UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~WASHINGTON~~Washington, D.C. 20549

FORM 10-Q

(Mark One)
[X]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015
For the quarterly period ended June 30, 2015
or
[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________

For the transition period from _______ to ________

Commission File Number: 001-31610

FIRST BANKS, INC.

(Exact name of registrant as specified in its charter)



MISSOURI	43-1175538
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

135 North Meramec, Clayton, Missouri	63105
(Address of principal executive offices)	(Zip code)

(314) 854-4600

(Registrant’s telephone number, including area code)

__________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 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 90 days.

þ Yes o 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).

þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



	Large accelerated filer o	Accelerated filer o
	Non-accelerated filer þ (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes þ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Shares Outstanding at ~~May~~July 1431, 2015
Common Stock, $250.00 par value		23,661

FIRST BANKS, INC.

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Consolidated Balance Sheets	1
	Consolidated Statements of Income	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Comprehensive Income (Loss)	3
	Consolidated Statements of Changes in Stockholders’ Equity	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2529
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4348
Item 4.	Controls and Procedures	4348
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	4449
Item 1A.	Risk Factors	4449
Item 5.	Other Information	44
Item 6.	Exhibits	50
Item 6.	Exhibits	45
SIGNATURES		51
SIGNATURES		46

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

FIRST BANKS, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share and per share data)	~~March~~June 3130, 2015			December 31, 2014
	(Unaudited)
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	97112,~~255~~490		100,349
Short-term investments	~~133~~125,~~480~~866			105,053
Total cash and cash equivalents	~~230~~238,~~735~~356			205,402
Investment securities:
Available for sale	1,~~554~~501,~~442~~503			1,445,689
Held to maturity (fair value of $597,341 and $614,272, respectively)	595,335			618,148
Held to maturity (fair value of $583,670 and $614,272, respectively)	587,200			618,148
Total investment securities	2,~~149~~088,~~777~~703			2,063,837
Loans:
Commercial, financial and agricultural	~~700~~753,~~183~~277			695,267
Real estate construction and development	~~110~~135,~~705~~070			89,851
Real estate mortgage	2,~~319~~402,~~175~~026			2,315,186
Consumer and installment	2019,~~956~~499			18,950
Net deferred loan fees	(1,~~277~~393		)	(1,422	)
Total loans held for portfolio	3,~~149~~308,~~742~~479			3,117,832
Loans held for sale	4336,~~655~~428			31,411
Total loans	3,~~193~~344,~~397~~907			3,149,243
Allowance for loan losses	(6458,~~142~~816		)	(66,874	)
Net loans	3,~~129~~286,~~255~~091			3,082,369
Federal Reserve Bank and Federal Home Loan Bank stock	30,~~348~~390			30,458
Bank premises and equipment, net	~~117~~108,~~803~~897			123,016
Deferred income taxes	310,698			312,575
Net deferred income taxes	269,967			271,847
Other real estate	1512,~~227~~386			55,666
Other assets	6261,~~787~~928			62,196
Total assets	$	6,~~046~~096,~~630~~718		5,~~935~~894,~~519~~791
LIABILITIES
Deposits:
Noninterest-bearing deposits	$	1,~~386~~406,~~562~~498		1,303,519
Interest-bearing deposits	3,~~585~~650,~~527~~027			3,545,985
Total deposits	45,~~972~~056,~~089~~525			4,849,504
Securities sold under agreements to repurchase	5145,~~032~~616			64,875
Subordinated debentures	354,~~305~~324			354,286
Deferred income taxes	43,558			40,728
Accrued expenses and other liabilities	112,329			113,682
Accrued expenses and other liabilities	106,275			113,682
Total liabilities	5,568,794			5,382,347
Total liabilities	5,527,259			5,423,075
STOCKHOLDERS’ EQUITY
First Banks, Inc. stockholders’ equity:
Preferred stock:
Class A convertible, adjustable rate, $20.00 par value, 750,000 shares authorized, 641,082 shares issued and outstanding	12,822			12,822
Class B adjustable rate, $1.50 par value, 200,000 shares authorized, 160,505 shares issued and outstanding	241			241
Class C fixed rate, cumulative, perpetual, $1.00 par value, 295,400 shares authorized, issued and outstanding	295			295
Class C fixed rate, cumulative, perpetual, $1.00 par value, 295,400 shares authorized, issued and outstanding (aggregate liquidation preference of $419,465 and $401,059, respectively)	295			295
Class D fixed rate, cumulative, perpetual, $1.00 par value, 14,770 shares authorized, issued and outstanding	15			15
Class D fixed rate, cumulative, perpetual, $1.00 par value, 14,770 shares authorized, issued and outstanding (aggregate liquidation preference of $25,314 and $24,205, respectively)	15			15
Common stock, $250.00 par value, 25,000 shares authorized, 23,661 shares issued and outstanding	5,915			5,915
Additional paid-in capital	324,913			324,913
Retained earnings	6779,~~048~~760			64,374
Accumulated other comprehensive income	1410,~~355~~178			10,111
Total First Banks, Inc. stockholders’ equity	~~425~~434,~~604~~139			418,686
Noncontrolling interest in subsidiary	93,~~767~~785			93,758
Total stockholders’ equity	~~519~~527,~~371~~924			512,444
Total liabilities and stockholders’ equity	$	6,~~046~~096,~~630~~718		5,~~935~~894,~~519~~791

The accompanying notes are an integral part of the consolidated financial statements.

FIRST BANKS, INC.

CONSOLIDATED STATEMENTS OF INCOME – (UNAUDITED)

	Three Months Ended					Six Months Ended
	March 31,
	June 30,					June 30,
(dollars in thousands)	2015			2014		2015		2014
Interest income:
Interest and fees on loans	$	3031,~~003~~110		2930,~~079~~182		61,113		59,261
Investment securities	1114,~~178~~398			1211,~~632~~903		25,576		24,535
Federal Reserve Bank and Federal Home Loan Bank stock	~~360~~359			~~358~~360		719		718
Short-term investments	~~125~~117			~~120~~142		242		262
Total interest income	4145,~~666~~984			42,~~189~~587		87,650		84,776
Interest expense:
Deposits	2,~~051~~162			2,034		4,213		4,068
Other borrowings	1312			42		25		6
Subordinated debentures	3,~~015~~055			3,~~811~~027		6,070		6,838
Total interest expense	5,~~079~~229			5,~~849~~063		10,308		10,912
Net interest income	3640,~~587~~755			3637,~~340~~524		77,342		73,864
Provision for loan losses	—			—
(Benefit) provision for loan losses	(7,500		)	—		(7,500	)	—
Net interest income after provision for loan losses	36,587			36,340
Net interest income after (benefit) provision for loan losses	48,255			37,524		84,842		73,864
Noninterest income:
Service charges on deposit accounts and client service fees	8,~~104~~539			8,~~333~~667		16,643		17,000
Gain on loans sold and held for sale	2,~~837~~093			~~865~~1,554		4,930		2,419
Net gain on investment securities	43			1,280
Net gain (loss) on investment securities	7,158			(1	)	7,201		1,279
Net gain on sale of other real estate	~~4,992~~196			~~442~~692		5,188		1,134
Decrease in fair value of servicing rights	(1,472		)	(232	)
Increase (decrease) in fair value of servicing rights	432			(901	)	(1,040	)	(1,133	)
Loan servicing fees	1,~~580~~669			1,~~711~~664		3,249		3,375
Other	2,~~044~~454			12,~~886~~162		4,498		4,048
Total noninterest income	1822,~~128~~541			1413,~~285~~837		40,669		28,122
Noninterest expense:
Salaries and employee benefits	2223,~~903~~246			1920,~~882~~383		46,149		40,265
Occupancy, net of rental income	54,~~396~~622			5,~~784~~479		10,018		11,263
Furniture and equipment	3,~~304~~246			2,~~360~~643		6,550		5,003
Postage, printing and supplies	~~583~~528			~~639~~554		1,111		1,193
Information technology fees	5,~~346~~118			5,~~220~~497		10,464		10,717
Legal, examination and professional fees	~~907~~1,032			1,~~291~~447		1,939		2,738
Advertising and business development	~~687~~777			~~622~~650		1,464		1,272
FDIC insurance	~~945~~921			1,~~264~~241		1,866		2,505
Write-downs and expenses on other real estate	~~232~~475			~~699~~639		707		1,338
Other	10,116			4,597
Restructuring charges on retail branch offices and other facilities	11,884			—		17,579		—
Total noninterest expense	50,419			42,358
Other	4,661			4,678		9,082		9,275
Income before provision for income taxes	4,296			8,267
Total noninterest expense	56,510			43,211		106,929		85,569
Provision for income taxes	1,613			2,917
Income before provision for income taxes	14,286			8,150		18,582		16,417
Net income	2,683			5,350
Provision for income taxes	1,556			2,918		3,169		5,835
Less: net income (loss) attributable to noncontrolling interest in subsidiary	9			(55	)
Net income	12,730			5,232		15,413		10,582
Net income attributable to First Banks, Inc.	$	2,674		5,405
Less: net income (loss) attributable to noncontrolling interest in subsidiary	18			1		27		(54	)
Net income attributable to First Banks, Inc.	$	12,712		5,231		15,386		10,636

The accompanying notes are an integral part of the consolidated financial statements.

FIRST BANKS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) – (UNAUDITED)

	Three Months Ended					Six Months Ended
	March 31,
	June 30,					June 30,
(dollars in thousands)	2015			2014		2015		2014
Net income	$	212,~~683~~730		5,~~350~~232		15,413		10,582
Other comprehensive income (loss):
Unrealized gains on securities:
Net unrealized gains on securities:
Unrealized gains on available-for-sale investment securities	~~7,949~~403			86,~~217~~918		8,352		15,135
Reclassification adjustment for available-for-sale investment securities gains included in net income	(43		)	(1,280	)
Reclassification adjustment for available-for-sale investment securities (gains) losses included in net income	(7,158		)	1		(7,201	)	(1,279	)
Amortization of net unrealized gain associated with transfer of available-for-sale investment securities to held-to-maturity investment securities	(~~746~~401		)	(~~683~~681	)	(1,147	)	(1,364	)
Income tax effect	(2,~~948~~946		)	(2,~~575~~569	)	(2	)	(5,144	)
Changes in unrealized gains on securities, net of tax	4,212			3,679
Changes in net unrealized gains on securities, net of tax	(4,210		)	3,669		2		7,348
Defined benefit pension plans:
Reclassification adjustment for amortization of net actuarial loss on pension plan	55			3536		110		71
Income tax effect	(2322		)	(1415	)	(45	)	(29	)
Changes in defined benefit pension plans, net of tax	3233			21		65		42
Other comprehensive income	4,244			3,700
Other comprehensive (loss) income	(4,177		)	3,690		67		7,390
Comprehensive income	68,~~927~~553			98,~~050~~922		15,480		17,972
Net income (loss) attributable to noncontrolling interest in subsidiary	918			~~(55~~1	)	27		(54	)
Comprehensive income attributable to First Banks, Inc.	$	68,~~918~~535		98,~~105~~921		15,453		18,026

The accompanying notes are an integral part of the consolidated financial statements.

FIRST BANKS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY – (UNAUDITED)

~~Three~~Six Months Ended ~~March~~June 3130, 2015 and 2014

	First Banks, Inc. Stockholders’ Equity
(dollars in thousands)	PreferredStock		CommonStock	AdditionalPaid-InCapital	RetainedEarnings	AccumulatedOtherComprehensiveIncome	Non-controllingInterest		TotalStockholders’Equity
Balance, December 31, 2013	$	13,373	5,915	324,913	42,719	7,502	93,834		488,256
Net income	—		—	—	510,~~405~~636	—	(5554	)	510,~~350~~582
Other comprehensive income	—		—	—	—	37,~~700~~390	—		37,~~700~~390
Balance, March 31, 2014	$	13,373	5,915	324,913	48,124	11,202	93,779		497,306
Balance, June 30, 2014	$	13,373	5,915	324,913	53,355	14,892	93,780		506,228
Balance, December 31, 2014	$	13,373	5,915	324,913	64,374	10,111	93,758		512,444
Net income	—		—	—	215,~~674~~386	—	927		215,~~683~~413
Other comprehensive income	—		—	—	—	~~4,244~~67	—		~~4,244~~67
Balance, March 31, 2015	$	13,373	5,915	324,913	67,048	14,355	93,767		519,371
Balance, June 30, 2015	$	13,373	5,915	324,913	79,760	10,178	93,785		527,924

The accompanying notes are an integral part of the consolidated financial statements.

FIRST BANKS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS – (UNAUDITED)

	Three Months Ended
	Six Months Ended
	March 31,
	June 30,
(dollars in thousands)	2015			2014
Cash flows from operating activities:
Net income	$	215,~~683~~413		510,~~350~~582
Adjustments to reconcile net income to net cash used in operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of bank premises and equipment	25,~~897~~608			25,~~921~~837
Amortization and accretion of investment securities	512,~~574~~506			511,~~799~~265
Originations of loans held for sale	(86180,~~557~~581		)	(3593,~~414~~643	)
Proceeds from sales of loans held for sale	76177,~~049~~219			4093,~~278~~710
Provision for current income taxes	1			283
(Benefit) provision for loan losses	(7,500		)	—
Provision for deferred income taxes	1,612			2,634
Provision for current income taxes	5,864			546
(Increase) decrease in accrued interest receivable	(803		)	1,711
Provision for deferred income taxes	3,430			5,289
Decrease in accrued interest payable	(1		)	(62,685	)
Decrease in deferred tax asset valuation allowance	(6,125		)	—
Gain on loans sold and held for sale	(2,837		)	(865	)
(Increase) decrease in accrued interest receivable	(142		)	3,056
Net gain on investment securities	(43		)	(1,280	)
Increase (decrease) in accrued interest payable	11			(62,558	)
Decrease in fair value of servicing rights	1,472			232
Gain on loans sold and held for sale	(4,930		)	(2,419	)
Write-downs on other real estate	109			97
Net gain on investment securities	(7,201		)	(1,279	)
Other operating activities, net	(6,657		)	(156	)
Net gain on sale of other real estate	(5,188		)	(1,134	)
Net cash used in operating activities	(6,501		)	(41,095	)
Decrease in fair value of servicing rights	1,040			1,133
Write-downs on other real estate	332			197
Restructuring charges on retail branch offices and other facilities	17,579			—
Other operating activities, net	(1,606		)	1,295
Net cash provided by (used in) operating activities	25,729			(28,123	)
Cash flows from investing activities:
Net cash paid for sale of assets and liabilities of discontinued operations, net of cash and cash equivalents sold	—			(15,467	)
Proceeds from sales of investment securities available for sale	44119,~~768~~898			166,320
Maturities of investment securities available for sale	47119,~~113~~166			4490,~~399~~817
Maturities of investment securities held to maturity	1942,~~371~~188			1738,~~783~~410
Purchases of investment securities available for sale	(~~193~~288,~~538~~121		)	(~~250~~62,293	)
Purchases of investment securities held to maturity	(223,~~025~~297		)	(12,~~429~~595	)
Net redemptions (purchases) of Federal Reserve Bank and Federal Home Loan Bank stock	~~110~~68			(43,~~791~~031	)
Proceeds from sales of commercial loans	122,~~804~~588			—3,682
Net increase in loans	(38,099		)	(41,400	)
Purchase of one-to-four-family residential real estate loans	(40,621		)	—
Purchases of bank premises and equipment	(2,188		)	(1,923	)
Net increase in loans	(177,073		)	(104,943	)
Net proceeds from sales of other real estate	45,658			5,876
Net purchases of bank premises and equipment	(4,971		)	(3,674	)
Other investing activities, net	118			671
Net proceeds from sales of other real estate	49,520			10,103
Net cash (used in) provided by investing activities	(76,908		)	169,789
Other investing activities, net	118			1,170
Net cash (used in) provided by investing activities	(180,537		)	118,499
Cash flows from financing activities:
Increase in deposits	122,585			28,536
Increase (decrease) in deposits	207,021			(7,861	)
Decrease in securities sold under agreements to repurchase	(13,843		)	(6,430	)
(Decrease) increase in securities sold under agreements to repurchase	(19,259		)	14,429
Net cash provided by financing activities	~~108~~187,~~742~~762			226,~~106~~568
Net increase in cash and cash equivalents	2532,~~333~~954			~~150~~96,~~800~~944
Cash and cash equivalents, beginning of period	205,402			190,435
Cash and cash equivalents, end of period	$	~~230~~238,~~735~~356		~~341~~287,~~235~~379
Supplemental disclosures of cash flow information:
Cash paid for interest on liabilities	$	510,~~080~~297		6873,~~534~~470
Cash paid for income taxes	29			~~257~~447
Noncash investing and financing activities:
Loans transferred to other real estate	$	~~459~~1,507		12,~~031~~915

The accompanying notes are an integral part of the consolidated financial statements.

FIRST BANKS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION

Basis of Presentation. The consolidated financial statements of First Banks, Inc. and subsidiaries (“the Company”) are unaudited and should be read in conjunction with the consolidated financial statements contained in the Company’s 2014 Annual Report on Form 10-K. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and conform to predominant practices within the banking industry. Certain disclosures pertaining to companies whose common stock is not publicly traded have been omitted from the Company’s financial statements in accordance with GAAP requirements. Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare the consolidated financial statements in conformity with GAAP. Actual results could differ from those estimates. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation of the results of operations for the interim periods presented herein, have been included. Operating results for the three and six months ended ~~March~~June 3130, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. Certain reclassifications of 2014 amounts have been made to conform to the 2015 presentation. All financial information is reported on a continuing operations basis.

Principles of Consolidation. The consolidated financial statements include the accounts of the parent company and its subsidiaries, giving effect to the noncontrolling interest in subsidiary, as more fully described below and in Note 1114 to the consolidated financial statements. All significant intercompany accounts and transactions have been eliminated.

The Company operates through its wholly owned subsidiary bank holding company, The San Francisco Company (“SFC”), headquartered in St. Louis, Missouri, and SFC’s wholly owned subsidiary bank, First Bank, also headquartered in St. Louis, Missouri. First Bank operates through its branch banking offices and subsidiaries. All of the subsidiaries are wholly owned as of ~~March~~June 3130, 2015 except FB Holdings, LLC (“FB Holdings”), which is 53.23% owned by First Bank and 46.77% owned by First Capital America, Inc. (“FCA”), a corporation owned and operated by the Company’s Chairman of the Board and members of his immediate family, including Mr. Michael Dierberg, Vice Chairman of the Company, and Ms. Ellen Dierberg Milne, Director of the Company, as further described in Note 1114 to the consolidated financial statements. FB Holdings is included in the consolidated financial statements and the noncontrolling ownership interest is reported as a component of stockholders’ equity in the consolidated balance sheets as “noncontrolling interest in subsidiary” and the earnings or loss, net of tax, attributable to the noncontrolling ownership interest, is reported as “net income (loss) attributable to noncontrolling interest in subsidiary” in the consolidated statements of income.

NOTE 2 – BRANCH DIVESTITURES AND RESTRUCTURING CHARGES

Pending Branch Sales. On March 6, 2015, as amended on June 25, 2015, First Bank entered into a Branch Purchase and Assumption Agreement with Bank of Stockton that provides for the sale of certain assets and the transfer of certain liabilities of First Bank’s three branch banking offices located in Napa, Brentwood and Fairfield, California. Under the terms of the agreement, Bank of Stockton is to assume approximately $74.0 million of deposits associated with these branches. Bank of Stockton is also expected to purchase approximately $11.6 million of loans as well as certain other assets, including premises and equipment of $3.1 million, associated with these branches. The transaction, which is subject to certain closing conditions, is expected to be completed during the third quarter of 2015.

