UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________

FORM 10-Q

____________________________________________________

xQuarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2017

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, smaller reporting company, or an emerging growth company. See the definitions of “larger accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
		Emerging growth company	¨

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    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 1, 2017)

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)	6
	Notes to Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	67
Item 4.	Controls and Procedures	67
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	69
Item 1A.	Risk Factors	69
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 6.	Exhibits	69

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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, 2017			December 31, 2016
Assets
Cash and due from banks	$	296,386		$	539,741
Overnight investments	2,432,233			1,872,594
Investment securities available for sale	6,992,877			7,006,580
Investment securities held to maturity	78			98
Loans held for sale	70,803			74,401
Loans and leases	23,149,073			21,737,878
Allowance for loan and lease losses	(231,842		)	(218,795		)
Net loans and leases	22,917,231			21,519,083
Premises and equipment	1,131,558			1,133,044
Other real estate owned	53,988			61,231
Income earned not collected	90,821			79,839
FDIC shared-loss receivable	4,610			4,172
Goodwill	150,601			150,601
Other intangible assets	77,491			78,040
Other assets	365,477			471,412
Total assets	$	34,584,154		$	32,990,836
Liabilities
Deposits:
Noninterest-bearing	$	11,483,033		$	10,130,549
Interest-bearing	17,850,916			18,030,794
Total deposits	29,333,949			28,161,343
Short-term borrowings	679,280			603,487
Long-term obligations	866,123			832,942
FDIC shared-loss payable	100,203			97,008
Other liabilities	290,768			283,629
Total liabilities	31,270,323			29,978,409
Shareholders’ equity
Common stock:
Class A - $1 par value (16,000,000 shares authorized; 11,005,220 shares issued and outstanding at September 30, 2017 and December 31, 2016)	11,005			11,005
Class B - $1 par value (2,000,000 shares authorized; 1,005,185 shares issued and outstanding at September 30, 2017 and December 31, 2016)	1,005			1,005
Preferred stock - $0.01 par value (10,000,000 shares authorized; no shares issued and outstanding at September 30, 2017 and December 31, 2016)	—			—
Surplus	658,918			658,918
Retained earnings	2,735,227			2,476,691
Accumulated other comprehensive loss	(92,324		)	(135,192		)
Total shareholders’ equity	3,313,831			3,012,427
Total liabilities and shareholders’ equity	$	34,584,154		$	32,990,836

See accompanying Notes to Consolidated Financial Statements.

3

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)	2017			2016			2017			2016
Interest income
Loans and leases	$	246,260		$	219,314		$	708,622		$	651,160
Investment securities and dividend income	29,706			23,395			89,863			71,139
Overnight investments	8,367			3,785			19,247			10,676
Total interest income	284,333			246,494			817,732			732,975
Interest expense
Deposits	3,839			4,457			12,407			13,717
Short-term borrowings	1,429			540			3,185			1,428
Long-term obligations	5,890			5,648			17,013			17,072
Total interest expense	11,158			10,645			32,605			32,217
Net interest income	273,175			235,849			785,127			700,758
Provision for loan and lease losses	7,946			7,507			28,501			16,912
Net interest income after provision for loan and lease losses	265,229			228,342			756,626			683,846
Noninterest income
Gain on acquisitions	—			837			134,745			5,831
Cardholder services	24,461			21,537			70,006			61,949
Merchant services	25,879			25,179			77,456			71,392
Service charges on deposit accounts	25,951			23,154			73,955			66,888
Wealth management services	21,234			19,915			64,116			60,840
Securities gains	1,337			352			4,664			17,509
Other service charges and fees	7,073			7,567			21,302			21,693
Mortgage income	6,775			6,692			19,317			12,540
Insurance commissions	2,894			2,755			9,015			8,198
ATM income	2,596			1,908			6,882			5,518
Adjustments to FDIC shared-loss receivable	(1,770		)	(2,773		)	(4,671		)	(7,673		)
Net impact from FDIC shared-loss agreement termination	—			—			(45		)	16,559
Other	8,957			10,718			24,137			22,129
Total noninterest income	125,387			117,841			500,879			363,373
Noninterest expense
Salaries and wages	121,086			107,762			351,518			315,720
Employee benefits	27,030			26,750			83,418			79,761
Occupancy expense	26,594			24,857			77,415			74,824
Equipment expense	23,887			23,736			73,129			68,796
Merchant processing	19,653			18,686			57,624			52,924
Cardholder processing	8,576			7,416			23,092			22,075
FDIC insurance expense	5,449			5,796			16,747			15,173
Collection and foreclosure-related expenses	3,443			4,039			9,582			9,732
Merger-related expenses	562			3,764			8,248			5,187
Other	50,687			44,427			136,145			133,015
Total noninterest expense	286,967			267,233			836,918			777,207
Income before income taxes	103,649			78,950			420,587			270,012
Income taxes	36,585			27,546			151,242			97,220
Net income	$	67,064		$	51,404		$	269,345		$	172,792
Average shares outstanding	12,010,405			12,010,405			12,010,405			12,010,405
Net income per share	$	5.58		$	4.28		$	22.43		$	14.39

