UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

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 ~~June~~September 30, 2017



		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from to

Commission File Number 001-35655

________________________________________________

(Exact name of registrant as specified in its charter)

________________________________________________



Delaware		27-1454759
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4725 Piedmont Row Drive Suite 110 Charlotte, North Carolina 28210

(Address of principal executive offices) (Zip Code)

(704) 554-5901

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

________________________________________________

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: ý Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files): ý Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or aan ~~smaller~~emerging ~~reporting~~growth company. See definitions of large “accelerated filer”, ~~“large~~ accelerated filer”, ~~and “~~smaller reporting company”, and emerging growth company in Rule 12b-2 of the Exchange Act (Check one):

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes ý No

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



Class A Voting Common Stock, $0.01 Par Value		41,616,875
Class B Non-Voting Common Stock, $0.01 Par Value		10,430,006
Class		Outstanding as of November 1, 2017

Class A Voting Common Stock, $0.01 Par Value		35,468,366
Class B Non-Voting Common Stock, $0.01 Par Value		16,533,429
Class		Outstanding as of July 31, 2017

CAPITAL BANK FINANCIAL CORP.

FORM 10-Q

For the quarter ended ~~June~~September 30, 2017

INDEX

PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS	3
CONSOLIDATED BALANCE SHEETS	3
CONSOLIDATED STATEMENTS OF INCOME	4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	5
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY	6
CONSOLIDATED STATEMENTS OF CASH FLOWS	7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF	46
OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	7576
ITEM 4. CONTROLS AND PROCEDURES	7677
PART II: OTHER INFORMATION	7677
ITEM 1. LEGAL PROCEEDINGS	7677
ITEM 1A. RISK FACTORS	77
ITEM 2. UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS	77
ITEM 3. DEFAULT UPON SENIOR SECURITIES	7778
ITEM 4. MINE SAFETY DISCLOSURES	7778
ITEM 5. OTHER INFORMATION	7778
ITEM 6. EXHIBITS	7879

Capital Bank Financial Corp.

Consolidated Balance Sheets

(Unaudited)

(Dollars and shares in thousands, except per share data)	~~June~~September 30, 2017			December 31, 2016
Assets
Cash and due from banks	$	~~106~~97,~~164~~147		$	107,707
Interest-bearing deposits in other banks	4986,~~247~~982			201,348
Total cash and cash equivalents	~~155~~184,~~411~~129			309,055
Trading securities	4,~~290~~458			3,791
Investment securities available-for-sale at fair value (amortized cost $1,152,613 and $927,266, respectively)	1,145,712			912,250
Investment securities available-for-sale at fair value (amortized cost $1,161,024 and $927,266, respectively)	1,155,694			912,250
Investment securities held-to-maturity at amortized cost (fair value $431,269 and $460,911, respectively)	430,411			463,959
Investment securities held-to-maturity at amortized cost (fair value $415,238 and $460,911, respectively)	412,051			463,959
Loans held for sale	3,~~533~~060			12,874
Loans, net of deferred loan costs and fees	7,~~566~~609,~~581~~540			7,393,318
Less: Allowance for loan and lease losses	4445,~~638~~428			43,065
Loans, net	7,~~521~~564,~~943~~112			7,350,253
Other real estate owned	4144,~~364~~416			53,482
Premises and equipment held for sale	1817,~~494~~378			2,599
Premises and equipment, net	~~184~~183,~~939~~734			205,425
Goodwill	~~234~~231,~~158~~292			235,500
Intangible assets, net	2927,~~750~~938			33,370
Deferred income tax asset, net	~~134~~113,~~452~~073			150,272
Bank owned life insurance	100,~~672~~611			99,702
Other assets	8898,~~572~~039			98,125
Total Assets	$	10,~~093~~139,~~701~~985		$	9,930,657
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Non-interest bearing demand	$	1,~~662~~631,~~416~~526		$	1,590,164
Interest bearing demand	1,~~884~~846,~~674~~172			1,930,143
Money market	1,~~828~~885,~~889~~180			1,725,838
Savings	~~480~~471,~~590~~931			497,171
Time deposits	2,~~218~~286,~~444~~815			2,137,312
Total deposits	8,~~075~~121,~~013~~624			7,880,628
Federal Home Loan Bank advances	~~470~~440,~~600~~549			545,701
Short-term borrowings	3234,~~637~~802			19,157
Long-term borrowings	118,~~096~~929			116,456
Accrued expenses and other liabilities	6569,~~271~~462			76,668
Total liabilities	8,~~761~~785,~~617~~366			8,638,610
Commitments and contingencies
Shareholders’ equity
Preferred stock $0.01 par value: 50,000 shares authorized, 0 shares issued	—			—
Common stock-Class A $0.01 par value: 200,000 shares authorized, 46,624 issued and 35,357 outstanding, and 46,178 issued and 34,911 outstanding, respectively.	466			462
Common stock-Class A $0.01 par value: 200,000 shares authorized, 50,632 issued and 39,366 outstanding, and 46,178 issued and 34,911 outstanding, respectively.	506			462
Common stock-Class B $0.01 par value: 200,000 shares authorized, 18,407 issued and 16,634 outstanding, and 18,627 issued and 16,854 outstanding, respectively.	184			186
Common stock-Class B $0.01 par value: 200,000 shares authorized, 14,435 issued and 12,661 outstanding, and 18,627 issued and 16,854 outstanding, respectively.	144			186
Additional paid in capital	1,~~371~~373,~~224~~227			1,368,459
Retained earnings	~~279~~299,~~914~~432			247,758
Accumulated other comprehensive loss	(76,~~320~~306		)	(12,434		)
Treasury stock, at cost, 13,040 and 13,040 shares, respectively	(312,384		)	(312,384		)
Total shareholders’ equity	1,~~332~~354,~~084~~619			1,292,047
Total Liabilities and Shareholders’ Equity	$	10,~~093~~139,~~701~~985		$	9,930,657

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

Capital Bank Financial Corp.

Consolidated Statements of Income

(Unaudited)

(Dollars and shares in thousands, except per share data)

Three Months Ended

~~Six~~Nine Months Ended

June 30, 2017

June 30, 2016

June 30, 2017

June 30, 2016

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

Interest and dividend income

Loans, including fees

8589,~~882~~527

6263,~~629~~662

~~169~~258,~~136~~663

~~125~~188,~~282~~944

Investment securities:

Taxable interest income

109,~~756~~451

6,~~414~~732

1929,~~821~~272

1219,~~701~~433

Tax-exempt interest income

~~156~~158

~~121~~118

~~309~~467

~~241~~359

Dividends

1110

1211

2232

2536

Interest-bearing deposits in other banks

93198

7469

~~190~~388

~~158~~227

Other earning assets

~~388~~367

~~329~~337

~~745~~1,112

~~644~~981

Total interest and dividend income

9799,~~286~~711

6970,~~579~~929

~~190~~289,~~223~~934

~~139~~209,~~051~~980

Interest expense

Deposits

89,~~228~~862

6,~~003~~082

1525,~~881~~743

1218,~~065~~147

Long-term borrowings

2,~~383~~476

1,~~547~~586

47,~~664~~140

34,~~058~~644

Federal Home Loan Bank advances

1,~~387~~405

~~499~~620

23,~~251~~656

1,~~017~~637

Other borrowings

4652

1514

69121

2943

Total interest expense

1213,~~044~~795

8,~~064~~302

2236,~~865~~660

1624,~~169~~471

Net interest income

85,~~242~~916

6162,~~515~~627

~~167~~253,~~358~~274

~~122~~185,~~882~~509

Provision for loan and lease losses

23,~~303~~042

~~1,172~~586

58,~~695~~737

23,~~547~~133

Net interest income after provision for loan and lease losses

82,~~939~~874

6062,~~343~~041

~~161~~244,~~663~~537

~~120~~182,~~335~~376

Non-interest income

Service charges on deposit accounts

5,~~237~~311

4,~~486~~777

1015,~~612~~923

914,~~297~~074

Debit card income

54,~~051~~822

3,~~235~~389

914,~~816~~638

69,~~321~~710

Fees on mortgage loans originated and sold

~~1,150~~931

1,~~140~~334

23,~~398~~329

23,~~111~~445

Investment advisory and trust fees

~~596~~537

~~455~~290

1,~~237~~774

~~952~~1,242

Termination of loss share agreements

—

(9,178

)

Investment securities gains, net

7098

~~117~~71

~~137~~235

~~157~~228

Other income

3,~~896~~074

2,~~489~~509

710,~~652~~726

47,~~828~~337

Total non-interest income

1614,~~000~~773

1112,~~922~~370

3146,~~852~~625

1426,~~488~~858

Non-interest expense

Salaries and employee benefits

2726,~~662~~708

20,~~139~~935

5683,~~828~~536

4263,~~301~~236

Stock-based compensation expense

~~964~~1,441

~~467~~790

13,~~864~~305

~~784~~1,574

Net occupancy and equipment expense

8,~~826~~894

7,~~355~~340

1726,~~818~~712

1522,~~058~~398

Computer services

43,~~280~~794

3,~~274~~153

811,~~153~~947

610,~~849~~002

Software expense

2,~~573~~524

21,~~000~~948

57,~~235~~759

45,~~036~~984

Telecommunication expense

1,~~939~~968

1,~~558~~790

46,~~363~~331

34,~~090~~880

OREO valuation expense

~~262~~249

~~1,119~~742

~~509~~758

12,~~586~~328

Net gains on sales of OREO

(204

)

(413

)

(512

)

(1,092

)

Net losses (gains) on sales of OREO

(159

)

(511

)

(1,251

)

Foreclosed asset related expense

~~376~~487

~~399~~397

~~740~~1,227

~~684~~1,081

Loan workout expense

281

71206

~~482~~763

~~315~~521

Conversion and merger related expense, net

~~981~~591

~~1,236~~394

4,~~018~~609

23,~~923~~317

Professional fees

12,~~800~~071

1,~~353~~642

35,~~896~~967

24,~~965~~607

Legal settlement expense

45—

—1,500

Regulatory assessments

1,~~145~~020

~~1,259~~841

12,~~864~~884

23,~~534~~375

Restructuring charges, net

~~2,978~~595

5(113

)

45,~~890~~485

~~147~~34

Other expense

76,~~077~~360

46,~~714~~124

1319,~~495~~855

915,~~294~~418

Total non-interest expense

6056,~~985~~984

4447,~~536~~530

~~123~~180,~~688~~672

91139,~~474~~004

Income before income taxes

3740,~~954~~663

2726,~~729~~881

69110,~~827~~490

4370,~~349~~230

Income tax expense

14,~~148~~905

108,~~288~~370

2540,~~138~~043

1624,~~048~~418

Net income

2325,~~806~~758

1718,~~441~~511

4470,~~689~~447

2745,~~301~~812

Earnings per share:

Basic

0.4650

0.4143

01.8736

01.6306

Diluted

0.4548

0.4042

01.8432

01.6204

Weighted average shares outstanding:

Basic

51,~~683~~705

43,~~011~~028

51,~~659~~674

43,~~036~~033

Diluted

53,226

44,~~068~~118

53,~~214~~204

44,~~074~~068

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

Capital Bank Financial Corp.

Consolidated Statements of Comprehensive Income

(Unaudited)

(Dollars in thousands)	Three Months Ended						~~Six~~Nine Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
Net Income	$	2325,~~806~~758		$	1718,~~441~~511		$	4470,~~689~~447		$	2745,~~301~~812
Other comprehensive income before tax:
Other comprehensive income (loss) before tax:
Unrealized holding gains on investment securities available-for-sale	7,598			7,196			8,114			16,615
Unrealized holding gains (losses) on investment securities available-for-sale	1,571			(141		)	9,685			16,474
Reclassification adjustment for gains realized in net income on securities available-for-sale	—			~~(92~~—		)	—			(92		)
Reclassification adjustment for losses amortized in net income on securities transferred from available-for-sale to held-to-maturity	~~287~~304			~~352~~363			~~602~~906			~~689~~1,052
Unrealized holding gains on cash flow hedges	650			2,155			199			7,681
Unrealized holding gains (losses) on cash flow hedges	(82		)	(1,336		)	117			6,345
Reclassification adjustments for net gains included in net income on cash flow hedges	(~~298~~171		)	(~~634~~613		)	(~~730~~901		)	(1,~~278~~891		)
Other comprehensive income before tax:	8,237			8,977			8,185			23,615
Other comprehensive income (loss) before tax:	1,622			(1,727		)	9,807			21,888
Tax effect	(~~3,090~~608		)	(~~3,412~~95		)	(3,~~071~~679		)	(89,~~976~~071		)
Other comprehensive income, net of tax:	5,147			5,565			5,114			14,639
Other comprehensive income (loss), net of tax:	1,014			(1,822		)	6,128			12,817
Comprehensive income	$	2826,~~953~~772		$	2316,~~006~~689		$	4976,~~803~~575		$	4158,~~940~~629

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

Capital Bank Financial Corp.

Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

(Dollars and shares in thousands)
	SharesCommonStock Class AOutstanding		Class AStock		SharesCommonStock Class BOutstanding		Class BStock			AdditionalPaid inCapital			RetainedEarnings			AccumulatedOtherComprehensiveIncome (Loss)			TreasuryStock			TotalShareholders'Equity
Balance, December 31, 2016	34,911		$	462	16,854		$	186		$	1,368,459		$	247,758		$	(12,434	)	$	(312,384	)	$	1,292,047
Net income	—		—		—		—			—			4470,~~689~~447			—			—			4470,~~689~~447
Dividends paid ($0.24 per share)	—		—		—		—			—			(12,533		)	—			—			(12,533		)
Dividends paid ($0.36 per share)	—		—		—		—			—			(18,773		)	—			—			(18,773		)
Other comprehensive income, net of tax expense of $3,071	—		—		—		—			—			—			5,114			—			5,114
Other comprehensive income, net of tax expense of $3,679	—		—		—		—			—			—			6,128			—			6,128
Stock-based compensation	—		—		—		—			13,~~927~~392			—			—			—			13,~~927~~392
Restricted stock grants	~~165~~175		2		—		—			(2		)	—			—			—			—
Restricted stock cancelled	(2326	)	—		—		—			(~~881~~909		)	—			—			—			(~~881~~909		)
Nonqualified stock option exercise	84113		—		—		—			12,~~721~~287			—			—			—			12,~~721~~287
Conversion of shares	~~220~~4,193		242		(~~220~~4,193	)	(242		)	—			—			—			—			—
Balance, June 30, 2017	35,357		$	466	16,634		$	184		$	1,371,224		$	279,914		$	(7,320	)	$	(312,384	)	$	1,332,084
Balance, September 30, 2017	39,366		$	506	12,661		$	144		$	1,373,227		$	299,432		$	(6,306	)	$	(312,384	)	$	1,354,619
Balance, December 31, 2015	26,589		$	370	16,554		$	183		$	1,076,415		$	208,742		$	(5,196	)	$	(294,249	)	$	986,265
Net income	—		—		—		—			—			2745,~~301~~812			—			—			2745,~~301~~812
Dividends paid ($0.20 per share)	—		—		—		—			—			(812,~~614~~918		)	—			—			(812,~~614~~918		)
Other comprehensive income, net of tax expense of $8,976	—		—		—		—			—			—			14,639			—			14,639
Other comprehensive income, net of tax expense of $9,071	—		—		—		—			—			—			12,817			—			12,817
Stock-based compensation	—		—		—		—			~~807~~1,626			—			—			—			~~807~~1,626
Restricted stock grants	~~197~~209		23		—		—			(23		)	—			—			—			—
Nonqualified stock option exercise	2736		—		—		—			~~490~~648			—			—			—			~~490~~648
Restricted stock cancelled	(5	)	—		—		—			(19		)	—			—			—			(19		)
Purchase of treasury stock	(148	)	—		—		—			—			—			—			(4,390		)	(4,390		)
Balance, June 30, 2016	26,665		$	372	16,554		$	183		$	1,077,710		$	227,429		$	9,443		$	(298,639	)	$	1,016,498
Conversion of shares	(300	)	—		300		3			(3		)	—			—			—			—
Balance, September 30, 2016	26,381		$	373	16,854		$	186		$	1,078,664		$	241,636		$	7,621		$	(298,639	)	$	1,029,841

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

Capital Bank Financial Corp.

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)	~~Six~~Nine Months Ended
	June 30, 2017			June 30, 2016
	September 30, 2017			September 30, 2016
Cash flows from operating activities
Net income	$	4470,~~689~~447		$	2745,~~301~~812
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of purchased credit impaired loans	(3756,~~399~~831		)	(4059,~~766~~636		)
Depreciation and amortization	1117,~~702~~435			812,~~274~~300
Impairment of premises and equipment	2,~~190~~471			—
Provision for loan and lease losses	58,~~695~~737			23,~~547~~133
Deferred income tax	1337,~~960~~001			415,~~063~~828
Net amortization of investment securities premium/discount	23,~~671~~965			23,~~265~~386
Net realized gains on investment securities	(~~137~~235		)	(~~157~~228		)
Stock-based compensation expense	13,~~927~~391			~~807~~1,626
Net gains on sales of OREO	(~~512~~511		)	(1,~~092~~251		)
OREO valuation expense	~~509~~758			12,~~586~~328
Other	(~~111~~138		)	~~(29~~13		)
Net deferred loan origination fees	~~490~~806			21,~~855~~017
Mortgage loans originated for sale	(6597,~~212~~690		)	(65111,~~573~~289		)
Proceeds from sales of mortgage loans originated for sale	76110,~~953~~833			71117,~~807~~141
Origination of mortgage servicing rights	(223		)	—
Fees on mortgage loans originated and sold	(23,~~398~~329		)	(23,~~111~~445		)
Termination of loss share agreements	—			9,178
Gains on sales/disposals of premises and equipment	(~~314~~303		)	(1128		)
Net proceeds from FDIC loss share agreements	—			(186		)
Change in other assets	7(2,~~535~~921		)	5(6,~~355~~511		)
Change in accrued expenses and other liabilities	(127,~~567~~722		)	~~809~~8,369
Net cash provided by operating activities	4985,~~448~~941			2637,~~922~~557
Cash flows from investing activities
Purchases of investment securities available-for-sale	(~~297~~359,~~793~~231		)	(~~127~~156,~~789~~551		)
Purchases of investment securities held-to-maturity	—			(3048,~~537~~600		)
Proceeds from sale of investment securities available-for-sale	—			90,646
Repayments of principal and maturities of investment securities available-for-sale	70122,~~338~~441			3763,~~696~~232
Repayments of principal and maturities of investment securities held-to-maturity	3351,~~225~~447			3455,~~988~~689
Net sales (purchases) of FHLB and FRB stock	34,~~107~~384			(85,~~630~~440		)
Net increase in loans	(~~158~~192,~~166~~685		)	(83257,~~280~~132		)
Proceeds paid to FDIC for settlement of loss share agreements	—			(3,029		)
Proceeds from the sale of loans	14,500			—
Purchases of premises and equipment	(79,~~263~~511		)	(47,~~456~~353		)
Proceeds from sales of premises and equipment	1,~~426~~502			23,~~292~~127
Proceeds from sales of OREO	1522,~~584~~192			1113,~~818~~227
Net cash used in investing activities	(~~325~~344,~~042~~961		)	(80252,~~281~~184		)
Cash flows from financing activities
Net increase in demand, money market and savings accounts	~~113~~91,~~253~~493			74251,~~728~~581
Net increase (decrease) in time deposits	81149,~~132~~503			(~~127~~78,~~811~~534		)
Net increase in short-term borrowings	1315,~~480~~645			43,~~375~~018
Proceeds from short-term FHLB advances	1,~~137~~362,000			~~530~~1,420,000
Repayment of short-term FHLB advances	(1,~~262~~517,000		)	(~~580~~1,480,000		)
Proceeds from long-term FHLB advances	75,000			~~240~~175,000
Repayment of long-term FHLB advances	(25,~~101~~152		)	(98148		)
Proceeds from exercise of stock options	12,~~721~~287			~~490~~648
Restricted stock cancelled	(2909		)	(219		)
Dividends paid	(1218,~~533~~773		)	(812,~~614~~918		)
Purchases of treasury stock	—			(4,390		)
Net cash provided by financing activities	~~121~~134,~~950~~094			~~128~~274,~~678~~238
Net (decrease) increase in cash and cash equivalents	(~~153~~124,~~644~~926		)	7559,~~319~~611
Cash and cash equivalents at beginning of period	309,055			144,696
Cash and cash equivalents at end of period	$	~~155~~184,~~411~~129		$	~~220~~204,~~015~~307
Supplemental disclosures of cash:
Interest paid	$	2133,~~744~~763		$	1423,~~465~~969
Cash collections of contractual interest on purchased credit impaired loans	2029,~~960~~968			2333,~~133~~203
Income taxes paid	35,~~497~~020			313,~~363~~084
Supplemental disclosures of non-cash transactions:
OREO acquired through loan transfers	$	313,~~463~~373		$	25,~~182~~944
Transfers of other assets to OREO	—			1,590
Fixed Assets transfered to held for sale	18,084			—87,091

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

1. Basis of Presentation

Nature of Operations and Principles of Consolidation

Capital Bank Financial Corp. (“CBF” or the “Company”; formerly known as North American Financial Holdings, Inc.) is a bank holding company incorporated in late 2009 in Delaware and headquartered in North Carolina whose business is conducted primarily through Capital Bank Corporation (“Capital Bank Corporation” or the “Bank”). The Company was incorporated with the goal of creating a regional banking franchise in the southeastern region of the United States through organic growth and acquisitions of other banks, including failed, underperforming and undercapitalized banks. CBF has raised $955.6 million to make acquisitions through a series of private placements and an initial public offering of its common stock. Since inception, CBF has acquired eight depository institutions, including the assets and certain deposits from failed banks. CBF has a total of ~~189~~178 full service banking offices located in Florida, North and South Carolina, Tennessee and Virginia. During the ~~six~~nine months ended ~~June~~September 30, 2017, the Company closed and consolidated ~~seven~~18 branches inrelated ~~conjunction~~to ~~with~~cost savings initiatives and the merger of CommunityOne. ~~The Company expects to close and consolidate an additional eleven branches during 2017.~~ As such, the Company transferred $18.1 million from fixed assets to bank properties held for sale during the ~~six~~nine months ended ~~June~~September 30, 2017.

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statement presentation. In the opinion of management, all adjustments consisting of normal recurring accruals and disclosures considered necessary for a fair interim presentation have been included. All significant inter-company accounts and transactions have been eliminated in consolidation. For further information, refer to the Company’s Consolidated Financial Statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2016.

Proposed merger with First Horizon National Corporation

On May 4, 2017, Capital Bank Financial Corp. issued a press release announcing the execution of an agreement and plan of merger with First Horizon National Corporation (the “First Horizon”) dated May 3, 2017, with First Horizon as the surviving corporation. Subject to terms and conditions of the Merger Agreement, each holder of Capital Bank common stock will be entitled to receive cash or stock with a value equivalent to 1.750 First Horizon shares and $7.90 in cash for each Capital Bank share held, subject to the election allocation and proration provisions of the merger agreement. The transaction ishas ~~subject~~received to shareholder approval as well as approval from the Federal Reserve, OCC, and ~~regulatory~~North ~~approvals~~Carolina inOffice ~~addition~~of tothe ~~satisfying~~Commissioner ~~certain~~of Banks, and remains subject to other customary closing conditions.

Hurricane Irma

On September 10, 2017, Hurricane Irma struck the south coast of Florida, temporarily disrupting our branch network. However within a matter of days, all but two of our offices were back open and assisting customers, while the remaining two offices will open during the fourth quarter. The Company incurred property costs associated with Hurricane Irma of approximately $0.2 million, which are reflected in third quarter results. The Company has also reviewed its lending and deposit portfolio and determined no impairment was indicated at this time as a result of Hurricane Irma. In working with its borrowers and depositors affected by this hurricane, the Company has entered into temporary payment deferral agreements of 90 days or less on loans covering $78.6 million of outstanding principle. Each of these loans were assessed individually and were determined to not be a troubled debt restructuring. The review process is on-going and we will continue to monitor the impact on our loan portfolio.

Use of Estimates and Assumptions

To prepare financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as presented in the financial statements. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

Recent Accounting Pronouncements

In ~~March~~August 2017, the Financial Accounting Standard Board (the “FASB”) issued Accounting Standards Update ("ASU") 2017-0912, ~~"Compensation—Stock~~“Derivatives ~~Compensation~~and Hedging (Topic ~~718~~815)": Targeted Improvement Activities”. The purpose of the amendments in this update ~~provide~~is ~~guidance about which changes~~ to ~~the~~better ~~terms~~align ~~or conditions of a share-based payment award require~~ an entity’s torisk ~~apply~~management ~~modification~~activities ~~accounting~~and infinancial ~~Topic~~reporting ~~718. An entity should account~~ for ~~the~~hedging ~~effects~~relationships ofby achanging ~~modification~~both ~~unless all~~ the ~~following~~designation ~~are~~and ~~met: (1) the fair value (or calculated value or intrinsic value, if such an alternative~~ measurement ~~method~~guidance isfor ~~used)~~hedging ofrelationships ~~the~~qualification ~~modified~~and ~~award~~hedge isresults ~~the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified~~presentation. IfThe ~~the~~amendments ~~modification~~expand ~~does~~and ~~not~~refine ~~affect~~hedge ~~any~~accounting offor ~~the~~both ~~inputs~~nonfinancial toand ~~the~~financial ~~valuation~~risk ~~technique~~components ~~that~~and ~~the~~align ~~entity uses to value~~ the ~~award,~~recognition ~~the entity is not required to estimate the value immediately before~~ and ~~after~~presentation ~~the~~of ~~modification, (2)~~ the ~~vesting~~effects ~~conditions~~ of the ~~modified~~hedge ~~award~~instrument ~~are~~and the ~~same~~hedged asitems ~~the~~in ~~vesting conditions of~~ the ~~original~~financial ~~award~~statements. ~~immediately before the original award is modified~~Further, ~~(3)~~ the ~~classification~~amendments ofin ~~the~~this ~~modified~~update ~~award~~make ascertain animprovements ~~equity~~specifically ~~instrument~~targeted orfor asimplifying ~~liability~~hedge ~~instrument~~accounting isapplication ~~the~~as ~~same~~well as ~~the~~hedge ~~classification~~documentation ofrequirements ~~the~~and ~~original~~assessment ~~award~~of ~~immediately~~hedge ~~before the original award is modified~~effectiveness. The amendments in this update are effective for ~~public business entities for~~ fiscal years beginning after December 15, ~~2017~~2018, and interim periods within those fiscal years. The Company is currently evaluating this ASU to determine the impact on its consolidated financial position, results of operations and cash flows.

In March 2017, the FASB issued Accounting Standards Update ("ASU") 2017-09, "Compensation—Stock Compensation (Topic 718)". The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2017. The Company is currently evaluating this ASU to determine the impact on its consolidated financial position, results of operations and cash flows.

In March 2017, the FASB issued ASU 2017-08, "Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20) Premium Amortization on Purchased Callable Debt Securities". The amendments in this update affect all entities that have an amortized cost basis in excess of the amount that is repayable by the issuer at the earliest call date. The objective is to shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. Securities held at a discount continue to be amortized to maturity. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2018. The Company is currently evaluating this ASU to determine the impact on its consolidated financial position, results of operations and cash flows.

In March 2017, the FASB issued ASU 2017-07, "Compensation - Retirement Benefits (Topic 715)". The amendments in this update require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost as defined in paragraphs 715-30-35-4 and 715-60-35-9 are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments in this update also allow only the service cost component to be eligible for capitalization when applicable (for example, as a cost of internally manufactured inventory or a self-constructed asset). The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2017. The Company is currently evaluating this ASU to determine the impact on its consolidated financial position, results of operations and cash flows.

In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350)". The amendments in this update aim to simplify the subsequent measurement of goodwill. Under these amendments, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The FASB also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets and still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2019. The Company is currently evaluating this ASU to determine the impact on its consolidated financial position, results of operations and cash flows.

In January 2017, the FASB issued ASU 2017-01, "Business Combinations (Topic 805)". The amendments in this update provide a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The amendments in this update should be applied prospectively on or after the effective date. The Company is currently evaluating this ASU to determine the impact on its consolidated financial position, results of operations and cash flows.

In May 2016, the FASB issued ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients". The amendments in this Update represent minor corrections or improvements to narrow aspects of Topic 606, as amended by ASU No. 2014-09, and do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by Update 2014-09), which is not yet effective. The Company is currently evaluating this ASU to determine the impact on its consolidated financial position, results of operations and cash flows.