On May 20, 2015, First Bank entered into a Branch Purchase and Assumption Agreement with Fidelity Bank that provides for the sale of certain assets and the transfer of certain liabilities of First Bank’s remaining eight branch banking offices located in Bradenton, Palmetto and Longboat Key, Florida. Under the terms of the agreement, Fidelity Bank is to assume approximately $155.0 million of deposits associated with these branches. Fidelity Bank is also expected to purchase approximately $30.9 million of loans as well as certain other assets, including premises and equipment of $6.4 million, associated with these branches. The transaction, which is subject to certain closing conditions, is expected to be completed during the third quarter of 2015.

Restructuring Charges on Retail Branch Offices and Other Facilities. The Company recorded certain restructuring charges associated with retail branch offices and other owned and leased facilities of $11.9 million and $17.6 million for the three and six months ended June 30, 2015, respectively. During the three and six months ended June 30, 2015, the Company recorded restructuring charges of $4.6 million related to seven retail branches that have been closed or are scheduled to be closed in order to adjust the carrying value of these facilities to fair value less estimated selling costs and/or adjust leases to the present value of current market rental rates in comparison to the contractual obligations on the leased facilities. During the three and six months ended June 30, 2015, the Company also recorded restructuring charges of $6.5 million and $12.2 million, respectively, on nine other facilities in

~~NOTE~~order 2to –adjust ~~INVESTMENTS~~the INcarrying ~~DEBT~~value ~~AND~~of ~~EQUITY~~these ~~SECURITIES~~facilities to fair value less estimated selling costs and/or adjust leases to the present value of current market rental rates in comparison to the contractual obligations on the leased facilities.

~~Securities~~NOTE ~~Available~~3 ~~for~~– ~~Sale.~~INVESTMENTS ~~The~~IN ~~amortized~~DEBT ~~cost,~~AND ~~contractual~~EQUITY ~~maturity, gross unrealized gains and losses and fair value of investment securities available for sale at March 31, 2015 and December 31, 2014 were as follows:~~SECURITIES

	Maturity									Total Amortized Cost	Gross				Weighted Average Yield
	1 Year			1-5		5-10		After			Unrealized			Fair
(dollars in thousands)	or Less			Years		Years		10 Years			Gains	Losses		Value
March 31, 2015:
Carrying value:
U.S. Government sponsored agencies	$	—		29,904		20,114		201,168		251,186	2,093	(727	)	252,552	1.45	%
Residential mortgage-backed	—			65,101		79,250		895,399		1,039,750	18,814	(2,308	)	1,056,256	2.38
Commercial mortgage-backed	—			775		—		—		775	63	—		838	4.95
State and political subdivisions	511			569		—		28,356		29,436	26	(268	)	29,194	1.04
Corporate notes	38,640			67,069		81,388		24,449		211,546	2,870	(799	)	213,617	2.55
Equity investments	—			—		—		2,000		2,000	—	(15	)	1,985	2.14
Total	$	39,151		163,418		180,752		1,151,372		1,534,693	23,866	(4,117	)	1,554,442	2.23
Fair value:
Debt securities	$	39,606		166,357		184,307		1,162,187
Equity securities	—			—		—		1,985
Total	$	39,606		166,357		184,307		1,164,172
Weighted average yield	2.57		%	1.96	%	2.58	%	2.20	%
December 31, 2014:
Carrying value:
U.S. Government sponsored agencies	$	—		29,942		20,119		180,098		230,159	2,129	(557	)	231,731	1.39	%
Residential mortgage-backed	269			65,433		48,174		885,896		999,772	14,189	(6,117	)	1,007,844	2.39
Commercial mortgage-backed	—			779		—		—		779	58	—		837	4.95
State and political subdivisions	863			571		—		28,371		29,805	33	(223	)	29,615	1.05
Corporate notes	27,382			72,959		70,990		—		171,331	2,759	(395	)	173,695	2.75
Equity investments	—			—		—		2,000		2,000	—	(33	)	1,967	2.15
Total	$	28,514		169,684		139,283		1,096,365		1,433,846	19,168	(7,325	)	1,445,689	2.25
Fair value:
Debt securities	$	28,901		172,561		140,717		1,101,543
Equity securities	—			—		—		1,967
Total	$	28,901		172,561		140,717		1,103,510
Weighted average yield	2.64		%	1.97	%	2.58	%	2.23	%

The amortized cost, gross unrealized gains and losses and fair value of investment securities available for sale and held to maturity at June 30, 2015 and December 31, 2014 were as follows:

Securities Held to Maturity. The amortized cost, contractual maturity, gross unrealized gains and losses and fair value of investment securities held to maturity at March 31, 2015 and December 31, 2014 were as follows:



(dollars in thousands)	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
June 30, 2015:
Available for sale:
U.S. Government sponsored agencies	$	231,379	1,842	(1,238	)	231,983
Residential mortgage-backed	936,625		14,603	(2,823	)	948,405
Commercial mortgage-backed	18,469		56	(2	)	18,523
State and political subdivisions	29,167		18	(292	)	28,893
Corporate notes	270,868		1,925	(1,050	)	271,743
Equity investments	2,000		—	(44	)	1,956
Total	$	1,488,508	18,444	(5,449	)	1,501,503

Held to maturity:
U.S. Government sponsored agencies	$	9,157	30	—		9,187
Residential mortgage-backed	573,237		2,167	(5,637	)	569,767
State and political subdivisions	4,806		1	(91	)	4,716
Total	$	587,200	2,198	(5,728	)	583,670

December 31, 2014:
Available for sale:
U.S. Government sponsored agencies	$	230,159	2,129	(557	)	231,731
Residential mortgage-backed	999,772		14,189	(6,117	)	1,007,844
Commercial mortgage-backed	779		58	—		837
State and political subdivisions	29,805		33	(223	)	29,615
Corporate notes	171,331		2,759	(395	)	173,695
Equity investments	2,000		—	(33	)	1,967
Total	$	1,433,846	19,168	(7,325	)	1,445,689

Held to maturity:
U.S. Government sponsored agencies	$	10,725	42	—		10,767
Residential mortgage-backed	605,077		1,931	(5,782	)	601,226
State and political subdivisions	2,346		1	(68	)	2,279
Total	$	618,148	1,974	(5,850	)	614,272

	Maturity									Total Amortized Cost	Gross				Weighted Average Yield
	1 Year			1-5		5-10		After			Unrealized			Fair
(dollars in thousands)	or Less			Years		Years		10 Years			Gains	Losses		Value
March 31, 2015:
Carrying value:
U.S. Government sponsored agencies	$	—		—		10,001		—		10,001	64	—		10,065	1.29	%
Residential mortgage-backed	—			103,224		48,400		429,339		580,963	4,013	(1,984	)	582,992	1.89
State and political subdivisions	561			660		2,189		961		4,371	1	(88	)	4,284	1.78
Total	$	561		103,884		60,590		430,300		595,335	4,078	(2,072	)	597,341	1.88
Fair value:
Debt securities	$	561		104,797		61,100		430,883
Weighted average yield	3.07		%	1.93	%	1.25	%	1.95	%
December 31, 2014:
Carrying value:
U.S. Government sponsored agencies	$	—		—		10,725		—		10,725	42	—		10,767	1.25	%
Residential mortgage-backed	—			105,660		50,512		448,905		605,077	1,931	(5,782	)	601,226	1.86
State and political subdivisions	561			335		489		961		2,346	1	(68	)	2,279	1.68
Total	$	561		105,995		61,726		449,866		618,148	1,974	(5,850	)	614,272	1.85
Fair value:
Debt securities	$	561		106,147		62,000		445,564
Weighted average yield	3.07		%	1.88	%	1.13	%	1.94	%

The amortized cost and fair value of debt securities available for sale and held to maturity by contractual maturity at June 30, 2015 are shown in the table below. Securities not due at a single maturity date are shown separately. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. The weighted average yields are based on amortized cost.



(dollars in thousands)	Amortized Cost		Fair Value	Weighted Average Yield


June 30, 2015:
Available for sale securities:
Within one year	$	62,932	63,546	2.50	%
After one year through five years	135,179		136,799	1.84
After five years through ten years	191,741		193,981	2.77
After ten years	1,096,656		1,105,221	2.20
Equity investments	2,000		1,956	2.18
Total	$	1,488,508	1,501,503	2.24

Held to maturity securities:
Within one year	$	565	565	3.07	%
After one year through five years	101,555		102,154	1.93
After five years through ten years	56,000		54,759	1.18
After ten years	429,080		426,192	2.09
Total	$	587,200	583,670	1.97

Residential and commercial mortgage-backed securities are primarily issued by U.S. government sponsored enterprises and U.S. government agencies. Proceeds from sales of available-for-sale investment securities were $4475.81 million and $~~166~~119.39 million for the three and six months ended ~~March~~June 3130, 2015 ~~and 2014~~, respectively., ~~Gross~~compared ~~realized~~to ~~gains~~zero and ~~gross~~$166.3 ~~realized~~million ~~losses on investment securities~~ for the ~~three~~comparable ~~months~~periods ~~ended~~in ~~March 31, 2015 and~~ 2014. ~~were as follows:~~

	Three Months Ended
	March 31,
(dollars in thousands)	2015			2014
Gross realized gains on sales of available-for-sale securities	$	560		2,010
Gross realized losses on sales of available-for-sale securities	(517		)	(730	)
Net realized gain on investment securities	$	43		1,280

Gross realized gains and gross realized losses on investment securities for the three and six months ended June 30, 2015 and 2014 were as follows:

Residential and commercial mortgage-backed securities are primarily issued by U.S. government sponsored enterprises and U.S. government agencies. Investment securities with a carrying value of $366.4 million and $349.0 million at March 31, 2015 and December 31, 2014, respectively, were pledged in connection with deposits of public and trust funds, securities sold under agreements to repurchase and for other purposes as required by law.



	Three Months Ended					Six Months Ended
	June 30,					June 30,
(dollars in thousands)	2015			2014		2015		2014
Gross realized gains on sales of available-for-sale securities	$	8,637		—		9,197		2,010
Gross realized losses on sales of available-for-sale securities	(1,479		)	—		(1,996	)	(730	)
Other-than-temporary impairment	—			(1	)	—		(1	)
Net realized gain (loss) on investment securities	$	7,158		(1	)	7,201		1,279

Provision (benefit) for income taxes on net realized gain (loss) on investment securities	$	2,947		—		2,965		527

Gross ~~unrealized~~realized ~~losses~~gains on ~~investment~~sales ~~securities and the fair value~~ of ~~the~~available-for-sale ~~related~~ securities, ~~aggregated~~for bythe ~~investment~~three ~~category~~ and ~~length~~six ofmonths ~~time~~ended ~~that~~June ~~individual~~30, ~~securities~~2015 ~~have~~include ~~been in~~ a ~~continuous~~pre-tax ~~unrealized~~gain ~~loss~~on ~~position,~~the atsale ~~March 31,~~of ~~2015~~a ~~and~~single ~~December 31,~~issuer’s ~~2014,~~common ~~were~~stock asof ~~follows:~~$8.4 million.

	Less Than 12 Months				12 Months or More			Total
(dollars in thousands)	Fair Value		UnrealizedLosses		Fair Value	UnrealizedLosses		Fair Value	UnrealizedLosses
March 31, 2015:
Available for sale:
U.S. Government sponsored agencies	$	86,684	(592	)	14,600	(135	)	101,284	(727	)
Residential mortgage-backed	66,185		(252	)	117,535	(2,056	)	183,720	(2,308	)
State and political subdivisions	28,087		(268	)	—	—		28,087	(268	)
Corporate notes	20,274		(756	)	4,957	(43	)	25,231	(799	)
Equity investments	1,985		(15	)	—	—		1,985	(15	)
Total	$	203,215	(1,883	)	137,092	(2,234	)	340,307	(4,117	)
Held to maturity:
Residential mortgage-backed	$	100,000	(386	)	119,905	(1,598	)	219,905	(1,984	)
State and political subdivisions	2,643		(27	)	899	(61	)	3,542	(88	)
Total	$	102,643	(413	)	120,804	(1,659	)	223,447	(2,072	)
December 31, 2014:
Available for sale:
U.S. Government sponsored agencies	$	79,207	(427	)	14,600	(130	)	93,807	(557	)
Residential mortgage-backed	204,378		(1,154	)	191,644	(4,963	)	396,022	(6,117	)
State and political subdivisions	28,148		(223	)	—	—		28,148	(223	)
Corporate notes	9,650		(350	)	4,955	(45	)	14,605	(395	)
Equity investments	1,967		(33	)	—	—		1,967	(33	)
Total	$	323,350	(2,187	)	211,199	(5,138	)	534,549	(7,325	)
Held to maturity:
Residential mortgage-backed	$	28,371	(112	)	325,820	(5,670	)	354,191	(5,782	)
State and political subdivisions	641		(3	)	896	(65	)	1,537	(68	)
Total	$	29,012	(115	)	326,716	(5,735	)	355,728	(5,850	)

Investment securities with a carrying value of $373.5 million and $349.0 million at June 30, 2015 and December 31, 2014, respectively, were pledged in connection with deposits of public and trust funds, securities sold under agreements to repurchase and for other purposes as required or permitted by law.

~~The~~Gross ~~Company does not believe the investment securities that were in an~~ unrealized ~~loss position at March 31, 2015 and December 31, 2014 are other-than-temporarily impaired. The unrealized~~ losses on ~~the~~ investment securities ~~were~~and ~~primarily attributable to fluctuations in interest rates. It is expected that~~ the ~~securities would not be settled at a price less than the amortized cost. Because the decline in~~ fair value isof ~~attributable~~the torelated ~~changes in interest rates and not credit loss~~securities, ~~and~~aggregated ~~because~~by ~~the~~investment ~~Company~~category ~~does not intend to sell these investments~~ and itlength isof ~~more~~time ~~likely than not~~ that ~~First~~individual ~~Bank will not be required to sell these~~ securities ~~before~~have ~~the~~been ~~anticipated~~in ~~recovery~~a ofcontinuous ~~the~~unrealized ~~remaining~~loss ~~amortized cost basis or maturity~~position, ~~these investments are not considered other-than-temporarily impaired. The unrealized losses for investment securities for 12 months or more~~ at ~~March~~June 3130, 2015 and December 31, 2014, ~~included~~were 27as ~~and 47 securities, respectively.~~follows:



	Less Than 12 Months				12 Months or More			Total
(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
June 30, 2015:
Available for sale:
U.S. Government sponsored agencies	$	87,514	(1,099	)	14,600	(139	)	102,114	(1,238	)
Residential mortgage-backed	194,279		(922	)	85,274	(1,901	)	279,553	(2,823	)
Commercial mortgage-backed	8,803		(2	)	—	—		8,803	(2	)
State and political subdivisions	28,049		(292	)	—	—		28,049	(292	)
Corporate notes	67,295		(1,009	)	4,959	(41	)	72,254	(1,050	)
Equity investments	—		—		1,956	(44	)	1,956	(44	)
Total	$	385,940	(3,324	)	106,789	(2,125	)	492,729	(5,449	)
Held to maturity:
Residential mortgage-backed	$	246,432	(3,277	)	114,765	(2,360	)	361,197	(5,637	)
State and political subdivisions	3,405		(91	)	—	—		3,405	(91	)
Total	$	249,837	(3,368	)	114,765	(2,360	)	364,602	(5,728	)

December 31, 2014:
Available for sale:
U.S. Government sponsored agencies	$	79,207	(427	)	14,600	(130	)	93,807	(557	)
Residential mortgage-backed	204,378		(1,154	)	191,644	(4,963	)	396,022	(6,117	)
State and political subdivisions	28,148		(223	)	—	—		28,148	(223	)
Corporate notes	9,650		(350	)	4,955	(45	)	14,605	(395	)
Equity investments	1,967		(33	)	—	—		1,967	(33	)
Total	$	323,350	(2,187	)	211,199	(5,138	)	534,549	(7,325	)
Held to maturity:
Residential mortgage-backed	$	28,371	(112	)	325,820	(5,670	)	354,191	(5,782	)
State and political subdivisions	641		(3	)	896	(65	)	1,537	(68	)
Total	$	29,012	(115	)	326,716	(5,735	)	355,728	(5,850	)

The Company does not believe the investment securities that were in an unrealized loss position at June 30, 2015 and December 31, 2014 are other-than-temporarily impaired. The unrealized losses on the investment securities were primarily attributable to fluctuations in interest rates. It is expected that the securities would not be settled at a price less than the amortized cost. Because the decline in fair value is attributable to changes in interest rates and not credit loss, and because the Company does not intend to sell these investments and it is more likely than not that First Bank will not be required to sell these securities before the anticipated recovery of the remaining amortized cost basis or maturity, these investments are not considered other-than-temporarily impaired. The unrealized losses for investment securities for 12 months or more at June 30, 2015 and December 31, 2014 included 17 and 47 securities, respectively.

NOTE 34 – LOANS AND ALLOWANCE FOR LOAN LOSSES

The following table summarizes the composition of the loan portfolio at ~~March~~June 3130, 2015 and December 31, 2014:

(dollars in thousands)	~~March~~June 3130, 2015			December 31, 2014
Commercial, financial and agricultural	$	~~700~~753,~~183~~277		695,267
Real estate construction and development	~~110~~135,~~705~~070			89,851
Real estate mortgage:
One-to-four-family residential	1,030,088			1,016,710
One-to-four-family residential:
Multi-family residential	114,288			115,434
Residential mortgage	687,162			621,168
Commercial real estate	1,174,799			1,183,042
Home equity	400,616			395,542
Consumer and installment	20,956			18,950
Multi-family residential	98,040			115,434
Net deferred loan fees	(1,277		)	(1,422	)
Commercial real estate	1,216,208			1,183,042
Total loans held for portfolio	3,149,742			3,117,832
Consumer and installment	19,499			18,950
Loans held for sale	43,655			31,411
Net deferred loan fees	(1,393		)	(1,422	)
Total loans	$	3,193,397		3,149,243
Total loans held for portfolio	3,308,479			3,117,832
Loans held for sale	36,428			31,411
Total loans	$	3,344,907		3,149,243

Aging of Loans. The following table presents the aging of loans by loan classification at ~~March~~June 3130, 2015 and December 31, 2014:

(dollars in thousands)	30-59Days		60-89Days	RecordedInvestment> 90 DaysAccruing	Nonaccrual	Total PastDue	Current	Total Loans
March 31, 2015:
June 30, 2015:
Commercial, financial and agricultural	$	59265	~~227~~308	—	75,~~240~~702	76,~~526~~275	~~692~~747,~~657~~002	~~700~~753,~~183~~277
Real estate construction and development	~~781~~683		~~102~~—	—	3,~~308~~152	43,~~191~~835	~~106~~131,~~514~~235	~~110~~135,~~705~~070
Real estate mortgage:
Residential mortgage	31,~~014~~614		~~952~~447	1527	108,~~911~~103	1410,~~892~~191	~~613~~676,~~181~~971	~~628~~687,~~073~~162
Home equity	~~810~~1,467		~~374~~441	—130	65,~~337~~698	7,~~521~~736	~~394~~392,~~494~~880	~~402~~400,~~015~~616
Multi-family residential	—		—	—	~~18,994~~319	~~18,994~~319	9597,~~294~~721	~~114~~98,~~288~~040
Commercial real estate	~~1,201~~12		3252	—	42,~~046~~828	52,~~279~~892	1,~~169~~213,~~520~~316	1,~~174~~216,~~799~~208
Consumer and installment and net deferred loan fees	~~100~~87		1816	—	48	~~122~~111	1917,~~557~~995	1918,~~679~~106
Loans held for sale	—		—	—	—	—	4336,~~655~~428	4336,~~655~~428
Total	$	5,965	1,705	15	50,840	58,525	3,134,872	3,193,397
Total loans	$	4,128	1,264	157	25,810	31,359	3,313,548	3,344,907
December 31, 2014:
Commercial, financial and agricultural	$	132	430	54	9,486	10,102	685,165	695,267
Real estate construction and development	431		—	—	3,393	3,824	86,027	89,851
Real estate mortgage:
Residential mortgage	2,690		986	35	13,890	17,601	603,567	621,168
Home equity	1,857		334	72	6,831	9,094	386,448	395,542
Multi-family residential	—		—	—	19,731	19,731	95,703	115,434
Commercial real estate	196		54	—	4,122	4,372	1,178,670	1,183,042
Consumer and installment and net deferred loan fees	136		33	2	23	194	17,334	17,528
Loans held for sale	—		—	—	—	—	31,411	31,411
Total	$	5,442	1,837	163	57,476	64,918	3,084,325	3,149,243
Total loans	$	5,442	1,837	163	57,476	64,918	3,084,325	3,149,243

Under the Company’s loan policy, loans are placed on nonaccrual status once principal or interest payments become 90 days past due. However, individual loan officers may submit written requests for approval to continue the accrual of interest on loans that become 90 days past due. These requests may be submitted for approval consistent with the authority levels provided in the Company’s credit approval policies, and they are only granted if an expected near term future event, such as a pending renewal or expected payoff, exists at the time the loan becomes 90 days past due. If the expected near term future event does not occur as anticipated, the loan is then placed on nonaccrual status.