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)	2017			2016			2017			2016
Net income	$	67,064		$	51,404		$	269,345		$	172,792
Other comprehensive income:
Unrealized gains (losses) on securities:
Change in unrealized securities gains (losses) arising during period	15,752			(1,577		)	65,619			90,631
Tax effect	(5,857		)	855			(24,401		)	(34,250		)
Reclassification adjustment for net gains realized and included in income before income taxes	(1,337		)	(352		)	(4,664		)	(17,509		)
Tax effect	495			191			1,726			6,583
Total change in unrealized gains (losses) on securities, net of tax	9,053			(883		)	38,280			45,455
Change in fair value of cash flow hedges:
Change in unrecognized loss on cash flow hedges	—			—			—			1,429
Tax effect	—			—			—			(537		)
Total change in unrecognized loss on cash flow hedges, net of tax	—			—			—			892
Change in pension obligation:
Amortization of actuarial losses and prior service cost	2,330			1,768			7,290			5,302
Tax effect	(864		)	(642		)	(2,702		)	(1,993		)
Total change in pension obligation, net of tax	1,466			1,126			4,588			3,309
Other comprehensive income	10,519			243			42,868			49,656
Total comprehensive income	$	77,583		$	51,647		$	312,213		$	222,448

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, 2015	$	11,005	$	1,005	$	658,918	$	2,265,621		$	(64,440	)	$	2,872,109
Net income	—		—		—		172,792			—			172,792
Other comprehensive income, net of tax	—		—		—		—			49,656			49,656
Cash dividends ($0.90 per share)	—		—		—		(10,809		)	—			(10,809		)
Balance at September 30, 2016	$	11,005	$	1,005	$	658,918	$	2,427,604		$	(14,784	)	$	3,083,748
Balance at December 31, 2016	$	11,005	$	1,005	$	658,918	$	2,476,691		$	(135,192	)	$	3,012,427
Net income	—		—		—		269,345			—			269,345
Other comprehensive income, net of tax	—		—		—		—			42,868			42,868
Cash dividends ($0.90 per share)	—		—		—		(10,809		)	—			(10,809		)
Balance at September 30, 2017	$	11,005	$	1,005	$	658,918	$	2,735,227		$	(92,324	)	$	3,313,831

See accompanying Notes to Consolidated Financial Statements.

First Citizens BancShares, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

	Nine months ended September 30
(Dollars in thousands, unaudited)	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	269,345		$	172,792
Adjustments to reconcile net income to cash provided by operating activities:
Provision for loan and lease losses	28,501			16,912
Deferred tax expense (benefit)	67,270			(13,328		)
Net change in current taxes	17,115			(16,906		)
Depreciation	67,749			66,400
Net increase (decrease) in accrued interest payable	401			(1,662		)
Net increase in income earned not collected	(4,471		)	(2,899		)
Gain on acquisitions	(134,745		)	(5,831		)
Securities gains	(4,664		)	(17,509		)
Loss on termination of FDIC shared-loss agreements	45			3,377
Origination of loans held for sale	(471,862		)	(589,313		)
Proceeds from sale of loans held for sale	487,017			564,026
Gain on sale of loans held for sale	(11,317		)	(10,857		)
Gain on sale of portfolio loans	(1,007		)	(3,758		)
Net write-downs/losses on other real estate	3,152			5,251
Gain on sales of premises and equipment	(490		)	—
Net accretion of premiums and discounts	(34,535		)	(32,924		)
Amortization of intangible assets	16,994			16,633
Reduction in FDIC receivable for shared-loss agreements	5,799			11,926
Net change in FDIC payable for shared-loss agreements	3,195			(12,474		)
Net change in other assets	(9,566		)	17,120
Net change in other liabilities	10,178			56,275
Net cash provided by operating activities	304,104			223,251
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans outstanding	(771,593		)	(782,771		)
Purchases of investment securities available for sale	(1,891,967		)	(2,382,141		)
Proceeds from maturities/calls of investment securities held to maturity	20			130
Proceeds from maturities/calls of investment securities available for sale	1,436,113			1,213,333
Proceeds from sales of investment securities available for sale	538,317			1,802,155
Net increase in overnight investments	(458,027		)	(891,059		)
Proceeds from sales of portfolio loans	162,486			77,665
Cash paid to the FDIC for shared-loss agreements	(7,440		)	(16,701		)
Net cash paid to the FDIC for termination of shared-loss agreements	(285		)	(20,115		)
Proceeds from sales of other real estate	31,072			24,406
Proceeds from sales of premises and equipment	2,920			—
Purchases of premises and equipment	(60,090		)	(60,982		)
Business acquisitions, net of cash acquired	300,703			(727		)
Net cash used in investing activities	(717,771		)	(1,036,807		)
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in time deposits	(469,540		)	(371,164		)
Net increase in demand and other interest-bearing deposits	538,084			917,382
Net change in short-term borrowings	(59,207		)	93,655
Repayment of long-term obligations	(6,819		)	(3,889		)
Origination of long-term obligations	175,000			150,000
Cash dividends paid	(7,206		)	(10,809		)
Net cash provided by financing activities	170,312			775,175
Change in cash and due from banks	(243,355		)	(38,381		)
Cash and due from banks at beginning of period	539,741			534,086
Cash and due from banks at end of period	$	296,386		$	495,705
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Transfers of loans to other real estate	$	26,926		$	31,517
Dividends declared but not paid	3,603			—
Reclassification of portfolio loans to loans held for sale	161,719			—

