 2019. Strict eligibility criteria for regulatory capital instruments were also implemented under the final rules. The final rules also revise the definition and calculation of Tier 1 capital, total capital, and risk-weighted assets.
The phase-in period for the final rules became effective for BancShares on January 1, 2015, with full compliance of all the final rules' requirements phased in over a multi-year schedule, to be fully phased-in by January 1, 2019. As of September 30, 2015, BancShares continues to exceed minimum capital standards and FCB remains well-capitalized under the new rules.
The implementation of Basel III increased risk-weighted assets in comparison to December 31, 2014, resulting in a decrease in our Tier 1 capital ratio and total capital ratio at September 30, 2015 due to the phasing out of trust preferred capital securities from Tier 1 to Tier 2 capital. Risk-weighted assets have also increased due to organic loan growth, increased unfunded commitments and the expiration of loss share coverage on lower risk-weighted covered loans. As aligned with expectations and incorporated in our capital planning process, BancShares remained well capitalized with a leverage capital ratio of 8.97 percent, Tier 1 risk-based capital ratio of 12.77 percent, common equity Tier 1 ratio of 12.63 and total risk-based capital ratio of 14.18 percent under Basel III guidelines at September 30, 2015.
BancShares had $32.1 million of trust preferred capital securities included in Tier 1 capital at September 30, 2015, compared to $128.5 million at December 31, 2014. The decrease during 2015 was due to the implementation of Basel III. Effective January 1, 2015, 75 percent of our trust preferred capital securities were excluded from Tier 1 capital, with the remaining 25 percent to be phased out on January 1, 2016.
RISK MANAGEMENT
Effective risk management is critical to our success. The board of directors has established a Risk Committee that provides oversight of enterprise-wide risk management. The Risk Committee is responsible for establishing risk appetite and supporting tolerances for credit, market and operational risk and ensuring that risk is managed within those tolerances, monitoring compliance with laws and regulations, reviewing the investment securities portfolio to ensure that portfolio returns are managed within market risk tolerance and monitoring our legal activity and associated risk. With guidance from and oversight by the Risk Committee, management continually refines and enhances its risk management policies and procedures to maintain effective risk management programs and processes.
Mortgage reform rules mandated by the Dodd-Frank Act became effective in January 2014, requiring lenders to make a reasonable, good faith determination of a borrower's ability to repay any consumer credit transaction secured by a dwelling and to limit prepayment penalties. Increased risks of legal challenge, private right of action and regulatory enforcement are presented by these rules. BancShares implemented the required system, process, procedural and product changes prior to the effective date of the new rules. We have also modified our underwriting standards to ensure compliance with the ability to repay requirements and have determined that we will continue to offer both qualified and non-qualified mortgage products. Historical performance and conservative underwriting of impacted loan portfolios mitigates the risks of non-compliance.
Credit risk management. Credit risk is the risk of not collecting payments pursuant to the contractual terms of loans, leases and investment securities. Loans and leases, other than acquired loans, were underwritten in accordance with our credit policies and procedures and are subject to periodic ongoing reviews. Acquired loans were recorded at fair value as of the acquisition date and are subject to periodic reviews to identify any further credit deterioration. Our independent credit review function conducts risk reviews and analyses of both acquired and originated loans to ensure compliance with credit policies and to monitor asset quality trends. The risk reviews include portfolio analysis by geographic location, industry, collateral type and product. We strive to identify potential problem loans as early as possible, to record charge-offs or write-downs as appropriate and to maintain an adequate ALLL that accounts for losses inherent in the loan and lease portfolio.
Interest rate risk management. Interest rate risk (IRR) results principally from assets and liabilities maturing or repricing at different points in time, from assets and liabilities repricing at the same point in time but in different amounts and from short-term and long-term interest rates changing in different magnitudes.
We assess our short term IRR by forecasting net interest income over 24 months under various interest rate scenarios and comparing those results to forecast net interest income assuming stable rates. Rate shock scenarios represent an instantaneous
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and parallel shift in rates, up or down, from a base yield curve. Due to the existence of contractual floors on certain loans, competitive pressures that constrain our ability to reduce deposit interest rates and the current extraordinarily low level of interest rates, it is unlikely that the rates on most interest-earning assets and interest-bearing liabilities can decline materially from current levels. Our shock projections incorporate assumptions of likely customer migration of low rate deposit instruments to intermediate term fixed rate instruments, such as certificates of deposit, as rates rise. Various other IRR scenarios are modeled to supplement shock scenarios. This may include interest rate ramps, changes in the shape of the yield curve and changes in the relationships of FCB rates to market rates.
Table 14
Net Interest Income Sensitivity Simulation Analysis
This table provides the impact on net interest income over 24 months resulting from various interest rate shock scenarios as of September 30, 2015 and December 31, 2014.