Credit Quality Indicators. The Company’s credit management policies and procedures focus on identifying, measuring and controlling credit exposure. These procedures employ a lender-initiated system of rating credits, which is ratified in the loan approval process and subsequently tested in internal credit reviews and regulatory bank examinations. The system requires the rating of all loans at the time they are originated or acquired, except for homogeneous categories of loans, such as residential real estate mortgage loans and consumer loans. These homogeneous loans are assigned an initial rating based on the Company’s experience with each type of loan. The Company adjusts the ratings of the homogeneous loans based on payment experience subsequent to their origination.

The Company includes adversely rated credits, including loans requiring close monitoring that would not normally be considered classified credits by the Company’s regulators, on its monthly loan watch list. Loans may be added to the Company’s watch list for reasons that are temporary and correctable, such as the absence of current financial statements of the borrower or a deficiency in loan documentation. Loans may also be added to the Company’s watch list whenever any adverse circumstance is detected which might affect the borrower’s ability to comply with the contractual terms of the loan. The delinquency of a scheduled loan

in loan documentation. Loans may also be added to the Company’s watch list whenever any adverse circumstance is detected which might affect the borrower’s ability to comply with the contractual terms of the loan. The delinquency of a scheduled loan payment, deterioration in the borrower’s financial condition identified in a review of periodic financial statements, a decrease in the value of the collateral securing the loan, or a change in the economic environment within which the borrower operates could initiate the addition of a loan to the Company’s watch list. Loans on the Company’s watch list require periodic detailed loan status reports prepared by the responsible officer which are discussed in formal meetings with credit review and credit administration staff members. Upgrades and downgrades of loan risk ratings may be initiated by the responsible loan officer. However, upgrades of risk ratings associated with significant credit relationships and/or problem credit relationships may only be made with the concurrence of appropriate regional credit officers.

Under the Company’s risk rating system, special mention loans are those loans that do not currently expose the Company to sufficient risk to warrant classification as substandard, troubled debt restructuring (“TDR”) or nonaccrual, but possess weaknesses that deserve management’s close attention. Substandard loans include those loans characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. A loan is classified as a TDR when a borrower is experiencing financial difficulties that lead to the restructuring of a loan, and the Company grants concessions to the borrower in the restructuring that it would not otherwise consider. Loans classified as TDRs ~~which~~that are accruing interest are classified as performing TDRs. Loans classified as TDRs ~~which~~that are not accruing interest are classified as nonperforming TDRs and are included with all other nonaccrual loans for presentation purposes. Loans classified as nonaccrual have all the weaknesses inherent in those loans classified as substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable. Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.

The following tables present the credit exposure of ~~the~~loans ~~loan~~held for portfolio by internally assigned credit grade and payment activity as of ~~March~~June 3130, 2015 and December 31, 2014:

Commercial Loan Portfolio Credit Exposure by Internally Assigned Credit Grade (dollars in thousands)	Commercialand Industrial		Real EstateConstructionandDevelopment	Multi-family	CommercialReal Estate	Total
March 31, 2015:
June 30, 2015:
Pass	$	~~663~~710,~~849~~208	~~106~~131,~~986~~333	8891,~~787~~424	1,~~145~~189,~~244~~818	2,~~004~~122,~~866~~783
Special mention	1631,~~359~~393		92585	5,~~870~~660	17,~~700~~883	4055,~~021~~521
Substandard	125,~~463~~710		—	637	75,~~809~~679	2012,~~909~~026
Performing troubled debt restructuring	~~272~~264		~~319~~—	—	—	~~591~~264
Nonaccrual	75,~~240~~702		3,~~308~~152	~~18,994~~319	42,~~046~~828	3312,~~588~~001
Total	$	~~700~~753,~~183~~277	~~110~~135,~~705~~070	~~114~~98,~~288~~040	1,~~174~~216,~~799~~208	2,~~099~~202,~~975~~595
December 31, 2014:
Pass	$	653,951	85,973	89,148	1,147,824	1,976,896
Special mention	18,713		143	5,945	20,691	45,492
Substandard	12,833		—	610	6,640	20,083
Performing troubled debt restructuring	284		342	—	3,765	4,391
Nonaccrual	9,486		3,393	19,731	4,122	36,732
Total	$	695,267	89,851	115,434	1,183,042	2,083,594

Consumer Loan Portfolio Credit Exposure by Payment Activity (dollars in thousands)	Residential Mortgage		HomeEquity	Consumer and Installment and Net Deferred Loan Fees	Total
March 31, 2015:
June 30, 2015:
Pass	$	~~537~~599,~~729~~840	~~394~~392,~~494~~880	1917,~~557~~995	~~951~~1,~~780~~010,715
Substandard	1,~~893~~647		12,~~184~~038	~~118~~103	3,~~195~~788
Performing troubled debt restructuring	77,~~540~~572		—	—	77,~~540~~572
Nonaccrual	108,~~911~~103		65,~~337~~698	48	1713,~~252~~809
Total	$	~~628~~687,~~073~~162	~~402~~400,~~015~~616	1918,~~679~~106	1,~~049~~105,~~767~~884
December 31, 2014:
Pass	$	528,388	386,448	17,334	932,170
Substandard	2,662		2,263	171	5,096
Performing troubled debt restructuring	76,228		—	—	76,228
Nonaccrual	13,890		6,831	23	20,744
Total	$	621,168	395,542	17,528	1,034,238

Impaired Loans. Loans deemed to be impaired include performing TDRs and nonaccrual loans. Impaired loans with outstanding balances equal to or greater than $~~500~~250,000 are evaluated individually for impairment. For these loans, the Company measures the level of impairment based on the present value of the estimated projected cash flows, or if the impaired loans are collateral dependent, the estimated value of the collateral, less applicable selling costs. If the current valuation is lower than the current book balance of the loan, the amount of the difference is evaluated for possible charge-off. In instances where management determines that a charge-off is not appropriate, a specific reserve is established for the individual loan in question. This specific reserve is included as a part of the overall allowance for loan losses.

The following tables present the recorded investment, unpaid principal balance, related allowance for loan losses, average recorded investment and interest income recognized while on impaired status for impaired loans without a related allowance for loan losses and for impaired loans with a related allowance for loan losses by loan classification at ~~March~~June 3130, 2015 and December 31, 2014:

(dollars in thousands)	RecordedInvestment		UnpaidPrincipalBalance	RelatedAllowance forLoan Losses	AverageRecordedInvestment	InterestIncomeRecognized (1)
March 31, 2015:
June 30, 2015:
With No Related Allowance Recorded:
Commercial, financial and agricultural	$	2,~~505~~573	3,~~401~~563	—	23,~~881~~342	—
Real estate construction and development	2,~~622~~617		12,318	—	2,~~661~~910	—
Real estate mortgage:
Residential mortgage	—		—	—	—	—
Home equity	—1,322		—1,527	—	—1,459	—
Multi-family residential	~~18,675~~—		~~24,647~~—	—	~~19,038~~—	—
Commercial real estate	—687		—962	—	—1,195	—
Consumer and installment	—		—	—	—	—
	23,802		40,366	—	24,580	—
	7,199		18,370	—	8,906	—
With A Related Allowance Recorded:
Commercial, financial and agricultural	53,~~007~~393		75,~~754~~861	~~479~~582	54,~~760~~407	36
Real estate construction and development	~~1,005~~535		32,~~259~~465	~~231~~255	~~1,020~~595	48
Real estate mortgage:
Residential mortgage	8885,~~451~~675		~~104~~100,~~415~~070	67,~~976~~391	8988,~~285~~081	~~521~~1,122
Home equity	64,~~337~~376		75,~~487~~302	1,~~267~~443	64,~~584~~830	—
Multi-family residential	319		~~3,185~~468	~~1,212~~24	~~325~~13,015	—
Commercial real estate	42,~~046~~141		53,~~813~~766	~~258~~214	53,~~967~~725	—5
Consumer and installment	48		48	—1	1412	5—
	105,169		131,917	10,423	108,955	533
	96,447		117,940	9,910	114,665	1,141
Total:
Commercial, financial and agricultural	75,~~512~~966		119,~~155~~424	~~479~~582	87,~~641~~749	36
Real estate construction and development	3,~~627~~152		1514,~~577~~783	~~231~~255	3,~~681~~505	48
Real estate mortgage:
Residential mortgage	8885,~~451~~675		~~104~~100,~~415~~070	67,~~976~~391	8988,~~285~~081	~~521~~1,122
Home equity	65,~~337~~698		76,~~487~~829	1,~~267~~443	6,~~584~~289	—
Multi-family residential	~~18,994~~319		~~27,832~~468	~~1,212~~24	1913,~~363~~015	—
Commercial real estate	42,~~046~~828		54,~~813~~728	~~258~~214	54,~~967~~920	—5
Consumer and installment	48		48	—1	1412	5—
	$	~~128~~103,~~971~~646	~~172~~136,~~283~~310	109,~~423~~910	~~133~~123,~~535~~571	~~533~~1,141

____________________


(1)	Interest income on impaired loans recognized while on impaired status was $608,000 for the three months ended June 30, 2015.



(dollars in thousands)	Recorded Investment		Unpaid Principal Balance	Related Allowance for Loan Losses	Average Recorded Investment	Interest Income Recognized
December 31, 2014:
With No Related Allowance Recorded:
Commercial, financial and agricultural	$	1,937	2,911	—	2,278	—
Real estate construction and development	2,626		12,333	—	3,106	—
Real estate mortgage:
Residential mortgage	—		—	—	—	—
Home equity	—		—	—	—	—
Multi-family residential	19,050		24,759	—	25,234	959
Commercial real estate	4,119		4,190	—	6,063	116
Consumer and installment	—		—	—	—	—
	27,732		44,193	—	36,681	1,075
With A Related Allowance Recorded:
Commercial, financial and agricultural	7,833		22,089	1,626	9,212	6
Real estate construction and development	1,109		3,403	219	1,312	17
Real estate mortgage:
Residential mortgage	90,118		106,163	7,639	94,835	2,082
Home equity	6,831		7,988	1,366	7,056	—
Multi-family residential	681		3,581	1,157	902	—
Commercial real estate	3,768		5,619	463	5,546	21
Consumer and installment	23		23	1	14	—
	110,363		148,866	12,471	118,877	2,126
Total:
Commercial, financial and agricultural	9,770		25,000	1,626	11,490	6
Real estate construction and development	3,735		15,736	219	4,418	17
Real estate mortgage:
Residential mortgage	90,118		106,163	7,639	94,835	2,082
Home equity	6,831		7,988	1,366	7,056	—
Multi-family residential	19,731		28,340	1,157	26,136	959
Commercial real estate	7,887		9,809	463	11,609	137
Consumer and installment	23		23	1	14	—
	$	138,095	193,059	12,471	155,558	3,201

Recorded investment represents the Company’s investment in its impaired loans (excluding accrued interest receivable and fees) reduced by cumulative charge-offs recorded against the allowance for loan losses on these same loans. At ~~March~~June 3130, 2015 and December 31, 2014, the Company had recorded charge-offs of $4332.37 million and $55.0 million, respectively, on its impaired loans, representing the difference between the unpaid principal balance and the recorded investment reflected in the tables above. The unpaid principal balance represents the principal amount contractually owed to the Company by the borrowers on the impaired loans.

Troubled Debt Restructurings. In the ordinary course of business, the Company modifies loan terms across loan types, including both consumer and commercial loans, for a variety of reasons. Modifications to consumer loans may include, but are not limited to, changes in interest rate, maturity, amortization and financial covenants. In the original underwriting, loan terms are established that represent the then current and projected financial condition of the borrower. Over any period of time, modifications to these loan terms may be required due to changes in the original underwriting assumptions. These changes may include the financial covenants of the borrower as well as underwriting standards.

Loan modifications are generally performed at the request of the borrower, whether commercial or consumer, and may include reductions in interest rates, changes in payments and maturity date extensions. Although the Company does not have formal, standardized loan modification programs for its commercial or consumer loan portfolios, it addresses loan modifications on a case-by-case basis and also participates in the United States Department of the Treasury’s (“U.S. Treasury”) Home Affordable Modification Program (“HAMP”). HAMP gives qualifying homeowners an opportunity to refinance into more affordable monthly payments, with the U.S. Treasury compensating the Company for a portion of the reduction in monthly amounts due from borrowers participating in this program. At ~~March~~June 3130, 2015 and December 31, 2014, the Company had $72.83 million and $72.7 million, respectively, of modified loans in the HAMP program.

For a loan modification to be classified as a TDR, all of the following conditions must be present: (1) the borrower is experiencing financial difficulty, (2) the Company makes a concession to the original contractual loan terms and (3) the Company would not consider the concessions but for economic or legal reasons related to the borrower’s financial difficulty. Modifications of loan terms to borrowers experiencing financial difficulty are made in an attempt to protect as much of the investment in the loan as possible. These modifications are generally made to either prevent a loan from becoming nonaccrual or to return a nonaccrual loan to performing status based on the expectations that the borrower can adequately perform in accordance with the modified terms.

The determination of whether a modification should be classified as a TDR requires significant judgment after taking into consideration all facts and circumstances surrounding the transaction. No single characteristic or factor, taken alone, is determinative of whether a modification should be classified as a TDR. The fact that a single characteristic is present is not considered sufficient to overcome the preponderance of contrary evidence. Assuming all of the TDR criteria are met, the Company considers one or more of the following concessions to the loan terms to represent a TDR: (1) a reduction of the stated interest rate, (2) an extension of the maturity date or dates at a stated interest rate lower than the current market rate for a new loan with similar terms or (3) forgiveness of principal or accrued interest.

Loans renegotiated at a rate equal to or greater than that of a new loan with comparable risk at the time the contract is modified are excluded from TDR classification in the calendar years subsequent to the renegotiation if the loan is in compliance with the modified terms for at least six months.

The Company does not accrue interest on any TDRs unless it believes collection of all principal and interest under the modified terms is reasonably assured. Generally, six months of consecutive payment performance by the borrower under the restructured terms is required before a TDR is returned to accrual status. However, the period could vary depending upon the individual facts and circumstances of the loan. TDRs accruing interest are classified as performing TDRs. The following table presents the categories of performing TDRs as of ~~March~~June 3130, 2015 and December 31, 2014:

(dollars in thousands)	~~March~~June 3130, 2015		December 31, 2014
Performing Troubled Debt Restructurings:
Commercial, financial and agricultural	$	~~272~~264	284
Real estate construction and development	~~319~~—		342
Real estate mortgage:
One-to-four-family residential	77,~~540~~572		76,228
Commercial real estate	—		3,765
Total performing troubled debt restructurings	$	7877,~~131~~836	80,619

The Company does not accrue interest on TDRs which have been modified for a period less than six months or are not in compliance with the modified terms. These loans are considered nonperforming TDRs and are included with other nonaccrual loans for classification purposes. The following table presents the categories of loans considered nonperforming TDRs as of ~~March~~June 3130, 2015 and December 31, 2014:

(dollars in thousands)	~~March~~June 3130, 2015		December 31, 2014
Nonperforming Troubled Debt Restructurings:
Commercial, financial and agricultural	$	35	243
Real estate construction and development	2,~~784~~779		2,788
Real estate mortgage:
One-to-four-family residential	32,~~378~~852		4,003
Multi-family residential	~~18,676~~—		19,050
Commercial real estate	~~371~~—		371
Total nonperforming troubled debt restructurings	$	255,~~244~~666	26,455

Both performing and nonperforming TDRs are considered to be impaired loans. When an individual loan is determined to be a TDR, the amount of impairment is based upon the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the underlying collateral less applicable selling costs. The impairment amount is either charged off as a reduction to the allowance for loan losses or provided for as a specific reserve within the allowance for loan losses. The allowance for loan losses allocated to TDRs was $56.86 million and $6.1 million at ~~March~~June 3130, 2015 and December 31, 2014, respectively.

The following table presents loans classified as TDRs that were modified during the three months ended March 31, 2015 and 2014:

	Three Months Ended March 31, 2015					Three Months Ended March 31, 2014
(dollars in thousands)	NumberofContracts	Pre-ModificationOutstandingRecordedInvestment		Post-ModificationOutstandingRecordedInvestment		NumberofContracts	Pre-ModificationOutstandingRecordedInvestment		Post-ModificationOutstandingRecordedInvestment
Loan Modifications Classified as Troubled Debt Restructurings:
Real estate mortgage:
One-to-four-family residential	6	$	1,723	$	1,640	15	$	2,580	$	2,157

The following ~~table~~tables ~~presents~~present ~~TDRs~~loans ~~that~~classified ~~defaulted~~as ~~within~~TDRs 12that ~~months~~were ofmodified ~~modification~~ during the three and six months ended ~~March~~June 3130, 2015 and 2014:

	Three Months Ended			Three Months Ended
	Three Months Ended June 30, 2015							Three Months Ended June 30, 2014
	March 31, 2015			March 31, 2014
(dollars in thousands)	NumberofContracts	Pre-ModificationOutstandingRecordedInvestment		Post-ModificationOutstandingRecordedInvestment				NumberofContracts	Pre-ModificationOutstandingRecordedInvestment		Post-ModificationOutstandingRecordedInvestment
(dollars in thousands)	Number ofContracts	RecordedInvestment		Number ofContracts		RecordedInvestment
Loan Modifications Classified as Troubled Debt Restructurings:
Troubled Debt Restructurings That Subsequently Defaulted:
Real estate mortgage:
Real estate mortgage:
One-to-four-family residential	6	$	669	$	626			12	$	1,467	$	1,177
One-to-four-family residential	—	$	—	1		$	438



	Six Months Ended June 30, 2015					Six Months Ended June 30, 2014
(dollars in thousands)	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Loan Modifications Classified as Troubled Debt Restructurings:
Real estate mortgage:
One-to-four-family residential	12	$	2,392	$	2,266	27	$	4,047	$	3,334

The following tables present TDRs that defaulted within 12 months of modification during the three and six months ended June 30, 2015 and 2014:



	Three Months Ended			Three Months Ended
	June 30, 2015			June 30, 2014
(dollars in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Troubled Debt Restructurings That Subsequently Defaulted:
Real estate mortgage:
One-to-four-family residential	—	$	—	5	$	764



	Six Months Ended			Six Months Ended
	June 30, 2015			June 30, 2014
(dollars in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Troubled Debt Restructurings That Subsequently Defaulted:
Real estate mortgage:
One-to-four-family residential	—	$	—	6	$	1,202

Upon default of a TDR, which is considered to be 90 days or more past due under the modified terms, impairment is measured based on the fair value of the underlying collateral less applicable selling costs. The impairment amount is either charged off as a reduction to the allowance for loan losses or provided for as a specific reserve within the allowance for loan losses.