See accompanying Notes to Consolidated Financial Statements.

6

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, 2016.

Reclassifications

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

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates, and different assumptions in the application of these policies could result in material changes in BancShares' consolidated financial position, the consolidated results of 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;

• Goodwill, mortgage servicing rights and other intangible assets;

• Federal Deposit Insurance Corporation (FDIC) shared-loss payable; and

• Income tax assets, liabilities and expense

Recently Adopted Accounting Pronouncements

Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update)

This ASU adds an SEC paragraph and amends other Topics pursuant to an SEC Staff Announcement that states a registrant should evaluate ASUs that have not yet been adopted, including ASU 2014-09, Revenue from Contracts with Customers (Topic 606), ASU 2016-02, Leases (Topic 842), and ASU 2016-13, Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, to determine the appropriate financial statement disclosures about the potential material effects of those ASUs on the financial statements when adopted. If a registrant does not know or cannot reasonably estimate the impact that adoption of the ASUs referenced are expected to have on the financial statements, then in addition to making a statement to that effect, the registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact the adoption will have on the financial statements, and a comparison to the registrant's current accounting policies. A registrant should describe the status of its process to implement the new standards and the significant matters yet to be addressed.

7

This ASU also addresses the accounting for tax benefits resulting from investments in qualified affordable housing projects where the decision to apply the proportional amortization method of accounting is an accounting policy decision to be applied consistently to all investments that meet the conditions, rather than a decision to be applied to individual investments that qualify for the use of the proportional amortization method.

The amendments in this ASU are effective upon issuance. We adopted the guidance effective in the first quarter of 2017. The disclosures required by this ASU are included within the “Recently Issued Accounting Pronouncements” section below. The adoption did not have an impact on our consolidated financial position or consolidated results of operations.

FASB ASU 2016-17, Consolidation (Topic 810): Interests Held Through Related Parties That Are Under Common Control

This ASU does not change the characteristics of a primary beneficiary in current GAAP; however, it requires that a reporting entity, in determining whether it satisfies the second characteristic of a primary beneficiary, to include all of its direct variable interests in a VIE and, on a proportionate basis, its indirect variable interests in a VIE held through related parties, including related parties that are under common control with the reporting entity. If, after performing that assessment, a reporting entity that is the single decision maker of a VIE concludes that it does not have the characteristics of a primary beneficiary, the amendments continue to require that reporting entity to evaluate whether it and one or more of its related parties under common control, as a group, have the characteristics of a primary beneficiary, then the party within the related party group that is most closely associated with the VIE is the primary beneficiary.

The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We adopted the guidance effective in the first quarter of 2017. The adoption did not have an impact on our consolidated financial position or consolidated results of operations.

FASB ASU 2016-07, Investments—Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting

This ASU eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The ASU requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. Further, the ASU requires that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings, the unrealized gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method.

The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We adopted the guidance effective in the first quarter of 2017. The adoption did not have an impact on our consolidated financial position or consolidated results of operations.

Recently Issued Accounting Pronouncements

FASU ASU 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business

This ASU provides a more robust framework to use in determining when a set of assets and activities is a business, including narrowing the definition of outputs and align it with how outputs are described in Topic 606. This ASU provides a screen to determine when an integrated set of assets and activities (collectively referred to as a "set") is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired or disposed of is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If the screen is not met, the amendments in this ASU (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. The framework includes two sets of criteria to consider that depend on whether a set has outputs.

The amendments in this ASU are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this standard is not expected to have an impact on our consolidated financial position or results of operation and we will adopt the guidance during the first quarter of 2018.

FASB ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment

This ASU eliminates Step 2 from the goodwill impairment test. Under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business

8

combination. Instead, under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This ASU eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative test.