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows—Credit Losses (Topic 230)". The amendments in this update provide guidance on the following eight specific cash flow issues: (1) Debt prepayment or debt extinguishment costs; (2) Settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (3) Contingent consideration payments made after a business combination; (4) Proceeds from the settlement of insurance claims; (5) Proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) Distributions received from equity method investees; (7) Beneficial interests in securitization transactions; (8) Separately identifiable cash flows and application of the predominance principle. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating this ASU to determine the impact on its consolidated financial position, results of operations and cash flows.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments—Credit Losses (Topic 326)". The main objective of this update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates and affects loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. For public business entities that are U.S. Securities and Exchange Commission (SEC) filers, the amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating this ASU to determine the impact on its consolidated financial position, results of operations and cash flows.

In March 2016, the FASB issued ASU 2016-9, "Compensation—Stock compensation (Topic 718)". Improvements to employee share-based payment accounting" which objective is the simplification through the identification, evaluation, and improvement of areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The areas for simplification involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities. We early adopted ASU 2016-09 during the fourth quarter of 2016 and prior periods were modified retrospectively. The adoption did not have a material impact on the Company's consolidated financial statements. The impact resulted in, among other items, a $0.1 million increase to net income ~~and a $0.01 increase to earnings per share~~ for the ~~six~~nine months ended ~~June~~September 30, 2016. The Company reflected these adjustments in our disclosures including the consolidated financial statements, earnings per common share, business combination and acquisitions, stock-based compensation, and income taxes.

In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”. The amendments in this update will clarify the implementation guidance on principal versus agent considerations. Topic 606 requires an entity to determine whether the nature of its promise is to provide that good or service to the customer (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). This determination is based upon whether the entity controls the good or the service before it is transferred to the customer. Topic 606 includes indicators to assist in this evaluation. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by update 2014-09 listed below), which is not yet effective. The Company is currently evaluating this ASU to determine the impact on its consolidated financial position, results of operations and cash flows.

In March 2016, the FASB issued ASU 2016-7, "Investments—Equity Method and Joint Ventures (Topic 323)". The amendments in this update eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. The amendments in this update require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Earlier application is permitted. The adoption did not have a material impact on the Company's consolidated financial statements.

In March 2016, the FASB issued ASU 2016-6, "Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments". The amendments in this update clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this update is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. For public business entities, the amendments in this update are effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The adoption did not have a material impact on the Company's consolidated financial statements.

In January 2016, the FASB issued ASU 2016-2, "Leases (Topic 842)" which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. To meet that objective, the FASB is amending the FASB Accounting Standards Codification and creating Topic 842, Leases. This update, along with IFRS 16, Leases, are the results of the FASB’s and the International Accounting Standards Board’s (IASB’s) efforts to meet that objective and improve financial reporting. The FASB and IASB decided to not fundamentally change lessor accounting with the amendments in this update. However, some changes have been made to lessor accounting to conform and align that guidance with the lessee guidance and other areas within generally accepted accounting principles (GAAP), such as Topic 606, Revenue from Contracts with Customers. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. For public business entities, the amendments in ASU 2016-2 are effective for fiscal years beginning after December 15, 2018. The Company is currently evaluating this ASU to determine the impact on its consolidated financial position, results of operations and cash flows.

In January 2016, the FASB issued ASU 2016-1, "Financial instruments—Overall (Subtopic 825-10)" which requires all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The amendments in this update also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the amendments in this update eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. For public business entities, the amendments in ASU 2016-1 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU 2016-1 is not expected to have a material impact on the Company's consolidated financial position, results of operations and cash flows.

In May 2014, the FASB issued ASU 2014-9, "Revenue from Contracts with Customers (Topic 606)". The core principle of Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies the performance obligation. In August 2015, the FASB issued ASU 2015-14, "Revenue from contracts with customers (Topic 606) - Deferral of the Effective Date". The amendments in ASU 2015-14 establish December 15, 2017 as the effective date of the information related to ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. While we anticipate some changes, the Company does not expect a material change from our current accounting for revenue as the majority of our interest and non-interest income is not in scope of Topic 606.

2. Earnings Per Common Share

Basic earnings per share is computed as net income attributable to common shareholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share include the dilutive effect of additional potential common shares issuable under stock options and unvested restricted shares computed using the treasury stock method. Earnings per share have been computed based on the following:



(Shares in thousands)	Three Months Ended		Nine Months Ended
	September 30, 2017	September 30, 2016	September 30, 2017	September 30, 2016
Weighted average number of shares outstanding:
Basic	51,705	43,028	51,674	43,033
Dilutive effect of options outstanding	1,447	1,057	1,473	1,032
Dilutive effect of unvested restricted shares	74	33	57	3
Diluted	53,226	44,118	53,204	44,068

(Shares in thousands)	Three Months Ended		Six Months Ended
	June 30, 2017	June 30, 2016	June 30, 2017	June 30, 2016
Weighted average number of shares outstanding:
Basic	51,683	43,011	51,659	43,036
Dilutive effect of options outstanding	1,478	1,041	1,501	1,030
Dilutive effect of unvested restricted shares	65	16	54	8
Diluted	53,226	44,068	53,214	44,074

The dilutive effect of stock options and unvested restricted shares are the only common stock equivalents for purposes of calculating diluted earnings per common share.

Weighted average anti-dilutive stock options and unvested restricted shares excluded from the computation of diluted earnings per share are as follows:

(Shares in thousands)

Three Months Ended

~~Six~~Nine Months Ended

June 30, 2017

June 30, 2016

June 30, 2017

June 30, 2016

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

Anti-dilutive stock options

—

3837

3—

3834

Anti-dilutive unvested restricted shares

—

14—

2166

3. Business Combinations and Acquisitions

Acquisition of CommunityOne Bancorp

On October 26, 2016, the Company completed its acquisition of CommunityOne Bancorp (“CommunityOne”) whereby CommunityOne merged with and into the Company. CommunityOne was a North Carolina-based bank with $2.4 billion in assets and 45 full service banking branches as of October 26, 2016. The combination will strengthen Capital Bank’s franchise in North Carolina, particularly in Charlotte, as well as in Greensboro/Winston Salem and the Catawba/Caldwell county area.

The Company acquired 100% of the outstanding common stock of CommunityOne. The total purchase price for CommunityOne was $340.5 million, consisting of $51.9 million of cash, and the issuance of 8.9 million shares of Capital Bank Common Stock valued at $288.6 million based on the Company's stock on October 25, 2016.

The acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Accordingly, the Company recognizes amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair value, with any excess of purchase consideration over the net assets being reported as goodwill. As the fair value of consideration paid exceeded the estimated fair value of net assets acquired, nondeductible goodwill of $~~103~~100.46 million was recorded. Fair value estimates are based on the information available, and are subject to change for up to one year after the closing date of the acquisition as additional information relative to the closing date fair values becomes available. During the ~~three~~nine months ended ~~June~~September 30, 2017, ~~there were no changes to~~ the ~~acquisition date balance sheet. During the six months ended June 30, 2017, the~~ Company adjusted the acquisition date balance sheet to reflect (1) a $01.49 million increase in loans due to arecoveries ~~recovery~~ on a fully charged off ~~loan~~loans; (2) a $1.0 ~~million increase in the deferred tax asset; and (3) a $1~~.39 million decrease in ~~Goodwill~~Premises caused by the net effect of these adjustments. These adjustments are reflected in the table below. Management continues to review initial estimates on certain areas such as loan valuations, core deposit intangibles and ~~the deferred tax asset.~~

Equipment due to updated appraisals on several properties; (3) a $3.3 million increase in the deferred tax asset; and (4) a $4.3 million decrease in Goodwill caused by the net effect of these adjustments. These adjustments are reflected in the table below.

The following table summarizes the Company's investment and CommunityOne's opening balance sheet as of October 26, 2016 adjusted to their preliminary fair value:



(Dollars in thousands)
Fair value of assets acquired:	October 26, 2016
Cash and cash equivalents	$	58,308
Investment securities	488,814
Loans	1,499,270
Premises and equipment	45,873
Goodwill	100,576
Other intangible assets	22,518
Deferred tax asset	62,967
Other assets	82,716
Total assets acquired	2,361,042

Fair value of liabilities assumed:
Deposits	1,892,443
Long term debt and other borrowings	105,720
Other liabilities	22,345
Total liabilities assumed	2,020,508
Net assets acquired	$	340,534

(Dollars in thousands)
Fair value of assets acquired:	October 26, 2016
Cash and cash equivalents	$	58,308
Investment securities	488,814
Loans	1,497,785
Premises and equipment	46,763
Goodwill	103,443
Other intangible assets	22,518
Deferred tax asset	60,695
Other assets	82,716
Total assets acquired	2,361,042
Fair value of liabilities assumed:
Deposits	1,892,443
Long term debt and other borrowings	105,720
Other liabilities	22,345
Total liabilities assumed	2,020,508
Net assets acquired	$	340,534

The following table summarizes the fair value of loans, the total contractual principal and interest payments, and management's estimate of expected total cash payments of purchase credit impaired loans:

(Dollars in thousands)	Fair Value of Acquired Loans			Gross Contractual Amounts Receivable			Best Estimate of Contractual Cash Flows not to be Collected
Loans acquired subject to ASC 310-30	$	~~129~~130,~~075~~247		$	~~182~~183,~~927~~852		$	34,219

In addition, the Bank acquired loans of $1.4 billion not determined to be purchase credit impaired at the time of acquisition. These loans have an estimated cash flow of $1.6 billion and management expects to collect contractual required payments from the borrower with similar characteristics as other non-impaired loans.

In the assumption of deposit liabilities, the Company estimated the fair value of the core deposits intangible asset to be $19.9 million, which will be amortized utilizing an accelerated amortization method over an estimated economic life of 10 years. Fair value estimates are based on factors such as type of deposit, retention rates, interest rates and customer relationships.

Pro-forma financial information

Pro-forma data for the ~~six~~nine months ended and ~~June~~September 30, 2016 listed in the table below presents pro-forma information as if the CommunityOne acquisition occurred at the beginning of 2016. The results include $3.9 million of transaction and integration expense incurred during the ~~six~~nine months ended ~~June~~September 30, 2016. The pro-forma financial information is not necessarily indicative of the results of operations that would have occurred had the transactions been effected on the assumed dates.

(Dollars and shares in thousands, except per share data)	For the six months ended June 30, 2016
Net interest income	$	156,905
Net income	$	33,958
Basic earnings per share	$	0.65
Diluted earnings per share	$	0.64



(Dollars and shares in thousands, except per share data)	For the three months ended September 30, 2016		For the nine months ended September 30, 2016
Net interest income	$	79,598	$	236,503
Net income	$	19,881	$	53,839
Basic earnings per share	$	0.39	$	1.04
Diluted earnings per share	$	0.38	$	1.02

4. Investment Securities

Trading securities totaled $4.35 million and $3.8 million at ~~June~~September 30, 2017 and December 31, 2016, respectively.

10The amortized cost and estimated fair value of investment securities available-for-sale and held-to-maturity at September 30, 2017 and December 31, 2016, are presented below:

The amortized cost and estimated fair value of investment securities available-for-sale and held-to-maturity at June 30, 2017 and December 31, 2016, are presented below:



(Dollars in thousands)	September 30, 2017
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Available-for-Sale
Corporate bonds	$	60,161	$	3,847	$	—	$	64,008
State and political subdivisions—tax exempt	11,859		—		367		11,492
Mortgage-backed securities—residential issued by government sponsored entities	1,085,935		2,475		11,358		1,077,052
Industrial revenue bonds	3,069		73		—		3,142
Total	$	1,161,024	$	6,395	$	11,725	$	1,155,694
Held-to-Maturity
U.S. Government agencies	$	9,738	$	161	$	—	$	9,899
Corporate bonds	94,004		1,894		262		95,636
State and political subdivisions—tax exempt	8,252		616		—		8,868
State and political subdivisions—taxable	513		11		—		524
Mortgage-backed securities—residential issued by government sponsored entities	299,544		2,065		1,298		300,311
Total	$	412,051	$	4,747	$	1,560	$	415,238

(Dollars in thousands)	June 30, 2017
	AmortizedCost		UnrealizedGains		UnrealizedLosses		EstimatedFair Value
Available-for-Sale
Corporate bonds	$	59,947	$	3,674	$	—	$	63,621
State and political subdivisions—tax exempt	11,864		—		487		11,377
Mortgage-backed securities—residential issued by government sponsored entities	1,077,733		2,456		12,612		1,067,577
Industrial revenue bonds	3,069		68		—		3,137
Total	$	1,152,613	$	6,198	$	13,099	$	1,145,712
Held-to-Maturity
U.S. Government agencies	$	10,292	$	114	$	—	$	10,406
Corporate bonds	94,006		780		739		94,047
State and political subdivisions—tax exempt	8,190		657		—		8,847
State and political subdivisions—taxable	516		12		—		528
Mortgage-backed securities—residential issued by government sponsored entities	317,407		1,635		1,601		317,441
Total	$	430,411	$	3,198	$	2,340	$	431,269



(Dollars in thousands)	December 31, 2016
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Available-for-Sale
Corporate bonds	$	28,354	$	786	$	187	$	28,953
State and political subdivisions—tax exempt	11,871		—		794		11,077
Mortgage-backed securities—residential issued by government sponsored entities	883,802		1,644		16,524		868,922
Industrial revenue bonds	3,239		59		—		3,298
Total	$	927,266	$	2,489	$	17,505	$	912,250
Held-to-Maturity
U.S. Government agencies	$	11,234	$	77	$	—	$	11,311
Corporate bonds	94,010		279		2,301		91,988
State and political subdivisions—tax exempt	8,069		389		—		8,458
State and political subdivisions—taxable	520		13		—		533
Mortgage-backed securities—residential issued by government sponsored entities	350,126		1,081		2,586		348,621
Total	$	463,959	$	1,839	$	4,887	$	460,911

There were no sales of securities during the three and six months ended June 30, 2017. Proceeds from sales of securities were $90.6 million for the three and six months ended June 30, 2016. Gross gains of $0.1 million were realized on10

There were no sales of ~~these~~securities ~~investments~~ during the three and ~~six~~nine months ended ~~June~~September 30, 2017. There were no sales of securities during the three months ended September 30, 2016. Proceeds from sales of securities were $90.6 million for the nine months ended September 30, ~~respectively~~2016. Gross gains of $0.2 million were realized on sales of these investments during the nine months ended September 30, 2016. Gross losses of $0.1 million were realized on sales of these investments during the nine months ended September 30, 2016.