Allowance for Loan Losses. The following ~~table~~tables ~~represents~~represent a summary of changes in the allowance for loan losses by portfolio segment for the three and six months ended ~~March~~June 3130, 2015 and 2014:

(dollars in thousands)

CommercialandIndustrial

Real EstateConstructionandDevelopment

One-to-Four-FamilyResidential

Multi-FamilyResidential

CommercialReal Estate

ConsumerandInstallment

Total

Three Months Ended March 31, 2015:

Three Months Ended June 30, 2015:

Allowance for loan losses:

Beginning balance

12,~~574~~332

32,~~490~~754

2422,~~055~~486

5,~~630~~574

20,~~983~~886

~~142~~110

6664,~~874~~142

Charge-offs

(21,~~987~~117

)

(40138

)

(~~1,163~~564

)

(~~189~~9

)

(~~343~~502

)

(2221

)

(42,~~744~~351

)

Recoveries

1,~~244~~181

~~164~~138

~~500~~913

562,177

21100

2716

24,~~012~~525

Provision (benefit) for loan losses

(1,~~501~~075

)

(~~860~~523

)

(~~906~~432

)

77(4,312

)

~~225~~(1,135

)

(3723

)

—(7,500

)

Ending balance

1211,~~332~~321

2,~~754~~231

22,~~486~~403

53,~~574~~430

2019,~~886~~349

~~110~~82

6458,~~142~~816

Three Months Ended March 31, 2014:

Three Months Ended June 30, 2014:

Allowance for loan losses:

Beginning balance

13,~~401~~871

7,~~407~~086

3231,~~619~~220

5,~~249~~269

22,~~052~~043

~~305~~342

8179,~~033~~831

Charge-offs

(~~1,622~~994

)

(3035

)

(12,~~426~~201

)

(~~132~~2,952

)

(~~188~~21

)

(4937

)

(36,~~447~~240

)

Recoveries

~~752~~1,263

~~600~~756

~~791~~1,478

57915

3813

24,~~245~~427

Provision (benefit) for loan losses

~~1,340~~(409

)

(~~891~~1,207

)

(~~764~~1,352

)

~~145~~5,055

~~122~~(2,117

)

4830

—

Ending balance

13,~~871~~731

76,~~086~~600

3129,~~220~~145

57,~~269~~374

2220,~~043~~820

~~342~~348

7978,~~831~~018

The following table represents a summary of the impairment method used by loan category at March 31, 2015 and December 31, 2014:

(dollars in thousands)	CommercialandIndustrial		Real EstateConstructionandDevelopment	One-to-Four-FamilyResidential	Multi-FamilyResidential	CommercialReal Estate	ConsumerandInstallment and Net Deferred Loan Fees	Total
March 31, 2015:
Allowance for loan losses:
Impaired loans individually evaluated for impairment	$	—	—	918	—	—	—	918
Impaired loans collectively evaluated for impairment	479		231	7,325	1,212	258	—	9,505
All other loans collectively evaluated for impairment	11,853		2,523	14,243	4,362	20,628	110	53,719
Total allowance for loan losses	$	12,332	2,754	22,486	5,574	20,886	110	64,142
Loans:
Impaired loans individually evaluated for impairment	$	2,505	2,622	6,899	18,676	—	—	30,702
Impaired loans collectively evaluated for impairment	5,007		1,005	87,889	318	4,046	4	98,269
All other loans collectively evaluated for impairment	692,671		107,078	935,300	95,294	1,170,753	19,675	3,020,771
Total loans	$	700,183	110,705	1,030,088	114,288	1,174,799	19,679	3,149,742
December 31, 2014:
Allowance for loan losses:
Impaired loans individually evaluated for impairment	$	1,053	—	1,184	—	—	—	2,237
Impaired loans collectively evaluated for impairment	573		219	7,821	1,157	463	1	10,234
All other loans collectively evaluated for impairment	10,948		3,271	15,050	4,473	20,520	141	54,403
Total allowance for loan losses	$	12,574	3,490	24,055	5,630	20,983	142	66,874
Loans:
Impaired loans individually evaluated for impairment	$	4,712	2,626	7,388	19,050	3,765	—	37,541
Impaired loans collectively evaluated for impairment	5,058		1,109	89,561	681	4,122	23	100,554
All other loans collectively evaluated for impairment	685,497		86,116	919,761	95,703	1,175,155	17,505	2,979,737
Total loans	$	695,267	89,851	1,016,710	115,434	1,183,042	17,528	3,117,832

NOTE 4 – SERVICING RIGHTS



(dollars in thousands)	Commercial and Industrial			Real Estate Construction and Development		One-to- Four-Family Residential		Multi- Family Residential		Commercial Real Estate		Consumer and Installment		Total
Six months ended June 30, 2015:
Allowance for loan losses:
Beginning balance	$	12,574		3,490		24,055		5,630		20,983		142		66,874
Charge-offs	(4,104		)	(178	)	(1,727	)	(198	)	(845	)	(43	)	(7,095	)
Recoveries	2,425			302		1,413		2,233		121		43		6,537
Provision (benefit) for loan losses	426			(1,383	)	(1,338	)	(4,235	)	(910	)	(60	)	(7,500	)
Ending balance	$	11,321		2,231		22,403		3,430		19,349		82		58,816

Six months ended June 30, 2014:
Allowance for loan losses:
Beginning balance	$	13,401		7,407		32,619		5,249		22,052		305		81,033
Charge-offs	(2,616		)	(65	)	(3,627	)	(3,084	)	(209	)	(86	)	(9,687	)
Recoveries	2,015			1,356		2,269		9		972		51		6,672
Provision (benefit) for loan losses	931			(2,098	)	(2,116	)	5,200		(1,995	)	78		—
Ending balance	$	13,731		6,600		29,145		7,374		20,820		348		78,018

~~Mortgage~~The ~~Banking~~following ~~Activities.~~table Atrepresents ~~March 31,~~a ~~2015~~summary ~~and~~of ~~December 31, 2014,~~ the ~~Company~~impairment ~~serviced~~method ~~mortgage~~used ~~loans~~by ~~for~~loan ~~others~~category ~~totaling~~at ~~$1.38~~June 30, ~~billion~~2015 and ~~$1.37 billion, respectively. Changes in mortgage servicing rights for the three months ended March~~ December 31, ~~2015 and~~ 2014 ~~were as follows~~:

	Three Months Ended
(dollars in thousands)	CommercialandIndustrial			Real EstateConstructionandDevelopment		One-to-Four-FamilyResidential	Multi-FamilyResidential	CommercialReal Estate	ConsumerandInstallment and Net Deferred Loan Fees	Total
	March 31,
June 30, 2015:
(dollars in thousands)	2015			2014
Allowance for loan losses:
Balance, beginning of period	$	14,012		14,211
Impaired loans individually evaluated for impairment	$	130		16		3,822	—	—	—	3,968
Originated mortgage servicing rights	822			455
Impaired loans collectively evaluated for impairment	452			239		5,012	24	214	1	5,942
Purchased mortgage servicing rights	39			—
All other loans collectively evaluated for impairment	10,739			1,976		13,569	3,406	19,135	81	48,906
Change in fair value resulting from changes in valuation inputs or assumptions used in valuation model (1)	(831		)	151
Total allowance for loan losses	$	11,321		2,231		22,403	3,430	19,349	82	58,816
Other changes in fair value (2)	(561		)	(422	)
Loans:
Balance, end of period	$	13,481		14,395
Impaired loans individually evaluated for impairment	$	1,955		2,877		41,321	—	687	—	46,840
Impaired loans collectively evaluated for impairment	4,011			275		50,052	319	2,141	8	56,806
All other loans collectively evaluated for impairment	747,311			131,918		996,405	97,721	1,213,380	18,098	3,204,833
Total loans held for portfolio	$	753,277		135,070		1,087,778	98,040	1,216,208	18,106	3,308,479
December 31, 2014:
Allowance for loan losses:
Impaired loans individually evaluated for impairment	$	1,053		—		1,184	—	—	—	2,237
Impaired loans collectively evaluated for impairment	573			219		7,821	1,157	463	1	10,234
All other loans collectively evaluated for impairment	10,948			3,271		15,050	4,473	20,520	141	54,403
Total allowance for loan losses	$	12,574		3,490		24,055	5,630	20,983	142	66,874
Loans:
Impaired loans individually evaluated for impairment	$	4,712		2,626		7,388	19,050	3,765	—	37,541
Impaired loans collectively evaluated for impairment	5,058			1,109		89,561	681	4,122	23	100,554
All other loans collectively evaluated for impairment	685,497			86,116		919,761	95,703	1,175,155	17,505	2,979,737
Total loans held for portfolio	$	695,267		89,851		1,016,710	115,434	1,183,042	17,528	3,117,832

NOTE 5 – SERVICING RIGHTS

At June 30, 2015 and December 31, 2014, the Company serviced mortgage loans for others totaling $1.42 billion and $1.37 billion, respectively, and serviced United States Small Business Administration (“SBA”) loans for others totaling $97.5 million and $114.4 million, respectively.

The fair value of mortgage servicing rights at June 30, 2015 and December 31, 2014 was determined using a weighted average discount rate of 9.24% and 9.17%, respectively, and a weighted average conditional prepayment rate (“CPR”) of 11.13% and 12.70%, respectively. The fair value of SBA servicing rights at June 30, 2015 and December 31, 2014 was determined using a weighted average discount rate of 11.14% and 11.80%, respectively, and a weighted average CPR of 6.26% and 6.33%, respectively.

Changes in mortgage and SBA servicing rights for the three and six months ended June 30, 2015 and 2014 were as follows:



	Three Months Ended					Six Months Ended
	June 30,					June 30,
(dollars in thousands)	2015			2014		2015		2014
Balance, beginning of period	$	17,402		19,077		18,013		18,854
Originated servicing rights	1,170			577		1,992		1,032
Purchased servicing rights	37			31		76		31
Change in fair value resulting from changes in valuation inputs or assumptions used in valuation model ⁽¹⁾	1,281			(284	)	583		42
Other changes in fair value ⁽²⁾	(849		)	(617	)	(1,623	)	(1,175	)
Balance, end of period	$	19,041		18,784		19,041		18,784

____________________


(1)	The change in fair value resulting from changes in valuation inputs or assumptions used in valuation model primarily reflects the change in discount rates and prepayment speed assumptions, primarily due to changes in interest rates.


(2)	Other changes in fair value reflect changes due to the collection/realization of expected cash flows over time.

~~Other~~NOTE ~~Servicing~~6 ~~Activities.~~– AtDERIVATIVE March 31, 2015 and December 31, 2014, the Company serviced United States Small Business Administration (“SBA”) loans for others totaling $105.0 million and $114.4 million, respectively. Changes in SBA servicing rights for the three months ended March 31, 2015 and 2014 were as follows:INSTRUMENTS

	Three Months Ended
	March 31,
(dollars in thousands)	2015			2014
Balance, beginning of period	$	4,001		4,643
Originated SBA servicing rights	—			—
Change in fair value resulting from changes in valuation inputs or assumptions used in valuation model (1)	133			175
Other changes in fair value (2)	(213		)	(136	)
Balance, end of period	$	3,921		4,682

The Company utilizes derivative instruments to assist in the management of interest rate sensitivity by modifying the repricing, maturity and option characteristics of certain assets and liabilities. The following table summarizes derivative instruments held by the Company, their notional amount, estimated fair values and their location in the consolidated balance sheets at June 30, 2015 and December 31, 2014:

____________________



(dollars in thousands)				Derivatives in Other Assets
	Notional Amount			Fair Value Gain (Loss)
	June 30, 2015		December 31, 2014	June 30, 2015	December 31, 2014
Derivative Instruments Not Designated as Hedging Instruments:
Interest rate lock commitments	$	30,704	20,762	655	580
Forward commitments to sell mortgage-backed securities	51,200		38,300	448	(294	)
Total	$	81,904	59,062	1,103	286

~~(1)~~Interest ~~The~~Rate ~~change~~Lock Commitments / Forward Commitments to Sell Mortgage-Backed Securities. Derivative instruments issued by the Company consist of interest rate lock commitments to originate fixed-rate loans to be sold. Commitments to originate fixed-rate loans consist primarily of residential real estate loans. These interest rate lock commitments and loans held for sale are hedged with forward contracts to sell mortgage-backed securities, which expire in September 2015. The fair value ~~resulting~~of ~~from~~the ~~changes~~interest inrate ~~valuation~~lock ~~inputs~~commitments orand ~~assumptions~~forward ~~used~~contracts into ~~valuation~~sell ~~model~~mortgage-backed ~~primarily~~securities ~~reflects~~are included in other assets in the ~~change~~consolidated balance sheets. Changes in ~~discount~~the ~~rates~~fair ~~and~~value ~~prepayment~~of ~~speed~~interest ~~assumptions,~~rate ~~primarily~~lock ~~due~~commitments and forward commitments to ~~changes~~sell mortgage-backed securities are recognized in ~~interest~~noninterest ~~rates~~income on a monthly basis.

~~(2)~~The ~~Other~~following ~~changes~~table summarizes amounts included in ~~fair~~the ~~value~~consolidated ~~reflect~~statements ~~changes~~of ~~due~~income tofor the ~~collection/realization~~three ofand ~~expected~~six ~~cash~~months ~~flows~~ended ~~over~~June ~~time.~~30, 2015 and 2014 related to non-hedging derivative instruments:

NOTE 5 – DERIVATIVE INSTRUMENTS



(dollars in thousands)	Location of Gain (Loss) Recognized in Operations on Derivatives	Amount of Gain (Loss) Recognized in Operations on Derivatives
		Three Months Ended					Six Months Ended
		June 30,					June 30,
		2015			2014		2015	2014
Derivative Instruments Not Designated as Hedging Instruments:
Interest rate lock commitments	Gain on loans sold and held for sale	$	(613	)	203		75	318
Forward commitments to sell mortgage-backed securities	Gain on loans sold and held for sale	732			(455	)	742	(737	)

(dollars in thousands)				Derivatives in Other Assets
	Notional Amount			Fair Value Gain (Loss)
	March 31, 2015		December 31, 2014	March 31, 2015		December 31, 2014
Derivative Instruments Not Designated as Hedging Instruments:
Interest rate lock commitments	$	43,610	20,762	1,268		580
Forward commitments to sell mortgage-backed securities	71,600		38,300	(284	)	(294	)
Total	$	115,210	59,062	984		286

NOTE 7 – OTHER BORROWINGS

~~Interest~~Other ~~Rate~~borrowings ~~Lock~~were ~~Commitments~~comprised /solely ~~Forward Commitments to Sell Mortgage-Backed Securities. Derivative instruments issued by the Company consist~~ of ~~interest~~daily ~~rate~~securities ~~lock~~sold ~~commitments~~under toagreements ~~originate fixed-rate loans~~ to berepurchase ~~sold. Commitments to originate fixed-rate loans consist primarily~~ of ~~residential~~$45.6 ~~real~~million ~~estate~~and ~~loans~~$64.9 ~~These~~million ~~interest~~at ~~rate~~June 30, ~~lock~~2015 ~~commitments~~ and ~~loans~~December 31, ~~held for sale are hedged with forward contracts to sell mortgage-backed securities~~2014, ~~which expire in June 2015~~respectively. ~~The~~These ~~fair~~daily ~~value~~securities ofsold ~~the~~under ~~interest~~agreements ~~rate~~to ~~lock~~repurchase ~~commitments~~represent ~~and~~funds ~~forward~~deposited ~~contracts~~by toFirst ~~sell~~Bank’s ~~mortgage-backed~~clients, ~~securities~~on ~~are~~an ~~included~~overnight inbasis, ~~other assets~~ in ~~the~~connection ~~consolidated~~with ~~balance~~cash ~~sheets.~~management ~~Changes~~activities ~~in the fair value~~ of ~~interest~~First ~~rate~~Bank’s ~~lock~~commercial ~~commitments~~deposit ~~and forward commitments to sell mortgage-backed securities are recognized in noninterest income on a monthly basis~~clients.

15Investment securities with a carrying value of $72.0 million and $75.6 million at June 30, 2015 and December 31, 2014, respectively, were pledged in connection with these daily securities sold under agreements to repurchase, and were comprised solely of residential mortgage-backed securities. The fair value of pledged securities may fluctuate due to market conditions. The Company is obligated to transfer additional securities if the fair value of the pledged securities declines below the balance of funds deposited by the Company’s clients.

~~The~~NOTE ~~following~~8 ~~table~~– ~~summarizes~~SUBORDINATED ~~amounts included in the consolidated statements of income for the three months ended March 31, 2015 and 2014 related to non-hedging derivative instruments:~~DEBENTURES

(dollars in thousands)	Location of Gain (Loss) Recognized in Operations on Derivatives	Amount of Gain (Loss) Recognized in Operations on Derivatives
		Three Months Ended
		March 31,
		2015		2014
Derivative Instruments Not Designated as Hedging Instruments:
Interest rate lock commitments	Gain on loans sold and held for sale	$	688	115
Forward commitments to sell mortgage-backed securities	Gain on loans sold and held for sale	10		(282	)

As of June 30, 2015, the Company had 13 affiliated Delaware or Connecticut statutory and business trusts (collectively, “the Trusts”) that were created for the sole purpose of issuing trust preferred securities. The trust preferred securities were issued in private placements, with the exception of First Preferred Capital Trust IV, which was issued in a publicly underwritten offering.

~~NOTE~~The Company’s distributions accrued on the junior subordinated debentures were $3.1 million and $6.1 –million ~~SUBORDINATED~~for ~~DEBENTURES~~the three and six months ended June 30, 2015, respectively, and $3.0 million and $6.8 million for the comparable periods in 2014, and are included in interest expense in the consolidated statements of income. The structure of the trust preferred securities currently satisfies the regulatory requirements for inclusion, subject to certain limitations, in the Company’s capital base, as further described in Note 10 to the consolidated financial statements.

As of March 31, 2015, the Company had 13 affiliated Delaware or Connecticut statutory and business trusts (collectively, “the Trusts”) that were created for the sole purpose of issuing trust preferred securities. The trust preferred securities were issued in private placements, with the exception of First Preferred Capital Trust IV, which was issued in a publicly underwritten offering.

The Company’s distributions accrued on the junior subordinated debentures were $3.0 million and $3.8 million for the three months ended March 31, 2015 and 2014, respectively, and are included in interest expense in the consolidated statements of income. The structure of the trust preferred securities currently satisfies the regulatory requirements for inclusion, subject to certain limitations, in the Company’s capital base, as further discussed in Note 8 to the consolidated financial statements.

The terms of the junior subordinated debentures and the related trust indentures allow the Company to defer payments of interest for up to 20 consecutive quarterly periods without triggering a payment default or penalty. Such interest payments are primarily funded through dividends from First Bank. In addition, during a deferral period, the Company may not, among other things and with limited exceptions, pay cash dividends on or repurchase its common stock or preferred stock nor make any payment on outstanding debt obligations that rank equally with or junior to the junior subordinated debentures. In March 2014, the Company paid all of the cumulative deferred interest on its junior subordinated debentures (which had been deferred for 18 quarterly periods), which was subsequently distributed to the trust preferred securities holders on the respective interest payment dates in March and April, 2014. Since that time, the Company has continued to pay interest on its junior subordinated debentures to the respective trustees on the regularly scheduled quarterly payment dates.

Under its Memorandum of Understanding (“MOU”) with the Federal Reserve Bank of St. Louis (“FRB”), as further discussed in Note 810 to the consolidated financial statements, ~~First~~the ~~Bank~~Company has agreed not to declare or pay any dividends, without the prior consent of the FRB, ~~that~~and ~~would~~not to cause First Bank to pay dividends in excess of its earnings or make a capital distribution that would cause First Bank's Tier 1 ~~Leverage~~leverage ~~Ratio~~ratio to fall below 9.0%. ~~Furthermore~~In addition, pursuant to Missouri Revised Statutes, First Bank is required to obtain approval from the Missouri Division of Finance (“MDOF”) prior to paying any dividends to the Company, as further described in Note 810 to the consolidated financial statements. Furthermore, pursuant to Section 208.5 of Regulation H, if such dividends would exceed undivided profits, First Bank is also required to obtain approval from its sole shareholder and the FRB prior to paying any dividends to the Company. The Company is unable to predict whether or when the FRB and/or the MDOF will grant such ~~consent~~consents in the future.

