Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
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 principal executive offices, ZIP code)
 
 
 
 
 
(919) 716-7000
 
 
(Registrant's telephone number, including area code)
 
____________________________________________________

Securities Registered Pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class
 
Name of each exchange on which registered
Class A Common Stock, Par Value $1
 
NASDAQ Global Select Market

Securities Registered Pursuant to Section 12(g) of the Securities Exchange Act of 1934.
Class B Common Stock, Par Value $1
(Title of class)
  _________________________________________________________________
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x    No ¨
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨    No x
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 during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x    No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
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 “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” 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

The aggregate market value of the Registrant’s common equity held by nonaffiliates computed by reference to the price at which the common equity was last sold as of the last business day of the Registrant’s most recently completed second fiscal quarter was $1,900,169,651.

On February 21, 2017, there were 11,005,220 outstanding shares of the Registrant's Class A Common Stock and 1,005,185 outstanding shares of the Registrant's Class B Common Stock.
Portions of the Registrant's definitive Proxy Statement for the 2017 Annual Meeting of Shareholders are incorporated in Part III of this report.





 
 
 
Page
 
 
CROSS REFERENCE INDEX
 
 
 
 
 
PART I
Item 1
 
Item 1A
 
Item 1B
Unresolved Staff Comments
None
 
Item 2
 
Item 3
PART II
Item 5
 
Item 6
 
Item 7
 
Item 7A
 
Item 8
Financial Statements and Supplementary Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
 
Item 9A
 
Item 9B
Other Information
None
PART III
Item 10
Directors, Executive Officers and Corporate Governance
*
 
Item 11
Executive Compensation
*
 
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
*
 
Item 13
Certain Relationships and Related Transactions and Director Independence
*
 
Item 14
Principal Accounting Fees and Services
*
PART IV
Item 15
Exhibits, Financial Statement Schedules
 
 
(1)
Financial Statements (see Item 8 for reference)
 
 
(2)
All Financial Statement Schedules normally required for Form 10-K are omitted since they are not applicable, except as referred to in Item 8.
 
 
(3)

* Information required by Item 10 is incorporated herein by reference to the information that appears under the headings or captions ‘Proposal 1: Election of Directors,’ ‘Code of Ethics,’ ‘Committees of our Board—General’ and ‘—Audit Committee’, ‘Executive Officers’ and ‘Section 16(a) Beneficial Ownership Reporting Compliance’ from the Registrant’s Proxy Statement for the 2017 Annual Meeting of Shareholders (2017 Proxy Statement).
Information required by Item 11 is incorporated herein by reference to the information that appears under the headings or captions ‘Compensation, Nominations and Governance Committee Report,’ ‘Compensation Discussion and Analysis,’ ‘Executive Compensation,’ and ‘Director Compensation,’ of the 2017 Proxy Statement.
Information required by Item 12 is incorporated herein by reference to the information that appears under the captions ‘Beneficial Ownership of Our Common Stock—Directors and Executive Officers’ and '—Principal Shareholders' of the 2017 Proxy Statement.
Information required by Item 13 is incorporated herein by reference to the information that appears under the headings or captions ‘Corporate Governance—Director Independence’ and ‘Transactions with Related Persons’ of the 2017 Proxy Statement.
Information required by Item 14 is incorporated by reference to the information that appears under the caption ‘Proposal 4: Ratification of Appointment of Independent Accounts – Services and Fees During 2016 and 2015’ of the 2017 Proxy Statement.



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Part I
Item 1. Business
 
General
First Citizens BancShares, Inc. (BancShares) was incorporated under the laws of Delaware on August 7, 1986, to become the holding company of First-Citizens Bank & Trust Company (FCB), its banking subsidiary. FCB opened in 1898 as the Bank of Smithfield, Smithfield, North Carolina, and later changed its name to First-Citizens Bank & Trust Company. BancShares has expanded through de novo branching and acquisitions and now operates in 21 states providing a broad range of financial services to individuals, businesses and professionals. As of December 31, 2016, BancShares had total assets of $32.99 billion.

Throughout its history, the operations of BancShares have been significantly influenced by descendants of Robert P. Holding, who came to control FCB during the 1920s. Robert P. Holding’s children and grandchildren have served as members of the Board of Directors, as chief executive officers and in other executive management positions and, since our formation in 1986, have remained shareholders controlling a large percentage of our common stock.

Our Chairman of the Board and Chief Executive Officer, Frank B. Holding, Jr., is the grandson of Robert P. Holding. Hope Holding Bryant, Vice Chairman of BancShares, is Robert P. Holding’s granddaughter. Peter M. Bristow, President and Corporate Sales Executive of BancShares, is the brother-in-law of Frank B. Holding, Jr. and Hope Holding Bryant.

FCB seeks to meet the financial needs of both individuals and commercial entities in its market areas through a wide range of retail and commercial banking services. Loan services include various types of commercial, business and consumer lending. Deposit services include checking, savings, money market and time deposit accounts. We also provide mortgage lending, a full-service trust department, wealth management services for businesses and individuals and other activities incidental to commercial banking. FCB’s wholly-owned subsidiaries, First Citizens Investor Services, Inc. (FCIS) and First Citizens Asset Management, Inc. (FCAM), provide various investment products including annuities, discount brokerage services and third-party mutual funds to customers primarily through the bank's branch network, as well as investment advisory services. First Citizens Securities Corporation Inc. merged into FCIS effective January 1, 2016.

We deliver products and services to our customers through our extensive branch network as well as digital banking, telephone banking and various ATM networks. Services offered at most offices include taking of deposits, cashing of checks and providing for individual and commercial cash needs. Business customers may conduct banking transactions through the use of remote image technology.

FCB’s primary deposit markets are North Carolina and South Carolina. FCB’s deposit market share in North Carolina was 4.3 percent as of June 30, 2016, based on the FDIC Deposit Market Share Report, which makes FCB the fourth largest bank in North Carolina. The three banks larger than FCB based on deposits in North Carolina as of June 30, 2016, controlled 76.6 percent of North Carolina deposits. In South Carolina, FCB was the 4th largest bank in terms of deposit market share with 8.5 percent at June 30, 2016. The three larger banks represent 45.2 percent of total deposits in South Carolina as of June 30, 2016.

Statistical information regarding our business activities is found in Management’s Discussion and Analysis.

Geographic Locations and Employees
As of December 31, 2016, FCB operated 550 branches in Arizona, California, Colorado, Florida, Georgia, Kansas, Maryland, Missouri, New Mexico, North Carolina, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia and Wisconsin. BancShares and its subsidiaries employ approximately 5,855 full-time staff and approximately 441 part-time staff for a total of 6,296 employees.

Business Combinations
FCB recently purchased certain assets and assumed certain liabilities of the following banks from the Federal Deposit Insurance Corporation (FDIC):
Harvest Community Bank (HCB) of Pennsville, New Jersey on January 13, 2017
First CornerStone Bank (FCSB) of King of Prussia, Pennsylvania on May 6, 2016
North Milwaukee State Bank (NMSB) of Milwaukee, Wisconsin on March 11, 2016
Capitol City Bank & Trust (CCBT) of Atlanta, Georgia on February 13, 2015

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On September 1, 2016, FCB completed the merger of Midlothian, Virginia-based Cordia Bancorp, Inc. (Cordia) and its subsidiary, Bank of Virginia (BVA) into FCB. Under the terms of the merger agreement, cash consideration of $5.15 was paid to Cordia’s shareholders for each of their shares of Cordia’s common stock, with total consideration paid of $37.1 million. The merger enabled FCB to strengthen its presence in the greater Richmond, Virginia area as Cordia operated six BVA branches in Richmond, Midlothian, Chesterfield, Colonial Heights and Chester, Virginia.
FDIC Shared-Loss Termination
On June 14, 2016, FCB terminated five of its nine shared-loss agreements with the FDIC, including Temecula Valley Bank (TVB), Sun American Bank (SAB), Williamsburg First National Bank (WFNB), Atlantic Bank & Trust (ABT) and Colorado Capital Bank (CCB). The resulting positive net impact to pre-tax earnings from the early termination of the FDIC shared-loss agreements was $16.6 million during 2016. See the FDIC-Assisted Transactions section in Management's Discussion and Analysis for more details.
Regulatory Considerations
The business and operations of BancShares and FCB are subject to significant federal and state regulation and supervision. BancShares is a financial holding company registered with the Federal Reserve Board (Federal Reserve) under the Bank Holding Company Act of 1956, as amended. It is subject to supervision and examination by, and the regulations and reporting requirements of, the Federal Reserve.

FCB is a state-chartered bank, subject to supervision and examination by, and the regulations and reporting requirements of, the FDIC and the North Carolina Commissioner of Banks (NCCB). Deposit obligations are insured by the FDIC to the maximum legal limits.

Various regulatory authorities supervise all areas of BancShares' and FCB's business including loans, allowances for loan and lease losses, mergers and acquisitions, the payment of dividends, various compliance matters and other aspects of its operations. The regulators conduct regular examinations, and BancShares and FCB must furnish periodic reports to their regulators containing detailed financial and other information.

Numerous statutes and regulations apply to and restrict the activities of FCB, including limitations on the ability to pay dividends, capital requirements, reserve requirements, deposit insurance requirements and restrictions on transactions with related persons and entities controlled by related persons. The impact of these statutes and regulations is discussed below and in the accompanying consolidated financial statements.

Dodd-Frank Act. The Dodd-Frank Act, enacted in 2010, significantly restructures the financial services regulatory environment and imposes significant regulatory and compliance changes, increased capital, leverage and liquidity requirements, including through the expansion of the scope of oversight responsibility of certain federal agencies through the creation of new oversight bodies. For example, the Dodd-Frank Act established the Consumer Financial Protection Bureau (CFPB) with broad powers to supervise and enforce consumer protection laws. The CFPB has broad rule-making authority for a wide range of consumer protection laws and regulations that apply to all banks and savings institutions and non-bank financial institutions, including the regulations that relate to credit card, deposit, mortgage and other consumer financial products and services we offer. The CFPB also has powers to issue regulations and take enforcement actions to prevent and remedy acts and practices relating to consumer financial products and services that it deems to be unfair, deceptive or abusive. The agency also has authority to impose new disclosure requirements for any consumer financial product or service.

Other changes resulting from the Dodd-Frank Act include:
Capital Planning and Stress Testing. The Dodd-Frank Act mandated that stress tests be developed and performed to ensure that financial institutions have sufficient capital to absorb losses and support operations during multiple economic and bank scenarios. Bank holding companies with total consolidated assets between $10 billion and $50 billion, including BancShares, undergo annual company-run stress tests. As directed by the Federal Reserve, summaries of BancShares’ annual results in the severely adverse stress tests were made available to the public starting in June 2015. The results of stress testing activities will be considered by our Risk Committee in combination with other risk management and monitoring practices as part of our risk management program.
The Volcker Rule. The Dodd-Frank Act prohibits insured depository institutions and their holding companies from engaging in proprietary trading except in limited circumstances, and prohibits them from owning equity interests in excess of 3 percent of Tier 1 capital in private equity and hedge funds (Volcker Rule). Each regulated entity is required to establish an internal compliance program that is consistent with the extent to which it engages in activities covered by the Volcker Rule. Although the rules provide some tiering of compliance and reporting obligations based on size, the fundamental prohibitions of the Volcker Rule apply to banking entities of any size, including BancShares and FCB. The adoption of

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the Volcker Rule did not have any material effect on our consolidated financial position or consolidated results of operations.
Ability-to-Repay and Qualified Mortgage Rule. Creditors are required to comply with mortgage reform provisions prohibiting the origination of any residential mortgages that do not meet rigorous Qualified Mortgage standards or Ability-to-Repay standards. All mortgage loans originated by FCB meet Ability-to-Repay standards and a substantial majority also meet Qualified Mortgage standards. 

BancShares
General. As a financial holding company registered under the Bank Holding Company Act (BHCA), BancShares is subject to supervision, regulation, and examination by the Federal Reserve. BancShares is also registered under the bank holding company laws of North Carolina and is subject to supervision, regulation, and examination by the NCCB.

Permitted Activities. A bank holding company is limited to managing or controlling banks, furnishing services to or performing services for its subsidiaries, and engaging in other activities that the Federal Reserve determines by regulation or order to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In addition, bank holding companies that qualify and elect to be financial holding companies, such as BancShares, may engage in any activity, or acquire and retain the shares of a company engaged in any activity, that is either (i) financial in nature or incidental to such financial activity (as determined by the Federal Reserve in consultation with the Secretary of the Treasury) or (ii) complementary to a financial activity and does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally (as solely determined by the Federal Reserve), without prior approval of the Federal Reserve. Activities that are financial in nature include securities underwriting and dealing, serving as an insurance agent and underwriter and engaging in merchant banking.

