FDIC LOSS SHARE RECEIVABLE AND PAYABLE

BancShares completed six FDIC-assisted transactions with loss share agreements during the period beginning in 2009 through 2011. Prior to its merger into BancShares, First Citizens Bancorporation, Inc. (Bancorporation) completed three FDIC-assisted transactions with loss share agreements: Georgian Bank (acquired in 2009); Williamsburg First National Bank (acquired in 2010); and Atlantic Bank & Trust (acquired in 2011).

During the second quarter of 2016, FCB entered into an agreement with the FDIC to terminate five of FCB's nine loss share agreements, including Temecula Valley Bank, Sun American Bank (SAB), Williamsburg First National Bank, Atlantic Bank & Trust, and Colorado Capital Bank (CCB). Under the terms of the agreement, FCB made a net payment of $20.1 million to the FDIC as consideration for early termination of the loss share agreements. Also, FCB wrote-off $1.5 million of the FDIC loss share receivable and released $18.2 million of the FDIC loss share payable associated with the terminated agreements. As a result, FCB recognized a $3.4 million loss on the termination of the loss share agreements.

The early termination agreement eliminated FCB's FDIC loss share payable for SAB and CCB. The remaining FDIC loss share payable balance at September 30, 2016 was $95.8 million. In conjunction with the early termination, FCB adjusted the FDIC loss share payable under the two remaining loss share agreements with clawback provisions and released other related reserves. The clawback liabilities were adjusted in order to conform to the methodology used to determine the net termination payment. The adjustment to the clawback liabilities is accounted for by management as a change in estimate. The total one-time pre-tax benefit of these adjustments was $20.0 million. The resulting positive net impact to pre-tax earnings from the early termination of the FDIC loss share agreements was $16.6 million during the second quarter of 2016. See Note L for further information related to FCB's payable to the FDIC for loss share agreements.

The remaining receivable from the FDIC for the United Western Bank (UWB), First Regional Bank (FRB), Venture Bank (VB) and Georgian Bank (GB) 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. Amortization reflects changes in the FDIC loss share receivable due to credit improvement. 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 claim estimates related to acquired loans and OREO still subject to loss share reporting requirements. At the beginning of the second quarter of 2016, the loss share protection expired for non-single family residential loans acquired from UWB. As of September 30, 2016, loss share protection has expired or has been terminated for all non-single family residential loans. Loss share protection remains only for single family residential loans acquired from UWB, VB and GB in the amount of $91.5 million.

The following table provides changes in the receivable from the FDIC for the three and nine months ended September 30, 2016 and September 30, 2015.



	Three months ended September 30						Nine months ended September 30
(Dollars in thousands)	2016			2015			2016			2015
Beginning balance	$	5,281		$	5,808		$	4,054		$	28,701
Amortization	(1,017		)	(2,343		)	(4,259		)	(8,835		)
Net cash payments to FDIC	3,199			13,915			16,701			24,805
Post-acquisition adjustments	(4,355		)	(8,104		)	(11,926		)	(35,395		)
Termination of FDIC loss share agreements	—			—			(1,462		)	—
Ending balance	$	3,108		$	9,276		$	3,108		$	9,276