Without the payment of dividends from First Bank, the Company currently lacks the source of income and the liquidity to make future interest payments on the junior subordinated debentures associated with its trust preferred securities. Given restrictions placed upon First Bank, including regulatory restrictions, it may not be able to provide the Company with dividends in an amount sufficient to pay the future interest on the trust preferred securities. In such case, the Company would have to pursue alternative funding sources, but there can be no assurance that the Company will be able to identify and obtain alternative funding due to the uncertainty that such alternative funding sources would be available to the Company on terms and conditions that are acceptable to the Company.

~~NOTE 7 – STOCKHOLDERS’ EQUITY~~17

NOTE 9 – STOCKHOLDERS’ EQUITY

Common Stock. There is no established public trading market for the Company’s common stock. Various trusts, which were established by and are administered by and for the benefit of the Company’s Chairman of the Board and members of his immediate family (including Mr. Michael Dierberg, Vice Chairman of the Company, and Ms. Ellen Dierberg Milne, Director of the Company), own all of the voting stock of the Company other than the Class C Preferred Stock and Class D Preferred Stock (as defined below) that have limited voting rights.

Preferred Stock. The Company has four classes of preferred stock outstanding.

The Company suspended the payment of cash dividends on its outstanding common stock and preferred stock beginning with the regularly scheduled quarterly dividend payments on the preferred stock that would otherwise have been made in August and September, 2009. The Company has declared and accrued $68.4 million of its regularly scheduled dividend payments on its Class C Fixed Rate Cumulative Perpetual Preferred Stock (“Class C Preferred Stock”) and Class D Fixed Rate Cumulative Perpetual Preferred Stock (“Class D Preferred Stock”) at ~~March~~June 3130, 2015 and December 31, 2014, and has accrued an additional $9.4 million of cumulative dividends on such deferred dividend payments at June 30, 2015 and December 31, 2014. As such, the aggregate amount of these deferred and accrued dividend payments was $77.8 million at June 30, 2015 and December 31, 2014.

16The Company ceased declaring dividends on its Class C Preferred Stock and Class D Preferred Stock during the fourth quarter of 2013. Previously, the Company had declared and accrued dividends on its Class C Preferred Stock and Class D Preferred Stock quarterly throughout the deferral period. If the Company had continued to declare and accrue dividends on its Class C Preferred Stock and Class D Preferred Stock from the fourth quarter of 2013 and forward, the Company would have accrued an additional $56.8 million of dividend payments (including $9.9 million and $19.5 million of dividend payments that would have been declared and accrued for the three and six months ended June 30, 2015, respectively), and the Company’s aggregate deferred and accrued dividend payments would have been $134.6 million and $115.1 million at June 30, 2015 and December 31, 2014, respectively. The Company will continue to evaluate whether declaring dividends on its Class C Preferred Stock and Class D Preferred Stock is appropriate in future periods. The Company’s cessation of declaring and accruing dividends on its Class C Preferred Stock and Class D Preferred Stock did not have any effect on the terms of the outstanding Class C Preferred Stock and Class D Preferred Stock, including the Company’s obligations thereunder.

ofAccumulated ~~cumulative~~Other ~~dividends~~Comprehensive onIncome ~~such~~(Loss). ~~deferred~~The ~~dividend~~following ~~payments~~tables atsummarize ~~March 31,~~changes ~~2015~~in ~~and~~accumulated ~~December 31,~~other ~~2014.~~comprehensive Asincome ~~such~~(loss), ~~the~~net ~~aggregate amount~~ of ~~these~~tax, ~~deferred~~by ~~and~~component, ~~accrued~~for ~~dividend~~the ~~payments~~three ~~was~~and ~~$77.8~~six ~~million~~months atended ~~March 31~~June 30, 2015 and ~~December 31,~~ 2014.:

The Company ceased declaring dividends on its Class C Preferred Stock and Class D Preferred Stock during the fourth quarter of 2013. Previously, the Company had declared and accrued dividends on its Class C Preferred Stock and Class D Preferred Stock quarterly throughout the deferral period. If the Company had continued to declare and accrue dividends on its Class C Preferred Stock and Class D Preferred Stock from the fourth quarter of 2013 and forward, the Company would have accrued an additional $46.9 million of dividend payments (including $9.6 million of dividend payments that would have been declared and accrued for the three months ended March 31, 2015), and the Company’s aggregate deferred and accrued dividend payments would have been $124.7 million and $115.1 million at March 31, 2015 and December 31, 2014, respectively. The Company will continue to evaluate whether declaring dividends on its Class C Preferred Stock and Class D Preferred Stock is appropriate in future periods. The Company’s cessation of declaring and accruing dividends on its Class C Preferred Stock and Class D Preferred Stock did not have any effect on the terms of the outstanding Class C Preferred Stock and Class D Preferred Stock, including the Company’s obligations thereunder.



(dollars in thousands)	Investment Securities			Defined Benefit Pension Plan		Total
Three Months Ended June 30, 2015:
Balance, beginning of period	$	18,263		(3,908	)	14,355
Other comprehensive income before reclassifications	1			—		1
Amounts reclassified from accumulated other comprehensive income	(4,211		)	33		(4,178	)
Net current period other comprehensive (loss) income	(4,210		)	33		(4,177	)
Balance, end of period	$	14,053		(3,875	)	10,178

Three Months Ended June 30, 2014:
Balance, beginning of period	$	13,830		(2,628	)	11,202
Other comprehensive income before reclassifications	3,668			—		3,668
Amounts reclassified from accumulated other comprehensive income	1			21		22
Net current period other comprehensive income	3,669			21		3,690
Balance, end of period	$	17,499		(2,607	)	14,892

Accumulated Other Comprehensive Income (Loss). The following table summarizes changes in accumulated other comprehensive income (loss), net of tax, by component, for the three months ended March 31, 2015 and 2014:



(dollars in thousands)	Investment Securities			Defined Benefit Pension Plan		Total
Six Months Ended June 30, 2015:
Balance, beginning of period	$	14,051		(3,940	)	10,111
Other comprehensive income before reclassifications	4,238			—		4,238
Amounts reclassified from accumulated other comprehensive income	(4,236		)	65		(4,171	)
Net current period other comprehensive income	2			65		67
Balance, end of period	$	14,053		(3,875	)	10,178

Six Months Ended June 30, 2014:
Balance, beginning of period	$	10,151		(2,649	)	7,502
Other comprehensive income before reclassifications	8,100			—		8,100
Amounts reclassified from accumulated other comprehensive income	(752		)	42		(710	)
Net current period other comprehensive income	7,348			42		7,390
Balance, end of period	$	17,499		(2,607	)	14,892

(dollars in thousands)	Investment Securities			Defined Benefit Pension Plan		Total
Three Months Ended March 31, 2015:
Balance, beginning of period	$	14,051		(3,940	)	10,111
Other comprehensive income before reclassifications	4,237			—		4,237
Amounts reclassified from accumulated other comprehensive income	(25		)	32		7
Net current period other comprehensive income	4,212			32		4,244
Balance, end of period	$	18,263		(3,908	)	14,355
Three Months Ended March 31, 2014:
Balance, beginning of period	$	10,151		(2,649	)	7,502
Other comprehensive income before reclassifications	4,432			—		4,432
Amounts reclassified from accumulated other comprehensive income	(753		)	21		(732	)
Net current period other comprehensive income	3,679			21		3,700
Balance, end of period	$	13,830		(2,628	)	11,202

NOTE 810 – REGULATORY CAPITAL AND OTHER REGULATORY MATTERS

Regulatory Capital. The Company and First Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain actions by regulators that, if undertaken, could have a direct material effect on the operations and financial condition of the Company and First Bank. Under these capital requirements, the Company and First Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and First Bank to maintain minimum amounts and ratios of total capital, Tier 1 capital and common equity Tier 1 capital to risk-weighted assets (as defined in the regulations), and of Tier 1 capital to average assets (“~~Tier1~~Tier 1 leverage ratio”).

In July 2013, the federal bank regulators approved final rules (the “Final Capital Rules”) implementing the Basel III framework as well as certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Final Capital Rules also substantially revise the risk-based capital requirements applicable to bank holding companies and their depository institution subsidiaries, including the Company and First Bank, as compared to the general risk-based capital rules (the “General Risk-Based Capital Rules”). The Final Capital Rules revise the components of capital and address other issues affecting the numerator in regulatory capital ratios. The Final Capital Rules also address asset risk weights and other issues affecting the denominator in regulatory capital ratios and replace the existing general risk-weighting approach based on Basel I with a more risk-sensitive approach. The Final Capital Rules became effective for the Company and First Bank on January 1, 2015 (subject to a phase-in period for certain provisions). The calculation of common equity Tier 1 capital is different from the calculation of common equity under GAAP. Most significantly for the Company, the Company's net deferred tax assets, which are included in the calculation of common equity under GAAP, will be substantially phased out over time from the ~~required~~applicable calculation of common equity Tier 1 capital for regulatory purposes. The net deferred tax assets attributable to net operating loss and tax credit carryforwards, which comprised over 91.87% of the Company's net deferred tax assets as of ~~March~~June 3130, 2015, are scheduled to be phased out entirely from inclusion in the calculation of common equity Tier 1 capital in 2018. In addition, the inclusion of trust preferred securities eligible for Tier 1 capital is more limited under the Final Capital Rules. Furthermore, the Company’s noncontrolling interest in subsidiary, which was $93.8 million as of June 30, 2015, will be phased out entirely from inclusion in the calculation of Tier 1 capital by 2018. As of June 30, 2015, the amount of noncontrolling interest in subsidiary that was eligible for inclusion in the calculation of Tier 1 capital was $56.3 million.

17The Company must maintain minimum total capital, Tier 1 capital, common equity Tier 1 capital and Tier 1 leverage ratios as set forth in the table below in order to meet the minimum capital adequacy standards. The Company was categorized as adequately capitalized under minimum regulatory capital standards established for bank holding companies by the Federal Reserve at December 31, 2014. The Company was not categorized as adequately capitalized under minimum regulatory capital standards established for bank holding companies by the Federal Reserve at June 30, 2015 as a result of not meeting the required common equity Tier 1 requirement under the Final Capital Rules.

~~The~~First ~~Company~~Bank ~~must~~was ~~maintain~~categorized ~~minimum~~as ~~total~~well ~~capital,~~capitalized ~~Tier~~at ~~1 capital~~June 30, ~~common~~2015 ~~equity Tier 1 capital~~ and ~~Tier~~December 31, 12014 ~~leverage~~under ~~ratios as set forth in~~ the ~~table~~prompt ~~below~~corrective inaction ~~order~~provisions toof ~~meet~~ the ~~minimum~~regulatory capital ~~adequacy~~ standards. ~~The~~First ~~Company~~Bank ~~was~~must ~~categorized~~maintain ~~as adequately capitalized under~~ minimum ~~regulatory~~total capital, ~~standards~~Tier ~~established~~1 ~~for bank holding companies by the Federal Reserve at December 31~~capital, ~~2014.~~common ~~The~~equity ~~Company~~Tier ~~was~~1 ~~not categorized as adequately capitalized under minimum regulatory~~ capital ~~standards~~and ~~established~~Tier ~~for~~1 ~~bank~~leverage ~~holding~~ratios ~~companies by the Federal Reserve at March 31, 2015~~ as aset ~~result~~forth ofin ~~not meeting~~ the ~~required~~table ~~common~~below ~~equity~~in ~~Tier~~order 1to ~~requirement~~be ~~under~~categorized ~~the~~as ~~Final~~well ~~Capital Rules~~capitalized.

First Bank was categorized as well capitalized at March 31, 2015 and December 31, 2014 under the prompt corrective action provisions of the regulatory capital standards. First Bank must maintain minimum total capital, Tier 1 capital, common equity Tier 1 capital and Tier 1 leverage ratios as set forth in the table below in order to be categorized as well capitalized.19

At June 30, 2015 and December 31, 2014, the Company’s and First Bank’s required and actual capital ratios were as follows:

										Final Capital Rules(Effective January 1, 2015)				General Risk-BasedCapital Rules(Prior to January 1, 2015)
												To be WellCapitalizedUnder Prompt Corrective Action Provisions				To be WellCapitalizedUnder Prompt Corrective Action Provisions
	Actual									For Capital Adequacy Purposes				For Capital Adequacy Purposes
	March 31, 2015					December 31, 2014
	June 30, 2015					December 31, 2014
(dollars in thousands)	Amount			Ratio		Amount		Ratio
Total capital (to risk-weighted assets):
First Banks, Inc.	$	~~582~~597,~~115~~006		14.8880	%	$	475,312	12.25	%	8.0	%	N/A		8.0	%	N/A
First Bank	~~660~~681,~~631~~126			16.8079		691,350		17.81		8.0		10.0	%	8.0		10.0	%
Tier 1 capital (to risk-weighted assets):
First Banks, Inc.	~~283~~296,~~962~~436			7.2635		284,396		7.33		6.0		N/A		4.0		N/A
First Bank	~~612~~628,~~837~~796			15.5950		642,593		16.55		6.0		8.0		4.0		6.0
Common equity Tier 1 capital (to risk-weighted assets):
First Banks, Inc.	(4434,~~624~~251		)	(10.1485	)	N/A		N/A		4.5		N/A		N/A		N/A
First Bank	~~612~~628,~~837~~796			15.5950		N/A		N/A		4.5		6.5		N/A		N/A
Tier 1 capital (to average assets):
First Banks, Inc.	~~283~~296,~~962~~436			5.0215		284,396		5.01		4.0		N/A		4.0		N/A
First Bank	~~612~~628,~~837~~796			10.7887		642,593		11.35		4.0		5.0		4.0		5.0

Regulatory Agreements. On May 19, 2014, the Company entered into an MOU with the FRB. The MOU is characterized by regulatory authorities as an informal action that is neither published nor made publicly available by the FRB and is used when circumstances warrant a milder form of action than a formal supervisory action. Under the terms of the MOU, the Company agreed, among other things, to provide certain information to the FRB including, but not limited to, progress of achieving its Capital Plan, notice of plans to materially change its Capital Plan, parent company cash flow plans and summaries of nonperforming asset classifications. In addition, the Company agreed not to do any of the following without the prior approval of the FRB: (i) declare or pay any dividends on its common or preferred stock; (ii) incur or guarantee any debt; (iii) redeem any of the Company's outstanding common or preferred stock; and (iv) cause First Bank to pay dividends in excess of its earnings or make a capital distribution that would cause First Bank'’s Tier 1 ~~Leverage~~leverage ~~Ratio~~ratio to fall below 9.0%. The FRB has complete discretion to grant any such approval and therefore, it is not known whether the FRB would approve any such request. As reflected in the previous table, First Bank’s Tier 1 leverage ratio was 10.87% as of June 30, 2015, or $108.0 million (1.87%), above the 9.0% minimum requirement under the MOU, which amount includes $56.3 million of currently eligible noncontrolling interest in subsidiary.

While the Company intends to take such actions as may be necessary to comply with the requirements of the MOU with the FRB, there can be no assurance that such efforts will not have adverse effects on the operations and financial condition of the Company or First Bank. If the Company fails to comply with the terms of the MOU, further enforcement action could be taken by the FRB which could have a materially adverse effect on the Company's business, financial condition or results of operations.

NOTE 911 – FAIR VALUE DISCLOSURES

In accordance with ASC Topic 820, “Fair Value Measurements and Disclosures,” financial assets and financial liabilities that are measured at fair value subsequent to initial recognition are grouped into three levels of inputs or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the reliability of assumptions used to determine fair value. The three input levels of the valuation hierarchy are as follows:


Level 1 Inputs –	Valuation is based on quoted prices in active markets for identical instruments in active markets.


Level 2 Inputs –	Valuation is based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

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

use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

The following describes valuation methodologies used to measure financial assets and financial liabilities at fair value, as well as the general classification of such financial instruments pursuant to the valuation hierarchy:

Available-for-sale investment securities. Available-for-sale investment securities are recorded at fair value on a recurring basis. Available-for-sale investment securities included in Level 1 are valued using quoted market prices. Where quoted market prices are unavailable, the fair value included in Level 2 is based on quoted market prices of comparable instruments obtained from independent pricing vendors based on recent trading activity and other relevant information.

are unavailable, the fair value included in Level 2 is based on quoted market prices of comparable instruments obtained from independent pricing vendors based on recent trading activity and other relevant information.

Loans held for sale. Mortgage loans held for sale are carried at fair value on a recurring basis. The determination of fair value is based on quoted market prices of comparable instruments obtained from independent pricing vendors based on recent trading activity and other relevant information. Other loans held for sale are carried at the lower of cost or market value, which is determined on an individual loan basis. The fair value is based on the prices secondary markets are offering for portfolios with similar characteristics. The Company classifies mortgage loans held for sale subjected to recurring fair value adjustments as recurring Level 2. The Company classifies other loans held for sale subjected to nonrecurring fair value adjustments as nonrecurring Level 2.

Impaired loans. The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans are considered impaired when, in the judgment of management based on current information and events, it is probable that payment of all amounts due under the contractual terms of the loan agreement will not be collected. In accordance with ASC Topic 820, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. Once a loan is identified as impaired, management measures the impairment in accordance with ASC Topic 310-10-35, “Receivables.” Impairment is measured by reference to an observable market price, if one exists, the expected future cash flows of an impaired loan discounted at the loan’s effective interest rate, or the fair value of the collateral for a collateral-dependent loan. In most cases, the Company measures fair value based on the value of the collateral securing the loan. Collateral may be in the form of real estate or personal property, including equipment and inventory. The vast majority of the collateral is real estate. The value of the collateral is determined based on third party appraisals as well as internal estimates. These measurements are classified as nonrecurring Level 3.

Other real estate. Certain other real estate, upon initial recognition, is re-measured and reported at fair value through a charge-off to the allowance for loan losses based upon the estimated fair value of the other real estate. The fair value of other real estate, upon initial recognition, is estimated using Level 3 inputs based on third party appraisals, and where applicable, discounted based on management’s judgment taking into account current market conditions, distressed or forced sale price comparisons and other factors in effect at the time of valuation. The Company classifies other real estate subjected to nonrecurring fair value adjustments as Level 3.

Derivative instruments. Substantially all derivative instruments utilized by the Company are traded in over-the-counter markets where quoted market prices are not readily available. Derivative instruments utilized by the Company currently include interest rate lock commitments and forward commitments to sell mortgage-backed securities. For these derivative instruments, fair value is based on market observable inputs utilizing pricing systems and valuation models, and where applicable, the values are compared to the market values calculated independently by the respective counterparties. The Company classifies its derivative instruments as Level 2.

Servicing rights. The valuation of mortgage and SBA servicing rights is performed by an independent third party. The valuation models estimate the present value of estimated future net servicing income, using market-based discount rate assumptions, and utilize assumptions based on the predominant risk characteristics of the underlying loans, including principal balance, interest rate, weighted average life, and certain unobservable inputs, including cost to service, estimated prepayment speed rates and default rates. Changes in the fair value of servicing rights occur primarily due to the realization of expected cash flows, as well as changes in valuation inputs and assumptions. Significant increases (decreases) in any of the unobservable inputs would result in a significantly lower (higher) fair value of the servicing rights. The Company classifies its servicing rights as Level 32.