Status Requirements. To maintain financial holding company status, a financial holding company and all of its depository institution subsidiaries must be well-capitalized and well-managed. A depository institution subsidiary is considered to be well-capitalized if it satisfies the requirements for this status under applicable Federal Reserve capital requirements. A depository institution subsidiary is considered “well managed” if it received a composite rating and management rating of at least “satisfactory” in its most recent examination. If a financial holding company ceases to meet these capital and management requirements, the Federal Reserve may impose limitations or conditions on the conduct of its activities.

Capital Requirements. The Federal Reserve imposes certain capital requirements on bank holding companies under the BHCA, including a minimum leverage ratio and a minimum ratio of “qualifying” capital to risk-weighted assets. These requirements are described below under “The Subsidiary Bank - FCB - Current Capital Requirements (Basel III)”. As of December 31, 2016, the risk-based Tier 1, common equity Tier 1, total capital, and leverage capital ratios of BancShares were 12.42 percent, 12.42 percent, 13.85 percent and 9.05 percent, respectively, and each capital ratio listed above exceeded the applicable minimum requirements as well as the well-capitalized standards. Subject to its capital requirements and certain other restrictions, BancShares is able to borrow money to make capital contributions to FCB and such loans may be repaid from dividends paid by FCB to BancShares.

Source of Strength. Under the Dodd-Frank Act, bank holding companies are required to act as a source of financial and managerial strength to their subsidiary banks. Under this requirement, BancShares is expected to commit resources to support FCB, including times when BancShares may not be in a financial position to provide such resources. Any capital loans made by a bank holding company to any of its subsidiary banks are subordinate in right of payment to depositors and to certain other indebtedness of such subsidiary banks. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment.

Safety and Soundness. The federal bank regulatory agencies have adopted guidelines prescribing safety and soundness standards. These guidelines establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth and compensation, fees and benefits. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risk and exposures specified in the guidelines. There are a number of obligations and restrictions imposed on bank holding companies and their subsidiary banks by law and regulatory policy that are designed to minimize potential loss to the depositors of such depository institutions and the FDIC insurance fund in the event of a depository institution default.

Limits on Dividends and Other Payments. BancShares is a legal entity, separate and distinct from its subsidiaries. Revenues of BancShares primarily result from dividends paid to it by FCB. There are various legal limitations applicable to the payment of dividends by FCB to BancShares and to the payment of dividends by BancShares to its shareholders. The payment of dividends by FCB or BancShares may be limited by certain factors, such as requirements to maintain capital above regulatory guidelines.

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Bank regulatory agencies have the authority to prohibit FCB or BancShares from engaging in an unsafe or unsound practice in conducting their business. The payment of dividends, depending on the financial condition of FCB or BancShares, could be deemed to constitute such an unsafe or unsound practice.

Under the Federal Deposit Insurance Act (FDIA), insured depository institutions, such as FCB, are prohibited from making capital distributions, including the payment of dividends, if, after making such distributions, the institution would become “undercapitalized” (as such term is used in the statute). Additionally, under Basel III capital requirements, banking institutions with a ratio of common equity Tier 1 to risk-weighted assets above the minimum but below the conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. Based on FCB’s current financial condition, BancShares currently does not expect these provisions to have any material impact on its ability to receive dividends from FCB. BancShares' non-bank subsidiaries pay dividends to BancShares periodically on a non-regulated basis.

Subsidiary Bank - FCB
General. FCB is a state-chartered bank, subject to supervision and examination by, and the regulations and reporting requirements of, the FDIC and the NCCB.

The various laws and regulations administered by the bank regulatory agencies affect corporate practices, such as the payment of dividends, incurrence of debt, and acquisition of financial institutions and other companies; they also affect business practices, such as the payment of interest on deposits, the charging of interest on loans, types of business conducted, and location of offices.

Capital Requirements (Basel III). Bank regulatory agencies approved Basel III regulatory capital guidelines aimed at strengthening existing capital requirements through a combination of higher minimum capital requirements, new capital conservation buffers and more conservative definitions of capital and balance sheet exposure. BancShares and FCB implemented the requirements of Basel III effective January 1, 2015, subject to a transition period for several aspects of the rule. The table below describes the minimum and well-capitalized requirements for the transitional period that began in 2016 and the fully-phased-in requirements that become effective in 2019.
 
Basel III minimum requirement
2016
 
Basel III well-capitalized
2016
 
Basel III minimum requirement
2019
 
Basel III well-capitalized
2019
Leverage ratio
4.00%
 
5.00%
 
4.00%
 
5.00%
Common equity Tier 1
4.50
 
6.50
 
4.50
 
6.50
Common equity Tier 1 plus conservation buffer
5.13
 
7.13
 
7.00
 
9.00
Tier 1 capital ratio
6.00
 
8.00
 
6.00
 
8.00
Tier 1 capital ratio plus conservation buffer
6.63
 
8.63
 
8.50
 
10.50
Total capital ratio
8.00
 
10.00
 
8.00
 
10.00
Total capital ratio plus conservation buffer
8.63
 
10.63
 
10.50
 
12.50

The capital conservation buffer requirement was phased in beginning January 1, 2016, at 0.625 percent of risk-weighted assets, increasing each year until fully implemented at 2.5 percent on January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of common equity Tier 1 to risk-weighted assets above the minimum, but below the conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall.

Failure to meet minimum capital requirements may result in certain actions by regulators that could have a direct material effect on the consolidated financial statements. As of December 31, 2016, FCB exceeded the applicable minimum requirements as well as the well-capitalized standards.

Transactions with Affiliates. Pursuant to Sections 23A and 23B of the Federal Reserve Act, Regulation W and Regulation O, the authority of FCB to engage in transactions with related parties or “affiliates” or to make loans to insiders is limited. Loan transactions with an affiliate generally must be collateralized and certain transactions between FCB and its affiliates, including the sale of assets, the payment of money or the provision of services, must be on terms and conditions that are substantially the same, or at least as favorable to FCB, as those prevailing for comparable nonaffiliated transactions. In addition, FCB generally may not purchase securities issued or underwritten by affiliates.


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FCB receives management fees from its subsidiaries and BancShares for expenses incurred for performing various functions on their behalf. These fees are charged to each company based upon the estimated cost for usage of services by that company. The fees are eliminated from the consolidated financial statements.

Community Reinvestment Act. FCB is subject to the requirements of the Community Reinvestment Act of 1977 (CRA). The CRA imposes on financial institutions an affirmative and ongoing obligation to meet the credit needs of the local communities, including low and moderate income neighborhoods. If FCB receives a rating from the Federal Reserve of less than “satisfactory” under the CRA, restrictions on operating activities would be imposed. In addition, in order for a financial holding company, like BancShares, to commence any new activity permitted by the BHCA, or to acquire any company engaged in any new activity permitted by the BHCA, each insured depository institution subsidiary of the financial holding company must have received a rating of at least “satisfactory” in its most recent examination under the CRA. FCB currently has a “satisfactory” CRA rating.

Anti-Money Laundering and OFAC Regulation. Governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist financing. The Bank Secrecy Act of 1970 (BSA) and subsequent laws and regulations require financial institutions to take steps to prevent the use of its systems from facilitating the flow of illegal or illicit money or terrorist funds. In 2001, the USA Patriot Act of 2001 (Patriot Act) significantly expanded the anti-money laundering (AML) and financial transparency laws and regulations by imposing new compliance and due diligence obligations, including standards for verifying customer identification at account opening, maintaining expanded records and rules to promote cooperation among financial institutions, regulators and law enforcement entities to identify persons who may be involved in terrorism or money laundering. Additional rules were finalized in 2016 and must be implemented by May 2018 which create expanded obligations regarding customer due diligence and the identification of beneficial owners of business entities. An institution subject to the BSA, such as FCB, must provide AML training to employees, designate an AML compliance officer and annually audit the AML program to assess its effectiveness. The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others. Based on their administration by the United States Department of the Treasury's Office of Foreign Assets Control (OFAC), these are typically known as the OFAC rules. Generally, the rules contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, and (ii) blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to United States jurisdiction. Blocked assets cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure of a financial institution to maintain and implement adequate BSA, AML and OFAC programs, or to comply with all the relevant laws and regulations, could have serious legal and reputational consequences for the institution and result in material fines and sanctions.

Consumer Laws and Regulations. FCB is also subject to certain consumer laws and regulations that are designed to protect consumers in transactions with banks. These laws include the Truth in Lending Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, Real Estate Settlement Procedures Act, Home Mortgage Disclosure Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Fair Housing Act and the Servicemembers Civil Relief Act, among others. The laws and related regulations mandate certain disclosure requirements and regulate the manner in which financial institutions transact business with certain customers. A financial institution must provide to its customers information regarding its policies and procedures with respect to the handling of customers’ personal information. Each institution must conduct an internal risk assessment of its ability to protect customer information. These privacy provisions generally prohibit a financial institution from providing a customer’s personal financial information to unaffiliated parties without prior notice and approval from the customer. FCB must comply with the applicable provisions of these consumer protection laws and regulations as part of its ongoing customer relations.
Available Information

BancShares does not have its own separate Internet website. However, FCB’s website (www.firstcitizens.com) includes a hyperlink to the SEC’s website where the public may obtain copies of BancShares’ annual reports on Form 10-K, quarterly reports on 10-Q, current reports on Form 8-K, and amendments to those reports, free of charge, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Interested parties may also directly access the SEC’s website that contains reports and other information that BancShares files electronically with the SEC. The address of the SEC’s website is www.sec.gov.

Item 1A. Risk Factors
The risks and uncertainties that management believes are material are described below. The risks listed are not the only risks that BancShares faces. Additional risks and uncertainties that are not currently known or that management does not currently deem material could also have a material adverse impact on our financial condition and/or the results of our operations or our business.

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If such risks and uncertainties were to become reality or the likelihoods of those risks were to increase, the market price of our common stock could significantly decline.
Our concentration of loans to borrowers within the medical and dental industry could impair our earnings if those industries experience economic difficulties
If regulatory changes (e.g., Affordable Care Act) in the market negatively impact the borrowers' businesses and their ability to repay their loans with us, this could have a material adverse effect on our financial condition and results of operations. We could be required to increase our allowance for loan losses through provisions for loan loss on our income statement that would reduce reported net income.
Our concentration of credit exposure in loans to dental practices could increase credit risk
Dentists and dental practices generally have fewer financial resources in terms of capital or borrowing capacity than larger entities, and generally have a heightened vulnerability to negative economic conditions. If economic conditions in the market negatively impact the borrowers’ businesses and their ability to repay their loans with us, this could have a material adverse effect on our financial condition and results of operations.
Economic conditions in real estate markets and our reliance on junior liens may adversely impact our business and our results of operations 
Real property collateral values may be impacted by economic conditions in the real estate market and may result in losses on loans that, while adequately collateralized at the time of origination, become inadequate. Our reliance on junior liens is concentrated in our non-commercial revolving mortgage loan portfolio. Approximately two-thirds of the revolving mortgage portfolio is secured by junior lien positions and lower real estate values for collateral underlying these loans may cause the outstanding balance of the senior lien to exceed the value of the collateral, resulting in a junior lien loan that is in effect unsecured. Inadequate collateral values, rising interest rates and unfavorable economic conditions could result in greater delinquency, write-downs or charge-offs in future periods, which could have a material adverse impact on our results of operations and capital adequacy.
Our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio
We maintain an allowance for loan losses that is designed to cover losses on loans that borrowers may not repay in their entirety. We believe that we maintain an allowance for loan losses at a level adequate to absorb probable losses inherent in the loan portfolio as of the corresponding balance sheet date, and in compliance with applicable accounting and regulatory guidance. However, the allowance may not be sufficient to cover actual loan losses, and future provisions for loan losses could materially and adversely affect our operating results. Accounting measurements related to impairment and the allowance require significant estimates that are subject to uncertainty and changes relating to new information and changing circumstances. The significant uncertainties surrounding our borrowers' abilities to conduct their businesses successfully through changing economic environments, competitive challenges, and other factors complicate our estimates of the risk and/or amount of loss on any loan. Due to the degree of uncertainty and the susceptibility to change, the actual losses may vary from current estimates. We expect fluctuations in the allowance due to the uncertain economic conditions.
As an integral part of their examination process, our banking regulators periodically review the allowance and may require us to increase it for loan losses by recognizing additional provisions for loan losses charged to expense or to decrease the allowance by recognizing loan charge-offs, net of recoveries. Any such required additional loan loss provisions or charge-offs could have a material adverse effect on our financial condition and results of operations.
BancShares has been monitoring the October 2016 impact of Hurricane Matthew in our market areas. We have assessed how this situation may impact our customers and the areas in which they operate. However, we have not identified any significant impact to the credit quality of the loans in these areas that would cause us to adjust the allowance for loan losses.
If we fail to effectively manage credit risk and interest rate risk, our business and financial condition will suffer
We must effectively manage credit risk. There are risks inherent in making any loan, including risks of repayment, risks with respect to the period of time over which the loan may be repaid, risks relating to proper loan underwriting and guidelines, risks resulting from changes in economic and industry conditions, risks inherent in dealing with individual borrowers and risks resulting from uncertainties as to the future value of collateral. There is no assurance that our credit risk monitoring and loan approval procedures are or will be adequate or will reduce the inherent risks associated with lending. Our credit administration personnel, policies and procedures may not adequately adapt to changes in economic or any other conditions affecting customers and the quality of our loan portfolio. Any failure to manage such credit risks may materially adversely affect our business and our consolidated results of operations and financial condition.