| Estimated increase (decrease) in net interest income
Change in interest rate (basis point) | September 30, 2015 |  | December 31, 2014
+100 | 2.60 | % |  | 2.90 | %
+200 | 2.40 |  |  | 4.10 |
+300 | (1.34 | ) |  | 2.40 |

Table 15
Economic Value of Equity Modeling Analysis
Long-term interest rate risk exposure is measured using the economic value of equity ("EVE") sensitivity analysis to study the impact of long-term cash flows on earnings and capital. EVE represents the difference between the sum of the present value of all asset cash flows and the sum of the present value of the liability cash flows. EVE sensitivity analysis involves discounting cash flows of balance sheet items under different interest rate scenarios. Cash flows will vary by interest rate scenario, resulting in variations in EVE. The base-case measurement and its sensitivity to shifts in the yield curve allow management to measure longer-term repricing and option risk in the balance sheet. This table presents the EVE profile as of September 30, 2015 and December 31, 2014.

| Estimated increase (decrease) in EVE
Change in interest rate (basis point) | September 30, 2015 |  | December 31, 2014
+100 | 3.61 | % |  | 2.80 | %
+200 | 2.20 |  |  | 2.20 |
+300 | (2.86 | ) |  | (0.90 | )

We do not typically utilize interest rate swaps, floors, collars or other derivative financial instruments to attempt to hedge our overall balance sheet rate sensitivity and interest rate risk. However, we have entered into an interest rate swap to synthetically convert the variable rate on $93.5 million of junior subordinated debentures to a fixed rate of 5.50 percent through June 2016. The interest rate swap qualifies as a hedge under GAAP. See Note N to the Consolidated Financial Statements, "Derivatives," for additional discussion of this interest rate swap.
Liquidity risk management. Liquidity risk is the risk that an institution will be unable to generate or obtain sufficient cash or its equivalents on a cost-effective basis to meet commitments as they fall due. The most common sources of liquidity risk arise from mismatches in the timing and value of on-balance sheet and off-balance sheet cash inflows and outflows. In general, on-balance sheet mismatches generate liquidity risk when the effective maturity of assets exceeds the effective maturity of liabilities. A commonly cited example of a balance sheet liquidity mismatch is when long-term loans (assets) are funded with short-term deposits (liabilities). Other forms of liquidity risk include market constraints on the ability to convert assets into cash at expected levels, an inability to access funding sources at sufficient levels at a reasonable cost, and changes in economic conditions or exposure to credit, market, operation, legal and reputation risks that can affect an institution’s liquidity risk profile.
We utilize various limit-based measures to monitor, measure and control liquidity risk across three different types of liquidity:

• | Tactical liquidity measures the risk of a negative cash flow position whereby cash outflows exceed cash inflows over a short-term horizon out to nine weeks;

• | Structural liquidity measures the amount by which illiquid assets are supported by long-term funding; and

• | Contingent liquidity utilizes cash flow stress testing across three crisis scenarios to determine the adequacy of our liquidity.