The estimated fair value of investment securities at ~~June~~September 30, 2017, by contractual maturity, is shown in the table that follows. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations without call or prepayment penalties. Debt securities not due at a single maturity date are shown separately.



(Dollars in thousands)	September 30, 2017
	Amortized Cost		Estimated Fair Value		Yield
Available-for-Sale
Due in one year or less	$	—	$	—	—	%
Due after one year through five years	—		—		—	%
Due after five years through ten years	46,911		49,753		3.42	%
Due after ten years	28,178		28,889		2.77	%
Mortgage-backed securities—residential issued by government sponsored entities	1,085,935		1,077,052		2.27	%
Total	$	1,161,024	$	1,155,694	2.33	%

	Amortized Cost		Estimated Fair Value		Yield
Held-to-Maturity
Due in one year or less	$	696	$	697	1.72	%
Due after one year through five years	59,803		60,250		4.90	%
Due after five years through ten years	42,270		44,081		5.02	%
Due after ten years	9,738		9,899		2.80	%
Mortgage-backed securities—residential issued by government sponsored entities	299,544		300,311		2.37	%
Total	$	412,051	$	415,238	3.02	%

(Dollars in thousands)	June 30, 2017
	AmortizedCost		EstimatedFair Value		Yield
Available-for-Sale
Due in one year or less	$	—	$	—	—	%
Due after one year through five years	—		—		—	%
Due after five years through ten years	46,751		49,340		3.28	%
Due after ten years	28,129		28,795		2.71	%
Mortgage-backed securities—residential issued by government sponsored entities	1,077,733		1,067,577		2.28	%
Total	$	1,152,613	$	1,145,712	2.33	%
	AmortizedCost		EstimatedFair Value		Yield
Held-to-Maturity
Due in one year or less	$	696	$	698	1.72	%
Due after one year through five years	59,776		59,736		4.90	%
Due after five years through ten years	42,240		42,987		5.03	%
Due after ten years	10,292		10,407		2.81	%
Mortgage-backed securities—residential issued by government sponsored entities	317,407		317,441		2.38	%
Total	$	430,411	$	431,269	3.00	%

Securities with unrealized losses not recognized in income, and the period of time they have been in an unrealized loss position, are as follows:

(Dollars in thousands)

Less than 12 Months

12 Months or Longer

Total

June 30, 2017

EstimatedFair Value

UnrealizedLosses

EstimatedFair Value

UnrealizedLosses

EstimatedFair Value

UnrealizedLosses

September 30, 2017

EstimatedFair Value

UnrealizedLosses

EstimatedFair Value

UnrealizedLosses

EstimatedFair Value

UnrealizedLosses

Available-for-Sale

State and political subdivisions—tax exempt

111,~~377~~258

~~487~~20

—10,234

—347

11,~~377~~492

~~487~~367

Mortgage-backed securities—residential issued by government sponsored entities

~~695~~609,~~840~~111

128,~~051~~212

19118,~~230~~122

~~561~~3,146

~~715~~727,~~070~~233

1211,~~612~~358

Total

~~707~~610,~~217~~369

128,~~538~~232

19128,~~230~~356

~~561~~3,493

~~726~~738,~~447~~725

1311,~~099~~725

Held-to-Maturity

U.S. government agencies

104,~~406~~904

~~309~~92

—4,995

—138

109,~~406~~899

~~309~~230

Corporate bonds

~~14,931~~—

68—

2914,~~363~~738

~~671~~262

4414,~~294~~738

~~739~~262

Mortgage-backed securities—residential issued by government sponsored entities

~~234~~104,~~408~~643

41,~~509~~113

7129,~~616~~856

~~284~~2,664

~~242~~234,~~024~~499

43,~~793~~777

Total

~~259~~109,~~745~~547

41,~~886~~205

36149,~~979~~589

~~955~~3,064

~~296~~259,~~724~~136

54,~~841~~269

1211



(Dollars in thousands)	Less than 12 Months				12 Months or Longer				Total
December 31, 2016	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Available-for-Sale
Corporate bonds	$	—	$	—	$	8,412	$	187	$	8,412	$	187
State and political subdivisions - tax exempt	11,077		794		—		—		11,077		794
Mortgage-backed securities—residential issued by government sponsored entities	672,672		16,524		—		—		672,672		16,524
Total	$	683,749	$	17,318	$	8,412	$	187	$	692,161	$	17,505
Held-to-Maturity
U.S Government agencies	$	11,311	$	402	$	—	$	—	$	11,311	$	402
Corporate bonds	24,629		371		28,112		1,930		52,741		2,301
Mortgage-backed securities—residential issued by government sponsored entities	276,555		6,614		8,494		332		285,049		6,946
Total	$	312,495	$	7,387	$	36,606	$	2,262	$	349,101	$	9,649

As of ~~June~~September 30, 2017, the Company’s security portfolio consisted of ~~175~~177 securities, 75 of which were in an unrealized loss position. The majority of unrealized losses are related to the Company’s mortgage-backed securities.

The corporate bonds in an unrealized loss position at ~~June~~September 30, 2017 and December 31, 2016 continue to perform and are expected to perform through maturity. Unrealized losses associated with these securities are primarily due to changes in interest rates and market volatility, and the corporate issuers have not experienced significant adverse events that would call into question their ability to repay those debt obligations according to contractual terms. Further, because the Company does not have the intent to sell these corporate bonds and it is more likely than not that it will not be required to sell the securities before their anticipated recovery of their amortized cost bases, the Company does not consider these securities to be other-than-temporarily impaired as of ~~June~~September 30, 2017 or December 31, 2016.

All of the mortgage-backed securities at ~~June~~September 30, 2017 and December 31, 2016 were issued by U.S. government-sponsored entities and agencies, which the government has affirmed its commitment to support. Unrealized losses associated with these securities are attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is more likely than not that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at ~~June~~September 30, 2017 or December 31, 2016.

Investment securities having carrying values of approximately $~~650~~672.84 million and $621.8 million at ~~June~~September 30, 2017 and December 31, 2016, respectively, were pledged to secure public funds on deposit, securities sold under agreements to repurchase, and for other purposes as required by law.

1312

5. Loans

Major classifications of loans, including loans held for sale, are as follows:

(Dollars in thousands)	~~June~~September 30, 2017		December 31, 2016
Non-owner occupied commercial real estate	$	1,~~265~~293,~~576~~647	$	1,130,883
Other commercial construction and land	~~384~~402,~~581~~250		327,622
Multifamily commercial real estate	~~147~~148,~~365~~192		117,515
1-4 family residential construction and land	~~153~~143,~~761~~807		140,030
Total commercial real estate	1,~~951~~987,~~283~~896		1,716,050
Owner occupied commercial real estate	1,~~287~~226,~~811~~211		1,321,405
Commercial and industrial	1,~~424~~502,~~862~~939		1,468,874
Total commercial	2,~~712~~729,~~673~~150		2,790,279
1-4 family residential	1,~~782~~787,~~799~~690		1,714,702
Home equity loans	~~489~~481,~~497~~696		507,759
Other consumer loans	~~395~~384,~~807~~728		448,972
Total consumer	2,~~668~~654,~~103~~114		2,671,433
Other	~~238~~241,~~055~~440		228,430
Total loans	$	7,~~570~~612,~~114~~600	$	7,406,192

Total loans include $3.51 million and $12.9 million of loans held for sale and $1514.07 million and $15.5 million of net deferred loan origination costs and fees as of ~~June~~September 30, 2017 and December 31, 2016, respectively.

As of ~~June~~September 30, 2017, other loans include $4241.93 million, $~~155~~160.32 million and $1.35 million of farm land, state and political subdivision obligations and deposit customer overdrafts, respectively. As of December 31, 2016, other loans include $41.9 million, $149.0 million and $1.6 million of farm land, state and political subdivision obligations and deposit customer overdrafts, respectively.

The Company designates purchased credit impaired loans as "PCI" by evaluating both qualitative and quantitative factors. At the time of acquisition, the Company accounted for the PCI loans by segregating each portfolio into loan pools with similar risk characteristics. Over the lives of the acquired PCI loans, the Company continues to estimate cash flows expected to be collected on each loan pool. The Company evaluates, at each balance sheet date, whether its estimates of the present value of the cash flows from the loan pools, determined using the effective interest rates, has decreased, such that the present value of such cash flows is less than the recorded investment of the pool, and if so, recognizes a provision for loan loss in its Consolidated Statements of Income, unless related to non-credit events.

Additionally, if the Company has favorable changes in estimates of cash flows expected to be collected for a loan pool such that the then-present value exceeds the recorded investment of that pool, the Company will first reverse any previously established allowance for loan and lease losses for the pool. If such estimate exceeds the amount of any previously established allowance, the Company will accrete future interest income over the remaining life of the pool at a rate which, when used to discount the expected cash flows, results in the then-present value of such cash flows equaling the recorded investment of the pool at the time of the revised estimate.

The table below presents a roll forward of accretable yield and income expected to be earned related to PCI loans. The accretable yield represents the excess of estimated cash flows expected to be collected over the carrying amount of the PCI loans. Nonaccretable difference represents estimated contractually required payments in excess of estimated cash flows expected to be collected. Other represents reductions of accretable yield due to non-credit events such as prepayment activity on PCI loans.

1413

(Dollars in thousands)

Three Months Ended

~~Six~~Nine Months Ended

June 30, 2017

June 30, 2016

June 30, 2017

June 30, 2016

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

Accretable Yield

Balance at beginning of period

~~152~~145,~~654~~419

~~195~~170,~~065~~935

161,639

208,844

Accretion of income

(1819,~~616~~432

)

(1918,~~923~~870

)

(3756,~~399~~831

)

(4059,~~766~~636

)

Reclassification from nonaccretable difference

15,~~941~~122

68,~~686~~045

3247,~~298~~420

2129,~~623~~668

Other

(45,~~560~~467

)

(104,~~893~~815

)

(1116,~~119~~586

)

(1823,~~766~~581

)

Balance at end of period

~~145~~135,~~419~~642

~~170~~155,~~935~~295

~~145~~135,~~419~~642

~~170~~155,~~935~~295

The accretable yield is accreted into interest income over the estimated life of the PCI loans using the level yield method. The accretable yield will change due to changes in:


•	The estimate of the remaining life of PCI loans which may change the amount of future interest income, and possibly principal, expected to be collected;


•	The estimate of the amount of contractually required principal and interest payments over the estimated life that will not be collected (the nonaccretable difference); and


•	Indices for PCI loans with variable rates of interest.

For PCI loans, the impact of loan modifications is included in the evaluation of expected cash flows for subsequent decreases or increases of cash flows. For variable rate PCI loans, expected future cash flows will be recalculated as the rates adjust over the lives of the loans. At acquisition, the expected future cash flows were based on the variable rates that were in effect at that time.

The following is a summary of the major categories of loans outstanding, as of September 30, 2017 and December 31, 2016:

(Dollars in thousands)

Non-PCI Loans

June 30, 2017

New

Acquired

PCI Loans

TotalLoans

September 30, 2017

Originated

Acquired

PCI Loans

TotalLoans

Non-owner occupied commercial real estate

~~837~~891,~~572~~125

~~211~~199,~~400~~244

~~216~~203,~~604~~278

1,~~265~~293,~~576~~647

Other commercial construction and land

~~252~~280,~~458~~126

7677,~~439~~414

5544,~~684~~710

~~384~~402,~~581~~250

Multifamily commercial real estate

~~115~~118,~~308~~128

1514,~~749~~138

1615,~~308~~926

~~147~~148,~~365~~192

1-4 family residential construction and land

~~136~~132,~~776~~701

1610,~~555~~812

~~430~~294

~~153~~143,~~761~~807

Total commercial real estate

1,~~342~~422,~~114~~080

~~320~~301,~~143~~608

~~289~~264,~~026~~208

1,~~951~~987,~~283~~896

Owner occupied commercial real estate

~~907~~908,~~374~~549

~~222~~168,~~145~~521

~~158~~149,~~292~~141

1,~~287~~226,~~811~~211

Commercial and industrial loans

1,~~274~~367,~~742~~979

7675,~~769~~988

7358,~~351~~972

1,~~424~~502,~~862~~939

Total commercial

2,~~182~~276,~~116~~528

~~298~~244,~~914~~509

~~231~~208,~~643~~113

2,~~712~~729,~~673~~150

1-4 family residential

1,~~108~~129,~~685~~241

~~484~~478,~~161~~755

~~189~~179,~~953~~694

1,~~782~~787,~~799~~690

Home equity loans

~~181~~186,~~931~~606

~~247~~239,~~238~~910

6055,~~328~~180

~~489~~481,~~497~~696

Other consumer loans

~~297~~295,~~963~~719

7267,~~688~~492

2521,~~156~~517

~~395~~384,~~807~~728

Total consumer

1,~~588~~611,~~579~~566

~~804~~786,~~087~~157

~~275~~256,~~437~~391

2,~~668~~654,~~103~~114

Other

~~203~~207,~~175~~672

7,~~387~~286

2726,~~493~~482

~~238~~241,~~055~~440

Total loans

5,~~315~~517,~~984~~846

1,~~430~~339,~~531~~560

~~823~~755,~~599~~194

7,~~570~~612,~~114~~600



(Dollars in thousands)	Non-PCI Loans
December 31, 2016	Originated		Acquired		PCI Loans		Total Loans
Non-owner occupied commercial real estate	$	680,044	$	221,304	$	229,535	$	1,130,883
Other commercial construction and land	182,486		73,248		71,888		327,622
Multifamily commercial real estate	77,694		19,108		20,713		117,515
1-4 family residential construction and land	105,816		33,831		383		140,030
Total commercial real estate	1,046,040		347,491		322,519		1,716,050
Owner occupied commercial real estate	901,957		239,982		179,466		1,321,405
Commercial and industrial loans	1,283,012		96,494		89,368		1,468,874
Total commercial	2,184,969		336,476		268,834		2,790,279
1-4 family residential	994,323		505,420		214,959		1,714,702
Home equity loans	172,883		268,093		66,783		507,759
Other consumer loans	330,423		88,134		30,415		448,972
Total consumer	1,497,629		861,647		312,157		2,671,433
Other	185,839		9,776		32,815		228,430
Total loans	$	4,914,477	$	1,555,390	$	936,325	$	7,406,192