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Our results of operations and cash flows are highly dependent upon net interest income. Interest rates are sensitive to economic and market conditions that are beyond our control, including the actions of the Federal Reserve Board’s Federal Open Market Committee (FOMC). Changes in monetary policy could influence interest income and interest expense as well as the fair value of our financial assets and liabilities. If changes in interest rates on our interest-earning assets are not equal to the changes in interest rates on our interest-bearing liabilities, our net interest income and, therefore, our net income could be adversely impacted.
Although we maintain an interest rate risk monitoring system, the forecasts of future net interest income are estimates and may be inaccurate. Actual interest rate movements may differ from our forecasts, and unexpected actions by the FOMC may have a direct impact on market interest rates.
Unfavorable economic conditions could adversely affect our business
Our business is subject to periodic fluctuations based on national, regional and local economic conditions. These fluctuations are not predictable, cannot be controlled, and may have a material adverse impact on our operations and financial condition. Our banking operations are locally oriented and community-based. Our retail and commercial banking activities are primarily concentrated within the same geographic footprint. Our markets include the Southeast, Mid-Atlantic, Midwest, and Western United States, with our deepest presence in North Carolina and South Carolina. Worsening economic conditions within our markets, particularly within North Carolina and South Carolina, could have a material adverse effect on our financial condition, results of operations and cash flows. Accordingly, we expect to continue to be dependent upon local business conditions as well as conditions in the local residential and commercial real estate markets we serve. Unfavorable changes in unemployment, real estate values, interest rates and other factors could weaken the economies of the communities we serve. In recent years, economic growth and business activity across a wide range of industries has been slow and uneven and there can be no assurance that economic conditions will continue to improve, and these conditions could worsen. In addition, oil price volatility, the level of U.S. debt and global economic conditions have had a destabilizing effect on financial markets. Weakness in any of our market areas could have an adverse impact on our earnings, and consequently our financial condition and capital adequacy.
Our ability to grow is contingent on access to capital
Our primary capital sources have been retained earnings and debt issued through both private and public markets. Rating agencies regularly evaluate our creditworthiness and assign credit ratings to our debt and the debt of FCB. The ratings of the agencies are based on a number of factors, some of which are outside our control. In addition to factors specific to our financial strength and performance, the rating agencies also consider conditions generally affecting the financial services industry. There can be no assurance that we will maintain our current credit ratings. Rating reductions could adversely affect our access to funding sources and the cost of obtaining funding.
Based on existing capital levels, BancShares and FCB are well-capitalized under current leverage and risk-based capital standards. Our ability to grow is contingent on our ability to generate sufficient capital to remain well-capitalized under current and future capital adequacy guidelines.
If our current level of balance sheet liquidity were to experience pressure, that could affect our ability to pay deposits and fund our operations
Our deposit base represents our primary source of core funding and balance sheet liquidity. We normally have the ability to stimulate core deposit growth through reasonable and effective pricing strategies. However, in circumstances where our ability to generate needed liquidity is impaired, we need access to noncore funding such as borrowings from the Federal Home Loan Bank (FHLB) and the Federal Reserve, Federal Funds purchased lines and brokered deposits. While we maintain access to these noncore funding sources, for some of them we are dependent on the availability of collateral and the counterparty’s willingness and ability to lend.
The Dodd-Frank Act rescinded the long-standing prohibition on the payment of interest on commercial demand deposit accounts. The current low interest rate environment, as well as relatively low levels of competition among banks for demand deposit accounts, has made it difficult to determine the impact on our deposit base, if any, of this repeal. As interest rates rise, our interest expense will increase and our net interest margins may decrease, negatively impacting our performance and, potentially, our financial condition. To the extent banks and other financial service providers were to compete for commercial demand deposit accounts through higher interest rates, our deposit base could be reduced if we are unwilling to pay those higher rates; if we should determine to compete with those higher interest rates, our cost of funds could increase and our net interest margins could be reduced.
Our financial condition could be adversely affected by the soundness of other financial institutions
Financial services institutions are interrelated as a result of trading, clearing, counterparty and/or other relationships. We have exposure to numerous financial service providers, including banks, securities brokers and dealers, and other financial service

9




providers. Although we monitor the financial conditions of financial institutions with which we have credit exposure, transactions with such institutions expose us to credit risk through the possibility of counterparty default.
Our business and financial performance could be impacted by natural disasters, acts of war or terrorist activities
Natural disasters (including but not limited to earthquakes, hurricanes, tornadoes, floods, fires, explosions), acts of war and terrorist activities could hurt our performance (i) directly through damage to our facilities or other impact to our ability to conduct business in the ordinary course, and (ii) indirectly through such damage or impacts to our customers, suppliers or other counterparties. In particular, a significant amount of our business is concentrated in North Carolina and South Carolina, including in coastal areas where our retail and commercial customers could be impacted by hurricanes. We could also suffer adverse results to the extent that disasters, wars or terrorist activities affect the broader markets or economy. Our ability to minimize the consequences of such events is in significant measure reliant on the quality of our disaster recovery planning and our ability, if any, to forecast the events.
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 that are designed to safeguard and maintain our operational and organizational infrastructure and information. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
We encounter significant competition which may reduce our market share and profitability
We compete with other banks and specialized financial service providers in our market areas. Our primary competitors include local, regional and national banks; credit unions; commercial finance companies; various wealth management providers; independent and captive insurance agencies; mortgage companies; and non-bank providers of financial services. Some of our larger competitors, including banks that have a significant presence in our market areas, have the capacity to offer products and services we do not offer. Some of our competitors operate in less stringent regulatory environments, and certain competitors are not subject to federal and/or state income taxes. The fierce competitive pressures that we face adversely affect pricing for many of our products and services.
We depend on key personnel for our success
Our success depends to a great extent on our ability to attract and retain key personnel. We have an experienced management team that our board of directors believes is capable of managing and growing our business. Losses of or changes in our current executive officers or other key personnel and their responsibilities may disrupt our business and could adversely affect our financial condition, results of operations and liquidity. There can be no assurance that we will be successful in retaining our current executive officers or other key personnel, or hiring additional key personnel to assist in executing our growth, expansion and acquisition strategies.
Breaches of our and our vendors' 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 risks. 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.

10




We may not be able to utilize technology to efficiently and effectively develop, market, and deliver new products and services to our customers
The continuous, widespread adoption of new technologies, including internet services, smart phones and other mobile devices, requires us to evaluate our product and service offerings to ensure they remain competitive. Our success depends in part on our ability to adapt our products and services, as well as our distribution of them, to evolving industry standards and consumer preferences. The increasing pressure from our competitors, both bank and non-bank, to keep pace and adopt new technologies and products and services may require us to further incur substantial expense. We may be unsuccessful at developing or introducing new products or services, modifying our existing products and services, adapting to changing customer preferences, achieving market acceptance or regulatory approval, sufficiently developing or maintaining a loyal customer base or offering products and services at prices and service levels competitive with those offered by our non-bank and bank competitors. These risks may affect our ability to grow and could reduce both our revenue streams from certain products and services and our revenues generated by our net interest margins. Our results of operations and financial condition could be adversely affected.
Our financial performance depends upon our ability to attract and retain clients for our products and services, which ability may be adversely impacted by weakened consumer and/or business confidence, and by any inability on our part to predict and satisfy customers’ needs and demands
Our financial performance is subject to risks associated with the loss of client confidence and demand. A fragile or weakening economy, or ambiguity surrounding the economic future, may lessen the demand for our products and services. Our performance may also be negatively impacted if we should fail to attract and retain customers because we are not able to successfully anticipate, develop and market products and services that satisfy market demands. Such events could impact our performance through fewer loans, reduced fee income, and fewer deposits, each of which could result in reduced net income.
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.
Accounting for acquired assets may result in earnings volatility
Fair value discounts that are recorded at the time an asset is acquired are accreted into interest income based on U.S. GAAP. The rate at which those discounts are accreted is unpredictable, the result of various factors including prepayments and credit quality improvements. Post-acquisition deterioration results in the recognition of provision expense and allowance for loan and lease losses. Additionally, the income statement impact of adjustments to the indemnification asset recorded in certain FDIC-assisted transactions may occur over a shorter period of time than the adjustments to the covered assets.
Fair value discount accretion, post-acquisition impairment and adjustments to the indemnification asset may result in significant volatility in our earnings. Volatility in earnings could unfavorably influence investor interest in our common stock thereby depressing the market value of our stock and the market capitalization of our company.
Our business is highly quantitative and requires widespread use of financial models for day-to-day operations; these models may produce inaccurate predictions that significantly vary from actual results
We rely on quantitative models to measure risks and to estimate certain financial values. Such models may be used in many processes including, but not limited to, the pricing of various products and services, classifications of loans, setting interest rates on loans and deposits, quantifying interest rate and other market risks, forecasting losses, measuring capital adequacy, and calculating economic and regulatory capital levels. Models may also be used to estimate the value of financial instruments and balance sheet items. Inaccurate or erroneous models present the risk that business decisions relying on the models will prove inefficient or ineffective. Additionally, information we provide to our investors and regulators may be negatively impacted by inaccurately designed or implemented models. For further information on models, see the Risk Management section included in Item 7 of this Form 10-K.
Failure to maintain effective systems of internal controls over financial reporting could have a material adverse effect on our results of operations and financial condition and disclosures
We must have effective internal controls over financial reporting in order to provide reliable financial reports, to effectively prevent fraud, and to operate successfully as a public company. If we were unable to provide reliable financial reports or prevent fraud,

11




our reputation and operating results would be harmed. As part of our ongoing monitoring of our internal controls over financial reporting, we may discover material weaknesses or significant deficiencies requiring remediation. A “material weakness” is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
We continually work to improve our internal controls; however, we cannot be certain that these measures will ensure appropriate and adequate controls over our future financial processes and reporting. Any failure to maintain effective controls or to timely implement any necessary improvement of our internal controls could, among other things, result in losses from fraud or error, harm our reputation, or cause investors to lose confidence in our reported financial information, each of which could have a material adverse effect on our results of operations and financial condition and the market value of our common stock.
The value of our goodwill may decline in the future
At December 31, 2016, we had $150.6 million of goodwill recorded as an asset on our balance sheet. We test goodwill for impairment at least annually, comparing the estimated fair value of a reporting unit with its net book value. We also test goodwill for impairment when certain events occur, such as a significant decline in our expected future cash flows, a significant adverse change in the business climate, or a sustained decline in the price of our common stock. These tests may result in a write-off of goodwill deemed to be impaired, which could have a significant impact on our financial results; however, any such write-off would not impact our regulatory capital ratios, given that regulatory capital ratios are calculated using tangible capital amounts.
We may be adversely affected by risks associated with completed, pending or any potential future acquisitions
We plan to continue to grow our business organically. However, we have pursued and expect to pursue additional acquisition opportunities that we believe support our business strategies and may enhance our profitability. We must generally satisfy a number of material conditions prior to consummating any acquisition, including, in many cases, federal and state regulatory approval. We may fail to complete strategic and competitively significant business opportunities as a result of our inability to obtain any required regulatory approvals in a timely manner or at all.
Acquisitions of financial institutions or assets of financial institutions involve operational risks and uncertainties, and acquired companies or assets may have unknown or contingent liabilities, exposure to unexpected asset quality problems that require write downs or write-offs, difficulty retaining key employees and customers and other issues that could negatively affect our results of operations and financial condition.
We may not be able to realize projected cost savings, synergies or other benefits associated with any such acquisition. Failure to efficiently integrate any acquired entities or assets into our existing operations could increase our operating costs significantly and have material adverse effects on our financial condition and results of operations. There can be no assurance that we will be successful in identifying or consummating any potential acquisitions.
The performance of equity securities and corporate bonds in the investment portfolio could be adversely impacted by the soundness and fluctuations in the market values of other financial institutions
Our investment securities portfolio contains certain equity securities and corporate bonds of other financial institutions. As a result, a portion of our investment securities portfolio is subject to fluctuation due to changes in the financial stability and market value of other financial institutions, as well as interest rate sensitivity to economic and market conditions. Such fluctuations could have an adverse effect on our results of operations.
We operate in a highly regulated industry and the laws and regulations that govern our operations, taxes, corporate governance, executive compensation and financial accounting, or reporting, including changes in them, or our failure to comply with them, may adversely affect us
We are subject to extensive regulation and supervision that govern almost all aspects of our operations. In addition to a multitude of regulations designed to protect customers, depositors and consumers, we must comply with other regulations that protect the deposit insurance fund and the stability of the United States' (U.S.) financial system, including laws and regulations which, among other matters, prescribe minimum capital requirements, impose limitations on our business activities and investments, limit the dividend or distributions that we can pay, restrict the ability of our bank subsidiaries to guarantee our debt, and impose certain specific accounting requirements that may be more restrictive and may result in greater or earlier charges to earnings or reductions in our capital than accounting principles generally accepted in the United States (GAAP). Compliance with laws and regulations can be difficult and costly, and changes in laws and regulations often impose additional compliance costs.
The Sarbanes-Oxley Act of 2002 and the related rules and regulations issued by the SEC and NASDAQ, as well as numerous other recently enacted statutes and regulations, including the Dodd-Frank Act and regulations promulgated thereunder, have