1921

Items Measured on a Recurring Basis. Assets and liabilities measured at fair value on a recurring basis as of ~~March~~June 3130, 2015 and December 31, 2014 are reflected in the following table:

	Fair Value Measurements
(dollars in thousands)	Level 1		Level 2		Level 3	Fair Value
March 31, 2015:
June 30, 2015:
Assets:
Available-for-sale investment securities:
U.S. Government sponsored agencies	$	—	~~252~~231,~~552~~983		—	~~252~~231,~~552~~983
Residential mortgage-backed	—		1948,~~056,256~~405		—	1948,~~056,256~~405
Commercial mortgage-backed	—		~~838~~18,523		—	~~838~~18,523
State and political subdivisions	—		2928,~~194~~893		—	2928,~~194~~893
Corporate notes	—		~~213~~271,~~617~~743		—	~~213~~271,~~617~~743
Equity investments	1,~~985~~956		—		—	1,~~985~~956
Mortgage loans held for sale	—		4336,~~655~~428		—	4336,~~655~~428
Derivative instruments:
Interest rate lock commitments	—		~~1,268~~655		—	~~1,268~~655
Forward commitments to sell mortgage-backed securities	—		~~(284~~448	)	—	~~(284~~448	)
Servicing rights	—		—19,041		~~17,402~~—	1719,~~402~~041
Total	$	1,~~985~~956	1,~~597~~556,~~096~~119		~~17,402~~—	1,~~616~~558,~~483~~075
December 31, 2014:
Assets:
Available-for-sale investment securities:
U.S. Government sponsored agencies	$	—	231,731		—	231,731
Residential mortgage-backed	—		1,007,844		—	1,007,844
Commercial mortgage-backed	—		837		—	837
State and political subdivisions	—		29,615		—	29,615
Corporate notes	—		173,695		—	173,695
Equity investments	1,967		—		—	1,967
Mortgage loans held for sale	—		31,411		—	31,411
Derivative instruments:
Interest rate lock commitments	—		580		—	580
Forward commitments to sell mortgage-backed securities	—		(294	)	—	(294	)
Servicing rights	—		—18,013		~~18,013~~—	18,013
Total	$	1,967	1,~~475~~493,~~419~~432		~~18,013~~—	1,495,399

There were no transfers between Levels 1 and 2 of the fair value hierarchy for the ~~three~~six months ended ~~March~~June 3130, 2015 and 2014.

~~The following table presents the changes in Level 3 assets measured on a recurring basis for the three months ended March 31, 2015 and 2014:~~22

	Servicing Rights
	Three Months Ended
	March 31,
(dollars in thousands)	2015			2014
Balance, beginning of period	$	18,013		18,854
Total gains or losses (realized/unrealized):
Included in earnings (1)	(1,472		)	(232	)
Included in other comprehensive income	—			—
Issuances	822			455
Purchases	39			—
Transfers in and/or out of level 3	—			—
Balance, end of period	$	17,402		19,077

Items Measured on a Nonrecurring Basis. From time to time, the Company measures certain assets at fair value on a nonrecurring basis. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis as of June 30, 2015 and December 31, 2014 are reflected in the following table:

____________________



	Fair Value Measurements
(dollars in thousands)	Level 1		Level 2	Level 3	Fair Value
June 30, 2015:
Assets:
Impaired loans:
Commercial, financial and agricultural	$	—	—	5,384	5,384
Real estate construction and development	—		—	2,897	2,897
Real estate mortgage:
Residential mortgage	—		—	78,284	78,284
Home equity	—		—	4,255	4,255
Multi-family residential	—		—	295	295
Commercial real estate	—		—	2,614	2,614
Consumer and installment	—		—	7	7
Other real estate	—		—	12,386	12,386
Total	$	—	—	106,122	106,122
December 31, 2014:
Assets:
Impaired loans:
Commercial, financial and agricultural	$	—	—	8,144	8,144
Real estate construction and development	—		—	3,516	3,516
Real estate mortgage:
Residential mortgage	—		—	82,479	82,479
Home equity	—		—	5,465	5,465
Multi-family residential	—		—	18,574	18,574
Commercial real estate	—		—	7,424	7,424
Consumer and installment	—		—	22	22
Other real estate	—		—	55,666	55,666
Total	$	—	—	181,290	181,290

(1) Gains or losses (realized/unrealized) are included in noninterest income in the consolidated statements of income.

Items Measured on a Nonrecurring Basis. From time to time, the Company measures certain assets at fair value on a nonrecurring basis. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis as of March 31, 2015 and December 31, 2014 are reflected in the following table:

	Fair Value Measurements
(dollars in thousands)	Level 1		Level 2	Level 3	Fair Value
March 31, 2015:
Assets:
Impaired loans:
Commercial, financial and agricultural	$	—	—	7,033	7,033
Real estate construction and development	—		—	3,396	3,396
Real estate mortgage:
Residential mortgage	—		—	81,475	81,475
Home equity	—		—	5,070	5,070
Multi-family residential	—		—	17,782	17,782
Commercial real estate	—		—	3,788	3,788
Consumer and installment	—		—	4	4
Other real estate	—		—	15,227	15,227
Total	$	—	—	133,775	133,775
December 31, 2014:
Assets:
Impaired loans:
Commercial, financial and agricultural	$	—	—	8,144	8,144
Real estate construction and development	—		—	3,516	3,516
Real estate mortgage:
Residential mortgage	—		—	82,479	82,479
Home equity	—		—	5,465	5,465
Multi-family residential	—		—	18,574	18,574
Commercial real estate	—		—	7,424	7,424
Consumer and installment	—		—	22	22
Other real estate	—		—	55,666	55,666
Total	$	—	—	181,290	181,290

Non-Financial Assets and Non-Financial Liabilities. Certain non-financial assets measured at fair value on a nonrecurring basis include other real estate (upon initial recognition or subsequent impairment) and other non-financial long-lived assets measured at fair value for impairment assessment.

Other real estate measured at fair value upon initial recognition totaled $~~459,000~~1.5 million and $12.09 million for the ~~three~~six months ended ~~March~~June 3130, 2015 and 2014, respectively. In addition to other real estate measured at fair value upon initial recognition, the Company recorded write-downs to the balance of other real estate of $~~109~~223,000 and $97332,000 to noninterest expense for the three and six months ended ~~March~~June 3130, 2015, respectively, compared to $100,000 and ~~2014~~$197,000 ~~respectively~~for the comparable periods in 2014.

Fair Value of Financial Instruments. The fair value of financial instruments is management’s estimate of the values at which the instruments could be exchanged in a transaction between willing parties. These estimates are subjective and may vary significantly from amounts that would be realized in actual transactions. In addition, other significant assets are not considered financial assets including deferred income tax assets, and bank premises and equipment ~~and goodwill~~. Furthermore, the income taxes that would be incurred if the Company were to realize any of the unrealized gains or unrealized losses indicated between the estimated fair values and corresponding carrying values could have a significant effect on the fair value estimates and have not been considered in any of the estimates. The following summarizes the methods and assumptions used in estimating the fair value of all other financial instruments:

Cash and cash equivalents and accrued interest receivable. The carrying values reported in the consolidated balance sheets approximate fair value.

Held-to-maturity investment securities. The fair value of held-to-maturity investment securities is based on quoted market prices where available. If quoted market prices are not available, the fair value is based on quoted market prices of comparable instruments. The Company classifies its held-to-maturity investment securities as Level 2.

Loans. The fair value of loans held for portfolio uses an exit price concept and reflects discounts the Company believes are consistent with liquidity discounts in the market place. Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial and industrial, real estate construction and development, commercial real estate, one-to-four-family residential real estate, home equity and consumer and installment. The fair value of loans is estimated by discounting the future cash flows, utilizing assumptions for prepayment estimates over the loans’ remaining life and considerations for the current interest rate environment compared to the weighted average rate of the loan portfolio. The fair value analysis also includes other assumptions to estimate fair value, intended to approximate those factors a market participant ~~would use in an orderly transaction, with adjustments for discount rates, interest rates, liquidity, and credit spreads, as appropriate. The Company classifies its loans held for portfolio as Level 3.~~

21would use in an orderly transaction, with adjustments for discount rates, interest rates, liquidity, and credit spreads, as appropriate. The Company classifies its loans held for portfolio as Level 3.

~~consolidated~~FRB ~~balance~~and ~~sheets~~FHLB stock. The ~~fair~~carrying ~~value~~values ofreported ~~demand~~in ~~deposits does not include~~ the ~~benefit~~consolidated ~~that~~balance ~~results~~sheets ~~from~~for ~~the~~FRB ~~low-cost~~and ~~funding~~FHLB ~~provided~~stock, bywhich ~~deposit~~are ~~liabilities~~carried ~~compared~~at ~~to the~~ cost, ofrepresent ~~borrowing~~redemption ~~funds in the market~~value. ~~The~~Estimates ~~fair value disclosed for time deposits is estimated utilizing a discounted cash flow calculation that applies interest rates currently being offered on similar deposits to a schedule~~ of ~~aggregated monthly maturities of time deposits. If the estimated~~ fair value isare ~~lower~~not ~~than~~available ~~the~~due ~~carrying~~to ~~value,~~limitations ~~the~~placed ~~carrying~~on ~~value is reported as~~ the ~~fair~~stock’s ~~value of time deposits~~transferability. ~~The Company classifies its time deposits as Level 3.~~

Deposits. The fair value of deposits payable on demand with no stated maturity (i.e., noninterest-bearing and interest-bearing demand, and savings and money market accounts) is considered equal to their respective carrying amounts as reported in the consolidated balance sheets. The fair value of demand deposits does not include the benefit that results from the low-cost funding provided by deposit liabilities compared to the cost of borrowing funds in the market. The fair value disclosed for time deposits is estimated utilizing a discounted cash flow calculation that applies interest rates currently being offered on similar deposits to a schedule of aggregated monthly maturities of time deposits. If the estimated fair value is lower than the carrying value, the carrying value is reported as the fair value of time deposits. The Company classifies its time deposits as Level 2.

Other borrowings and accrued interest payable. The carrying values reported in the consolidated balance sheets for variable rate borrowings approximate fair value. The fair value of fixed rate borrowings is based on quoted market prices where available. If quoted market prices are not available, the fair value is based on discounting contractual maturities using an estimate of current market rates for similar instruments. The Company classifies its other borrowings, comprised of securities sold under agreements to repurchase, as Level 1. The carrying values reported in the consolidated balance sheets for accrued interest payable approximate fair value.

Subordinated debentures. The fair value of subordinated debentures is based on quoted market prices of comparable instruments. The Company classifies its subordinated debentures as Level 3.

Off-Balance Sheet Financial Instruments. The fair value of commitments to extend credit, standby letters of credit and financial guarantees is based on estimated probable credit losses. The Company classifies its off-balance sheet financial instruments as Level 3.

The estimated fair value of the Company’s financial instruments at ~~March~~June 3130, 2015 was as follows:

	March 31, 2015
	June 30, 2015
	CarryingValue		Estimated Fair Value
(dollars in thousands)			Level 1	Level 2	Level 3	Total
Financial Assets:
Cash and cash equivalents	$	~~230~~238,~~735~~356	~~230~~238,~~735~~356	—	—	~~230~~238,~~735~~356
Investment securities:
Available for sale	1,~~554~~501,~~442~~503		1,~~985~~956	1,~~552~~499,~~457~~547	—	1,~~554~~501,~~442~~503
Held to maturity	~~595~~587,~~335~~200		—	~~597~~583,~~341~~670	—	~~597~~583,~~341~~670
Loans held for portfolio	3,~~085~~249,~~600~~663		—	—	3,~~096~~252,~~743~~942	3,~~096~~252,~~743~~942
Loans held for sale	4336,~~655~~428		—	4336,~~655~~428	—	4336,~~655~~428
Derivative instruments	984		—	984	—	984
FRB and FHLB stock	30,390		N/A	N/A	N/A	N/A
Accrued interest receivable	15,867		15,867	—	—	15,867
Derivative instruments	1,103		—	1,103	—	1,103
Accrued interest receivable	15,206		15,206	—	—	15,206
Financial Liabilities:
Deposits	$	45,~~972~~056,~~089~~525	4,~~049~~180,~~806~~414	—875,028	~~921,817~~—	45,~~971~~055,~~623~~442
Securities sold under agreements to repurchase	5145,~~032~~616		5145,~~032~~616	—	—	5145,~~032~~616
Accrued interest payable	~~830~~842		~~830~~842	—	—	~~830~~842
Subordinated debentures	354,~~305~~324		—	—	~~270~~273,~~473~~116	~~270~~273,~~473~~116
Liability for Off-Balance Sheet Financial Instruments:
Commitments to extend credit, standby letters of credit and financial guarantees	$	12	—	—	12	12

The estimated fair value of the Company’s financial instruments at December 31, 2014 was as follows:

	December 31, 2014
	CarryingValue		Estimated Fair Value
(dollars in thousands)			Level 1	Level 2	Level 3	Total
Financial Assets:
Cash and cash equivalents	$	205,402	205,402	—	—	205,402
Investment securities:
Available for sale	1,445,689		1,967	1,443,722	—	1,445,689
Held to maturity	618,148		—	614,272	—	614,272
Loans held for portfolio	3,050,958		—	—	2,937,948	2,937,948
Loans held for sale	31,411		—	31,411	—	31,411
FRB and FHLB stock	30,458		N/A	N/A	N/A	N/A
Derivative instruments	286		—	286	—	286
Accrued interest receivable	15,064		15,064	—	—	15,064
Financial Liabilities:
Deposits	$	4,849,504	3,923,627	—924,955	~~924,955~~—	4,848,582
Securities sold under agreements to repurchase	64,875		64,875	—	—	64,875
Accrued interest payable	831		831	—	—	831
Subordinated debentures	354,286		—	—	303,191	303,191
Liability for Off-Balance Sheet Financial Instruments:
Commitments to extend credit, standby letters of credit and financial guarantees	$	12	—	—	12	12

22NOTE 12 – INCOME TAXES

~~NOTE~~A 10summary –of ~~BUSINESS~~the ~~SEGMENT~~Company’s ~~RESULTS~~deferred tax assets and deferred tax liabilities at June 30, 2015 and December 31, 2014 is as follows:

The Company’s business segment is First Bank. The reportable business segment is consistent with the management structure of the Company, First Bank and the internal reporting system that monitors performance. First Bank provides similar products and services in its defined geographic areas through its branch network. The products and services offered include a broad range of commercial and personal deposit products, including demand, savings, money market and time deposit accounts. In addition, First Bank markets combined basic services for various client groups, including packaged accounts for more affluent clients, and sweep accounts, lock-box deposits and cash management products for commercial clients. First Bank also offers consumer and commercial loans. Consumer lending includes residential real estate, home equity and installment lending. Commercial lending includes commercial, financial and agricultural loans, real estate construction and development loans, commercial real estate loans and small business lending. Other financial services include mortgage banking, debit cards, brokerage services, internet banking, remote deposit, mobile banking, automated teller machine (“ATMs”), telephone banking, safe deposit boxes, and trust and private banking services. The revenues generated by First Bank and its subsidiaries consist primarily of interest income generated from the loan and investment security portfolios, service charges and fees generated from deposit products and services, and fees generated by the Company’s mortgage banking and trust and private banking business units. The Company’s products and services are offered to clients primarily within its geographic areas, which include eastern Missouri, southern Illinois, southern and northern California, and Florida’s Bradenton, Palmetto and Longboat Key communities. Certain loan products are available nationwide.



(dollars in thousands)	June 30, 2015			December 31, 2014
Gross deferred tax assets	$	340,684		348,116
Valuation allowance	(29,416		)	(35,541	)
Deferred tax assets, net of valuation allowance	311,268			312,575
Deferred tax liabilities	41,301			40,728
Net deferred tax assets	$	269,967		271,847

~~The~~During ~~business~~the ~~segment~~three ~~results~~months ~~are~~ended ~~consistent~~June ~~with~~30, 2015, the Company’s ~~internal~~recorded ~~reporting~~adjustments ~~system~~to ~~and~~the valuation allowance against its net deferred tax assets, which are reflected as a benefit for income taxes in ~~all~~the ~~material~~consolidated ~~respects~~statements of income. These adjustments primarily resulted from the generation of capital gains, changes in state tax rates and changes in estimates associated with ~~GAAP~~certain federal and ~~practices~~state ~~predominant~~tax attributes (net operating loss carryforwards, capital loss carryforwards, contributions, state rates and credits). Additionally, based upon forecasted pre-tax earnings, the Company determined that additional deferred tax assets will be utilized prior to their expiration and thus, additional federal and state valuation allowances were reversed and recorded as a benefit for income taxes in the ~~banking~~consolidated ~~industry~~statements of income. The ~~business~~adjustments ~~segment~~to ~~results~~the valuation allowance against our net deferred tax assets for the six months ended June 30, 2015 are ~~summarized~~reflected asin ~~follows~~the following table:

	First Bank					Corporate, Other and Intercompany Reclassifications				Consolidated Totals
(dollars in thousands)	Federal			State		Total
(dollars in thousands)	March 31, 2015			December 31, 2014		March 31, 2015		December 31, 2014		March 31, 2015	December 31, 2014
Change in forecasted earnings	$	(2,134	)	(1,163	)	(3,297	)
Balance sheet information:
Generation of capital gain on single issuer’s common stock sale	(2,943		)	(738	)	(3,681	)
Investment securities	$	2,149,777		2,063,837		—		—		2,149,777	2,063,837
Changes in estimates associated with certain federal & state tax attributes	342			511		853
Total loans	3,193,397			3,149,243		—		—		3,193,397	3,149,243
Total decrease in deferred tax asset valuation allowance	$	(4,735	)	(1,390	)	(6,125	)
FRB and FHLB stock	30,348			30,458		—		—		30,348	30,458
Total assets	5,992,340			5,882,222		54,290		53,297		6,046,630	5,935,519
Deposits	4,997,353			4,871,140		(25,264	)	(21,636	)	4,972,089	4,849,504
Securities sold under agreements to repurchase	51,032			64,875		—		—		51,032	64,875
Subordinated debentures	—			—		354,305		354,286		354,305	354,286
Stockholders’ equity	872,736			871,301		(353,365	)	(358,857	)	519,371	512,444

	First Bank				Corporate, Other and Intercompany Reclassifications				Consolidated Totals
	Three Months Ended				Three Months Ended				Three Months Ended
	March 31,				March 31,				March 31,
(dollars in thousands)	2015		2014		2015		2014		2015	2014
Income statement information:
Interest income	$	41,666	42,189		—		—		41,666	42,189
Interest expense	2,075		2,051		3,004		3,798		5,079	5,849
Net interest income (loss)	39,591		40,138		(3,004	)	(3,798	)	36,587	36,340
Provision for loan losses	—		—		—		—		—	—
Net interest income (loss) after provision for loan losses	39,591		40,138		(3,004	)	(3,798	)	36,587	36,340
Noninterest income	18,037		14,169		91		116		18,128	14,285
Noninterest expense	50,243		42,603		176		(245	)	50,419	42,358
Income (loss) before provision (benefit) for income taxes	7,385		11,704		(3,089	)	(3,437	)	4,296	8,267
Provision (benefit) for income taxes	2,694		4,120		(1,081	)	(1,203	)	1,613	2,917
Net income (loss)	4,691		7,584		(2,008	)	(2,234	)	2,683	5,350
Net income (loss) attributable to noncontrolling interest in subsidiary	9		(55	)	—		—		9	(55	)
Net income (loss) attributable to First Banks, Inc.	$	4,682	7,639		(2,008	)	(2,234	)	2,674	5,405

At June 30, 2015 and December 31, 2014, for federal income tax purposes, the Company had net operating loss carryforwards of approximately $549.6 million and $529.3 million, respectively. For state income tax purposes, the Company had net operating loss carryforwards of approximately $729.9 million and $719.5 million at June 30, 2015 and December 31, 2014, respectively, and a related deferred tax asset of $59.8 million and $58.7 million, respectively.