(Dollars in thousands)	Non-PCI Loans
December 31, 2016	New		Acquired		PCI Loans		TotalLoans
Non-owner occupied commercial real estate	$	680,044	$	221,304	$	229,535	$	1,130,883
Other commercial construction and land	182,486		73,248		71,888		327,622
Multifamily commercial real estate	77,694		19,108		20,713		117,515
1-4 family residential construction and land	105,816		33,831		383		140,030
Total commercial real estate	1,046,040		347,491		322,519		1,716,050
Owner occupied commercial real estate	901,957		239,982		179,466		1,321,405
Commercial and industrial loans	1,283,012		96,494		89,368		1,468,874
Total commercial	2,184,969		336,476		268,834		2,790,279
1-4 family residential	994,323		505,420		214,959		1,714,702
Home equity loans	172,883		268,093		66,783		507,759
Other consumer loans	330,423		88,134		30,415		448,972
Total consumer	1,497,629		861,647		312,157		2,671,433
Other	185,839		9,776		32,815		228,430
Total loans	$	4,914,477	$	1,555,390	$	936,325	$	7,406,192

The following tables present the aging of the recorded investment in past due loans, based on contractual terms, as of September 30, 2017:



(Dollars in thousands)	30-89 Days Past Due		Greater than 90 Days Past Due and Still Accruing/Accreting		Non-accrual		Total
Non-purchased credit impaired loans
Non-owner occupied commercial real estate	$	—	$	—	$	2,220	$	2,220
Other commercial construction and land	183		—		47		230
Multifamily commercial real estate	—		—		—		—
1-4 family residential construction and land	—		—		—		—
Total commercial real estate	183		—		2,267		2,450
Owner occupied commercial real estate	162		—		4,336		4,498
Commercial and industrial loans	431		—		2,884		3,315
Total commercial	593		—		7,220		7,813
1-4 family residential	376		—		2,142		2,518
Home equity loans	2,428		—		2,895		5,323
Other consumer loans	9,234		—		3,602		12,836
Total consumer	12,038		—		8,639		20,677
Other	55		—		—		55
Total loans	$	12,869	$	—	$	18,126	$	30,995



(Dollars in thousands)	30-89 Days Past Due		Greater than 90 Days Past Due and Still Accruing/Accreting		Non-accrual		Total
Purchased credit impaired loans ⁽¹⁾
Non-owner occupied commercial real estate	$	633	$	1,679	$	—	$	2,312
Other commercial construction and land	261		801		—		1,062
Multifamily commercial real estate	—		139		—		139
1-4 family residential construction and land	—		—		—		—
Total commercial real estate	894		2,619		—		3,513
Owner occupied commercial real estate	3,308		4,057		—		7,365
Commercial and industrial loans	3		222		—		225
Total commercial	3,311		4,279		—		7,590
1-4 family residential	1,835		1,687		—		3,522
Home equity loans	1,065		401		—		1,466
Other consumer loans	2,099		1,436		—		3,535
Total consumer	4,999		3,524		—		8,523
Other	109		100		—		209
Total loans	$	9,313	$	10,522	$	—	$	19,835

The following tables present the aging of the recorded investment in past due loans, based on contractual terms, as of June 30, 2017:

(Dollars in thousands)	30-89 Days Past Due		Greater than 90 Days Past Dueand Still Accruing/Accreting		Non-accrual		Total
Non-purchased credit impaired loans
Non-owner occupied commercial real estate	$	—	$	—	$	2,255	$	2,255
Other commercial construction and land	55		—		53		108
Multifamily commercial real estate	—		—		—		—
1-4 family residential construction and land	—		—		—		—
Total commercial real estate	55		—		2,308		2,363
Owner occupied commercial real estate	40		—		4,367		4,407
Commercial and industrial loans	101		—		784		885
Total commercial	141		—		5,151		5,292
1-4 family residential	762		—		1,557		2,319
Home equity loans	2,089		—		2,186		4,275
Other consumer loans	5,915		—		2,619		8,534
Total consumer	8,766		—		6,362		15,128
Other	—		—		—		—
Total loans	$	8,962	$	—	$	13,821	$	22,783

(Dollars in thousands)	30-89 Days Past Due		Greater than 90 Days Past Dueand Still Accruing/Accreting		Non-accrual		Total
Purchased credit impaired loans(1)
Non-owner occupied commercial real estate	$	2,360	$	333	$	—	$	2,693
Other commercial construction and land	348		880		—		1,228
Multifamily commercial real estate	—		139		—		139
1-4 family residential construction and land	—		—		—		—
Total commercial real estate	2,708		1,352		—		4,060
Owner occupied commercial real estate	1,250		3,150		—		4,400
Commercial and industrial loans	2		555		—		557
Total commercial	1,252		3,705		—		4,957
1-4 family residential	1,878		2,233		—		4,111
Home equity loans	993		786		—		1,779
Other consumer loans	2,521		1,489		—		4,010
Total consumer	5,392		4,508		—		9,900
Other	—		724		—		724
Total loans	$	9,352	$	10,289	$	—	$	19,641

The following tables present the aging of the recorded investment in past due loans, based on contractual terms, as of December 31, 2016:



(Dollars in thousands)	30-89 Days Past Due		Greater than 90 Days Past Due and Still Accruing/Accreting		Non-accrual		Total
Non-purchased credit impaired loans
Non-owner occupied commercial real estate	$	—	$	—	$	2,584	$	2,584
Other commercial construction and land	23		—		204		227
Multifamily commercial real estate	—		—		—		—
1-4 family residential construction and land	148		—		—		148
Total commercial real estate	171		—		2,788		2,959
Owner occupied commercial real estate	2,633		—		2,950		5,583
Commercial and industrial loans	169		—		698		867
Total commercial	2,802		—		3,648		6,450
1-4 family residential	493		—		1,048		1,541
Home equity loans	1,336		—		1,568		2,904
Other consumer loans	8,143		—		2,397		10,540
Total consumer	9,972		—		5,013		14,985
Other	—		—		—		—
Total loans	$	12,945	$	—	$	11,449	$	24,394



(Dollars in thousands)	30-89 Days Past Due		Greater than 90 Days Past Due and Still Accruing/Accreting		Non-accrual		Total
Purchased credit impaired loans⁽¹⁾
Non-owner occupied commercial real estate	$	—	$	1,130	$	—	$	1,130
Other commercial construction and land	550		777		—		1,327
Multifamily commercial real estate	—		420		—		420
1-4 family residential construction and land	—		—		—		—
Total commercial real estate	550		2,327		—		2,877
Owner occupied commercial real estate	1,844		3,776		—		5,620
Commercial and industrial loans	592		509		—		1,101
Total commercial	2,436		4,285		—		6,721
1-4 family residential	4,288		6,060		—		10,348
Home equity loans	1,128		1,470		—		2,598
Other consumer loans	2,558		1,048		—		3,606
Total consumer	7,974		8,578		—		16,552
Other	87		716		—		803
Total loans	$	11,047	$	15,906	$	—	$	26,953

(1)Pooled PCI loans are not classified as nonaccrual as they are considered to be accruing because their interest income relates to the accretable yield recognized under accounting for purchased credit-impaired loans and not to contractual interest payments.

1817

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed at origination and upon identification of a material change for all loans, on an annual basis for commercial loans exceeding $0.5 million, and at least quarterly for commercial loans not rated pass. The Company uses the following definitions for risk ratings:


•	Pass —These loans range from superior quality with minimal credit risk to loans requiring heightened management attention but that are still an acceptable risk and continue to perform as contracted.


•	Special Mention —Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

•

Substandard —Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.


•	Doubtful —Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The following table summarizes loans, excluding PCI loans, by internal rating at ~~June~~September 30, 2017:

Substandard

(Dollars in thousands)

Pass

Special Mention

Accruing

Non-accrual

Doubtful

Total

Non-owner occupied commercial real estate

1,~~044~~085,~~423~~892

2,~~294~~257

—

2,~~255~~220

—

1,~~048~~090,~~972~~369

Other commercial construction and land

~~328~~357,~~844~~493

—

5347

—

~~328~~357,~~897~~540

Multifamily commercial real estate

~~130~~132,~~861~~075

—

~~196~~191

—

~~131~~132,~~057~~266

1-4 family residential construction and land

~~153~~143,~~331~~513

—

~~153~~143,~~331~~513

Total commercial real estate

1,~~657~~718,~~459~~973

2,~~294~~257

~~196~~191

2,~~308~~267

—

1,~~662~~723,~~257~~688

Owner occupied commercial real estate

1,~~094~~051,~~739~~286

2718,~~128~~202

3,~~285~~246

4,~~367~~336

—

1,~~129~~077,~~519~~070

Commercial and industrial loans

1,~~334~~429,~~082~~031

~~1,447~~516

1511,~~198~~536

~~784~~2,884

—

1,~~351~~443,~~511~~967

Total commercial

2,~~428~~480,~~821~~317

2818,~~575~~718

1814,~~483~~782

57,~~151~~220

—

2,~~481~~521,~~030~~037

1-4 family residential

1,~~587~~602,~~587~~050

1,~~586~~699

2,~~116~~105

12,~~557~~142

—

1,~~592~~607,~~846~~996

Home equity loans

~~425~~422,~~468~~514

~~256~~55

1,~~259~~052

2,~~186~~895

—

~~429~~426,~~169~~516

Other consumer loans

~~367~~359,~~971~~379

—

61230

23,~~619~~602

—

~~370~~363,~~651~~211

Total consumer

2,~~381~~383,~~026~~943

1,~~842~~754

3,~~436~~387

68,~~362~~639

—

2,~~392~~397,~~666~~723

Other

~~210~~214,~~562~~958

—

~~210~~214,~~562~~958

Total loans

6,~~677~~798,~~868~~191

3222,~~711~~729

2218,~~115~~360

1318,~~821~~126

—

6,~~746~~857,~~515~~406

1918

The following table summarizes loans, excluding PCI loans, by internal rating at December 31, 2016:



					Substandard
(Dollars in thousands)	Pass		Special Mention		Accruing		Non-accrual		Doubtful		Total
Non-owner occupied commercial real estate	$	896,394	$	1,251	$	1,119	$	2,584	$	—	$	901,348
Other commercial construction and land	255,530		—		—		204		—		255,734
Multifamily commercial real estate	96,802		—		—		—		—		96,802
1-4 family residential construction and land	139,647		—		—		—		—		139,647
Total commercial real estate	1,388,373		1,251		1,119		2,788		—		1,393,531
Owner occupied commercial real estate	1,124,285		10,210		4,494		2,950		—		1,141,939
Commercial and industrial loans	1,351,581		16,709		10,518		698		—		1,379,506
Total commercial	2,475,866		26,919		15,012		3,648		—		2,521,445
1-4 family residential	1,495,653		899		2,143		1,048		—		1,499,743
Home equity loans	437,880		62		1,466		1,568		—		440,976
Other consumer loans	416,117		—		43		2,397		—		418,557
Total consumer	2,349,650		961		3,652		5,013		—		2,359,276
Other	195,615		—		—		—		—		195,615
Total loans	$	6,409,504	$	29,131	$	19,783	$	11,449	$	—	$	6,469,867

2019

6. Allowance for Loan and Lease Losses

Activity in the allowance for loan and lease losses for the three and ~~six~~nine months ended ~~June~~September 30, 2017 and 2016 is as follows:

(Dollars in thousands)

Three Months Ended

~~Six~~Nine Months Ended

June 30, 2017

June 30, 2016

June 30, 2017

June 30, 2016

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

Balance, beginning of period

4344,~~891~~638

4544,~~263~~883

43,065

45,034

Provision (reversal) for loan losses for PCI loans

~~818~~167

(~~778~~48

)

1,~~004~~171

(~~787~~835

)

Provision for loan losses for non-PCI loans

12,~~485~~875

~~1,950~~634

47,~~691~~566

3,~~334~~968

Non-PCI loans charged-off

(2,~~502~~934

)

(21,~~316~~954

)

(58,~~685~~619

)

(46,~~140~~094

)

Recoveries of non-PCI loans previously charged-off

~~946~~682

~~764~~469

12,~~563~~245

1,~~442~~911

Balance, end of period

4445,~~638~~428

4443,~~883~~984

4445,~~638~~428

4443,~~883~~984

The following tables present the roll forward of the allowance for loan and lease losses for the three and ~~six~~nine months ended ~~June~~September 30, 2017 by the class of loans against which the allowance is allocated:

(Dollars in thousands)

~~March~~June 3130, 2017

Provision/(Reversals)

Net (Charge-offs)/Recoveries

~~June~~September 30, 2017

Non-owner occupied commercial real estate

1,~~241~~252

8263

3(20

)

1,~~252~~495

Other commercial construction and land

1311,~~668~~515

(21,~~260~~669

)

~~107~~1

119,~~515~~847

Multifamily commercial real estate

~~171~~193

229

—

~~193~~202

1-4 family residential construction and land

~~741~~591

(~~152~~139

)

~~591~~453

Total commercial real estate

1513,~~821~~551

(21,~~382~~536

)

~~112~~(18

)

1311,~~551~~997

Owner occupied commercial real estate

1,~~486~~324

(~~197~~345

)

3513

~~1,324~~992

Commercial and industrial loans

89,~~918~~570

~~620~~318

32135

910,~~570~~023

Total commercial

10,~~404~~894

~~423~~(27

)

67148

1011,~~894~~015

1-4 family residential

89,~~880~~416

~~488~~(37

)

4814

9,~~416~~393

Home equity loans

1,~~079~~197

~~159~~(87

)

(4183

)

1,~~197~~027

Other consumer loans

79,~~410~~222

34,~~240~~417

(12,~~428~~023

)

911,~~222~~616

Total consumer

1719,~~369~~835

34,~~887~~293

(12,~~421~~092

)

1922,~~835~~036

Other

~~297~~358

~~375~~312

(~~314~~290

)

~~358~~380

Total loans

4344,~~891~~638

23,~~303~~042

(12,~~556~~252

)

4445,~~638~~428



(Dollars in thousands)	December 31, 2016		Provision/ (Reversals)			Net (Charge-offs)/ Recoveries			September 30, 2017
Non-owner occupied commercial real estate	$	1,989	$	(478	)	$	(16	)	$	1,495
Other commercial construction and land	12,692		(2,955		)	110			9,847
Multifamily commercial real estate	171		31			—			202
1-4 family residential construction and land	666		(218		)	5			453
Total commercial real estate	15,518		(3,620		)	99			11,997
Owner occupied commercial real estate	1,397		(455		)	50			992
Commercial and industrial loans	9,509		561			(47		)	10,023
Total commercial	10,906		106			3			11,015
1-4 family residential	9,188		143			62			9,393
Home equity loans	1,214		(107		)	(80		)	1,027
Other consumer loans	5,890		11,245			(5,519		)	11,616
Total consumer	16,292		11,281			(5,537		)	22,036
Other	349		970			(939		)	380
Total loans	$	43,065	$	8,737		$	(6,374	)	$	45,428