12




increased the scope, complexity and cost of corporate governance and reporting and disclosure practices, including the costs of completing our external audit and maintaining our internal controls. Such additional regulation and supervision may limit our ability to pursue business opportunities.
The failure to comply with these various rules and regulations could subject us to restrictions on our business activities, mergers and acquisitions, fines and other penalties, any of which could adversely affect our results of operations, capital base and the price of our common stock.
We are subject to capital adequacy and liquidity guidelines and, if we fail to meet these guidelines, our financial condition would be adversely affected
Under regulatory capital adequacy guidelines and other regulatory requirements, BancShares, together with FCB, must meet certain capital and liquidity guidelines, subject to qualitative judgments by regulators about components, risk weightings, and other factors.
The Federal Reserve Bank (FRB) issued capital rules that established a new comprehensive capital framework for U.S. banking institutions and established a more conservative definition of capital. These requirements, known as Basel III, became effective January 1, 2015, and as a result, we became subject to enhanced minimum capital and leverage ratios. These requirements could adversely affect our ability to pay dividends or could require us to limit certain business activities or to raise capital, which may adversely affect our results of operations or financial condition. In addition, the costs associated with complying with more stringent capital requirements, such as the requirement to formulate and submit capital plans based on pre-defined stress scenarios on an annual basis, could have an adverse affect on us. See the Supervision and Regulation section included in Item 7 of this Form 10-K for additional information regarding the capital requirements under the Dodd-Frank Act and Basel III.
We may be adversely affected by changes in U.S. tax and other laws and regulations
The U.S. Congress and the Administration have indicated an interest in reforming the U.S. corporate income tax code. Possible approaches include lowering the 35 percent corporate tax rate, limiting or eliminating various other deductions, tax credits and/or other tax preferences. It is not possible at this time to quantify either the one-time impacts from the re-measurement of deferred tax assets and liabilities that might result upon tax reform enactment or the ongoing impacts reform proposals might have on income tax expense.
Accounting standards may change and increase our operating costs and/or otherwise adversely affect our results
The Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC) periodically modify the standards that govern the preparation of our financial statements. The nature of these changes is not predictable and could impact how we record transactions in our financial statements, which could lead to material changes in assets, liabilities, shareholders’ equity, revenues, expenses and net income. In some cases, we could be required to apply new or revised standards retroactively, resulting in changes to previously-reported financial results or a cumulative adjustment to retained earnings. Application of new accounting rules or standards could require us to implement costly technology changes.
We are subject to litigation risks, and our expenses related to litigation may adversely affect our results
We are subject to litigation risks in the ordinary course of our business. Claims and legal actions, including supervisory actions by our regulators, that may be initiated against us from time to time, could involve large monetary sums and significant defense costs. During the last credit crisis, we saw both the number of cases and our expenses related to those cases increase. The outcomes of such cases are always uncertain until finally adjudicated or resolved.
We establish reserves for legal claims when payments associated with the claims become probable and our liability can be reasonably estimated. We may still incur legal costs for a matter even if we have not established a reserve. In addition, the actual amount paid in resolution of a legal claim may be substantially higher than any amounts reserved for the matter. The ultimate resolution of a legal proceeding, depending on the remedy sought and any relief granted, could materially adversely affect our results of operations and financial condition.
Substantial legal claims or significant regulatory action against us could have material adverse financial effects or cause significant reputational harm to us, which in turn could seriously harm our business prospects. We may be exposed to substantial uninsured legal liabilities and/or regulatory actions, which could adversely affect our results of operations and financial condition. For additional information, see Note U, “Commitments and Contingencies,” to the Consolidated Financial Statements in this Form 10-K.

13




Certain provisions in our Certificate of Incorporation and Bylaws may prevent a change in management or a takeover attempt that you might consider to be in your best interests
Certain provisions contained in our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws could delay or prevent the removal of directors and other management. The provisions could also delay or make more difficult a tender offer, merger, or proxy contest that you might consider to be in your best interests. For example, the Certificate of Incorporation and/or Bylaws:
allow our Board of Directors to issue and set the terms of preferred shares without further shareholder approval;
limit who can call a special meeting of shareholders; and
establish advance notice requirements for nominations for election to the Board of Directors and proposals of other business to be considered at annual meetings of shareholders.
These provisions, as well as provisions of the Bank Holding Company Act and other relevant statutes and regulations which require advance notice and/or applications for regulatory approval of changes in control of banks and bank holding companies, and additionally the fact that the Holding family holds or controls shares representing a majority of the voting power of our common stock, may discourage potential takeover attempts, discourage bids for our common stock at a premium over market price, and adversely affect the market price of our common stock.
The market price of our stock may be volatile
Although publicly traded, our common stock has less liquidity and public float than other large publicly traded financial services companies. Low liquidity increases the price volatility of our stock and could make it difficult for our shareholders to sell or buy our common stock at specific prices.
Excluding the impact of liquidity, the market price of our common stock can fluctuate widely in response to other factors including expectations of financial and operating results, actual operating results, actions of institutional shareholders, speculation in the press or the investment community, market perception of acquisitions, rating agency upgrades or downgrades, stock prices of other companies that are similar to us, general market expectations related to the financial services industry, and the potential impact of government actions affecting the financial services industry.
We rely on dividends from FCB
As a financial holding company, we are a separate legal entity from FCB. We derive most of our revenue and cash flow from dividends paid by FCB. These dividends are the primary source on which we pay dividends on our common stock and interest and principal on our debt obligations. State and federal laws impose restrictions on the dividends that FCB may pay to us. In the event FCB is unable to pay dividends to us for an extended period of time, we may not be able to service our debt obligations or pay dividends on our common stock.
Item 2. Properties
As of December 31, 2016, BancShares operated branch offices at 550 locations in Arizona, California, Colorado, Florida, Georgia, Kansas, Maryland, Missouri, New Mexico, North Carolina, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia and Wisconsin. FCB owns many of the buildings and leases other facilities from third parties.
BancShares' headquarters facility, a nine-story building with approximately 163,000 square feet, is located in Raleigh, North Carolina. In addition, we occupy separate facilities in Raleigh and Columbia, South Carolina that serve as our data and operations centers.
Additional information relating to premises, equipment and lease commitments is set forth in Note F of BancShares’ Notes to Audited Consolidated Financial Statements.
Item 3. 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 matters cannot be determined, in the opinion of management, no legal action currently exists that is expected to have a material effect on BancShares’ consolidated financial statements. Additional information related to legal proceedings is set forth in Note U in BancShares’ Notes to Consolidated Financial Statements.



14




Part II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
BancShares has two classes of common stock—Class A common and Class B common. Shares of Class A common have one vote per share, while shares of Class B common have 16 votes per share. BancShares’ Class A common stock is listed on the NASDAQ Global Select Market under the symbol FCNCA. The Class B common stock is traded on the over-the-counter market and quoted on the OTC Bulletin Board under the symbol FCNCB. As of December 31, 2016, there were 1,399 holders of record of the Class A common stock and 220 holders of record of the Class B common stock. The market volume for Class B common stock is extremely limited. On many days, there is no trading and, to the extent there is trading, it is generally low.
 
The average monthly trading volume for the Class A common stock was 632,933 shares for the fourth quarter of 2016 and 448,233 shares for the year ended December 31, 2016. The Class B common stock monthly trading volume averaged 1,033 shares in the fourth quarter of 2016 and 1,208 shares for the year ended December 31, 2016.
 
The per share cash dividends declared by BancShares on both the Class A and Class B common stock, the high and low sales prices per share of BancShares Class A common stock, as reported on NASDAQ, and the high and low bid prices for BancShares Class B common stock, as reported in the OTC Bulletin Board, for each quarterly period during 2016 and 2015, are set forth in the following table. Over-the-counter bid prices for BancShares Class B common stock represent inter-dealer prices without retail markup, markdown or commissions, and may not represent actual transactions.
 
2016
 
2015
 
Fourth
quarter
 
Third
quarter
 
Second
quarter
 
First
quarter
 
Fourth
quarter
 
Third
quarter
 
Second
quarter
 
First
quarter
Cash dividends (Class A and Class B)
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

Class A sales price
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
High
367.00

 
294.50

 
262.49

 
257.97

 
263.62

 
266.01

 
261.27

 
264.95

Low
280.98

 
245.60

 
229.51

 
217.41

 
215.98

 
213.74

 
226.09

 
221.61

Class B bid price
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
High
318.00

 
258.51

 
237.00

 
233.25

 
245.00

 
246.01

 
244.66

 
246.74

Low
252.00

 
219.00

 
214.00

 
197.36

 
202.05

 
197.05

 
228.01

 
212.00

 
A cash dividend of 30 cents per share was declared by the Board of Directors on January 24, 2017, payable on April 4, 2017, to holders of record as of March 20, 2017. Payment of dividends is made at the discretion of the Board of Directors and is contingent upon satisfactory earnings as well as projected future capital needs. BancShares’ principal source of liquidity for payment of shareholder dividends is the dividend it receives from FCB. FCB is subject to various requirements under federal and state banking laws that restrict the payment of dividends and its ability to lend to BancShares. Subject to the foregoing, it is currently management’s expectation that comparable cash dividends will continue to be paid in the future.

During 2016, our Board approved a stock repurchase plan that provides for the purchase of up to 200,000 shares of Class A common stock. The shares may be purchased from time to time from November 1, 2016 through October 31, 2017. That authority replaced a similar plan in effect during the twelve months preceding November 1, 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. As of December 31, 2016, no purchases had occurred pursuant to either authorization.

There were no shares of Class A or Class B common stock purchased by BancShares during the year ended December 31, 2016.
 
 
 
 
 
 

15




The following graph compares the cumulative total shareholder return (CTSR) of our Class A common stock during the previous five years with the CTSR over the same measurement period of the NASDAQ – Banks Index and the NASDAQ – U.S. Index. Each trend line assumes that $100 was invested on December 31, 2011, and that dividends were reinvested for additional shares.
fcnca_10kx12xchart-58950a01.jpg

16




Item 6. Selected Financial Data
Table 1
FINANCIAL SUMMARY AND SELECTED AVERAGE BALANCES AND RATIOS
(Dollars in thousands, except share data)
2016
 
2015
 
2014
 
2013
 
2012
SUMMARY OF OPERATIONS
 
 
 
 
 
 
 
 
 
Interest income
$
987,757

 
$
969,209

 
$
760,448

 
$
796,804

 
$
1,004,836

Interest expense
43,082

 
44,304

 
50,351

 
56,618

 
90,148

Net interest income
944,675

 
924,905

 
710,097

 
740,186

 
914,688

Provision (credit) for loan and lease losses
32,941

 
20,664

 
640

 
(32,255
)
 
142,885

Net interest income after provision for loan and lease losses
911,734

 
904,241

 
709,457

 
772,441

 
771,803

Gain on acquisitions
5,831

 
42,930

 

 

 

Noninterest income
482,240

 
424,158

 
343,213

 
267,382

 
192,254

Noninterest expense
1,048,738

 
1,038,915

 
849,076

 
771,380

 
766,933

Income before income taxes
351,067

 
332,414

 
203,594

 
268,443

 
197,124

Income taxes
125,585

 
122,028

 
65,032

 
101,574

 
64,729

Net income
$
225,482

 
$
210,386

 
$
138,562

 
$
166,869

 
$
132,395

Net interest income, taxable equivalent
$
949,768

 
$
931,231

 
$
714,085

 
$
742,846

 
$
917,664

PER SHARE DATA
 
 
 
 
 
 
 
 
 
Net income
$
18.77

 
$
17.52

 
$
13.56

 
$
17.35

 
$
12.92

Cash dividends
1.20

 
1.20

 
1.20

 
1.20

 
1.20

Market price at period end (Class A)
355.00

 
258.17

 
252.79

 
222.63

 
163.50

Book value at period end
250.82

 
239.14

 
223.77

 
215.35

 
193.29

SELECTED PERIOD AVERAGE BALANCES
 
 
 
 
 
 
 
 
 