This ASU will be effective for BancShares' annual or interim goodwill impairment tests for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this standard is not expected to have an impact on our consolidated financial position or results of operation and we expect to adopt the guidance for our annual impairment test in fiscal year 2020.

FASB ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

This ASU eliminates the delayed recognition of the full amount of credit losses until the loss was probable of occurring and instead will reflect an entity's current estimate of all expected credit losses. The amendments in this ASU broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The ASU does not specify a method for measuring expected credit losses and allows an entity to apply methods that reasonably reflect its expectations of the credit loss estimate based on the entity's size, complexity and risk profile. In addition, the disclosures of credit quality indicators in relation to the amortized cost of financing receivables, a current disclosure requirement, are further disaggregated by year of origination.

The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018. We will adopt the guidance by the first quarter of 2020 with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. For BancShares, the standard will apply to loans, unfunded loan commitments and debt securities held to maturity. We have formed a cross-functional team co-led by Finance and Risk Management and engaged a third party to assist with the adoption, which began with a readiness and data gap analysis. The implementation team has developed a high-level project plan and is staying informed about the broader industry's perspective and insights, and identifying and researching key decision points. We anticipate the gap analysis to be completed during the fourth quarter of 2017 which will determine our path going forward. We are currently evaluating the impact the new standard will have on our consolidated financial statements as the final impact will be dependent, among other items, upon the loan portfolio composition and quality at the adoption date, as well as economic conditions, financial models used and forecasts at that time.

FASB ASU 2016-02, Leases (Topic 842)

This ASU increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The key difference between existing standards and this ASU is the requirement for lessees to recognize on their balance sheet all lease contracts. An entity may make an accounting election by classification to not recognize leases with terms less than 12 months on their balance sheet. Both a right-of-use asset, representing the right to use the leased asset, and a lease liability, representing the contractual obligation, are required to be recognized on the balance sheet of the lessee at lease commencement. Further, this ASU requires lessees to classify leases as either operating or finance leases, which are substantially similar to the current operating and capital leases classifications. The distinction between these two classifications under the new standard does not relate to balance sheet treatment, but relates to treatment in the statements of income and cash flows. Lessor guidance remains largely unchanged with the exception of how a lessor determines the appropriate lease classification for each lease to better align the lessor guidance with revised lessee classification guidance.

The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. For BancShares, the impact of this ASU will primarily relate to its accounting and reporting of leases as a lessee. We will adopt during the first quarter of 2019. We have engaged a third party and completed an inventory of all leases and their terms and service contracts with embedded leases. While we continue to evaluate the impact of the new standard, we expect an increase to the Consolidated Balance Sheets for right-of-use assets and associated lease liabilities, as well as resulting depreciation expense of the right-of-use assets and interest expense of the lease liabilities in the Consolidated Statements of Income, for arrangements previously accounted for as operating leases. Additionally, adding these assets to our balance sheet will impact our total risk-weighted assets used to determine our regulatory capital levels.

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FASB ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities

This ASU addresses certain aspects of recognition, measurement, presentation and disclosure of certain financial instruments. The amendments in this ASU (1) require equity investments to be measured at fair value with changes in fair value recognized in net income; (2) simplify the impairment assessment of equity investments without a readily determinable fair value; (3) eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet; (4) require public business entities to use exit price notion, rather than entry prices, when measuring fair value of financial instruments for disclosure purposes; (5) require separate presentation of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial statements; (6) require separate presentation in other comprehensive income of the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; and (7) state that a valuation allowance on deferred tax assets related to available-for-sale securities should be evaluated in combination with other deferred tax assets.

The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The ASU only permits early adoption of the instrument-specific credit risk provision. We will adopt during the first quarter of 2018 with a cumulative-effect adjustment from accumulated other comprehensive income (AOCI) to retained earnings as of the beginning of the year of adoption. We are currently evaluating the impact the new standard will have on our consolidated financial statements. We anticipate the adoption of this ASU will primarily impact the fair value recognition of BancShares' equity securities portfolio. The cumulative-effect adjustment at adoption will be determined by the equity securities portfolio composition and valuation at the date of adoption.

FASB ASU 2014-09, Revenue from Contracts with Customers (Topic 606)

In May 2014, the FASB issued a standard on the recognition of revenue from contracts with customers with the core principle being for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also results in enhanced disclosures about revenue, provides guidance for transactions that were not previously addressed comprehensively and improves guidance for multiple-element arrangements. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, to improve the operability and understandability of the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, to clarify guidance for identifying performance obligations and licensing implementation. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, to clarify and improve the guidance for certain aspects of Topic 606. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, to clarify guidance for certain aspects of Topic 606.