The following tables present the roll forward of the allowance for loan and lease losses for the three and nine months ended September 30, 2016 by the class of loans against which the allowance is allocated:



(Dollars in thousands)	June 30, 2016		Provision/ (Reversals)			Net(Charge-offs)/ Recoveries			September 30, 2016
Non-owner occupied commercial real estate	$	2,039	$	(27	)	$	2		$	2,014
Other commercial construction and land	12,757		345			37			13,139
Multifamily commercial real estate	153		3			—			156
1-4 family residential construction and land	958		(142		)	2			818
Total commercial real estate	15,907		179			41			16,127
Owner occupied commercial real estate	1,559		(179		)	—			1,380
Commercial and industrial loans	10,800		(573		)	16			10,243
Total commercial	12,359		(752		)	16			11,623
1-4 family residential	9,964		(579		)	(21		)	9,364
Home equity loans	1,361		(121		)	16			1,256
Other consumer loans	4,988		1,432			(1,129		)	5,291
Total consumer	16,313		732			(1,134		)	15,911
Other	304		427			(408		)	323
Total loans	$	44,883	$	586		$	(1,485	)	$	43,984

(Dollars in thousands)

December 31, ~~2016~~2015

Provision/(Reversals)

Net (Charge-offs)/Recoveries

~~June~~September 30, ~~2017~~2016

Non-owner occupied commercial real estate

1,~~989~~598

~~(741~~405

)

411

12,~~252~~014

Other commercial construction and land

12,~~692~~919

~~(1,286~~174

)

~~109~~46

1113,~~515~~139

Multifamily commercial real estate

~~171~~186

22(30

)

—

~~193~~156

1-4 family residential construction and land

~~666~~1,275

(79462

)

~~591~~818

Total commercial real estate

15,~~518~~978

~~(2,084~~87

)

~~117~~62

1316,~~551~~127

Owner occupied commercial real estate

1,~~397~~505

(~~110~~45

)

37(80

)

1,~~324~~380

Commercial and industrial loans

9,~~509~~627

~~243~~1,045

(~~182~~429

)

910,~~570~~243

Total commercial

1011,~~906~~132

~~133~~1,000

(~~145~~509

)

1011,~~894~~623

1-4 family residential

911,~~188~~057

~~180~~(1,852

)

48159

9,~~416~~364

Home equity loans

1,~~214~~853

(20714

)

3117

1,~~197~~256

Other consumer loans

54,~~890~~751

63,~~828~~584

(3,~~496~~044

)

95,~~222~~291

Total consumer

1617,~~292~~661

61,~~988~~018

(32,~~445~~768

)

1915,~~835~~911

Other

~~349~~263

~~658~~1,028

(~~649~~968

)

~~358~~323

Total loans

4345,~~065~~034

53,~~695~~133

(4,~~122~~183

)

4443,~~638~~984

The following tables present the roll forward of the allowance for loan and lease losses for PCI and non-PCI loans for the three and ~~six~~nine months ended ~~June~~September 30, 2017 and 2016, by the class of loans against which the allowance is allocated:

(Dollars in thousands)	March 31, 2016		Provision/(Reversals)			Net(Charge-offs)/Recoveries			June 30, 2016
Non-owner occupied commercial real estate	$	1,671	$	366		$	2		$	2,039
Other commercial construction and land	13,196		(445		)	6			12,757
Multifamily commercial real estate	182		(29		)	—			153
1-4 family residential construction and land	1,285		(329		)	2			958
Total commercial real estate	16,334		(437		)	10			15,907
Owner occupied commercial real estate	1,687		(128		)	—			1,559
Commercial and industrial loans	10,129		1,153			(482		)	10,800
Total commercial	11,816		1,025			(482		)	12,359
1-4 family residential	10,374		(585		)	175			9,964
Home equity loans	1,595		(223		)	(11		)	1,361
Other consumer loans	4,842		1,161			(1,015		)	4,988
Total consumer	16,811		353			(851		)	16,313
Other	302		231			(229		)	304
Total loans	$	45,263	$	1,172		$	(1,552	)	$	44,883

(Dollars in thousands)	Three Months Ended	~~December 31, 2015~~			~~Provision/(Reversals)~~				~~Net(Charge-offs)/Recoveries~~				~~June 30, 2016~~
Non-owner occupied commercial real estate		$	1,598		$	432			$	9			$	2,039
	September 30, 2017											September 30, 2016
Other commercial construction and land		12,919			(171		)		9				12,757
	Non-PCI			PCI				Total				Non-PCI			PCI			Total
Multifamily commercial real estate		186			(33		)		—				153
Allowance for loan and lease losses at the beginning of the period	$	20,619		$	24,019			$	44,638			$	21,182		$	23,701		$	44,883
1-4 family residential construction and land		1,275			(320		)		3				958
Charge-offs:
Total commercial real estate		15,978			(92		)		21				15,907
Non-owner occupied commercial real estate	(22		)	—				(22		)		—			—			—
Owner occupied commercial real estate		1,505			134				(80		)		1,559
Other commercial construction and land	1			—				1				—			—			—
Commercial and industrial loans		9,627			1,618				(445		)		10,800
Multifamily commercial real estate	—			—				—				—			—			—
Total commercial		11,132			1,752				(525		)		12,359
1-4 family residential construction and land	—			—				—				—			—			—
1-4 family residential		11,057			(1,273		)		180				9,964
Total commercial real estate	(21		)	—				(21		)		—			—			—
Home equity loans		1,853			(593		)		101				1,361
Owner occupied commercial real estate	1			—				1				—			—			—
Other consumer loans		4,751			2,152				(1,915		)		4,988
Commercial and industrial loans	(133		)	—				(133		)		(6		)	—			(6		)
Total consumer		17,661			286				(1,634		)		16,313
Total commercial	(132		)	—				(132		)		(6		)	—			(6		)
Other		263			601				(560		)		304
1-4 family residential	(1		)	—				(1		)		(47		)	—			(47		)
Total loans		$	45,034		$	2,547			$	(2,698	)		$	44,883
Home equity loans	(209		)	—				(209		)		(50		)	—			(50		)
Other consumer loans	(2,145		)	—				(2,145		)		(1,293		)	—			(1,293		)
Total consumer	(2,355		)	—				(2,355		)		(1,390		)	—			(1,390		)
Other	(426		)	—				(426		)		(558		)	—			(558		)
Total charge-offs	(2,934		)	—				(2,934		)		(1,954		)	—			(1,954		)
Recoveries:
Non-owner occupied commercial real estate	2			—				2				2			—			2
Other commercial construction and land	—			—				—				37			—			37
Multifamily commercial real estate	—			—				—				—			—			—
1-4 family residential construction and land	1			—				1				2			—			2
Total commercial real estate	3			—				3				41			—			41
Owner occupied commercial real estate	12			—				12				—			—			—
Commercial and industrial loans	268			—				268				22			—			22
Total commercial	280			—				280				22			—			22
1-4 family residential	15			—				15				26			—			26
Home equity loans	126			—				126				66			—			66
Other consumer loans	122			—				122				164			—			164
Total consumer	263			—				263				256			—			256
Other	136			—				136				150			—			150
Total recoveries	682			—				682				469			—			469
Net charge-offs	(2,252		)	—				(2,252		)		(1,485		)	—			(1,485		)
Provision (reversal) for loan and lease losses:
Non-owner occupied commercial real estate	(88		)	351				263				(96		)	69			(27		)
Other commercial construction and land	(142		)	(1,527		)		(1,669		)		(102		)	447			345
Multifamily commercial real estate	(21		)	30				9				(9		)	12			3
1-4 family residential construction and land	(139		)	—				(139		)		(31		)	(111		)	(142		)
Total commercial real estate	(390		)	(1,146		)		(1,536		)		(238		)	417			179
Owner occupied commercial real estate	(119		)	(226		)		(345		)		(183		)	4			(179		)
Commercial and industrial loans	155			163				318				(695		)	122			(573		)
Total commercial	36			(63		)		(27		)		(878		)	126			(752		)
1-4 family residential	(272		)	235				(37		)		(148		)	(431		)	(579		)
Home equity loans	20			(107		)		(87		)		15			(136		)	(121		)
Other consumer loans	3,178			1,239				4,417				1,461			(29		)	1,432
Total consumer	2,926			1,367				4,293				1,328			(596		)	732
Other	303			9				312				422			5			427
Total provision (reversal) for loan and lease losses	2,875			167				3,042				634			(48		)	586
Allowance for loan and lease losses at the end of the period	$	21,242		$	24,186			$	45,428			$	20,331		$	23,653		$	43,984

The following tables present the roll forward of the allowance for loan and lease losses for PCI and non-PCI loans for the three and six months ended June 30, 2017 and 2016, by the class of loans against which the allowance is allocated:

(Dollars in thousands)	~~Three~~Nine Months Ended
	June 30, 2017									June 30, 2016
	September 30, 2017									September 30, 2016
	Non-PCI			PCI			Total			Non-PCI			PCI			Total
Allowance for loan and lease losses at the beginning of the period	$	20,~~690~~050		$	23,~~201~~015		$	43,~~891~~065		$	20,~~784~~546		$	24,~~479~~488		$	45,~~263~~034
Charge-offs:
Non-owner occupied commercial real estate	—(22		)	—			—(22		)	(12		)	—			(12		)
Other commercial construction and land	(76		)	—			(76		)	—			—			—
Multifamily commercial real estate	—			—			—			—			—			—
1-4 family residential construction and land	—			—			—			—			—			—
Total commercial real estate	(728		)	—			(728		)	(12		)	—			(12		)
Owner occupied commercial real estate	—(5		)	—			—(5		)	—(80		)	—			—(80		)
Commercial and industrial loans	(12385		)	—			(12385		)	(~~503~~510		)	—			(~~503~~510		)
Total commercial	(12390		)	—			(12390		)	(~~503~~590		)	—			(~~503~~590		)
1-4 family residential	—(3		)	—			—(3		)	—(47		)	—			—(47		)
Home equity loans	(~~117~~365		)	—			(~~117~~365		)	(~~113~~224		)	—			(~~113~~224		)
Other consumer loans	(16,~~873~~340		)	—			(16,~~873~~340		)	(13,~~211~~633		)	—			(13,~~211~~633		)
Total consumer	(16,~~990~~708		)	—			(16,~~990~~708		)	(13,~~324~~904		)	—			(13,~~324~~904		)
Other	(1,493		)	—			(1,493		)	(~~488~~1,598		)	—			(~~488~~1,598		)
Total charge-offs	(28,~~502~~619		)	—			(28,~~502~~619		)	(26,~~316~~094		)	—			(26,~~316~~094		)
Recoveries:
Non-owner occupied commercial real estate	36			—			36			313			—			313
Other commercial construction and land	~~114~~116			—			~~114~~116			646			—			646
Multifamily commercial real estate	—			—			—			—			—			—
1-4 family residential construction and land	25			—			25			25			—			25
Total commercial real estate	~~119~~127			—			~~119~~127			1164			—			1164
Owner occupied commercial real estate	3555			—			3555			—			—			—
Commercial and industrial loans	44338			—			44338			2181			—			2181
Total commercial	79393			—			79393			2181			—			2181
1-4 family residential	4865			—			4865			~~175~~206			—			~~175~~206
Home equity loans	76285			—			76285			~~102~~341			—			~~102~~341
Other consumer loans	~~445~~821			—			~~445~~821			~~196~~589			—			~~196~~589
Total consumer	~~569~~1,171			—			~~569~~1,171			~~473~~1,136			—			~~473~~1,136
Other	~~179~~554			—			~~179~~554			~~259~~630			—			~~259~~630
Total recoveries	~~946~~2,245			—			~~946~~2,245			~~764~~1,911			—			~~764~~1,911
Net charge-offs	(16,~~556~~374		)	—			(16,~~556~~374		)	(14,~~552~~183		)	—			(14,~~552~~183		)
Provision (reversal) for loan and lease losses:
Non-owner occupied commercial real estate	(95154		)	~~103~~(324		)	8(478		)	(~~176~~323		)	~~542~~728			~~366~~405
Other commercial construction and land	(52344		)	(2,~~208~~611		)	(2,~~260~~955		)	~~186~~(19		)	~~(631~~193		)	~~(445~~174		)
Multifamily commercial real estate	1318			913			2231			(831		)	~~(21~~1		)	(2930		)
1-4 family residential construction and land	(~~152~~218		)	—			(~~152~~218		)	4555			(~~374~~517		)	(~~329~~462		)
Total commercial real estate	(~~286~~698		)	(2,~~096~~922		)	(23,~~382~~620		)	47(318		)	~~(484~~405		)	~~(437~~87		)
Owner occupied commercial real estate	(~~227~~200		)	30(255		)	(~~197~~455		)	(~~100~~145		)	~~(28~~100		)	(~~128~~45		)
Commercial and industrial loans	~~166~~(367		)	~~454~~928			~~620~~561			~~680~~291			~~473~~754			1,~~153~~045
Total commercial	(61567		)	~~484~~673			~~423~~106			~~580~~146			~~445~~854			1,~~025~~000
1-4 family residential	(~~173~~527		)	~~661~~670			~~488~~143			(~~185~~433		)	(~~400~~1,419		)	(~~585~~1,852		)
Home equity loans	(25		)	~~161~~(112		)	~~159~~(107		)	71(69		)	(~~294~~645		)	(~~223~~714		)
Other consumer loans	18,~~688~~415			12,~~552~~830			311,~~240~~245			13,~~183~~628			(2244		)	13,~~161~~584
Total consumer	17,~~513~~893			23,~~374~~388			311,~~887~~281			13,~~069~~126			(~~716~~2,108		)	~~353~~1,018
Other	~~319~~938			5632			~~375~~970			~~254~~1,014			~~(23~~14		)	~~231~~1,028
Total provision (reversal) for loan and lease losses	17,~~485~~566			~~818~~1,171			28,~~303~~737			13,~~950~~968			(~~778~~835		)	13,~~172~~133
Allowance for loan and lease losses at the end of the period	$	2021,~~619~~242		$	24,~~019~~186		$	4445,~~638~~428		$	2120,~~182~~331		$	23,~~701~~653		$	4443,~~883~~984