Total assets
$
32,439,492

 
$
31,072,235

 
$
24,104,404

 
$
21,295,587

 
$
21,073,061

Investment securities
6,616,355

 
7,011,767

 
5,994,080

 
5,206,000

 
4,698,559

Loans and leases (1)
20,897,395

 
19,528,153

 
14,820,126

 
13,163,743

 
13,560,773

Interest-earning assets
30,267,788

 
28,893,157

 
22,232,051

 
19,433,947

 
18,974,915

Deposits
27,515,161

 
26,485,245

 
20,368,275

 
17,947,996

 
17,727,117

Interest-bearing liabilities
19,158,317

 
18,986,755

 
15,273,619

 
13,910,299

 
14,298,026

Long-term obligations
811,755

 
547,378

 
403,925

 
462,203

 
574,721

Shareholders' equity
$
3,001,269

 
$
2,797,300

 
$
2,256,292

 
$
1,936,895

 
$
1,910,886

Shares outstanding
12,010,405

 
12,010,405

 
10,221,721

 
9,618,952

 
10,244,472

SELECTED PERIOD-END BALANCES
 
 
 
 
 
 
 
 
 
Total assets
$
32,990,836

 
$
31,475,934

 
$
30,075,113

 
$
21,193,878

 
$
21,279,269

Investment securities
7,006,678

 
6,861,548

 
7,172,435

 
5,388,610

 
5,227,570

Loans and leases:
 
 
 
 
 
 
 
 
 
PCI
809,169

 
950,516

 
1,186,498

 
1,029,426

 
1,809,235

Non-PCI
20,928,709

 
19,289,474

 
17,582,967

 
12,104,298

 
11,576,115

Interest-earning assets
30,691,551

 
29,224,436

 
27,730,515

 
19,428,929

 
19,142,433

Deposits
28,161,343

 
26,930,755

 
25,678,577

 
17,874,066

 
18,086,025

Interest-bearing liabilities
19,467,223

 
18,955,173

 
18,930,297

 
13,654,436

 
14,213,751

Long-term obligations
832,942

 
704,155

 
351,320

 
510,769

 
444,921

Shareholders' equity
$
3,012,427

 
$
2,872,109

 
$
2,687,594

 
$
2,071,462

 
$
1,859,624

Shares outstanding
12,010,405

 
12,010,405

 
12,010,405

 
9,618,941

 
9,620,914

SELECTED RATIOS AND OTHER DATA
 
 
 
 
 
 
 
 
 
Rate of return on average assets
0.70
%
 
0.68
%
 
0.57
%
 
0.78
%
 
0.63
%
Rate of return on average shareholders' equity
7.51

 
7.52

 
6.14

 
8.62

 
6.93

Average equity to average assets ratio
9.25

 
9.00

 
9.36

 
9.10

 
9.07

Net yield on interest-earning assets (taxable equivalent)
3.14

 
3.22

 
3.21

 
3.82

 
4.84

Allowance for loan and lease losses to total loans and leases:
 
 
 
 
 
 
 
 
 
PCI
1.70

 
1.72

 
1.82

 
5.20

 
7.74

Non-PCI
0.98

 
0.98

 
1.04

 
1.49

 
1.55

Total
1.01

 
1.02

 
1.09

 
1.78

 
2.38

Nonperforming assets to total loans and leases and other real estate at period end:
 
 
 
 
 
 
 
 
 
Covered
0.66

 
3.51

 
9.84

 
7.02

 
9.26

Noncovered
0.67

 
0.79

 
0.66

 
0.74

 
1.15

Total
0.67

 
0.83

 
0.91

 
1.25

 
2.30

Tier 1 risk-based capital ratio
12.42

 
12.65

 
13.61

 
14.89

 
14.24

Common equity Tier 1 ratio
12.42

 
12.51

 
N/A

 
N/A

 
N/A

Total risk-based capital ratio
13.85

 
14.03

 
14.69

 
16.39

 
15.92

Leverage capital ratio
9.05

 
8.96

 
8.91

 
9.80

 
9.21

Dividend payout ratio
6.39

 
6.85

 
8.85

 
6.92

 
9.29

Average loans and leases to average deposits
75.95

 
73.73

 
72.76

 
73.34

 
76.50

(1) Average loan and lease balances include PCI loans, non-PCI loans and leases, loans held for sale and nonaccrual loans and leases.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis 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 audited consolidated financial statements and related notes presented within this report. Intercompany accounts and transactions have been eliminated. See Note A in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Report for more detail. Although certain amounts for prior years have been reclassified to conform to statement presentations for 2016, the reclassifications had no 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.
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 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.

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.

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.

CRITICAL ACCOUNTING POLICIES
 
The accounting and reporting policies of BancShares are in accordance with accounting principles generally accepted in the United States (GAAP) and conform to general practices within the banking industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions to arrive at the carrying value of assets and liabilities and amounts reported for revenues and expenses. Our financial position and results of operations can be materially affected by these estimates and assumptions. Critical accounting policies are those policies that are most important to the determination of our financial condition and results of operations or that require management to make assumptions and estimates that are subjective or complex. The most critical accounting and reporting policies include those related to the allowance for loan and lease losses, fair value estimates, the payable to the FDIC for shared-loss agreements, pension plan assumptions, and income taxes. Significant accounting policies are discussed in Note A in the Notes to Consolidated Financial Statements.

The following is a summary of our critical accounting policies that are material to our consolidated financial statements and are highly dependent on estimates and assumptions.

Allowance for loan and lease losses. The allowance for loan and lease losses (ALLL) reflects the estimated losses resulting from the inability of our customers to make required loan and lease payments. The ALLL is based on management's evaluation of the risk characteristics of the loan and lease portfolio under current economic conditions and considers such factors as the financial condition of the borrower, fair market value of collateral and other items that, in our opinion, deserve current recognition in estimating possible loan and lease losses. Our evaluation process is based on historical experience and current trends among delinquencies, defaults and nonperforming assets.

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BancShares' methodology for calculating the ALLL includes estimating a general allowance for pools of performing loans and specific allocations for significant individual impaired loans. It also includes establishing an ALLL for purchased credit-impaired loans (PCI) that have deteriorated since acquisition. The general allowance is based on historical net loan loss experience for homogeneous groups of loans based mostly on loan type then aggregated on the basis of similar risk characteristics and performance trends. This allowance estimate contains qualitative components that allow management to adjust reserves based on historical loan loss experience for changes in the economic environment, portfolio trends and other factors. The methodology also considers the remaining discounts recognized upon acquisition associated with purchased non-impaired loans in estimating a general allowance. The specific allowance component is determined when management believes that the collectability of an individually reviewed loan has been impaired and a loss is probable.
The ALLL for PCI loans is estimated based on the expected cash flows approach. Over the life of PCI loans, BancShares continues to estimate cash flows expected to be collected on individual loans and leases or on pools of loans sharing common risk characteristics. BancShares evaluates at each balance sheet date whether the estimated cash flows and corresponding present value of its loans and leases determined using the effective interest rates has decreased and if so, recognizes provision for loan and lease losses. For any increases in cash flows expected to be collected, BancShares adjusts any prior recorded allowance for loan and lease losses first and then the amount of accretable yield recognized on a prospective basis over the loan's or pool's remaining life.

Management continuously monitors and actively manages the credit quality of the entire loan portfolio and recognizes provision expense to maintain the ALLL at an appropriate level. Specific allowances for impaired loans are determined by analyzing estimated cash flows discounted at a loan's original rate or collateral values in situations where we believe repayment is dependent on collateral liquidation. A majority of our impaired loans are collateralized by real property or tangible personal property.
Management considers the established ALLL adequate to absorb losses that relate to loans and leases outstanding at December 31, 2016, although future additions may be necessary based on changes in economic conditions, collateral values, erosion of the borrower's access to liquidity and other factors. If the financial condition of our borrowers were to deteriorate, resulting in an impairment of their ability to make payments, our estimates would be updated and additions to the allowance may be required. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the ALLL. These agencies may require the recognition of additions to the ALLL based on their judgments of information available to them at the time of their examination. See Note E in the Notes to Consolidated Financial Statements for additional disclosures.
Fair value estimates. Fair value is the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date under current market conditions. Certain assets and liabilities are measured at fair value on a recurring basis. Examples of recurring uses of fair value include available for sale securities and loans held for sale. At December 31, 2016, the percentage of total assets measured at fair value on a recurring basis was 21.5 percent. There were no liabilities measured at fair value on a recurring basis at December 31, 2016. We also measure certain assets at fair value on a non-recurring basis either to evaluate assets for impairment or for disclosure purposes. Examples of non-recurring uses of fair value include impaired loans, other real estate owned (OREO), goodwill, and intangible assets, including mortgage serving rights (MSRs). Depending on the nature of the asset or liability, we use various valuation techniques and assumptions when estimating fair value. As required under GAAP, the assets acquired and liabilities assumed in business combinations are recognized at their fair values as of the acquisition dates. Fair values estimated as part of a business combination are determined using valuation methods and assumptions established by management.

The objective of fair value is to use market-based inputs or assumptions, when available, to estimate the fair value. Where observable market prices from transactions for identical assets or liabilities are not available, we identify what we believe to be similar assets or liabilities. If observable market prices are unavailable or impracticable to obtain for any such similar assets or liabilities, we look to other techniques by obtaining third party quotes or using modeling techniques, such as discounted cash flows, while attempting to utilize market observable assumptions to the extent available which may require making a number of significant judgments in the estimation of fair value. Fair value estimates requiring significant judgments are determined using various inputs developed by management with the appropriate skills, understanding and knowledge of the underlying asset or liability for which the fair value is being estimated to ensure the development of fair value estimates is sound. Typical pricing sources used in estimating fair values include, but are not limited to, active markets with high trading volume, third party pricing services, external appraisals, valuation models, and commercial and residential evaluation reports. In certain cases, our assessments with respect to assumptions that market participants would make may be inherently difficult to determine, and the use of different assumptions could result in material changes to these fair value measurements. See Note M in the Notes to Consolidated Financial Statements for additional disclosures regarding fair value.

FDIC shared-loss payable. Certain shared-loss agreements include clawback provisions that require payments to the FDIC if actual losses and expenses do not exceed a calculated amount. Our estimate of the clawback payments based on current loss and

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expense projections are recorded as a payable to the FDIC. Projected cash flows are discounted to reflect the estimated timing of the payments to the FDIC. See Note U in the Notes to Consolidated Financial Statements for additional disclosures.
 
Pension plan assumptions. BancShares has a noncontributory qualified defined benefit pension plan that covers qualifying employees (BancShares plan) and certain legacy Bancorporation employees are covered by a noncontributory qualified defined benefit pension plan (Bancorporation plan). The calculation of the benefit obligations, the future value of plan assets, funded status and related pension expense under the pension plans require the use of actuarial valuation methods and assumptions. The valuations and assumptions used to determine the future value of plan assets and liabilities are subject to management judgment and may differ significantly depending upon the assumptions used. The discount rate used to estimate the present value of the benefits to be paid under the pension plans reflect the interest rate that could be obtained for a suitable investment used to fund the benefit obligations, which was 4.30 percent for both the BancShares and Bancorporation plans during 2016, compared to 4.68 percent during 2015. For the calculation of pension expense, the assumed discount rate was 4.68 percent for both the BancShares and Bancorporation plans during 2016, compared to 4.27 percent during 2015.
 
We also estimate a long-term rate of return on pension plan assets that is used to estimate the future value of plan assets. We consider such factors as the actual return earned on plan assets, historical returns on the various asset classes in the plans and projections of future returns on various asset classes. The calculation of pension expense was based on an assumed expected long-term return on plan assets of 7.50 percent for both of the BancShares and Bancorporation plans during 2016 and 2015.
 
The assumed rate of future compensation increases is reviewed annually based on actual experience and future salary expectations. We used an assumed rate of compensation increase of 4.00 percent for both the BancShares and Bancorporation plans to calculate pension expense during 2016 and 2015. Assuming other variables remain unchanged, an increase in the rate of future compensation increases results in higher pension expense for periods following the increase in the assumed rate of future compensation increases. See Note N in the Notes to Consolidated Financial Statements for additional disclosures.

Income taxes. Management estimates income tax expense using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the amount of assets and liabilities reported in the consolidated financial statements and their respective tax bases. In estimating the liabilities and corresponding expense related to income taxes, management assesses the relative merits and risks of various tax positions considering statutory, judicial and regulatory guidance. Because of the complexity of tax laws and regulations, interpretation is difficult and subject to differing judgments. Accrued income taxes payable represents an estimate of the net amounts due to or from taxing jurisdictions based upon various estimates, interpretations and judgments.
 
We evaluate our effective tax rate on a quarterly basis based upon the current estimate of net income, the favorable impact of various credits, statutory tax rates expected for the year and the amount of tax liability in each jurisdiction in which we operate. Annually, we file tax returns with each jurisdiction where we have tax nexus and settle our return liabilities.
 
Changes in estimated income tax liabilities occur periodically due to changes in actual or estimated future tax rates and projections of taxable income, interpretations of tax laws, the complexities of multi-state income tax reporting, the status of examinations being conducted by various taxing authorities and the impact of newly enacted legislation or guidance as well as income tax accounting pronouncements. See Note P in the Notes to Consolidated Financial Statements for additional disclosures.

CURRENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements
Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments
This ASU eliminates the requirement to retrospectively account for adjustments made to provisional amounts recognized in a business combination and requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts must be calculated as if the accounting had been completed at the acquisition date.
The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments in this ASU should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this ASU with earlier application permitted for financial statements that have not been issued. We adopted the guidance effective in the first quarter of 2016.

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During the third quarter of 2016, adjustments were made to the acquisition fair value for the FDIC-assisted acquisition of FCSB. The adjustments were primarily based upon updated collateral valuations, resulting in an increase of $837 thousand to the gain on acquisition. These adjustments brought the total gain on the transaction to $3.0 million and are included in noninterest income in the Consolidated Statements of Income.
During the second quarter of 2016, adjustments were made to the acquisition fair values for the FDIC-assisted acquisition of NMSB, primarily based upon updated collateral valuations, resulting in an increase of $1.2 million to the gain on acquisition. These adjustments brought the total gain on the transaction to $2.9 million and are included in noninterest income in the Consolidated Statements of Income.
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 fiscal years beginning after December 15, 2015 for public business entities, including interim periods within those fiscal years. We adopted the guidance effective in the first quarter of 2016. We evaluated our investments in partnerships and limited liability entities under the new guidance and concluded that not consolidating was still appropriate and did not have an impact on our consolidated financial position or consolidated results of operations.
Recently Issued Accounting Pronouncements
FASB ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash
The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU does not provide a definition of restricted cash or restricted cash equivalents.
This ASU is effective for fiscal years beginning after December 15, 2017 for public business entities, including interim periods within those fiscal years. BancShares does not anticipate any affect on our Consolidated Statements of Cash Flows.
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 will adopt the guidance during the first quarter of 2017. BancShares does not anticipate any effect on our consolidated financial position or consolidated results of operations as a result of adoption.
FASB ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory
This ASU states that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory, such as intellectual property or property, plant and equipment, when the transfer occurs. This ASU does not change GAAP for an intra-entity transfer of inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party.
The amendments in this ASU are effective for pubic business entities for fiscal years beginning after December 15, 2017, including interim reporting periods within those annual reporting periods, and should be applied on a modified retrospective basis. The adoption of this standard is not expected to have a significant impact on our consolidated financial position or results of operation and we will adopt the guidance during the first quarter of 2018.

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FASB ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
This ASU addresses the diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in this ASU provide guidance on (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon debt instruments; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle.
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. Early adoption is permitted. The guidance requires application using a retrospective transition method. We will adopt the guidance during the first quarter of 2018. The adoption of this standard is not expected to have a significant impact on our Consolidated Statements of Cash Flows.
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. We are currently evaluating the impact the new standard will have on our consolidated financial statements. Upon adoption, our allowance for loan and lease losses will be impacted by the loan portfolio composition and quality at the adoption date as well as economic conditions and forecasts at that time.
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. Early adoption is permitted. We will adopt the guidance during the first quarter of 2017. BancShares does not anticipate any effect on our consolidated financial position or consolidated results of operations as a result of adoption.
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. We will adopt during the first quarter of 2019. While we are

22




currently evaluating 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.
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 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. The cumulative-effect adjustment will be impacted by the equity securities portfolio composition and fair value prices available 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.
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. Our revenue is balanced between net interest income on financial assets and liabilities, which is explicitly excluded from the scope of the new guidance, and noninterest income. We continue to evaluate the impact of the new standard on our noninterest income and on our presentation and disclosures. 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.

EXECUTIVE OVERVIEW

BancShares’ earnings and cash flows are primarily derived from our commercial and retail banking activities. We gather deposits from retail and commercial customers and 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.

BancShares conducts its banking operations through its wholly-owned subsidiary FCB, a state-chartered bank organized under the laws of the state of North Carolina.

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In September 2016, BancShares completed the merger of Cordia and its subsidiary, BVA into FCB. Under the terms of the merger agreement, cash consideration of $5.15 was paid to Cordia’s shareholders for each of their shares of Cordia’s common stock, with total consideration paid of $37.1 million. The merger enabled FCB to strengthen its presence in the greater Richmond, Virginia area as Cordia operated six BVA branches in Richmond, Midlothian, Chesterfield, Colonial Heights and Chester, Virginia.
During the first half of 2016, FCB purchased certain assets and assumed certain liabilities of FCSB of King of Prussia, Pennsylvania and NMSB of Milwaukee, Wisconsin from the FDIC. Both transactions provided FCB the opportunity to grow capital and enhance earnings.
In 2015, FCB purchased certain assets and assumed certain liabilities of CCBT of Atlanta, Georgia from the FDIC. The transaction enabled FCB to expand its presence in Georgia.
Interest rates have presented significant challenges to commercial banks’ efforts to generate earnings and shareholder value. While interest rates were higher at the end of the year, our strategy continues to focus on maintaining an interest rate risk profile that will benefit net interest income in a rising rate environment.  Management drives to this goal by focusing on core customer deposits and loans in the targeted interest rate risk profile. Additionally, our initiatives focus on control of noninterest expenses, optimization of our branch network, and further enhancements to our technology and delivery channels.

In lending, our initiatives concentrate on broadening and diversifying the loan portfolio through loan products with high growth potential. These efforts include expanded product offerings in the commercial real estate construction and non-owner occupied commercial real estate markets. We have also expanded our efforts in non-real estate secured commercial and industrial lending and have enhanced our product menu for high net worth individuals.

Our initiatives also pursue additional non-interest fee income through enhanced credit card offerings and expanded wealth management and merchant services. We have redesigned our credit card programs to offer more competitive products, intended to both increase the number of accounts and frequency of card usage. Enhancements include more comprehensive reward programs and improved card benefits. In wealth management, we have broadened our products and services to better align with the specialized needs and wants of those customers.

Management is pursuing opportunities to improve our operational efficiency and increase profitability through expense reductions, while continuing enterprise sustainability projects to stabilize the operating environment. Such initiatives include the automation of certain manual processes, elimination of duplicated and outdated systems, enhancements to existing technology and reduction of discretionary spending. We review vendor agreements and larger third party contracts for cost savings. We also seek to increase profitability through optimizing our branch network. Our goals are to increase efficiencies and control costs while effectively executing an operating model that best serves our customers’ needs. We seek the appropriate footprint and staffing levels to take efficient advantage of the revenue opportunities in each of our markets.

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. Based on the latest real gross domestic product (GDP) information available, the Bureau of Economic Analysis’ advance estimate of fourth quarter 2016 GDP growth was 1.9 percent, down from 3.5 percent GDP growth in the third quarter 2016. The estimated real GDP growth during the quarter was due to positive contributions from residential fixed investments, private inventory investments, and state and local government spending, offset by a decline in exports, slowed consumer spending and an increase in imports. Consumer spending positively contributed to fourth quarter GDP growth although at a lower rate in comparison to the prior quarter. For all of 2016, the economy grew by 1.6 percent, down from an increase of 2.6 percent in 2015.
The U.S. unemployment rate dropped from 5.0 percent in December 2015 to 4.7 percent in December 2016. However, according to the U.S. Department of Labor, nonfarm payroll employment growth in 2016 was 2.2 million, compared to 2.7 million in 2015.
The Federal Reserve’s Federal Open Market Committee (FOMC) indicated in the fourth quarter that the labor market continued to strengthen and economic activity expanded at a moderate pace. In light of the cumulative progress made, the FOMC decided to raise the target range for the federal funds rate by 25 basis points. In determining the timing and size of future adjustments to the target range for the federal funds rate, the FOMC will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. The FOMC expects that economic activity will expand at a moderate pace and labor market conditions will continue to strengthen with gradual increases in the federal funds rate in the future.

24




The housing market remained solid during the year, fueled by low mortgage interest rates, economic growth and job creation. An estimated 563,000 new homes were purchased in 2016, up 12.2 percent, from the 2015 figure of 501,000. Purchases of existing homes in 2016 were 5.5 million, up 3.8 percent, compared to the 2015 rate of 5.3 million.
The trends in the banking industry are similar to those of the broader economy as shown in the latest national banking results from the third quarter of 2016. FDIC-insured institutions reported a 12.9 percent increase in net income compared to the third quarter of 2015, mainly attributable to an increase in net operating revenue and higher noninterest income. Across the industry, banking industry average net interest margin increased to 3.18 percent in the third quarter of 2016 from 3.08 percent in the same quarter a year ago. Total loans and leases increased by 6.8 percent from the same quarter a year ago primarily due to growth in residential mortgage loans.
EARNINGS PERFORMANCE SUMMARY
For the year ended December 31, 2016, net income was $225.5 million, or $18.77 per share, compared to $210.4 million, or $17.52 per share, during 2015. The $15.1 million, or 7.2 percent, increase in net income was primarily due to higher net interest income resulting from strong core loan growth and higher investment interest income and higher noninterest income, partially offset by a decline in loan interest income on the PCI loan portfolio due to continued run-off, higher provision expense and higher noninterest expense.
Key financial drivers for 2016 include:
Loan growth was strong during 2016, as net balances increased by $1.50 billion to $21.74 billion, primarily driven by originated portfolio growth.
Deposit growth continued in 2016, up $1.23 billion to $28.16 billion, primarily due to organic growth in low-cost demand deposits and checking with interest accounts.
FCB successfully completed the NMSB, FCSB and Cordia acquisitions during 2016. All three acquisitions contributed to growth in loans and deposits during the year.
The yield on the investment portfolio continued to improve, while deposit funding costs remained low.
The early termination of certain FDIC shared-loss agreements during the year resulted in a net positive pre-tax earnings impact of $16.6 million.
Earnings in 2016 included $26.7 million in investment securities gains and gains of $5.8 million recognized in connection with the NMSB and FCSB acquisitions.
Core fee-based business contributed to higher noninterest income, led by growth of $17.6 million in merchant and cardholder income reflecting increases in sales volume.
Strategic cost management efforts continue as evidenced by year-over-year noninterest expense growth of less than 1.0 percent.
Net charge-offs remained low at 0.10 percent of average loans and leases in 2016, unchanged from 2015. However, provision expense increased by $12.3 million due to stabilized credit quality trends in the non-PCI portfolio and changes in reserves on impaired non-PCI loans and leases.
BancShares remained well-capitalized at December 31, 2016 under Basel III capital requirements, with a leverage capital ratio of 9.05 percent, Tier 1 risk-based capital of 12.42 percent, common equity Tier 1 ratio of 12.42 percent and total risk-based capital ratio of 13.85 percent.
The return on average assets was 0.70 percent during 2016, compared to 0.68 percent during 2015. The return on average shareholders' equity was 7.51 percent and 7.52 percent for the respective periods.
Net interest income for the year ended December 31, 2016 increased by $19.8 million, or 2.1 percent, to $944.7 million. Interest income was up $18.5 million due to higher originated loan and investment interest income, partially offset by a decline in PCI loan interest income due to continued run-off of the portfolio. The year-to-date taxable-equivalent net interest margin for 2016 was 3.14 percent, compared to 3.22 percent during 2015. The margin decline was due to PCI loan portfolio run-off, with PCI loans generally having higher yields, partially offset by the positive impacts of originated loan growth, higher yields on investments and lower funding costs.
BancShares recorded net provision expense of $32.9 million for loan and lease losses for the full year of 2016, compared to $20.7 million net provision expense for 2015. The net provision expense on non-PCI loans and leases was $34.9 million for 2016, compared to $22.9 million in 2015. The $12.0 million increase in 2016 primarily resulted from higher reserves on impaired loans

25




and, to a lesser extent, higher net charge-offs. The PCI loan portfolio net provision credit was $2.0 million for the year ended 2016, compared to a net provision credit of $2.2 million during the same period of 2015.
Noninterest income was $488.1 million for the year ended 2016, compared to $467.1 million for 2015. Excluding the $5.8 million acquisition gains in 2016 and the $42.9 million CCBT acquisition gain in 2015, total noninterest income increased $58.1 million, primarily due to higher securities gains of $15.9 million, the $16.6 million impact from the early termination of FDIC shared-loss agreements and a $17.6 million increase in merchant and cardholder income. Noninterest income was also positively impacted by a $9.3 million reduction in FDIC receivable adjustments.
Noninterest expense was $1.05 billion for the year ended December 31, 2016, compared to $1.04 billion for the same period in 2015. The increase was a result of higher merchant and cardholder processing expenses due to an increase in sales volumes, an increase in occupancy expense, and an increase in other expense due to operational losses, offset by lower personnel expense and merger-related expense.
Income tax expense was $125.6 million and $122.0 million for the years ended 2016 and 2015, respectively.
Loan balances increased by a net $1.50 billion, or 7.4 percent, since December 31, 2015. This increase was primarily driven by $1.41 billion of organic growth in the non-PCI portfolio and the addition of $225.0 million to the non-PCI portfolio from the Cordia acquisition at December 31, 2016. The PCI portfolio declined over this period by $141.3 million, as a result of continued loan run-off of $206.6 million offset by net loans acquired from NMSB and FCSB, which were $29.5 million and $35.8 million, respectively, at December 31, 2016.
The allowance for loan and lease losses as a percentage of total loans was 1.01 percent at December 31, 2016 compared to 1.02 percent at December 31, 2015. As of December 31, 2016, BancShares’ nonperforming assets, including nonaccrual loans and OREO, declined $22.0 million to $147.0 million from $169.0 million at December 31, 2015.
At December 31, 2016, total deposits were $28.16 billion, an increase of $1.23 billion, or 4.6 percent, since December 31, 2015. The increase was due to organic growth in low-cost demand deposits and checking with interest accounts and the additions of deposit balances from the NMSB, FCSB and Cordia acquisitions of $318.2 million at December 31, 2016, offset by continued run-off in time deposits.
REGULATORY CAPITAL

The Dodd-Frank Act mandated that stress tests be developed and performed to ensure that financial institutions have sufficient capital to absorb losses and support operations during multiple economic and shock scenarios. Bank holding companies with total consolidated assets between $10 billion and $50 billion, including BancShares, undergo annual company-run stress tests. As directed by the Federal Reserve, summaries of BancShares’ results in the severely adverse stress tests are available to the public. The results of stress testing activities will be considered in combination with other risk management and monitoring practices as part of our risk management program.