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We aim to maintain a diverse mix of liquidity sources to support the liquidity management function, while aiming to avoid funding concentrations by diversifying our external funding with respect to maturities, counterparties and nature. Our primary sources of liquidity are our retail deposit book due to the generally stable balances and low cost it offers, cash in excess of our reserve requirement at the Federal Reserve Bank and various other corresponding bank accounts and unencumbered securities which totaled $4.31 billion at September 30, 2015 compared to $4.29 billion at December 31, 2014. Another source of available funds is advances from the FHLB of Atlanta. Outstanding FHLB advances equaled $530.3 million as of September 30, 2015, and we had sufficient collateral pledged to secure $2.07 billion of additional borrowings. Additionally, we maintain Federal Funds lines and other borrowing facilities that totaled $740.0 million at September 30, 2015.
CRITICAL ACCOUNTING POLICIES
There have been no significant changes in our Critical Accounting Policies as described in our 2014 Annual Report on Form 10-K.
FORWARD-LOOKING STATEMENTS
Statements in this Report and exhibits relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments, expectations or beliefs about future events or results and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements may be identified by terms such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “forecasts,” “projects,” “potential” or “continue,” or similar terms or the negative of these terms, or other statements concerning opinions or judgments of BancShares’ management about future events.
Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors which include, but are not limited to, factors discussed in our Annual Report on Form 10-K and in other documents filed by us from time to time with the Securities and Exchange Commission.
Factors that could influence the accuracy of those forward-looking statements include, but are not limited to, the financial success or changing strategies of our customers, customer acceptance of our services, products and fee structure, the competitive nature of the financial services industry, our ability to compete effectively against other financial institutions in our banking markets, actions of government regulators, the level of market interest rates and our ability to manage our interest rate risk, changes in general economic conditions that affect our loan and lease portfolio, the abilities of our borrowers to repay their loans and leases, the values of real estate and other collateral, the impact of the FDIC-assisted transactions and other developments or changes in our business that we do not expect.
Actual results may differ materially from those expressed in or implied by any forward-looking statements. Except to the extent required by applicable law or regulation, BancShares undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

Item 3. | Quantitative and Qualitative Disclosures about Market Risk

Market risk is the potential economic loss resulting from changes in market prices and interest rates. This risk can either result in diminished current fair values of financial instruments or reduced net interest income in future periods. As of September 30, 2015, BancShares’ market risk profile has not changed significantly from December 31, 2014, as discussed in the Form 10-K. Changes in fair value that result from movement in market rates cannot be predicted with any degree of certainty. Therefore, the impact that future changes in market rates will have on the fair values of financial instruments is uncertain.

Item 4. | Controls and Procedures

BancShares' management, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of BancShares' disclosure controls and procedures as of the end of the period covered by this Quarterly Report, in accordance with Rule 13a-15 of the Securities Exchange Act of 1934 (Exchange Act). Based upon that evaluation, as of the end of the period covered by this report, the Chief Executive Officer and the Chief Financial Officer concluded that BancShares' disclosure controls and procedures were effective to provide reasonable assurance that it is able to record, process, summarize and report in a timely manner the information required to be disclosed in the reports it files under the Exchange Act.
No change in BancShares' internal control over financial reporting occurred during the third quarter of 2015 that had materially affected, or is reasonably likely to materially affect, BancShares' internal control over financial reporting.
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PART II
Item 1. Legal Proceedings
BancShares and various subsidiaries have been named as defendants in various legal actions arising from our normal business activities in which damages in various amounts are claimed. Although the amount of any ultimate liability with respect to those other matters cannot be determined, in the opinion of management, any such liability will not have a material effect on BancShares’ consolidated financial statements.
Additional information relating to legal proceedings is set forth in Note L of BancShares' Notes to Unaudited Consolidated Financial Statements.