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 expect to adopt the ASU during the first quarter of 2018 with a cumulative-effect adjustment to opening retained earnings and the modified retrospective approach will likely be used if we determine there is a material impact. Our revenue is comprised of net interest income on financial assets and liabilities, which is explicitly excluded from the scope of the new guidance, and noninterest income. The contracts that are in scope of the guidance are primarily related to service charges on deposit accounts, cardholder and merchant income, wealth advisory services income, other service charges and fees, sales of other real estate, insurance commissions and miscellaneous fees. We engaged a third party to assist in developing processes and procedures for gathering evidence related to the implementation of this standard and have performed an analysis of contracts for wealth management income, customer service charges, ATM fees and miscellaneous income, for which we do not expect to have a significant impact on our results of operations. We continue to evaluate the impact of the new standard on other sources of our noninterest income and on our presentation and disclosures.

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NOTE B - BUSINESS COMBINATIONS

Guaranty Bank

On May 5, 2017, FCB entered into an agreement with the FDIC, as Receiver, to purchase certain assets and assume certain liabilities of Guaranty Bank (Guaranty) of Milwaukee, Wisconsin. The acquisition provides FCB with the opportunity to grow capital and enhance earnings.

The Guaranty 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 was $875.1 million, including $574.6 million in non-purchased credit-impaired (non-PCI) loans, $114.5 million in purchased credit-impaired (PCI) loans and $9.9 million in core deposit intangibles. Liabilities assumed were $982.7 million, of which $982.3 million were deposits. The total gain on the transaction was $122.7 million which is included in noninterest income in the Consolidated Statements of Income.

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 due from banks	$	48,824
Overnight investments	94,134
Investment securities	12,140
Loans	689,086
Premises and equipment	8,603
Other real estate owned	55
Income earned not collected	6,720
Intangible assets	9,870
Other assets	5,693
Total assets acquired	875,125
Liabilities
Deposits	982,307
Other liabilities	440
Total liabilities assumed	982,747
Fair value of net liabilities assumed	(107,622		)
Cash received from FDIC	230,342
Due from FDIC	8
Gain on acquisition of Guaranty	$	122,728

Merger-related expenses of $562 thousand and $7.2 million from the Guaranty transaction were recorded in the Consolidated Statements of Income for the three and nine months ended September 30, 2017, respectively. Loan-related interest income generated from Guaranty was approximately $8.5 million for the three months ended September 30, 2017 and $13.5 million since the acquisition date.

Based on such credit factors as past due status, nonaccrual status, loan-to-value and credit scores, the acquired loans were divided into loans with evidence of credit quality deterioration, which are accounted for under ASC 310-30 (included in PCI loans), and loans that do not meet this criteria, which are accounted for under ASC 310-20 (included in non-PCI loans).

Harvest Community Bank

On January 13, 2017, FCB entered into an agreement with the FDIC, as Receiver, to purchase certain assets and assume certain liabilities of Harvest Community Bank (HCB) of Pennsville, New Jersey. The acquisition provides FCB with the opportunity to grow capital and enhance earnings.

The HCB 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

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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 was $111.6 million, including $85.1 million in purchased credit-impaired (PCI) loans and $850 thousand in core deposit intangibles. Liabilities assumed were $121.8 million of which the majority were deposits. As a result of the transaction, FCB recorded a gain on the acquisition of $12.0 million which is included in noninterest income in the Consolidated Statements of Income.

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 due from banks	$	3,350
Overnight investments	7,478
Investment securities	14,455
Loans	85,149
Income earned not collected	31
Intangible assets	850
Other assets	237
Total assets acquired	111,550
Liabilities
Deposits	121,755
Other liabilities	74
Total liabilities assumed	121,829
Fair value of net liabilities assumed	(10,279		)
Cash received from FDIC	22,296
Gain on acquisition of HCB	$	12,017

No merger-related expenses were recorded for the three months ended September 30, 2017 and $698 thousand were recorded in the Consolidated Statements of Income for the nine months ended September 30, 2017for the HCB transaction. Loan-related interest income generated from HCB was approximately $579 thousand and $3.4 million for the three and nine months ended September 30, 2017, respectively.

All loans resulting from the HCB transaction were recorded at the acquisition date with a discount attributable, at least in part, to credit quality deterioration, and are therefore accounted for as PCI under ASC 310-30.