The Dodd-Frank Act also imposed new regulatory capital requirements for banks which has resulted in the disallowance of qualified trust preferred capital securities as Tier 1 capital. As of December 31, 2016, BancShares had $121.5 million in trust preferred capital securities that were outstanding and, based on the Inter-Agency Capital Rule Notice, all of these trust preferred capital securities were excluded from Tier 1 capital effective January 1, 2016.

Bank regulatory agencies approved Basel III regulatory capital guidelines aimed at strengthening existing capital requirements for bank holding companies through a combination of higher minimum capital requirements, new capital conservation buffers and more conservative definitions of capital and balance sheet exposure. BancShares implemented the requirements of Basel III effective January 1, 2015, subject to a transition period for several aspects of the rule. Table 2 describes the minimum and well-capitalized requirements for the transitional period beginning during 2016 and the fully-phased-in requirements that become effective during 2019. As of December 31, 2016, BancShares' common equity Tier 1 ratio was 12.42 percent, compared to the fully-phased in minimum of 7.00 percent, which includes the 2.50 percent minimum conservation buffer.









26




Table 2
BASEL III CAPITAL REQUIREMENTS
 
Basel III minimum requirement
2016
 
Basel III well-capitalized
2016
 
Basel III minimum requirement
2019
 
Basel III well-capitalized
2019
Leverage ratio
4.00%
 
5.00%
 
4.00%
 
5.00%
Common equity Tier 1
4.50
 
6.50
 
4.50
 
6.50
Common equity Tier 1 plus conservation buffer
5.13
 
7.13
 
7.00
 
9.00
Tier 1 capital ratio
6.00
 
8.00
 
6.00
 
8.00
Tier 1 capital ratio plus conservation buffer
6.63
 
8.63
 
8.50
 
10.50
Total capital ratio
8.00
 
10.00
 
8.00
 
10.00
Total capital ratio plus conservation buffer
8.63
 
10.63
 
10.50
 
12.50

Although we are unable to control the external factors that influence our business, by maintaining high levels of balance sheet liquidity, prudently managing our interest rate exposures, ensuring our capital positions remain strong and actively monitoring asset quality, we seek to minimize the potentially adverse risks of unforeseen and unfavorable economic trends and take advantage of favorable economic conditions and opportunities when appropriate.
BUSINESS COMBINATIONS

Cordia Bancorp, Inc.
On September 1, 2016, FCB completed the merger of Cordia and its subsidiary, BVA into FCB. Under the terms of the merger agreement, cash consideration of $5.15 was paid to Cordia’s shareholders for each of their shares of Cordia’s common stock, with total consideration paid of $37.1 million. The merger allowed FCB to strengthen its presence in the greater Richmond, Virginia area as Cordia operated six BVA branches in Richmond, Midlothian, Chesterfield, Colonial Heights and Chester, Virginia.

The Cordia 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.

As a result of the transaction, FCB recorded $10.8 million of goodwill. The amount of goodwill recorded represents the excess purchase price over the estimated fair value of the net assets acquired. This premium paid reflects the increased market share and related synergies that are expected to result from the acquisition. None of the goodwill is deductible for income tax purposes as the merger is accounted for as a qualified stock purchase.

Table 3 provides the purchase price as of the acquisition date and the identifiable assets acquired and liabilities assumed at their estimated fair values.


27




Table 3
CORDIA PURCHASE PRICE, NET ASSETS ACQUIRED AND NET LIABILITIES ASSUMED
(Dollars in thousands)
As recorded by FCB
Purchase price
 
 
$
37,053

Assets
 
 
 
Cash and due from banks
$
8,383

 
 
Overnight investments
3,081

 
 
Investment securities available for sale
76,633

 
 
Loans and leases
241,392

 
 
Premises and equipment
4,151

 
 
Other real estate owned
1,170

 
 
Income earned not collected
1,990

 
 
Intangible assets
2,210

 
 
Other assets
10,318

 
 
Total assets acquired
349,328

 
 
Liabilities
 
 
 
Deposits
292,192

 
 
Short-term borrowings
30,164

 
 
Other liabilities
747

 
 
Total liabilities assumed
$
323,103

 
 
Fair value of net assets acquired
 
 
26,225

Goodwill recorded for Cordia
 
 
$
10,828

Merger-related expenses of $3.8 million were recorded in the Consolidated Statements of Income for the year ended December 31, 2016. Loan-related interest income generated from Cordia was approximately $4.2 million since the acquisition date for the year ended December 31, 2016.
Due to the immaterial amount of loans resulting from the Cordia transaction that had evidence of credit quality deterioration, all loans were accounted for as non-PCI loans under ASC 310-20.
First CornerStone Bank
On May 6, 2016, FCB entered into an agreement with the FDIC, as Receiver, to purchase certain assets and assume certain liabilities of FCSB of King of Prussia, Pennsylvania. The acquisition provided FCB the opportunity to grow capital and enhance earnings. This is an FDIC-assisted transaction; however, it has no shared-loss agreement.

The FCSB 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 third quarter of 2016, adjustments were made to the acquisition fair values primarily based upon updated collateral valuations resulting in an increase of $837 thousand to the gain on acquisition. These adjustments brought the total gain on the transaction to $3.0 million which is included in noninterest income in the Consolidated Statements of Income.

Table 4 provides the identifiable assets acquired and liabilities assumed at their estimated fair values as of the acquisition date.


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Table 4
FIRST CORNERSTONE BANK NET ASSETS ACQUIRED AND NET LIABILITIES ASSUMED
(Dollars in thousands)
 
As recorded by FCB
Assets
 
 
Cash and due from banks
 
$
748

Overnight investments
 
37,540

Investment securities
 
4,564

Loans
 
43,776

Other real estate owned
 
375

Income earned not collected
 
8

Intangible assets
 
390

Other assets
 
13

Total assets acquired
 
87,414

Liabilities
 
 
Deposits
 
96,882

Other liabilities
 
23

Total liabilities assumed
 
96,905

Fair value of net liabilities assumed
 
(9,491
)
Cash received from FDIC
 
12,450

Gain on acquisition of FCSB
 
$
2,959

Merger-related expenses of $1.0 million were recorded in the Consolidated Statement of Income for the year ended December 31, 2016. Loan-related interest income generated from FCSB was approximately $1.6 million since the acquisition date for the year ended December 31, 2016.
All loans resulting from the FCSB transaction were recorded at the acquisition date with a discount attributable, at least in part, to credit quality, and are therefore accounted for as PCI loans under ASC 310-30.
North Milwaukee State Bank
On March 11, 2016, FCB entered into an agreement with the FDIC, as Receiver, to purchase certain assets and assume certain liabilities of NMSB with two branches in Milwaukee, Wisconsin. The acquisition provided FCB with the opportunity to grow capital and enhance earnings. This is an FDIC-assisted transaction; however, it has no shared-loss agreement.

The NMSB 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 2016, adjustments were made to the acquisition fair values primarily based upon updated collateral valuations resulting in an increase of $1.2 million to the gain on acquisition. These adjustments brought the total gain on the transaction to $2.9 million which is included in noninterest income in the Consolidated Statements of Income.

Table 5 provides the identifiable assets acquired and liabilities assumed at their estimated fair values as of the acquisition date.


29




Table 5
NORTH MILWAUKEE STATE BANK NET ASSETS ACQUIRED AND NET LIABILITIES ASSUMED
(Dollars in thousands)
As recorded by FCB
Assets
 
Cash and due from banks
$
4,545

Overnight investments
2,274

Investment securities available for sale
9,425

Loans
36,914

Other intangible assets
240

Other assets
216

Total assets acquired
53,614

Liabilities
 
Deposits
59,206

Short-term borrowings
1,662

Other liabilities
74

Total liabilities assumed
$
60,942

Fair value of net liabilities assumed
(7,328
)
Cash received from FDIC
10,200

Gain on acquisition of NMSB
$
2,872

Merger-related expenses of $517 thousand from the NMSB transaction were recorded in the Consolidated Statements of Income for the year ended December 31, 2016. Loan-related interest income generated from NMSB was approximately $1.9 million since the acquisition date for the year ended December 31, 2016.
All loans resulting from the NMSB transaction were recorded at the acquisition date with a discount attributable, at least in part, to credit quality, and are therefore accounted for as PCI loans under ASC 310-30.

Capitol City Bank & Trust Company
On February 13, 2015, FCB entered into an agreement with the FDIC, as Receiver, to purchase certain assets and assume certain liabilities of CCBT. This is an FDIC-assisted transaction; however, it has no shared-loss 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. The fair value of the assets acquired 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. The fair value of the net liabilities assumed was $60.6 million and cash received from the FDIC was $103.5 million. The total gain on the transaction was $42.9 million which is included in noninterest income in the Consolidated Statement of Income. The total after-tax impact of the gain was $26.4 million.

Merger-related expenses of $1.9 million were recorded in the Consolidated Statement of Income for the year ended December 31, 2015.

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 PCI loans under ASC 310-30.

Additional information related to the acquisitions listed above is included in Note B to the Consolidated Financial Statements.

FDIC-ASSISTED TRANSACTIONS

BancShares completed seven FDIC-assisted transactions during the period beginning in 2009 through 2015, and it acquired NMSB and FCSB in its eighth and ninth such transaction during 2016. These transactions provided us significant contributions to our results of operations. Prior to its merger into BancShares in 2014, First Citizens Bancorporation, Inc. (Bancorporation) completed three FDIC-assisted transactions: Georgian Bank of Atlanta, Georgia (acquired in 2009); Williamsburg First National Bank of Williamsburg, South Carolina (acquired in 2010); and Atlantic Bank & Trust of Charleston, South Carolina (acquired in 2011). Nine of the twelve FDIC-assisted transactions (including the three completed by Bancorporation) included shared-loss agreements that, for their terms, protect us from a substantial portion of the credit and asset quality risk we would otherwise incur. The CCBT, NMSB and FCSB transactions did not include shared-loss agreements.

30




Table 6 provides information regarding the fair value of loans at the acquisition date from the twelve FDIC-assisted transactions consummated during 2016, 2015 and 2009 through 2011.
Table 6
FDIC-ASSISTED TRANSACTIONS
Entity
 
Date of
transaction
 
Fair value of loans at acquisition date
 
 
 
 
(Dollars in thousands)
First Cornerstone Bank (FCSB)
 
May 6, 2016
 
$
43,776

North Milwaukee State Bank (NMSB)
 
March 11, 2016
 
36,914

Capitol City Bank & Trust (CCBT)
 
February 13, 2015
 
154,496

Colorado Capital Bank (CCB)
 
July 8, 2011
 
320,789

Atlantic Bank & Trust (ABT) (1)
 
June 3, 2011
 
112,238

United Western Bank (United Western)
 
January 21, 2011
 
759,351

Williamsburg First National Bank (WFNB) (1)
 
July 23, 2010
 
55,054

Sun American Bank (SAB)
 
March 5, 2010
 
290,891

First Regional Bank (First Regional)
 
January 29, 2010
 
1,260,249

Georgian Bank (GB) (1)
 
September 25, 2009
 
979,485

Venture Bank (VB)
 
September 11, 2009
 
456,995

Temecula Valley Bank (TVB)
 
July 17, 2009
 
855,583

Total
 
 
 
$
5,325,821

Carrying value of FDIC-assisted acquired loans as of December 31, 2016
 
 
 
$
577,907

(1) Date of transaction and fair value of loans acquired represent when Bancorporation acquired the entities and the fair value of the loans on that date.

Generally, losses on single family residential loans are covered under shared-loss agreements for ten years. As of December 31, 2016, shared-loss protection has expired or has been terminated for all non-single family residential loans. Shared-loss protection remains only for single family residential loans acquired from UWB, VB and GB in the amount of $84.8 million.