NOTE 1113 – ~~TRANSACTIONS~~BUSINESS ~~WITH~~SEGMENT ~~RELATED PARTIES~~RESULTS

~~First~~The ~~Services,~~Company’s ~~L.P.~~business ~~First~~segment ~~Services,~~is LFirst Bank.P. ~~(“First~~The ~~Services”),~~reportable abusiness ~~limited~~segment ~~partnership~~is ~~indirectly~~consistent ~~owned~~with bythe management structure of the Company’s, ~~Chairman~~First Bank and ~~members~~the ofinternal ~~his~~reporting ~~immediate~~system ~~family,~~that ~~including~~monitors Mrperformance. ~~Michael~~First ~~Dierberg,~~Bank ~~Vice~~provides ~~Chairman~~similar ofproducts ~~the~~and ~~Company,~~services ~~and~~in Msits defined geographic areas through its branch network. ~~Ellen~~The ~~Dierberg~~products ~~Milne,~~and ~~Director~~services offered include a broad range of ~~the~~commercial ~~Company,~~and ~~provides~~personal ~~information~~deposit ~~technology~~products, ~~item~~including ~~processing~~demand, ~~and~~savings, ~~various~~money ~~related~~market ~~services~~and totime ~~the~~deposit ~~Company~~accounts. ~~and~~In addition, First Bank. ~~Fees~~markets ~~charged~~combined bybasic ~~First~~services ~~Services~~for tovarious ~~First~~client ~~Bank~~groups, ~~(net~~including ofpackaged ~~payments~~accounts ~~from~~for ~~First~~more ~~Services~~affluent toclients, ~~First~~and ~~Bank~~sweep ~~for~~accounts, ~~rental~~lock-box ofdeposits ~~information~~and ~~technology~~cash ~~and~~management ~~other~~products ~~equipment)~~for ~~were~~commercial $5clients.0 ~~million~~First ~~and~~Bank ~~$4.9~~also ~~million~~offers ~~for~~consumer ~~the~~and ~~three~~commercial ~~months~~loans. ~~ended~~Consumer ~~March~~lending 31includes residential real estate, ~~2015~~home equity and ~~2014,~~installment lending. Commercial lending includes

2325

~~respectively~~commercial, financial and agricultural loans, real estate construction and development loans, commercial real estate loans and small business lending. InOther ~~addition~~financial services include mortgage banking, ~~First~~debit ~~Services~~cards, ~~paid~~brokerage ~~$435~~services,~~000~~ ~~for~~internet ~~the~~banking, ~~three~~remote ~~months~~deposit, ~~ended~~mobile ~~March~~banking, 31automated teller machine (“ATMs”), ~~2015~~telephone banking, safe deposit boxes, and ~~2014~~trust inand ~~rental~~private ~~payments~~banking toservices. The revenues generated by First Bank ~~for~~and ~~occupancy~~its subsidiaries consist primarily of ~~certain~~interest ~~First~~income ~~Bank~~generated ~~premises~~from the loan and investment security portfolios, service charges and fees generated from deposit products and services, and fees generated by the Company’s mortgage banking and trust and private banking business units. The Company’s products and services are currently offered to clients primarily within its geographic areas, which include eastern Missouri, southern Illinois, southern and northern California, and Florida’s Bradenton, Palmetto and Longboat Key communities. Certain loan products are available nationwide. The business issegment ~~conducted~~results are consistent with the Company’s internal reporting system and, in all material respects, with GAAP and practices predominant in the banking industry. The business segment results are summarized as follows:

First Services has an Affiliate Services Agreement with the Company and First Bank that relates to various services provided to First Services, including certain human resources, payroll, employee benefit and training services, accounting services, insurance services, vendor payment processing services and advisory services. Fees incurred under the Affiliate Services Agreement by First Services were $54,000 and $60,000 for the three months ended March 31, 2015 and 2014, respectively.



	First Bank			Corporate, Other and Intercompany Reclassifications				Consolidated Totals
(dollars in thousands)	June 30, 2015		December 31, 2014	June 30, 2015		December 31, 2014		June 30, 2015	December 31, 2014
Balance sheet information:
Investment securities	$	2,088,703	2,063,837	—		—		2,088,703	2,063,837
Total loans	3,344,907		3,149,243	—		—		3,344,907	3,149,243
FRB and FHLB stock	30,390		30,458	—		—		30,390	30,458
Total assets	6,047,605		5,847,778	49,113		47,013		6,096,718	5,894,791
Deposits	5,078,758		4,871,140	(22,233	)	(21,636	)	5,056,525	4,849,504
Securities sold under agreements to repurchase	45,616		64,875	—		—		45,616	64,875
Subordinated debentures	—		—	354,324		354,286		354,324	354,286
Stockholders’ equity	883,317		871,301	(355,393	)	(358,857	)	527,924	512,444

First Brokerage America, L.L.C. First Brokerage America, L.L.C. (“First Brokerage”), a limited liability company indirectly owned by the Company’s Chairman and members of his immediate family, including Mr. Michael Dierberg, Vice Chairman of the Company, and Ms. Ellen Dierberg Milne, Director of the Company, received approximately $1.0 million for the three months ended March 31, 2015 and 2014, respectively, in gross commissions paid by unaffiliated third-party companies. The commissions received primarily resulted from sales of annuities, securities and other insurance products to clients of First Bank. First Brokerage paid approximately $117,000 and $93,000 for the three months ended March 31, 2015 and 2014, respectively, to First Bank in rental payments for occupancy of certain First Bank premises from which brokerage business is conducted.



	First Bank				Corporate, Other and Intercompany Reclassifications				Consolidated Totals
	Three Months Ended				Three Months Ended				Three Months Ended
	June 30,				June 30,				June 30,
(dollars in thousands)	2015			2014	2015		2014		2015		2014
Income statement information:
Interest income	$	45,984		42,557	—		30		45,984		42,587
Interest expense	2,186			2,041	3,043		3,022		5,229		5,063
Net interest income (loss)	43,798			40,516	(3,043	)	(2,992	)	40,755		37,524
(Benefit) provision for loan losses	(7,500		)	—	—		—		(7,500	)	—
Net interest income (loss) after (benefit) provision for loan losses	51,298			40,516	(3,043	)	(2,992	)	48,255		37,524
Noninterest income	22,450			13,747	91		90		22,541		13,837
Noninterest expense	56,343			43,230	167		(19	)	56,510		43,211
Income (loss) before provision (benefit) for income taxes	17,405			11,033	(3,119	)	(2,883	)	14,286		8,150
Provision (benefit) for income taxes	2,647			1,901	(1,091	)	1,017		1,556		2,918
Net income (loss)	14,758			9,132	(2,028	)	(3,900	)	12,730		5,232
Net income attributable to noncontrolling interest in subsidiary	18			1	—		—		18		1
Net income (loss) attributable to First Banks, Inc.	$	14,740		9,131	(2,028	)	(3,900	)	12,712		5,231

Dierbergs Markets, Inc. First Bank leases certain of its in-store branch offices and ATM sites from Dierbergs Markets, Inc., a grocery store chain headquartered in St. Louis, Missouri that is owned and operated by the brother of the Company’s Chairman and members of his immediate family. Total rent expense incurred by First Bank under the lease obligation contracts was $128,000 and $126,000 for the three months ended March 31, 2015 and 2014, respectively.



	First Bank					Corporate, Other and Intercompany Reclassifications				Consolidated Totals
	Six Months Ended					Six Months Ended				Six Months Ended
	June 30,					June 30,				June 30,
(dollars in thousands)	2015			2014		2015		2014		2015		2014
Income statement information:
Interest income	$	87,650		84,746		—		30		87,650		84,776
Interest expense	4,261			4,092		6,047		6,820		10,308		10,912
Net interest income (loss)	83,389			80,654		(6,047	)	(6,790	)	77,342		73,864
(Benefit) provision for loan losses	(7,500		)	—		—		—		(7,500	)	—
Net interest income (loss) after (benefit) provision for loan losses	90,889			80,654		(6,047	)	(6,790	)	84,842		73,864
Noninterest income	40,487			27,916		182		206		40,669		28,122
Noninterest expense	106,586			85,833		343		(264	)	106,929		85,569
Income (loss) before provision (benefit) for income taxes	24,790			22,737		(6,208	)	(6,320	)	18,582		16,417
Provision (benefit) for income taxes	5,341			6,021		(2,172	)	(186	)	3,169		5,835
Net income (loss)	19,449			16,716		(4,036	)	(6,134	)	15,413		10,582
Net income (loss) attributable to noncontrolling interest in subsidiary	27			(54	)	—		—		27		(54	)
Net income (loss) attributable to First Banks, Inc.	$	19,422		16,770		(4,036	)	(6,134	)	15,386		10,636

First Capital America, Inc. / FB Holdings, LLC. The Company formed FB Holdings, a limited liability company organized in the state of Missouri, in May 2008. FB Holdings operates as a majority-owned subsidiary of First Bank and was formed for the primary purpose of holding and managing certain nonperforming loans and assets and to permit an efficient vehicle for the investment of additional capital by the Company’s sole owner of its Class A and Class B preferred stock. First Bank owned 53.23% and FCA, a corporation owned by the Company’s Chairman and members of his immediate family, including Mr. Michael Dierberg, Vice Chairman of the Company, and Ms. Ellen Dierberg Milne, Director of the Company, owned the remaining 46.77% of FB Holdings as of March 31, 2015. FCA’s ownership in FB Holdings is reflected as a component of stockholders’ equity in the consolidated balance sheets.26

~~Loans~~NOTE to14 ~~Directors,~~– ~~Executive~~TRANSACTIONS ~~Officers~~WITH ~~and/or~~RELATED their Affiliates. First Bank has had in the past, and may have in the future, loan transactions in the ordinary course of business with its directors, executive officers and/or their affiliates. Loans to directors, their affiliates and executive officers of the Company were $9.2 million and $28.8 million at March 31, 2015 and December 31, 2014, respectively. First Bank does not extend credit to its officers or to officers of the Company, except extensions of credit secured by mortgages on personal residences, loans to purchase automobiles, personal credit card accounts and deposit account overdraft protection under a plan whereby a credit limit has been established in accordance with First Bank’s standard credit criteria.PARTIES

First Services, L.P. First Services, L.P. (“First Services”), a limited partnership indirectly owned by the Company’s Chairman and members of his immediate family, including Mr. Michael Dierberg, Vice Chairman of the Company, and Ms. Ellen Dierberg Milne, Director of the Company, provides information technology, item processing and various related services to the Company and First Bank. Fees charged by First Services to First Bank (net of payments from First Services to First Bank for rental of information technology and other equipment) were $4.8 million and $9.8 million for the three and six months ended June 30, 2015, respectively, and $5.1 million and $10.0 million for the comparable periods in 2014. In addition, First Services paid $435,000 and $870,000, respectively, for the three and six months ended June 30, 2015 and 2014, in rental payments to First Bank for occupancy of certain First Bank premises from which business is conducted.

First Services has an Affiliate Services Agreement with the Company and First Bank that relates to various services provided to First Services, including certain human resources, payroll, employee benefit and training services, accounting services, insurance services, vendor payment processing services and advisory services. Fees incurred under the Affiliate Services Agreement by First Services were $54,000 and $108,000 for the three and six months ended June 30, 2015, respectively, and $60,000 and $120,000 for the comparable periods in 2014.

First Brokerage America, L.L.C. First Brokerage America, L.L.C. (“First Brokerage”), a limited liability company indirectly owned by the Company’s Chairman and members of his immediate family, including Mr. Michael Dierberg, Vice Chairman of the Company, and Ms. Ellen Dierberg Milne, Director of the Company, received approximately $1.0 million and $2.0 million for the three and six months ended June 30, 2015, respectively, and $1.2 million and $2.3 million for the comparable periods in 2014, in gross commissions paid by unaffiliated third-party companies. The commissions received primarily resulted from sales of annuities, securities and other insurance products to clients of First Bank. First Brokerage paid approximately $103,000 and $220,000 for the three and six months ended June 30, 2015, respectively, and $149,000 and $242,000 for the comparable periods in 2014, to First Bank in rental payments for occupancy of certain First Bank premises from which brokerage business is conducted.

Dierbergs Markets, Inc. First Bank leases certain of its in-store branch offices and ATM sites from Dierbergs Markets, Inc., a grocery store chain headquartered in St. Louis, Missouri that is owned and operated by the brother of the Company’s Chairman and members of his immediate family. Total rent expense incurred by First Bank under the lease obligation contracts was $125,000 and $253,000 for the three and six months ended June 30, 2015, respectively, and $126,000 and $252,000 for the comparable periods in 2014.

First Capital America, Inc. / FB Holdings, LLC. The Company formed FB Holdings, a limited liability company organized in the state of Missouri, in May 2008. FB Holdings operates as a majority-owned subsidiary of First Bank and was formed for the primary purpose of holding and managing certain nonperforming loans and assets and to permit an efficient vehicle for the investment of additional capital by the Company’s sole owner of its Class A and Class B preferred stock. First Bank owned 53.23% and FCA, a corporation owned by the Company’s Chairman and members of his immediate family, including Mr. Michael Dierberg, Vice Chairman of the Company, and Ms. Ellen Dierberg Milne, Director of the Company, owned the remaining 46.77% of FB Holdings as of June 30, 2015. FCA’s ownership in FB Holdings is reflected as a component of stockholders’ equity in the consolidated balance sheets.

Loans to Directors, Executive Officers and/or their Affiliates. First Bank has had in the past, and may have in the future, loan transactions in the ordinary course of business with its directors, executive officers and/or their affiliates. Loans to directors, their affiliates and executive officers of the Company were $7.8 million and $28.8 million at June 30, 2015 and December 31, 2014, respectively. First Bank does not extend credit to its officers or to officers of the Company, except extensions of credit secured by mortgages on personal residences, loans to purchase automobiles, personal credit card accounts and deposit account overdraft protection under a plan whereby a credit limit has been established in accordance with First Bank’s standard credit criteria.

Depositary Accounts of Directors, Executive Officers and/or their Affiliates. Certain directors, executive officers and/or their affiliates maintain funds on deposit with First Bank in the ordinary course of business. These deposit transactions include demand, savings and time accounts, and have been established on the same terms, including interest rates, as those prevailing at the time for comparable transactions with unaffiliated persons.

~~NOTE 12 – CONTINGENT LIABILITIES~~27

NOTE 15 – CONTINGENT LIABILITIES

Litigation Matters. In the ordinary course of business, the Company and its subsidiaries become involved in legal proceedings, including litigation arising out of the Company’s efforts to collect outstanding loans. It is not uncommon for collection efforts to lead to so-called “lender liability” suits in which borrowers may assert various claims against the Company. From time to time, the Company is party to other legal matters arising in the normal course of business. While some matters pending against the Company specify damages claimed by plaintiffs, others do not seek a specified amount of damages or are at very early stages of the legal process. The Company records a loss accrual for all legal matters for which it deems a loss is probable and can be reasonably estimated. Management, after consultation with legal counsel, believes the ultimate resolution of these existing proceedings is not reasonably likely to have a material adverse effect on the business, financial condition or results of operations of the Company and/or its subsidiaries and the range of possible additional loss in excess of amounts accrued is not material.

Regulatory Matters. The Company entered into an MOU with the FRB, dated May 19, 2014. This agreement is further described in Note 810 to the consolidated financial statements.

2428

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements and Factors that Could Affect Future Results

The discussion set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations contains certain forward-looking statements with respect to our financial condition, results of operations and business. Generally, forward-looking statements may be identified through the use of words such as: “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” or words of similar meaning or future or conditional terms such as: “will,” “would,” “should,” “could,” “may,” “likely,” “probably,” or “possibly.” Examples of forward-looking statements include, but are not limited to, estimates or projections with respect to our future financial condition and earnings, including the ability of the Company to remain profitable, and expected or anticipated revenues with respect to our results of operations and our business. These forward-looking statements are subject to certain risks and uncertainties, not all of which can be predicted or anticipated. Factors that may cause our actual results to differ materially from those contemplated by the forward-looking statements herein include market conditions as well as conditions affecting the banking industry generally and factors having a specific impact on us, including but not limited to, the following factors whose order is not indicative of likelihood or significance of impact:


•	Our ability to raise sufficient capital and/or maintain capital at levels necessary or desirable to support our operations;


•	The risks associated with implementing our business strategy;

• Regulatory actions that impact First Banks, Inc. and First Bank, including our ability to comply with the terms of the Memorandum of Understanding entered into between First Banks, Inc. and the Federal Reserve Bank of St. Louis, as further ~~discussed~~described under “~~Overview~~Part ~~and~~II, ~~Recent~~Item ~~Developments~~1 – ~~Regulatory~~Legal ~~Agreements~~Proceedings;”


•	The effects of and changes in trade and monetary and fiscal policies and laws;


•	The appropriateness of our allowance for loan losses to absorb the amount of actual losses inherent in our existing loan portfolio;


•	The accuracy of assumptions underlying the establishment of our allowance for loan losses and the estimation of values of collateral or cash flow projections and the potential resulting impact on the carrying value of various financial assets and liabilities;


•	Credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio including certain large individual loans;


•	Weakness in the residential real estate market and the potential impact on the value of collateral securing residential real estate loans held or originated for sale;


•	Credit risks associated with our home equity loan portfolio upon commencement of the loan amortization period;


•	Possible changes in the creditworthiness of clients and the possible impairment of collectability of loans;


•	Our ability to maintain an appropriate level of liquidity to fund operations, service debt obligations and meet obligations and other commitments;

• Implementation of the Basel III regulatory capital reforms and changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act ~~includes~~which include significant changes to bank capital, leverage and liquidity requirements, as further ~~discussed~~described under “Overview and Recent Developments – Capital Adequacy Requirements;”


•	Inaccessibility of funding sources on the same or similar terms on which we have historically relied if we are unable to maintain sufficient capital ratios;


•	The ability of First Bank to pay dividends to its parent holding company;


•	Our ability to pay cash dividends on our preferred stock and interest on our junior subordinated debentures;


•	Possible changes in interest rates may increase our funding costs and reduce earning asset yields, thus reducing our margins;

• ~~The~~Our ability to attract and retain senior management experienced in the banking and financial services industry;

• ~~The~~Our ability to successfully acquire low cost deposits or alternative funding;


•	Changes in consumer spending, borrowing and savings habits;


•	Changes in the economic environment, competition, or other factors that may influence loan demand, deposit flows, the quality of our loan portfolio and loan and deposit pricing;


•	The impact on our financial condition of unknown and/or unforeseen liabilities arising from legal or administrative proceedings;


•	The threat of future terrorist activities, existing and potential wars and/or military actions related thereto, and domestic responses to terrorism or threats of terrorism;


•	Possible changes in general economic and business conditions in the United States in general and particularly in the communities and market segments we serve;


•	Volatility and disruption in national and international financial markets;


•	Government intervention in the U.S. financial system;


•	The impact of laws and regulations applicable to us and changes therein;

2529


•	The impact of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters;


•	The impact of litigation generally and specifically arising out of our efforts to collect outstanding client loans;


•	Competitive conditions in the markets in which we conduct our operations, including competition from banking and non-banking companies with substantially greater resources than us, some of which may offer and develop products and services not offered by us;


•	Our ability to control the composition of our loan portfolio without adversely affecting interest income and credit default risk;


•	The geographic dispersion of our offices;

• The highly regulated environment in which we operate; ~~and~~


•	The impact on us resulting from the inherent risk that our operations could be interrupted if our third party service providers experience difficulty, terminate their services or fail to comply with banking regulations; and


•	Our ability to respond to changes in technology or an interruption or breach in security of our information systems, including potential cyber attacks.

Actual events or our actual future results may differ materially from any forward-looking statement due to these and other risks, uncertainties and significant factors. For a discussion of these and other risk factors that may impact these forward-looking statements, please refer to our 2014 Annual Report on Form 10-K, as filed with the United States Securities and Exchange Commission on March 24, 2015. We wish to caution readers of this Quarterly Report on Form 10-Q that the foregoing list of important factors may not be all-inclusive and we specifically decline to undertake any obligation to publicly revise any forward-looking statements that have been made to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. We do not have a duty to and do not undertake any obligation to update these forward-looking statements. Readers of this Quarterly Report on Form 10-Q should therefore consider these risks and uncertainties in evaluating forward-looking statements and should not place undue reliance on these statements.