(Dollars in thousands)	Six Months Ended
	June 30, 2017									June 30, 2016
	Non-PCI			PCI			Total			Non-PCI			PCI			Total
Allowance for loan and lease losses at the beginning of the period	$	20,050		$	23,015		$	43,065		$	20,546		$	24,488		$	45,034
Charge-offs:
Non-owner occupied commercial real estate	—			—			—			(2		)	—			(2		)
Other commercial construction and land	(7		)	—			(7		)	—			—			—
Multifamily commercial real estate	—			—			—			—			—			—
1-4 family residential construction and land	—			—			—			—			—			—
Total commercial real estate	(7		)	—			(7		)	(2		)	—			(2		)
Owner occupied commercial real estate	(6		)	—			(6		)	(80		)	—			(80		)
Commercial and industrial loans	(252		)	—			(252		)	(504		)	—			(504		)
Total commercial	(258		)	—			(258		)	(584		)	—			(584		)
1-4 family residential	(2		)	—			(2		)	—			—			—
Home equity loans	(156		)	—			(156		)	(174		)	—			(174		)
Other consumer loans	(4,195		)	—			(4,195		)	(2,340		)	—			(2,340		)
Total consumer	(4,353		)	—			(4,353		)	(2,514		)	—			(2,514		)
Other	(1,067		)	—			(1,067		)	(1,040		)	—			(1,040		)
Total charge-offs	(5,685		)	—			(5,685		)	(4,140		)	—			(4,140		)
Recoveries:
Non-owner occupied commercial real estate	4			—			4			11			—			11
Other commercial construction and land	116			—			116			9			—			9
Multifamily commercial real estate	—			—			—			—			—			—
1-4 family residential construction and land	4			—			4			3			—			3
Total commercial real estate	124			—			124			23			—			23
Owner occupied commercial real estate	43			—			43			—			—			—
Commercial and industrial loans	70			—			70			59			—			59
Total commercial	113			—			113			59			—			59
1-4 family residential	50			—			50			180			—			180
Home equity loans	159			—			159			275			—			275
Other consumer loans	699			—			699			425			—			425
Total consumer	908			—			908			880			—			880
Other	418			—			418			480			—			480
Total recoveries	1,563			—			1,563			1,442			—			1,442
Net charge-offs	(4,122		)	—			(4,122		)	(2,698		)	—			(2,698		)
Provision (reversal) for loan and lease losses:
Non-owner occupied commercial real estate	(66		)	(675		)	(741		)	(227		)	659			432
Other commercial construction and land	(202		)	(1,084		)	(1,286		)	83			(254		)	(171		)
Multifamily commercial real estate	39			(17		)	22			(22		)	(11		)	(33		)
1-4 family residential construction and land	(79		)	—			(79		)	86			(406		)	(320		)
Total commercial real estate	(308		)	(1,776		)	(2,084		)	(80		)	(12		)	(92		)
Owner occupied commercial real estate	(81		)	(29		)	(110		)	38			96			134
Commercial and industrial loans	(522		)	765			243			986			632			1,618
Total commercial	(603		)	736			133			1,024			728			1,752
1-4 family residential	(255		)	435			180			(285		)	(988		)	(1,273		)
Home equity loans	(15		)	(5		)	(20		)	(84		)	(509		)	(593		)
Other consumer loans	5,237			1,591			6,828			2,167			(15		)	2,152
Total consumer	4,967			2,021			6,988			1,798			(1,512		)	286
Other	635			23			658			592			9			601
Total provision (reversal) for loan and lease losses	4,691			1,004			5,695			3,334			(787		)	2,547
Allowance for loan and lease losses at the end of the period	$	20,619		$	24,019		$	44,638		$	21,182		$	23,701		$	44,883

The following table presents the balance in the allowance for loan and lease losses and the recorded investment in loans by class of loan and by impairment evaluation method as of September 30, 2017:



(Dollars in thousands)	Allowance for Loan and Lease Losses						Loans
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Purchased Credit- Impaired		Individually Evaluated for Impairment		Collectively Evaluated for Impairment ⁽¹⁾		Purchased Credit- Impaired
Non-owner occupied commercial real estate	$	—	$	789	$	706	$	2,732	$	1,087,637	$	203,278
Other commercial construction and land	17		1,447		8,383		109		357,431		44,710
Multifamily commercial real estate	—		67		135		—		132,266		15,926
1-4 family residential construction and land	—		453		—		—		143,513		294
Total commercial real estate	17		2,756		9,224		2,841		1,720,847		264,208
Owner occupied commercial real estate	—		992		—		8,502		1,068,568		149,141
Commercial and industrial loans	650		5,466		3,907		13,195		1,430,772		58,972
Total commercial	650		6,458		3,907		21,697		2,499,340		208,113
1-4 family residential	97		1,695		7,601		3,003		1,601,933		179,694
Home equity loans	117		444		466		1,916		424,600		55,180
Other consumer loans	27		8,679		2,910		368		362,843		21,517
Total consumer	241		10,818		10,977		5,287		2,389,376		256,391
Other	—		302		78		—		214,958		26,482
Total loans	$	908	$	20,334	$	24,186	$	29,825	$	6,824,521	$	755,194

~~The~~(1) ~~following~~Loans ~~table~~collectively ~~presents~~evaluated ~~the balance in the allowance~~ for ~~loan~~impairment ~~and~~include ~~lease~~$1.4 ~~losses~~billion ~~and~~of ~~the~~acquired ~~recorded~~loans ~~investment~~which inare ~~loans~~presented bynet ~~class~~ of ~~loan~~unamortized ~~and~~purchase bydiscounts ~~impairment evaluation method as~~ of ~~June 30,~~$14.5 ~~2017:~~million.

(Dollars in thousands)	Allowance for Loan and Lease Losses						Loans
	IndividuallyEvaluatedforImpairment		CollectivelyEvaluatedforImpairment		PurchasedCredit-Impaired		IndividuallyEvaluatedforImpairment		CollectivelyEvaluatedforImpairment (1)		PurchasedCredit-Impaired
Non-owner occupied commercial real estate	$	—	$	897	$	355	$	2,764	$	1,046,208	$	216,604
Other commercial construction and land	21		1,584		9,910		120		328,777		55,684
Multifamily commercial real estate	—		88		105		—		131,057		16,308
1-4 family residential construction and land	—		591		—		—		153,331		430
Total commercial real estate	21		3,160		10,370		2,884		1,659,373		289,026
Owner occupied commercial real estate	1		1,097		226		8,591		1,120,928		158,292
Commercial and industrial loans	400		5,426		3,744		13,532		1,337,979		73,351
Total commercial	401		6,523		3,970		22,123		2,458,907		231,643
1-4 family residential	121		1,929		7,366		2,626		1,586,687		189,953
Home equity loans	122		502		573		1,921		427,248		60,328
Other consumer loans	9		7,542		1,671		386		370,265		25,156
Total consumer	252		9,973		9,610		4,933		2,384,200		275,437
Other	—		289		69		—		210,562		27,493
Total loans	$	674	$	19,945	$	24,019	$	29,940	$	6,713,042	$	823,599

(1) Loans collectively evaluated for impairment include $1.3 billion of acquired loans which are presented net of unamortized purchase discounts of $17.0 million.

The following table presents the balance in the allowance for loan and lease losses and the recorded investment in loans by class of loan and by impairment evaluation method as of December 31, 2016:



(Dollars in thousands)	Allowance for Loan and Lease Losses						Loans
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Purchased Credit- Impaired		Individually Evaluated for Impairment		Collectively Evaluated for Impairment ⁽¹⁾		Purchased Credit- Impaired
Non-owner occupied commercial real estate	$	—	$	959	$	1,030	$	2,835	$	898,513	$	229,535
Other commercial construction and land	20		1,678		10,994		109		255,625		71,888
Multifamily commercial real estate	—		49		122		—		96,802		20,713
1-4 family residential construction and land	—		666		—		—		139,647		383
Total commercial real estate	20		3,352		12,146		2,944		1,390,587		322,519
Owner occupied commercial real estate	1		1,141		255		8,858		1,133,081		179,466
Commercial and industrial loans	6		6,524		2,979		9,548		1,369,958		89,368
Total commercial	7		7,665		3,234		18,406		2,503,039		268,834
1-4 family residential	121		2,136		6,931		1,963		1,484,906		214,959
Home equity loans	113		523		578		1,392		439,584		66,783
Other consumer loans	13		5,797		80		452		418,105		30,415
Total consumer	247		8,456		7,589		3,807		2,342,595		312,157
Other	—		303		46		—		195,615		32,815
Total loans	$	274	$	19,776	$	23,015	$	25,157	$	6,431,836	$	936,325


⁽¹⁾	Loans collectively evaluated for impairment include $1.6 billion of acquired loans which are presented net of unamortized purchase discounts of $20.0 million.

2625

For the three and ~~six~~nine months ended ~~June~~September 30, 2017 and ~~June~~September 30, 2016, the amount of interest income recognized on loans that were impaired was not material.

Troubled Debt Restructuring

If a borrower is experiencing financial difficulty, the Bank may consider, in certain circumstances, modifying the terms of their loan to maximize collection of amounts due. A troubled debt restructuring (“TDR”) typically involves either a reduction of the stated interest rate of the loan, an extension of the loan’s maturity date(s) with a stated rate lower than the current market rate for a new loan with similar risk, or in limited circumstances, a reduction of the principal balance of the loan or the loan’s accrued interest. Upon modification of a loan, the Bank measures the related impairment as the excess of the recorded investment in the loan over the discounted expected future cash flows. The present value of expected future cash flows is discounted at the loan’s effective interest rate. If the impairment analysis results in a loss, an allowance for loan and lease losses is established for the loan. During the ~~six~~nine months ended ~~June~~September 30, 2017 and 2016, loans modified in TDRs were nominal. Because of the insignificance of the amount and the nature of the modifications, the modifications did not have a material impact on the Company’s Consolidated Financial Statements or on the determination of the allowance for loan and lease losses at ~~June~~September 30, 2017 and 2016. The Company had loans modified in TDRs with recorded investments of $2.53 million, $2.7 million, and $12.83 million as of ~~June~~September 30, 2017, December 31, 2016 and ~~June~~September 30, 2016, respectively.

Hurricane Irma

7. Other Real Estate Owned

The activity within Other Real Estate Owned (“OREO”) for the three and ~~six~~nine months ended ~~June~~September 30, 2017 and 2016 is presented in the table below.

For the three and ~~six~~nine months ended ~~June~~September 30, 2017 , proceeds on sales of OREO were $106.7 million and $1522.62 million, respectively and net gains were $0.20 million and $0.5 million, respectively. For the three and ~~six~~nine months ended ~~June~~ September 30, 2016, proceeds on sales of OREO were $41.74 million and $1113.82 million, respectively and net gains were $0.42 million and $1.13 million., respectively.

(Dollars in thousands)

Three Months Ended

~~Six~~Nine Months Ended

June 30, 2017

June 30, 2016

June 30, 2017

June 30, 2016

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

Balance, beginning of period

5141,~~050~~364

4844,~~505~~236

53,482

52,776

Real estate acquired from borrowers and transfers from other assets

19,~~036~~909

13,~~184~~762

313,~~463~~373

37,~~772~~534

Valuation allowance

(~~262~~249

)

(~~1,119~~742

)

(~~509~~758

)

(12,~~586~~328

)

Properties sold

(106,~~460~~608

)

(41,~~334~~249

)

(1521,~~072~~681

)

(1011,~~726~~975

)

Balance, end of period

4144,~~364~~416

4446,~~236~~007

4144,~~364~~416

4446,~~236~~007

8. Federal Home Loan Bank Advances and Short-Term Borrowings

Short-term borrowings include securities sold under agreements to repurchase, cash received from counterparties as collateral for mark-to-market exposure on interest rate swaps, and advances from the Federal Home Loan Bank (“FHLB”) .

The Bank has securities sold under agreements to repurchase with customers. These overnight agreements are collateralized by investment securities of the United States Government or its agencies which are chosen by the Bank. The amounts outstanding at June 30, 2017 and December 31, 2016 were $32.4 million and $18.0 million, respectively, and were collateralized by $37.7 million and $27.6 million, respectively, of agency mortgage-backed securities.26

The Bank has ~~$0.3~~securities ~~million~~sold ~~and~~under $1agreements to repurchase with customers.2 ~~million~~These ofovernight ~~short~~agreements ~~term~~are ~~borrowings~~collateralized ~~related~~by toinvestment ~~cash~~securities ~~received~~of ~~from~~the ~~counterparties~~United asStates ~~collateral~~Government ~~for~~or ~~mark-to-market~~its ~~exposure~~agencies onwhich ~~interest~~are ~~rate~~chosen ~~swaps~~by the Bank. The amounts outstanding at ~~June~~September 30, 2017 and December 31, 2016 were $34.6 million and $18.0 million, respectively, and were collateralized by $37.2 million and $27.6 million, respectively, of agency mortgage-backed securities.

The Bank ~~invests~~has in$0.3 ~~FHLB~~million ~~stock~~and ~~for~~$1.2 ~~the~~million ~~purpose~~ of ~~establishing~~short ~~credit~~term ~~lines~~borrowings ~~with~~related ~~the FHLB. The credit availability~~ to ~~the~~cash ~~Bank~~received isfrom ~~based~~counterparties ~~on a percentage of the Bank’s total assets~~ as ~~reported~~collateral onfor ~~the most recent quarterly financial information submitted~~ mark-to-market ~~the~~exposure ~~regulators~~on ~~subject~~interest torate ~~the~~swaps ~~pledging~~at ofSeptember 30, ~~sufficient~~2017 ~~collateral.~~and ~~The Bank’s collateral with the FHLB consists of a blanket floating lien pledge of the Bank’s residential 1-4 family mortgage~~December 31, ~~multifamily~~2016, ~~home equity line of credit and~~ respectively.

27The Bank invests in FHLB stock for the purpose of establishing credit lines with the FHLB. The credit availability to the Bank is based on a percentage of the Bank’s total assets as reported on the most recent quarterly financial information submitted to the regulators subject to the pledging of sufficient collateral. The Bank’s collateral with the FHLB consists of a blanket floating lien pledge of the Bank’s residential 1-4 family mortgage, multifamily, home equity line of credit and commercial real estate secured loans. The amounts of eligible collateral at September 30, 2017 and December 31, 2016 provided for incremental borrowing availability of up to $566.9 million and $415.9 million, respectively.