FDIC shared-loss termination. During 2016, FCB entered into an agreement with the FDIC to terminate five of FCB's nine shared-loss agreements, including TVB, SAB, WFNB, ABT and 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 shared-loss agreements. Also, FCB wrote-off $1.5 million of the FDIC shared-loss receivable and released $18.2 million of the FDIC shared-loss payable associated with the terminated agreements. As a result, FCB recognized a $3.4 million loss on the termination of the shared-loss agreements.

FDIC shared-loss payable (clawback). The early termination agreement eliminated FCB's FDIC shared-loss payable for SAB and CCB. The remaining shared-loss payable balance at December 31, 2016 was $97.0 million. In conjunction with the early termination, FCB adjusted the FDIC shared-loss payable under the two remaining shared-loss 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 shared-loss agreements was $16.6 million during 2016.

Table 7 provides the various terms of each shared-loss agreement and the components of the receivable from the FDIC.















31




Table 7
SHARED-LOSS PROVISIONS FOR FDIC-ASSISTED TRANSACTIONS
 
 
Fair value at acquisition date (1)
Losses/expenses incurred through 12/31/2016 (2)
Cumulative amount reimbursed by FDIC through 12/31/2016 (3)
Carrying value at
December 31, 2016
Current portion of receivable due from (to) FDIC for 12/31/2016 filings
Prospective amortization (accretion) (4)
(Dollars in thousands)
FDIC shared-loss receivable
FDIC shared-loss payable
Entity
VB - combined losses
138,963

156,441

124,724

92


(147
)
239

GB - combined losses
279,310

900,712

464,894

(571
)

(571
)

First Regional - combined losses
378,695

211,923

136,567

(705
)
84,321

(705
)

United Western
 
 
 
 
 
 
 
Non-single family residential losses
112,672

94,218

78,251

(1,527
)
12,687

(1,527
)

Single family residential losses
24,781

5,880

4,549

6,883



6,883

Total
$
934,421

$
1,369,174

$
808,985

$
4,172

$
97,008

$
(2,950
)
$
7,122

 
 
 
 
 
 
 
 
 
(1)  
Fair value at acquisition date represents the initial fair value of the receivable from FDIC, excluding the payable to FDIC. For GB the acquisition date is when Bancorporation initially acquired the banks.
(2)  
For GB the losses/expenses incurred through December 31, 2016 include amounts prior to BancShares' acquisition through merger with Bancorporation.
(3)  
For GB the cumulative amount reimbursed by FDIC through December 31, 2016 include amounts prior to BancShares' acquisition through merger with Bancorporation.
(4)  
Prospective amortization (accretion) reflects balances that, due to post-acquisition credit quality improvement, will be amortized over the shorter of the covered asset's life or the term of the loss share period.
 
 
Except where noted, each FDIC-assisted transaction has a separate shared-loss agreement for Single-Family Residential loans (SFR) and Non-Single-Family Residential loans (NSFR).
 
For VB, combined losses are covered at 80 percent up to $235.0 million and 95 percent for losses above $235.0 million. The shared-loss agreement expired on September 11, 2014 for all VB NSFR loans and will expire on September 11, 2019 for the SFR loans.
 
For GB, combined losses are covered at 0 percent up to $327.0 million, 80 percent for losses between $327.0 million and $853.0 million and 95 percent above $853.0 million. The shared-loss agreement expired on September 25, 2014 for all GB NSFR loans and will expire on September 25, 2019 for the SFR loans.
 
For First Regional, NSFR losses were covered at 0 percent up to $41.8 million, 80 percent for losses between $41.8 million and $1.02 billion and 95 percent for losses above $1.02 billion. The shared-loss agreement expired on January 29, 2015 for all First Regional NSFR loans. First Regional had no SFR loans.
 
For United Western NSFR loans, losses are covered at 80 percent up to $111.5 million, 30 percent between $111.5 million and $227.0 million and 80 percent for losses above $227.0 million. The shared-loss agreement expired on January 21, 2016.
 
For United Western SFR loans, losses are covered at 80 percent up to $32.5 million, 0 percent between $32.5 million and $57.7 million and 80 percent for losses above $57.7 million. The shared-loss agreement expires on January 21, 2021.
 


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Table 8
AVERAGE BALANCE SHEETS
 
2016
 
2015
 
(Dollars in thousands, taxable equivalent)
Average
Balance
 
Interest
Income/
Expense
 
Yield/
Rate
 
Average
Balance
 
Interest
Income/
Expense
 
Yield/
Rate
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Loans and leases
$
20,897,395

 
$
881,266

 
4.22

%
$
19,528,153

 
$
880,381

 
4.51

%
Investment securities:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury
1,548,895

 
12,078

 
0.78

 
2,065,750

 
15,918

 
0.77

 
Government agency
332,107

 
2,941

 
0.89

 
801,408

 
7,095

 
0.89

 
Mortgage-backed securities
4,631,927

 
79,336

 
1.71

 
4,141,703

 
65,815

 
1.59

 
Corporate bonds
30,347

 
1,783

 
5.88

 
1,042

 
178

 
17.08

 
State, county and municipal
49

 
1

 
2.69

 
903

 
53

 
5.85

 
Other
73,030

 
911

 
1.25

 
961

 
28

 
2.93

 
Total investment securities
6,616,355

 
97,050

 
1.47

 
7,011,767

 
89,087

 
1.27

 
Overnight investments
2,754,038

 
14,534

 
0.53

 
2,353,237

 
6,067

 
0.26

 
Total interest-earning assets
30,267,788

 
$
992,850

 
3.28

%
28,893,157

 
$
975,535

 
3.38

 
Cash and due from banks
467,315

 
 
 
 
 
469,270

 
 
 
 
 
Premises and equipment
1,128,870

 
 
 
 
 
1,125,159

 
 
 
 
 
FDIC shared-loss receivable
7,370

 
 
 
 
 
18,637

 
 
 
 
 
Allowance for loan and lease losses
(209,232
)
 
 
 
 
 
(206,342
)
 
 
 
 
 
Other real estate owned
66,294

 
 
 
 
 
76,845

 
 
 
 
 
Other assets
711,087

 
 
 
 
 
695,509

 
 
 
 
 
 Total assets
$
32,439,492

 
 
 
 
 
$
31,072,235

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits:
 
 
 
 
 
 
 
 
 
 
 
 
Checking with interest
$
4,484,557

 
$
910

 
0.02

%
$
4,170,598

 
$
856

 
0.02

%
Savings
2,024,656

 
615

 
0.03

 
1,838,531

 
479

 
0.03

 
Money market accounts
8,148,123

 
6,472

 
0.08

 
8,236,160

 
7,051

 
0.09

 
Time deposits
2,959,757

 
10,172

 
0.34

 
3,359,794

 
12,844

 
0.38

 
Total interest-bearing deposits
17,617,093

 
18,169

 
0.10

 
17,605,083

 
21,230

 
0.12

 
Repurchase obligations
721,933

 
1,861

 
0.26

 
606,357

 
1,481

 
0.24

 
Other short-term borrowings
7,536

 
104

 
1.38

 
227,937

 
3,179

 
1.39

 
Long-term obligations
811,755

 
22,948

 
2.83

 
547,378

 
18,414

 
3.36

 
Total interest-bearing liabilities
19,158,317

 
43,082

 
0.22

 
18,986,755

 
44,304

 
0.23

 
Demand deposits
9,898,068

 
 
 
 
 
8,880,162

 
 
 
 
 
Other liabilities
381,838

 
 
 
 
 
408,018

 
 
 
 
 
Shareholders' equity
3,001,269

 
 
 
 
 
2,797,300

 
 
 
 
 
 Total liabilities and shareholders' equity
$
32,439,492

 
 
 
 
 
$
31,072,235

 
 
 
 
 
Interest rate spread
 
 
 
 
3.06

%
 
 
 
 
3.15

%
Net interest income and net yield
 
 
 
 
 
 
 
 
 
 
 
 
on interest-earning assets
 
 
$
949,768

 
3.14

%
 
 
$
931,231

 
3.22

%
Loans and leases include PCI and non-PCI loans, nonaccrual loans and loans held for sale. Interest income on loans and leases includes accretion income and loan fees. Loan fees were $37.5 million, $30.9 million, $16.4 million, $14.1 million and $14.2 million for the years ended 2016, 2015, 2014, 2013, and 2012, respectively. 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 3.1 percent, 5.5 percent, 6.2 percent, 6.9 percent, and 6.9 percent for the years ended 2016, 2015, 2014, 2013, and 2012, respectively. The taxable-equivalent adjustment was $5,093, $6,326, $3,988, $2,660 and $2,976 for the years ended 2016, 2015, 2014, 2013, and 2012, respectively.

33




Table 8
AVERAGE BALANCE SHEETS (continued)
2014
 
2013
 
2012
 
Average
Balance
 
Interest
Income/
Expense
 
Yield/
Rate
 
Average
Balance
 
Interest
Income/
Expense
 
Yield/
Rate
 
Average
Balance
 
Interest
Income/
Expense
 
Yield/
Rate
 
(Dollars in thousands, taxable equivalent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
14,820,126

 
$
703,716

 
4.75
%
$
13,163,743

 
$
759,261

 
5.77
%
$
13,560,773

 
$
969,802

 
7.15
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,690,186

 
12,139

 
0.72
 
610,327

 
1,714

 
0.28
 
935,135

 
2,574

 
0.28
 
1,509,868

 
7,717

 
0.51
 
2,829,328

 
12,783

 
0.45
 
2,857,714

 
16,339

 
0.57
 
2,769,255

 
36,492

 
1.32
 
1,745,540

 
22,642

 
1.30
 
757,296

 
14,388

 
1.90
 
4,779

 
254

 
5.31
 

 

 
 
129,827

 
2,574

 
1.98
 
295

 
21

 
7.12
 
276

 
20

 
7.25
 
829

 
57

 
6.88
 
19,697

 
385

 
1.95
 
20,529

 
321

 
1.56
 
17,758

 
340

 
1.91
 
5,994,080

 
57,008

 
0.95
 
5,206,000

 
37,480

 
0.72
 
4,698,559

 
36,272

 
0.77
 
1,417,845

 
3,712

 
0.26
 
1,064,204

 
2,723

 
0.26
 
715,583

 
1,738

 
0.24
 
22,232,051

 
$
764,436

 
3.44
%
19,433,947

 
$
799,464

 
4.12
%
18,974,915

 
$
1,007,812

 
5.31
%
493,947

 
 
 
 
 
483,186

 
 
 
 
 
529,224

 
 
 
 
 
943,270

 
 
 
 
 
874,862

 
 
 
 
 
876,802

 
 
 
 
 
61,605

 
 
 
 
 
168,281

 
 
 
 
 
350,933

 
 
 
 
 
(210,937
)
 
 
 
 
 
(257,791
)
 
 
 
 
 
(272,105
)
 
 
 
 
 
87,944

 
 
 
 
 
119,694

 
 
 
 
 
172,269

 
 
 
 
 
496,524

 
 
 
 
 
473,408

 
 
 
 
 
441,023

 
 
 
 
 
$
24,104,404

 
 
 
 
 
$
21,295,587

 
 
 
 
 
$
21,073,061

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
2,988,287

 
$
779

 
0.03
%
$
2,346,192

 
$
600

 
0.03
%
$
2,105,587

 
$
1,334

 
0.06
%
1,196,096

 
624

 
0.05
 
968,251

 
482

 
0.05
 
874,311

 
445

 
0.05
 
6,733,959

 
6,527

 
0.10
 
6,338,622

 
9,755

 
0.15
 
5,985,562

 
16,185

 
0.27
 
3,159,510

 
16,856

 
0.53
 
3,198,606

 
23,658

 
0.74
 
4,093,347

 
39,604

 
0.97
 
14,077,852

 
24,786

 
0.18
 
12,851,671

 
34,495

 
0.27
 
13,058,807

 
57,568

 
0.44
 
159,696

 
350

 
0.22
 
108,612

 
316

 
0.29
 
143,140

 
504

 
0.35
 
632,146

 
8,827

 
1.40
 
487,813

 
2,408

 
0.49
 
521,358

 
4,603

 
0.88
 
403,925

 
16,388

 
4.06
 
462,203

 
19,399

 
4.20
 
574,721

 
27,473

 
4.78
 
15,273,619

 
50,351

 
0.33
 
13,910,299

 
56,618

 
0.41
 
14,298,026

 
90,148

 
0.63
 
6,290,423

 
 
 
 
 
5,096,325

 
 
 
 
 
4,668,310

 
 
 
 
 
284,070

 
 
 
 
 
352,068

 
 
 
 
 
195,839

 
 
 
 
 
2,256,292

 
 
 
 
 
1,936,895

 
 
 
 
 
1,910,886

 
 
 
 
 
$
24,104,404

 
 
 
 
 
$
21,295,587

 
 
 
 
 
$
21,073,061

 
 
 
 
 
 
 
 
 
3.11
%
 
 
 
 
3.71
%
 
 <