Item 1A. | Risk Factors

BancShares is currently monitoring the impact of the October 2015 flooding in South Carolina. We are in the preliminary stage of assessing how this situation may impact our customers and the areas in which they operate. The impact of the flooding could affect the company and our earnings but until more is known about the magnitude of the situation, it is premature to reasonably assess that impact.
Except as discussed below, there have been no material changes from the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2014.
Additional risks and uncertainties that are not currently known or that management does not currently deem to be material could also have a material adverse impact on our financial condition, the results of our operations or our business. If such risks and uncertainties were to become reality or the likelihood of those risks was to increase, the market price of our common stock could decline significantly.
Certain risks continue to receive attention from regulators and financial statement users and therefore have been included in the 10-Q.
Completing the integration of BancShares and Bancorporation may be more difficult, costly, or time consuming than expected, and the anticipated benefits and cost savings of the merger may not be fully realized.
BancShares merged with Bancorporation on October 1, 2014. The ultimate success of the merger will depend, in part, on our ability to realize the anticipated benefits and cost savings from combining and integrating the businesses, and to do so in a manner that permits growth opportunities and cost savings to be realized without materially disrupting existing customer relationships or decreasing revenues due to loss of customers. While the conversion of systems and customer accounts acquired from Bancorporation has been completed, we are still analyzing inconsistencies in standards, controls, procedures and policies. The ultimate resolution of those inconsistencies could affect adversely our ability to maintain relationships with customers and employees and/or to achieve the anticipated benefits and cost savings of the merger. The loss of key employees or delays could adversely affect our ability to successfully conduct business, which could have an adverse effect on our financial results and the value of our common stock.
Breaches of our and our vendor's information security systems could expose us to hacking and the loss of customer information, which could damage our business reputation and expose us to significant liability
We maintain and transmit large amounts of sensitive information electronically, including personal and financial information of our customers. In addition to our own systems, we also rely on external vendors to provide certain services and are, therefore,
exposed to their information security risk. While we seek to mitigate internal and external information security risks, the volume of business conducted through electronic devices continues to grow, and our computer systems and network infrastructure, as well as the systems of external vendors and customers, present security risks including susceptibility to hacking and/or identity theft.
We are also subject to risks arising from a broad range of attacks by doing business on the Internet, which arise from both domestic and international sources and seek to obtain customer information for fraudulent purposes or, in some cases, to disrupt business activities. Information security risks could result in reputational damage and lead to a material adverse impact on our business, financial condition and financial results of operations.
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We continue to encounter technological change for which we expect to incur significant expense
The technological complexity necessary for a competitive array of financial products and services to customers continues to increase. Our future success requires that we maintain technology and associated facilities that will support our ability to meet the banking and other financial needs of our customers. In 2013, we undertook projects to modernize our systems and associated facilities, strengthen our business continuity and disaster recovery efforts, and reduce operational risk. As these projects have evolved over time, we have identified other areas that require improvements to infrastructure, and have accordingly expanded the projects’ scope. In 2014, we increased the total projected spend to approximately $130 million; however, we are currently projecting total costs to be approximately $115 million. Of this projected spend, $100.8 million has been incurred, with $89.6 million capitalized and $11.2 million expensed through September 30, 2015. As the remaining projects are completed over the next few quarters, we expect operating expenses to increase as the projects are amortized over their expected useful lives. If the remaining projects' objectives are not achieved or if the cost of the projects materially exceeds the estimate, our business, financial condition and financial results could be adversely impacted.
We rely on external vendors
Third party vendors provide key components of our business infrastructure, including certain data processing and information services. A number of our vendors are large national entities with dominant market presence in their respective fields, and their services could be difficult to quickly replace in the event of failure or other interruption in service. Failures of certain vendors to provide services could adversely affect our ability to deliver products and services to our customers. External vendors also present information security risks. We monitor vendor risks, including the financial stability of critical vendors. The failure of a critical external vendor could disrupt our business and cause us to incur significant expense.
We face significant operational risks in our businesses
Safely conducting and growing our business requires that we create and maintain an appropriate operational and organizational control infrastructure. Operational risk can arise in numerous ways, including employee fraud, customer fraud, and control lapses in bank operations and information technology. Our dependence on our employees, and internal and third party automated systems, to record and process transactions may further increase the risk that technical failures or system-tampering will result in losses that are difficult to detect. We may be subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control. Failure to maintain appropriate operational infrastructure and oversight can lead to loss of service to customers, legal actions and noncompliance with various laws and regulations. We have implemented internal controls to safeguard and maintain our operational and organizational infrastructure and information.

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

On October 27, 2015, the Board of Directors approved a stock trading plan that provides for the purchase of up to 100,000 shares of Registrant's Class A common stock. The shares may be purchased from time to time from November 1, 2015 through October 31, 2016. The board's action approving share purchases does not obligate BancShares to acquire any particular amount of shares and purchases may be suspended or discontinued at any time. Any shares of stock that are purchased will be canceled.

Item 6. | Exhibits

31.1 | Certification of Chief Executive Officer (filed herewith)
31.2 | Certification of Chief Financial Officer (filed herewith)
32.1 | Certification of Chief Executive Officer (filed herewith)
32.2 | Certification of Chief Financial Officer (filed herewith)
101.INS | XBRL Instance Document
101.SCH | XBRL Taxonomy Extension Schema
101.CAL | XBRL Taxonomy Extension Calculation Linkbase
101.DEF | XBRL Taxonomy Extension Definition Linkbase
101.LAB | XBRL Taxonomy Extension Label Linkbase
101.PRE | XBRL Taxonomy Extension Presentation Linkbase

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

Date: | November 4, 2015 |  |  | FIRST CITIZENS BANCSHARES, INC.
|  |  |  | (Registrant)
|  | By: |  | /s/ CRAIG L. NIX
|  |  |  | Craig L. Nix
|  |  |  | Chief Financial Officer

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