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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, 2017 and December 31, 2016, are as follows:

	September 30, 2017
(Dollars in thousands)	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
Investment securities available for sale
U.S. Treasury	$	1,619,343	$	—	$	3,019	$	1,616,324
Mortgage-backed securities	5,240,922		3,256		43,837		5,200,341
Equity securities	82,314		31,336		—		113,650
Corporate bonds	54,412		471		10		54,873
Other	7,638		225		174		7,689
Total investment securities available for sale	$	7,004,629	$	35,288	$	47,040	$	6,992,877
	December 31, 2016
	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
U.S. Treasury	$	1,650,675	$	579	$	935	$	1,650,319
Government agency	40,291		107		—		40,398
Mortgage-backed securities	5,259,466		2,809		86,850		5,175,425
Equity securities	71,873		11,634		—		83,507
Corporate bonds	49,367		195		—		49,562
Other	7,615		—		246		7,369
Total investment securities available for sale	$	7,079,287	$	15,324	$	88,031	$	7,006,580
	September 30, 2017
	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
Investment securities held to maturity
Mortgage-backed securities	$	78	$	6	$	—	$	84
	December 31, 2016
	Cost		Gross unrealized gains		Gross unrealized losses		Fair value
Mortgage-backed securities	$	98	$	6	$	—	$	104

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. Investments in equity securities and corporate bonds represent positions in securities of other financial institutions. Other includes investments in trust preferred securities of financial institutions. The following table provides the amortized cost and fair value by contractual maturity. Expected maturities will differ from contractual maturities on certain securities because borrowers and issuers may have the right to call or prepay obligations with or without prepayment penalties. Repayments of mortgage-backed securities are dependent on the repayments of the underlying loan balances. Equity securities do not have a stated maturity date.

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	September 30, 2017				December 31, 2016
(Dollars in thousands)	Cost		Fair value		Cost		Fair value
Investment securities available for sale
Non-amortizing securities maturing in:
One year or less	$	749,215	$	748,157	$	842,798	$	842,947
One through five years	872,243		870,507		848,168		847,770
Five through 10 years	54,412		54,873		49,367		49,562
Over 10 years	5,523		5,349		7,615		7,369
Mortgage-backed securities	5,240,922		5,200,341		5,259,466		5,175,425
Equity securities	82,314		113,650		71,873		83,507
Total investment securities available for sale	$	7,004,629	$	6,992,877	$	7,079,287	$	7,006,580
Investment securities held to maturity
Mortgage-backed securities held to maturity	$	78	$	84	$	98	$	104

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

	Three months ended September 30					Nine months ended September 30
(Dollars in thousands)	2017		2016			2017			2016
Gross gains on sales of investment securities available for sale	$	1,337	$	452		$	4,693		$	17,940
Gross losses on sales of investment securities available for sale	—		(100		)	(29		)	(431		)
Total realized securities gains	$	1,337	$	352		$	4,664		$	17,509

The following table provides information regarding securities with unrealized losses as of September 30, 2017 and December 31, 2016.

	September 30, 2017
	Less than 12 months				12 months or more				Total
(Dollars in thousands)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Investment securities available for sale:
U.S. Treasury	$	1,616,324	$	3,019	$	—	$	—	$	1,616,324	$	3,019
Mortgage-backed securities	3,989,074		38,441		406,480		5,396		4,395,554		43,837
Corporate bonds	5,025		10				—		5,025		10
Other	5,349		174		—		—		5,349		174
Total	$	5,615,772	$	41,644	$	406,480	$	5,396	$	6,022,252	$	47,040
	December 31, 2016
	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	$	807,822	$	935	$	—	$	—	$	807,822	$	935
Mortgage-backed securities	4,442,700		82,161		362,351		4,689		4,805,051		86,850
Other	7,369		246		—		—		7,369		246
Total	$	5,257,891	$	83,342	$	362,351	$	4,689	$	5,620,242	$	88,031

Investment securities with an aggregate fair value of $406.5 million and $362.4 million had continuous unrealized losses for more than 12 months with a corresponding aggregate unrealized loss of $5.4 million and $4.7 million as of September 30, 2017 and December 31, 2016, respectively. As of September 30, 2017, all 55 of these investments are government sponsored enterprise-issued mortgage-backed securities.

None of the unrealized losses identified as of September 30, 2017 or December 31, 2016 relate to the marketability of the securities or the issuers' 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.

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Investment securities having an aggregate carrying value of $4.51 billion at September 30, 2017 and $4.55 billion at December 31, 2016 were pledged as collateral to secure public funds on deposit and certain short-term borrowings, and for other purposes as required by law.

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 non-impaired loans, purchased leases and certain purchased revolving credit. For purchased non-impaired loans to be included as non-PCI, it must be determined that the loans do not have any credit deterioration 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 impaired and, therefore, classified as PCI loans. PCI loans are accounted for under the guidance in ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. PCI loans 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 over the life of the loans. 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, commercial and non-commercial loans are assigned to loan classes, which further disaggregate loans based upon common risk characteristics.

Commercial –Commercial loans include construction and land development, commercial 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, and certain loans repurchased with government guarantees.