OVERVIEW AND RECENT DEVELOPMENTS

We (“the “Company”), are a registered bank holding company incorporated in Missouri in 1978 and headquartered in St. Louis, Missouri. We operate through our wholly owned subsidiary bank holding company, The San Francisco Company (“SFC”), headquartered in St. Louis, Missouri, and SFC’s wholly owned subsidiary bank, First Bank, also headquartered in St. Louis, Missouri. First Bank operates through its branch banking offices and subsidiaries. First Bank’s subsidiaries are wholly owned at ~~March~~June 3130, 2015 except ~~for~~ FB Holdings, LLC (“FB Holdings”), which is 53.23% owned by First Bank and 46.77% owned by First Capital America, Inc. (“FCA,”), a corporation owned and operated by the Company’s Chairman of the Board and members of his immediate family, including Mr. Michael Dierberg, Vice Chairman of the Company, and Ms. Ellen Dierberg Milne, Director of the Company, as further described in Note 1114 to our consolidated financial statements.

First Bank currently operates ~~129~~125 branch banking offices in eastern Missouri, southern Illinois, southern and northern California, and Florida’s Bradenton, Palmetto and Longboat Key communities. Through First Bank, we offer a broad range of financial services, including commercial and personal deposit products, commercial and consumer lending, and many other financial products and services.

All financial information in this Quarterly Report on Form 10-Q is reported on a continuing operations basis.

Capital Adequacy Requirements. The Company and First Bank are each required to comply with applicable capital adequacy standards established by the Board of Governors of the Federal Reserve System (“Federal Reserve”). The current risk-based capital standards applicable to the Company and First Bank, parts of which are currently in the process of being phased-in, are based on the December 2010 final capital framework for strengthening international capital standards, known as Basel III, of the Basel Committee on Banking Supervision (“the “Basel Committee”). Prior to January 1, 2015, the risk-based capital standards applicable to the Company and First Bank (“the “General Risk-Based Capital Rules”) were based on the 1988 Capital Accord, known as Basel I, of the Basel Committee.

General Risk-Based Capital Rules (Effective Prior to January 1, 2015). The General Risk-Based Capital rules were intended to make regulatory capital requirements sensitive to differences in credit and market risk profiles among banks and bank holding companies, to account for off-balance sheet exposure, and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items were assigned to weighted risk categories. Capital was classified as Tier 1 (or core) capital or Tier 2 (or supplementary) capital depending on its characteristics. Under the General Risk-Based Capital Rules, Tier 1 capital included common equity, retained earnings, qualifying noncumulative perpetual preferred stock (including related surplus), non-controlling interests in equity accounts of consolidated subsidiaries, and a limited amount of certain restricted core capital elements (including subordinated debt and related trust preferred securities), less goodwill, most intangible assets and certain other assets, and Tier 2 capital included qualifying subordinated debt, qualifying mandatorily convertible debt securities, perpetual preferred stock not included in the definition of Tier 1 capital, a limited amount of certain restricted core capital elements not eligible for inclusion in Tier 1 capital (including subordinated debt and related trust preferred securities), and a limited amount of the allowance for loan losses.

capital included qualifying subordinated debt, qualifying mandatorily convertible debt securities, perpetual preferred stock not included in the definition of Tier 1 capital, a limited amount of certain restricted core capital elements not eligible for inclusion in Tier 1 capital (including subordinated debt and related trust preferred securities), and a limited amount of the allowance for loan losses.

Under the General Risk-Based Capital Rules, the Company and First Bank were each required to maintain Tier 1 capital and Total capital (that is, the sum of Tier 1 and Tier 2 capital) equal to at least 4.0% and 8.0%, respectively, of total risk-weighted assets (including certain off-balance sheet items, such as unfunded loan commitments greater than one year and standby letters of credit).

In addition to the General Risk-Based Capital Rules, we were subject to minimum requirements with respect to the ratio of our Tier I capital to our average assets less goodwill and certain other intangible assets (“Leverage Ratio”). Applicable requirements provided for a minimum Leverage Ratio of 3% for bank holding companies that have the highest supervisory rating, while all other bank holding companies must maintain a minimum Leverage Ratio of at least 4% to 5%.

First Bank was categorized as well capitalized at December 31, 2014 under the prompt corrective action provisions of the General Risk-Based Capital Rules. The Company was categorized as adequately capitalized under the regulatory capital standards established for bank holding companies by the Federal Reserve at December 31, 2014, as further described in Note 810 to our consolidated financial statements.

Basel III and the Final Capital Rules (Effective January 1, 2015). In July 2013, the federal bank regulators approved final rules (“the “Final Capital Rules”) implementing the Basel III framework as well as certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). The Final Capital Rules also substantially revise the risk-based capital requirements applicable to bank holding companies and their depository institution subsidiaries, including the Company and First Bank, as compared to the General Risk-Based Capital Rules. The Final Capital Rules revise the components of capital and address other issues affecting the numerator in regulatory capital ratios. The Final Capital Rules also address asset risk weights and other issues affecting the denominator in regulatory capital ratios and replace the existing general risk-weighting approach based on Basel I with a more risk-sensitive approach. The Final Capital Rules became effective for the Company and First Bank on January 1, 2015 (subject to a phase-in period for certain provisions). ~~The Final Capital Rules:~~

27The Final Capital Rules:


•	Include a new minimum common equity Tier 1 capital ratio of 4.5% of risk-weighted assets and raise the minimum Tier 1 capital ratio from 4.0% to 6.0% of risk-weighted assets;

•

Require institutions to maintain a capital conservation buffer composed of common equity Tier 1 capital of 2.5% above the minimum risk-based capital requirements in order to avoid limitations on capital distributions, including dividend payments (unless a waiver is granted by the Federal Reserve) and certain discretionary bonus payments to executive officers (unless a waiver is granted by the Federal Reserve). In addition, institutions that do not maintain the required capital conservation buffer may also be limited in their ability to make payments on trust preferred securities. The capital conservation buffer is measured relative to risk-weighted assets and will be phased in over a four-year period beginning on January 1, 2016 with an initial requirement of 0.625%, that subsequently increases to 1.25%, 1.875% and 2.5% on January 1, 2017, 2018 and 2019, respectively;


•	Implement new constraints on the inclusion of minority interests, mortgage servicing assets, deferred tax assets and certain investments in the capital of unconsolidated financial institutions in Tier 1 capital;


•	Increase risk-weightings for past-due loans, certain commercial real estate loans and some equity exposures; and


•	Allow non-advanced banking organizations, such as us, a one-time option to filter certain accumulated other comprehensive income components, such as unrealized gains and losses on available-for-sale investment securities, out of regulatory capital. We exercised the option to filter these items out of regulatory capital during the first quarter of 2015.

The Final Capital Rules revise the capital levels for depository institutions under the prompt corrective action regulations for depository institutions.

First Bank was categorized as well capitalized at ~~March~~June 3130, 2015 under the prompt corrective action provisions of the regulatory capital standards. The Company was not categorized as adequately capitalized under minimum regulatory capital standards established for bank holding companies by the Federal Reserve at ~~March~~June 3130, 2015 as a result of not meeting the required common equity Tier 1 requirement under the Final Capital Rules, as further described below and in Note 810 to our consolidated financial statements.

The calculation of common equity Tier 1 capital is different from the calculation of common equity under U.S. generally accepted accounting principles (“GAAP”). Most significantly for the Company, the Company's net deferred tax assets, which are included in the calculation of common equity under GAAP, will be substantially phased out over time from the ~~required~~applicable calculation of common equity Tier 1 capital for regulatory purposes. ~~The~~To ~~net~~illustrate ~~deferred tax assets attributable to net operating loss and tax credit carryforwards, which comprised over 91.8% of~~ the ~~Company's~~difference ~~net~~between ~~deferred tax assets as of March 31, 2015, are scheduled to be substantially phased out of the calculation of~~ common equity ~~Tier 1 capital in 2018. In addition, the inclusion of trust preferred securities eligible for Tier 1 capital is more limited~~ under ~~the~~GAAP ~~Final~~and ~~Capital Rules. The Company did not meet the~~ common equity Tier 1 ~~requirement~~capital atfor ~~March 31,~~regulatory ~~2015~~purposes, ~~and absent a substantial increase in qualifying common equity,~~ the Company’s ~~will not meet the~~ common equity ~~Tier 1 requirement~~ under ~~the~~GAAP ~~Final Capital Rules in the future. The inability to be categorized~~ as ~~adequately~~of ~~capitalized~~June ~~under the Final Capital Rules could materially adversely impact our financial condition~~30, ~~results~~2015 ofwas ~~operations,~~$108.3 ~~ability to grow~~million, ~~and~~which ~~ability~~includes tonet ~~make~~deferred ~~dividend~~tax ~~payments~~assets ~~and~~of ~~interest~~$270.0 ~~payments on capital stock and trust preferred securities~~million. ~~For~~In ~~additional~~2016 ~~information~~(when ~~regarding~~ the ~~Final~~initial ~~Capital~~requirement ~~Rules,~~of ~~see~~the ~~Note~~capital 8conservation ~~to our consolidated financial statements.~~

buffer becomes effective), the majority of the Company’s net deferred tax assets will be excluded from the regulatory calculation of common equity Tier 1 capital due to the phase in requirements of the Final Capital Rules. As a direct result of this exclusion and the phase in of other required changes in the regulatory calculation of common equity Tier 1 capital, if, hypothetically, the Company were to apply the regulatory capital rules applicable in 2016 as of June 30, 2015, the Company’s common equity Tier 1 capital as of June 30, 2015 using the rules applicable in 2016 would be negative $94.2 million, or $202.5 million less than the Company’s common equity under GAAP. As previously noted, the capital conservation buffer requirement increases annually through 2019. The net deferred tax assets attributable to net operating loss and tax credit carryforwards, which comprised over 91.7% of the Company's net deferred tax assets as of June 30, 2015, are scheduled to be substantially phased out of the calculation of common equity Tier 1 capital in 2018. In addition, the inclusion of trust preferred securities eligible for Tier 1 capital is more limited under the Final Capital Rules. Furthermore, the Company’s noncontrolling interest in subsidiary, which was $93.8 million as of June 30, 2015, will be phased out entirely from inclusion in the calculation of Tier 1 capital by 2018. As of June 30, 2015, the amount of noncontrolling interest in subsidiary that was eligible for inclusion in the calculation of Tier 1 capital was $56.3 million.

The Company did not meet the common equity Tier 1 requirement at June 30, 2015, and absent a substantial increase in qualifying common equity, the Company will not meet the common equity Tier 1 requirement under the Final Capital Rules in the future. The inability to be categorized as adequately capitalized under the Final Capital Rules could materially adversely impact our financial condition, results of operations, ability to grow, and ability to make dividend payments and interest payments on capital stock and trust preferred securities. For additional information regarding the Final Capital Rules, see Note 10 to our consolidated financial statements.

RESULTS OF OPERATIONS

Executive Summary. We recorded net income of $212.7 million and $15.4 million for the three and six months ended ~~March~~June 3130, 2015, respectively, compared to $5.42 million and $10.6 million for the comparable ~~period~~periods in 2014.

Our net interest margin ~~decreased~~increased ~~four~~nine and three basis points to 2.7394% and 2.84% for the three and six months ended ~~March~~June 3130, 2015, respectively, from 2.7785% and 2.81% for the comparable ~~period~~periods in 2014.

Net interest income, expressed on a tax-equivalent basis, ~~was~~increased $363.62 million and $3.5 million to $40.8 million and $77.4 million for the three and six months ended ~~March~~June 3130, 2015, asrespectively, ~~compared~~from to$37.6 million and $3673.49 million for the comparable ~~period~~periods in 2014.

We recorded a negative provision for loan losses of $7.5 million for the three and six months ended June 30, 2015. We did not record a provision for loan losses for the three and six months ended ~~March~~June 3130, ~~2015 and~~ 2014.

Noninterest income increased $3.8.7 million, orand 26$12.~~9%,~~5 million to $1822.15 million and $40.7 million for the three and six months ended ~~March~~June 3130, 2015, respectively, from $1413.38 million and $28.1 million for the comparable ~~period~~periods in 2014.

Noninterest expense increased $813.13 million, orand 19$21.~~0%,~~4 million to $5056.45 million and $106.9 million for the three and six months ended ~~March~~June 3130, 2015, respectively, from $4243.42 million and $85.6 million for the comparable ~~period~~periods in 2014.

28Total assets increased $201.9 million to $6.10 billion at June 30, 2015, from $5.89 billion at December 31, 2014.

Total ~~assets~~loans increased $~~111~~195.17 million to $63.0534 billion at ~~March~~June 3130, 2015, from $53.9415 billion at December 31, 2014.

~~Total~~Investment ~~loans~~securities increased $4424.29 million to $32.1909 billion at ~~March~~June 3130, 2015, from $32.1506 billion at December 31, 2014.

~~Investment~~Deposits ~~securities~~ increased $85207.90 million to $25.1506 billion at ~~March~~June 3130, 2015, from $24.0685 billion at December 31, 2014.

~~Deposits~~Nonperforming ~~increased~~assets, comprised of nonaccrual loans and other real estate, decreased $~~122~~74.69 million, or 66.2%, to $438.972 ~~billion~~million at ~~March~~June 30, 2015, from $113.1 million at December 31, 2014. Nonaccrual loans decreased $31.7 million, or 55.1%, to $25.8 million at June 30, 2015, from $57.5 million at December 31, 2014, primarily driven by the sale of a single $18.4 million multi-family residential loan relationship in our Chicago region during the second quarter of 2015, resulting in a loan recovery of $2.851 ~~billion~~million. Other real estate decreased $43.3 million, or 77.7%, to $12.4 million at June 30, 2015, from $55.7 million at December 31, 2014, primarily driven by the sale of a single property in our Southern California region during the first quarter of 2015 with a carrying value of $37.6 million at a net gain of $4.6 million.

~~Nonperforming~~On ~~assets,~~March ~~comprised of other real estate and nonaccrual loans~~6, ~~decreased $47.1 million~~2015, oras ~~41.6%,~~amended toon ~~$66.1~~June ~~million at March 31~~25, 2015, ~~from~~First ~~$113.1~~Bank ~~million~~entered atinto ~~December 31,~~a ~~2014.~~Branch ~~Other~~Purchase ~~real~~and ~~estate~~Assumption ~~decreased~~Agreement ~~$40.4~~with ~~million,~~Bank orof ~~72.6%,~~Stockton tothat ~~$15.2~~provides ~~million~~for atthe ~~March 31,~~sale ~~2015,~~of ~~from~~certain ~~$55.7~~assets ~~million~~and atthe ~~December 31,~~transfer ~~2014,~~of ~~primarily~~certain ~~driven~~liabilities ~~by the sale~~ of aFirst ~~single~~Bank’s ~~property~~three inretail ~~our~~branch ~~Southern~~banking ~~California~~offices ~~region~~located in ~~January~~Napa, ~~2015~~Brentwood ~~with~~and aFairfield, ~~carrying~~California, ~~value~~as offurther ~~$37.6~~described ~~million~~in atNote a2 ~~net~~to ~~gain~~our ofconsolidated ~~$4.6~~financial ~~million~~statements.

On March 6, 2015, First Bank entered into a Branch Purchase and Assumption Agreement with Bank of Stockton that provides for the sale of certain assets and the transfer of certain liabilities of First Bank’s two branch banking office located in Napa and Brentwood, California. Under the terms of the agreement, Bank of Stockton is to assume approximately $43 million of deposits associated with these branches. Bank of Stockton is also expected to purchase approximately $7 million of loans as well as certain other assets, including premises and equipment, associated with these branches. The transaction, which is subject to regulatory approvals and certain closing conditions, is expected to be completed during the third quarter of 2015 and, based on current deposit levels and terms of the agreement, result in a gain of approximately $1.7 million.32

~~Net~~On ~~Interest~~May ~~Income~~20, ~~and~~2015, ~~Average~~First ~~Balance~~Bank ~~Sheets.~~entered ~~The~~into ~~primary~~a ~~source~~Branch ofPurchase ~~our~~and ~~income~~Assumption isAgreement ~~net~~with ~~interest~~Fidelity ~~income.~~Bank ~~The~~that ~~following~~provides ~~table~~for ~~sets~~the ~~forth,~~sale onof ~~a tax-equivalent basis,~~ certain ~~information~~assets onand athe ~~continuing~~transfer ~~operations~~of ~~basis~~certain ~~relating~~liabilities toof ~~our~~First ~~average~~Bank’s ~~balance~~remaining ~~sheets,~~eight ~~and~~retail ~~reflects~~branch ~~the~~banking ~~average~~offices ~~yield~~located ~~earned~~in ~~on our interest-earning assets~~Bradenton, ~~the~~Palmetto ~~average cost of our interest-bearing liabilities~~ and ~~the~~Longboat ~~resulting~~Key, ~~net~~Florida, ~~interest~~as ~~income~~further ~~for~~described ~~the~~in ~~three~~Note ~~months~~2 ~~ended~~to ~~March~~our ~~31,~~consolidated ~~2015~~financial ~~and 2014:~~statements.

	Three Months Ended March 31,
	2015					2014
(dollars in thousands)	AverageBalance		InterestIncome/Expense	Yield/Rate		AverageBalance		InterestIncome/Expense	Yield/Rate
ASSETS:
Interest-earning assets:
Loans (1)(2)(3)	$	3,148,465	30,011	3.87	%	$	2,877,153	29,091	4.10	%
Investment securities (3)	2,074,537		11,193	2.19		2,222,831		12,656	2.31
FRB and FHLB stock	30,404		360	4.80		30,280		358	4.79
Short-term investments	182,075		125	0.28		189,171		120	0.26
Total interest-earning assets	5,435,481		41,689	3.11		5,319,435		42,225	3.22
Nonearning assets	561,552					580,512
Total assets	$	5,997,033				$	5,899,947
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand	$	717,288	91	0.05	%	$	675,021	82	0.05	%
Savings and money market	1,913,978		881	0.19		1,843,543		744	0.16
Time deposits of $100 or more	370,219		480	0.53		399,589		486	0.49
Other time deposits	561,449		599	0.43		645,885		722	0.45
Total interest-bearing deposits	3,562,934		2,051	0.23		3,564,038		2,034	0.23
Other borrowings	54,426		13	0.10		39,839		4	0.04
Subordinated debentures	354,296		3,015	3.45		354,220		3,811	4.36
Total interest-bearing liabilities	3,971,656		5,079	0.52		3,958,097		5,849	0.60
Noninterest-bearing liabilities:
Demand deposits	1,349,236					1,244,380
Other liabilities	157,184					202,606
Total liabilities	5,478,076					5,405,083
Stockholders’ equity	518,957					494,864
Total liabilities and stockholders’ equity	$	5,997,033				$	5,899,947
Net interest income			36,610					36,376
Interest rate spread				2.59					2.62
Net interest margin (4)				2.73	%				2.77	%

Net Interest Income and Average Balance Sheets. The primary source of our income is net interest income. The following table sets forth, on a tax-equivalent basis, certain information on a continuing operations basis relating to our average balance sheets, and reflects the average yield earned on our interest-earning assets, the average cost of our interest-bearing liabilities and the resulting net interest income for the three and six months ended June 30, 2015 and 2014:



	Three Months Ended June 30,										Six Months Ended June 30,
	2015					2014					2015					2014
(dollars in thousands)	Average Balance		Interest Income/ Expense	Yield/ Rate		Average Balance		Interest Income/ Expense	Yield/ Rate		Average Balance		Interest Income/ Expense	Yield/ Rate		Average Balance		Interest Income/ Expense	Yield/ Rate
ASSETS:
Interest-earning assets:
Loans ^(1)(2)(3)	$	3,252,381	31,118	3.84	%	$	2,935,163	30,191	4.13	%	$	3,200,710	61,129	3.85	%	$	2,906,318	59,282	4.11	%
Investment securities ⁽³⁾	2,108,306		14,414	2.74		2,110,914		11,924	2.27		2,091,514		25,607	2.47		2,166,563		24,580	2.29
FRB and FHLB stock	30,370		359	4.74		31,103		360	4.64		30,387		719	4.77		30,694		718	4.72
Short-term investments	171,092		117	0.27		216,364		142	0.26		176,554		242	0.28		202,843		262	0.26
Total interest-earning assets	5,562,149		46,008	3.32		5,293,544		42,617

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