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, student loans 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, 2017 and December 31, 2016:

(Dollars in thousands)	September 30, 2017		December 31, 2016
Non-PCI loans and leases:
Commercial:
Construction and land development	$	626,887	$	649,157
Commercial mortgage	9,510,158		9,026,220
Other commercial real estate	434,736		351,291
Commercial and industrial	2,654,898		2,567,501
Lease financing	866,804		826,270
Other	322,216		340,264
Total commercial loans	14,415,699		13,760,703
Noncommercial:
Residential mortgage	3,467,978		2,889,124
Revolving mortgage	2,692,558		2,601,344
Construction and land development	227,184		231,400
Consumer	1,511,487		1,446,138
Total noncommercial loans	7,899,207		7,168,006
Total non-PCI loans and leases	22,314,906		20,928,709
PCI loans:
Commercial:
Construction and land development	17,406		20,766
Commercial mortgage	393,557		453,013
Other commercial real estate	17,771		12,645
Commercial and industrial	7,064		11,844
Other	922		1,702
Total commercial loans	436,720		499,970
Noncommercial:
Residential mortgage	327,263		268,777
Revolving mortgage	67,847		38,650
Consumer	2,337		1,772
Total noncommercial loans	397,447		309,199
Total PCI loans	834,167		809,169
Total loans and leases	$	23,149,073	$	21,737,878

At September 30, 2017, $70.4 million of total residential loans and leases were covered under shared-loss agreements with the FDIC, compared to $84.8 million at December 31, 2016. The shared-loss agreements, for their terms, protect BancShares from a substantial portion of the credit and asset quality risk that would otherwise be incurred.

At September 30, 2017, $8.61 billion in noncovered loans with a lendable collateral value of $5.94 billion were used to secure $835.2 million in Federal Home Loan Bank (FHLB) of Atlanta advances, resulting in additional borrowing capacity of $5.10 billion. At December 31, 2016, $8.26 billion in noncovered loans with a lendable collateral value of $5.50 billion were used to secure $660.2 million in FHLB of Atlanta advances, resulting in additional borrowing capacity of $4.84 billion. At September 30, 2017, $2.74 billion in noncovered loans with a lendable collateral value of $2.05 billion were used to secure additional borrowing capacity at the Federal Reserve Bank (FRB). There were no loans used to secure additional borrowing capacity at the FRB at December 31, 2016.

Net deferred fees on originated non-PCI loans and leases, including unearned income and unamortized costs, fees, premiums and discounts, were $1.9 million and $6.7 million at September 30, 2017 and December 31, 2016, respectively. The unamortized discount related to purchased non-PCI loans and leases in the Guaranty, Cordia Bancorp Inc. (Cordia) and First Citizens Bancorporation, Inc. (Bancorporation) acquisitions was $15.6 million, $3.1 million and $19.9 million at September 30, 2017, respectively. At December 31, 2016, the unamortized discount related to purchased non-PCI loans and leases from the Cordia and Bancorporation acquisitions was $4.2 million and $27.4 million, respectively. During the three months ended September 30, 2017 and September 30, 2016, accretion income on non-PCI loans and leases was $4.2 million and $3.6 million, respectively. During the nine months ended September 30, 2017 and September 30, 2016, accretion income on non-PCI loans and leases was $10.2 million and $9.7 million, respectively.

Certain residential real estate loans are originated to be sold to investors and are recorded in loans held for sale at fair value. In addition, we may change our strategy for certain portfolio loans and sell them in the secondary market. At that time, portfolio loans are transferred to loans held for sale at the lower of amortized cost or market. Loans held for sale totaled $70.8 million at

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September 30, 2017. During the third quarter of 2017, certain residential mortgage portfolio loans of $130.2 million were sold resulting in a gain of $843 thousand. During the nine months ended September 30, 2017, $162.7 million of certain residential mortgage portfolio loans were sold, resulting in a gain of $1.0 million.

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 affected 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, 2017 and December 31, 2016 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, lease financing and other commercial real estate loans.

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Non-PCI loans and leases outstanding at September 30, 2017 and December 31, 2016 by credit quality indicator are provided below:

	September 30, 2017
(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	$	616,505	$	9,321,377	$	430,282	$	2,448,998	$	855,877	$	317,991	$	13,991,030
Special mention	4,128		64,907		1,208		36,707		3,833		1,159		111,942
Substandard	6,193		123,327		3,246		21,215		6,824		3,066		163,871
Doubtful	61		292		—		47		—		—		400
Ungraded	—		255		—		147,931		270		—		148,456
Total	$	626,887	$	9,510,158	$	434,736	$	2,654,898	$	866,804	$	322,216	$	14,415,699
	December 31, 2016
	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	$	645,232	$	8,821,439	$	347,509	$	2,402,659	$	818,008	$	335,831	$	13,370,678
Special mention	2,236		76,084		1,433		22,804		2,675		1,020		106,252
Substandard	1,683		126,863		2,349		17,870		5,415		3,413		157,593
Doubtful	6		334		—		8		—		—		348
Ungraded	—		1,500		—		124,160		172		—		125,832
Total	$	649,157	$	9,026,220	$	351,291	$	2,567,501	$	826,270	$	340,264	$	13,760,703

	September 30, 2017
	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	$	3,424,113	$	2,668,131	$	223,849	$	1,498,399	$	7,814,492
30-59 days past due	17,635		11,606		1,026		7,671		37,938
60-89 days past due	7,460		2,796		497		2,793		13,546
90 days or greater past due	18,770		10,025		1,812		2,624		33,231
Total	$	3,467,978	$	2,692,558	$	227,184	$	1,511,487	$	7,899,207
	December 31, 2016
	Non-PCI noncommercial loans and leases
	Residential mortgage		Revolving mortgage		Construction and land development		Consumer		Total non-PCI noncommercial loans and leases
Current	$	2,839,045	$	2,576,942	$	229,106	$	1,434,658	$	7,079,751
30-59 days past due	27,760		14,290		1,139		6,775		49,964
60-89 days past due	7,039		2,698		598		2,779		13,114
90 days or greater past due	15,280		7,414		557		1,926		25,177
Total	$	2,889,124	$	2,601,344	$	231,400	$	1,446,138	$	7,168,006

18

PCI loans outstanding at September 30, 2017 and December 31, 2016 by credit quality indicator are provided below:

	September 30, 2017
(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	$	6,781	$	202,496	$	14,323	$	4,464	$	274	$	228,338
Special mention	730		57,887		379		560		393		59,949
Substandard	7,651		123,909		2,291		1,707		255		135,813
Doubtful	2,244		9,265		778		297		—		12,584
Ungraded	—		—		—		36		—		36
Total	$	17,406	$	393,557	$	17,771	$	7,064	$	922	$	436,720
	December 31, 2016
	PCI commercial loans
	Construction and land development		Commercial mortgage		Other commercial real estate		Commercial and industrial		Other		Total PCI commercial loans
Pass	$	8,103	$	234,023	$	8,744	$	7,253	$	696	$	258,819
Special mention	950		67,848		102		620		—		69,520
Substandard	7,850		138,312		3,462		3,648		1,006		154,278
Doubtful	3,863		12,830		337		303		—		17,333
Ungraded	—		—		—		20		—		20
Total	$	20,766	$	453,013	$	12,645	$	11,844	$	1,702	$	499,970

	September 30, 2017
	PCI noncommercial loans
(Dollars in thousands)	Residential mortgage		Revolving mortgage		Consumer		Total PCI noncommercial loans
Current	$	283,789	$	60,334	$	2,179	$	346,302
30-59 days past due	8,379		2,410		62		10,851
60-89 days past due	4,234		1,542		28		5,804
90 days or greater past due	30,861		3,561		68		34,490
Total	$	327,263	$	67,847	$	2,337	$	397,447
	December 31, 2016
	PCI noncommercial loans
	Residential mortgage		Revolving mortgage		Consumer		Total PCI noncommercial loans
Current	$	230,065	$	33,827	$	1,637	$	265,529
30-59 days past due	9,595		618		68		10,281
60-89 days past due	6,528		268		4		6,800
90 days or greater past due	22,589		3,937		63		26,589
Total	$	268,777	$	38,650	$	1,772	$	309,199

19

The aging of the outstanding non-PCI loans and leases, by class, at September 30, 2017 and December 31, 2016 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, 2017
(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	$	1,075	$	346	$	122	$	1,543	$	625,344	$	626,887
Commercial mortgage	7,661		2,272		10,447		20,380		9,489,778		9,510,158
Other commercial real estate	52		—		680		732		434,004		434,736
Commercial and industrial	10,322		2,459		1,217		13,998		2,640,900		2,654,898
Lease financing	1,752		932		833		3,517		863,287		866,804
Residential mortgage	17,635		7,460		18,770		43,865		3,424,113		3,467,978
Revolving mortgage	11,606		2,796		10,025		24,427		2,668,131		2,692,558
Construction and land development - noncommercial	1,026		497		1,812		3,335		223,849		227,184
Consumer	7,671		2,793		2,624		13,088		1,498,399		1,511,487
Other	—		—		155		155		322,061		322,216
Total non-PCI loans and leases	$	58,800	$	19,555	$	46,685	$	125,040	$	22,189,866	$	22,314,906
	December 31, 2016
	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	$	1,845	$	39	$	286	$	2,170	$	646,987	$	649,157
Commercial mortgage	11,592		2,773		10,329		24,694		9,001,526		9,026,220
Other commercial real estate	310		—		—		310		350,981		351,291
Commercial and industrial	7,918		2,102		1,051		11,071