~~commercial~~At ~~real estate secured loans. The amounts of eligible collateral at June~~September 30, 2017 and December 31, 2016, ~~provided~~the ~~for~~Bank ~~incremental~~had ~~borrowing~~$15.8 ~~availability~~million and $15.4 million in letters of upcredit toissued by the FHLB respectively, of which $~~482~~15.60 million and $~~415~~15.92 million are used as collateral for public funds deposits in lieu of pledging securities to the State of Florida, respectively.

AtThe ~~June~~FHLB advances as of September 30, 2017 and December 31, 2016, ~~the~~consisted ~~Bank had $15.3 million and $15.4 million in letters~~ of ~~credit issued by~~ the ~~FHLB respectively, of which $15.0 million and $15.2 million are used as collateral for public funds deposits in lieu of pledging securities to the State of Florida, respectively.~~following:

The FHLB advances as of June 30, 2017 and December 31, 2016 consisted of the following:



(Dollars in thousands)

Contractual Outstanding Amount
September 30, 2017		Maturity Date	Interest Rate as of September 30, 2017
151		November 6, 2017	0.50%
50,000		November 20, 2017	1.19%	(1 Month FRC + 2 bps)*
50,000		November 23, 2018	1.19%	(1 Month FRC + 2 bps)*
50,000		December 31, 2019	1.17%	(1 Month FRC + 2 bps)*
60,000		May 28, 2020	1.18%	(1 Month FRC + 2 bps)*
80,000		September 20, 2021	1.25%	(1 Month FRC + 8 bps)*
75,000		September 29, 2021	1.23%	(1 Month FRC + 8 bps)*
75,000		January 20, 2022	1.25%	(1 Month FRC + 8 bps)*
398		February 10, 2026	—%
$	440,549

(Dollars in thousands)
ContractualOutstandingAmount
June 30, 2017		Maturity Date	Interest Rate as of June 30, 2017
191		November 6, 2017	0.50%
50,000		November 20, 2017	1.18%	(1 Month FRC + 2 bps)*
30,000		May 21, 2018	1.32%
50,000		November 23, 2018	1.18%	(1 Month FRC + 2 bps)*
50,000		December 31, 2019	1.16%	(1 Month FRC + 2 bps)*
60,000		May 28, 2020	1.19%	(1 Month FRC + 2 bps)*
80,000		September 20, 2021	1.24%	(1 Month FRC + 8 bps)*
75,000		September 29, 2021	1.23%	(1 Month FRC + 8 bps)*
75,000		January 20, 2022	1.24%	(1 Month FRC + 8 bps)*
409		February 10, 2026	—%
$	470,600

^(*) FRC = FHLB Fixed Rate Credit interest rate.



(Dollars in thousands)

Contractual Outstanding Amount
December 31, 2016		Maturity Date	Interest Rate as of December 31, 2016
$	25,000	January 20, 2017	0.63%
155,000		May 19, 2017	0.80%
271		November 6, 2017	0.50%
50,000		November 20, 2017	0.65%	(1 Month FRC + 2 bps)*
50,000		November 23, 2018	0.66%	(1 Month FRC + 2 bps)*
50,000		December 31, 2019	0.64%	(1 Month FRC + 2 bps)*
60,000		May 28, 2020	0.63%	(1 Month FRC + 2 bps)*
80,000		September 20, 2021	0.71%	(1 Month FRC + 8 bps)*
75,000		September 29, 2021	0.71%	(1 Month FRC + 8 bps)*
430		February 10, 2026	—%
$	545,701

^(*) FRC = FHLB Fixed Rate Credit interest rate.

9. Long-Term Borrowings

Subordinated Debentures

Through its acquisitions of TIB Financial ("TIBB"), Capital Bank Corp. ("CBKN"), Green Bankshares ("GRNB"), Southern Community Financial ("SCMF" or "Southern Community"), and CommunityOne Bancorp ("COB" or "CommunityOne"), the Company assumed fourteen separate pooled offerings of trust preferred securities listed below. The Company is not considered the primary beneficiary of the trusts (variable interest entities), therefore the trusts are not consolidated in the Company’s Consolidated Financial Statements, but rather the subordinated debentures are presented as liabilities. The trusts consist of wholly-owned statutory trust subsidiaries for the purpose of issuing the trust preferred securities. The trusts used the proceeds from the issuance of trust preferred securities to acquire junior subordinated deferrable interest debentures of the Company. The trust preferred securities essentially mirror the debt securities, carrying a cumulative preferred dividend equal to the interest rate on the debt securities. The debt securities and the trust preferred securities each have 30-year lives. The trust preferred securities and the debt securities are callable by the Company or the trust, at their respective option after a period of time, and at varying premiums and sooner in specific events, subject to prior approval by the Federal Reserve Board (“FRB”), if then required. Deferral of interest payments on the trust preferred securities is allowed for up to 60 months without being considered an event of default.

The subordinated debentures are included in Tier 1 capital under the capital guidelines of the Dodd-Frank Act. The subordinated debentures as of ~~June~~September 30, 2017 and December 31, 2016 consisted of the following:

(Dollars in thousands)
			Carrying Amount
Date of Offering	Face Amount		~~June~~September 30, 2017		December 31, 2016		Interest Rate as of ~~June~~September 30, 2017			Maturity Date
July 31, 2001	$	5,000	$	4,~~049~~064	$	4,018	4.7589	%	(3 Month LIBOR + 358 bps)	July 31, 2031
July 31, 2001	4,000		2,~~865~~882		2,831		4.7589	%	(3 Month LIBOR + 358 bps)	July 31, 2031
December 20, 2002	5,000		3,~~579~~597		3,544		4.5065	%	(3 Month LIBOR + 335 bps)	December 30, 2032
June 26, 2003	10,000		6,~~289~~320		6,231		4.4043	%	(3 Month LIBOR + 310 bps)	June 26, 2033
September 25, 2003	10,000		6,~~902~~941		6,823		4.0115	%	(3 Month LIBOR + 285 bps)	October 8, 2033
December 30, 2003	10,000		6,~~079~~110		6,020		4.0216	%	(3 Month LIBOR + 285 bps)	December 30, 2033
June 28, 2005	3,000		1,~~724~~737		1,697		23.9300	%	(3 Month LIBOR + 168 bps)	June 28, 2035
November 4, 2005	20,000		10,~~271~~365		10,085		2.6269	%	(3 Month LIBOR + 137 bps)	December 15, 2035
December 22, 2005	10,000		4,~~932~~968		4,863		2.6572	%	(3 Month LIBOR + 140 bps)	March 15, 2036
December 28, 2005	13,000		7,~~220~~278		7,107		2.7986	%	(3 Month LIBOR + 154 bps)	March 15, 2036
April 27, 2006	30,000		15,~~090~~229		14,816		2.62	%	(3 Month LIBOR + 132 bps)	June 30, 2036
June 23, 2006	20,000		12,~~247~~326		12,092		2.7185	%	(3 Month LIBOR + 155 bps)	July 7, 2036
May 16, 2007	56,000		31,~~147~~380		30,685		2.9097	%	(3 Month LIBOR + 165 bps)	June 15, 2037
June 15, 2007	10,000		5,~~702~~732		5,644		2.6575	%	(3 Month LIBOR + 143 bps)	September 6, 2037
Total	$	206,000	$	118,~~096~~929	$	116,456

10. Shareholders’ Equity and Minimum Regulatory Capital Requirements

The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements results in certain discretionary and required actions by regulators that could have an effect on the Company’s operations. The regulations require the Company and the Bank to meet specific capital adequacy guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

To be considered well capitalized or adequately capitalized as defined under the regulatory framework for prompt corrective action, the Bank must maintain minimum Tier 1 leverage, Tier 1 common, Tier 1 risk-based and Total Risk-based ratios. At ~~June~~September 30, 2017 and December 31, 2016 the Bank maintained capital ratios exceeding the requirement to be considered well capitalized. These minimum ratios along with the actual ratios for the Company and the Bank are presented in the following tables:

(Dollars in thousands)

Well CapitalizedRequirement

Adequately CapitalizedRequirement

Actual

June 30, 2017

Amount

Ratio

Amount

Ratio

Amount

Ratio

September 30, 2017

Amount

Ratio

Amount

Ratio

Amount

Ratio

Tier 1 Leverage Capital

(to Average Assets)

CBF Consolidated

N/A

~~391~~392,~~011~~224

≥ 4.0%

1,~~150~~176,~~427~~655

1112.80%

Bank

~~487~~488,~~466~~678

≥ 5.0%

~~389~~390,~~973~~943

≥ 4.0%

1,~~046~~062,~~843~~316

10.79%

Tier 1 Common Equity Capital

(to Risk-weighted Assets)

CBF Consolidated

N/A

~~377~~378,~~096~~507

≥ 4.5%

1,~~043~~068,~~384~~825

12.57%

Bank

~~543~~544,~~319~~345

≥ 6.5%

376,~~144~~854

≥ 4.5%

1,~~046~~062,~~843~~316

12.57%

Tier 1 Risk-based Capital

(to Risk-weighted Assets)

CBF Consolidated

N/A

~~502~~504,~~795~~676

≥ 6.0%

1,~~150~~176,~~427~~655

1314.70%

Bank

~~668~~669,~~700~~963

≥ 8.0%

~~501~~502,~~525~~472

≥ 6.0%

1,~~046~~062,~~843~~316

12.57%

Total Risk-based Capital

(to Risk-weighted Assets)

CBF Consolidated

N/A

~~670~~672,~~393~~901

≥ 8.0%

1,~~195~~222,~~497~~487

14.35%

Bank

~~835~~837,~~875~~453

≥ 10.0%

~~668~~669,~~700~~963

≥ 8.0%

1,~~091~~108,~~913~~148

13.12%



(Dollars in thousands)	Well Capitalized Requirement			Adequately Capitalized Requirement			Actual
December 31, 2016	Amount		Ratio	Amount		Ratio	Amount		Ratio
Tier 1 Capital
(to Average Assets)
CBF Consolidated	N/A		N/A	$	360,513	≥ 4.0%	$	1,101,743	12.2%
Bank	$	450,006	≥ 5.0%	$	360,005	≥ 4.0%	$	1,010,409	11.2%
Tier 1 Common Equity Capital
(to Risk-weighted Assets)
CBF Consolidated	N/A		N/A	$	367,521	≥ 4.5%	$	1,012,831	12.4%
Bank	$	529,887	≥ 6.5%	$	366,845	≥ 4.5%	$	1,010,409	12.4%
Tier 1 Capital
(to Risk-weighted Assets)
CBF Consolidated	N/A		N/A	$	490,028	≥ 6.0%	$	1,101,743	13.5%
Bank	$	652,169	≥ 8.0%	$	489,127	≥ 6.0%	$	1,010,409	12.4%
Total Capital
(to Risk-weighted Assets)
CBF Consolidated	N/A		N/A	$	653,371	≥ 8.0%	$	1,145,351	14.0%
Bank	$	815,211	≥ 10.0%	$	652,169	≥ 8.0%	$	1,054,016	12.9%

As of ~~June~~September 30, 2017 and December 31, 2016, the Company and the Bank met all capital requirements to which they were subject. Tier 1 Capital for the Company includes trust preferred securities to the extent allowable.

Dividends that may be paid by a national bank are limited to that bank’s retained net profits for the preceding two years plus retained net profits up to the date of any dividend declaration in the current calendar year. The Company received dividends from the Bank totaling $8.0 million, $6.8 million, $4.2 million, $6.1 million, $5.7 million, and $64.2 million, on July 28, 2017, May 2, 2017, January 31, 2017, January 24, 2017, October 19, 2016 and June 1, 2016, respectively. The Company may use these dividends for general corporate purposes including acquisitions, or as a return of capital to shareholders through future share repurchases or dividends.

In July 2013, the U.S. banking regulators adopted a final rule which implements the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision, and certain changes required by the Dodd-Frank Act. The final rule established an integrated regulatory capital framework and introduces the “Standardized Approach” for risk-weighted assets, which replaces the Basel I risk-based guidance for determining risk-weighted assets as of January 1, 2015, the date the Company became subject to the new rules. Based on the Company's current capital composition and levels, the Company believes it is in compliance with the requirements as set forth in the final rules.

The rules include new risk-based capital and leverage ratios, which will be phased in from 2015 to 2019, and refine the definition of what constitutes “capital” for purposes of calculating those ratios. The new minimum capital level requirements applicable to the Company and the Bank under the final rules are as follows: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from previous rules); and (iv) a Tier 1 leverage ratio of 4% for all institutions. The final rules also establish a “capital conservation buffer” above the new regulatory minimum capital requirements. The capital conservation buffer will be phased-in over four years beginning on January 1, 2016, as follows: the maximum buffer will be 0.625% of risk-weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter. This will result in the following minimum ratios beginning in 2019: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. Under the final rules, institutions are subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions. As of ~~June~~September 30, 2017, our capital buffer is 6.35%; exceeding the 2.5% 2019 requirement.

The final rules also contain revisions to the prompt corrective action framework, which is designed to place restrictions on insured depository institutions if their capital levels begin to show signs of weakness. Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions are required to meet the following increased capital level requirements in order to qualify as “well capitalized:” (i) a

new common equity Tier 1 capital ratio of 6.5%; (ii) a Tier 1 capital ratio of 8% (increased from 6%); (iii) a total capital ratio of 10% (unchanged from previous rules); and (iv) a Tier 1 leverage ratio of 5% (unchanged from previous rules).

Dividend Program

On ~~July~~October 2019, 2017, the Company's board of directors approved a quarterly common dividend of $0.12 per share payable on ~~August~~November 2113, 2017, to shareholders of record as of ~~August~~November 73, 2017.

Share Repurchases

The Company’s board of directors has authorized stock repurchases of up to $400.0 million. Stock repurchases may be made from time to time, on the open market or in privately negotiated transactions. The approved stock repurchase program does not obligate the Company to repurchase any particular amount of shares, and the program may be extended, modified, suspended, or discontinued at any time.

As of ~~June~~September 30, 2017, the Company has repurchased a total of $312.4 million, or 12,739,763 common shares at an average price of $24.52 per share with $87.6 million remaining under the current board authorized stock repurchase program.

The Company accounts for treasury stock using the cost method as a reduction of shareholders’ equity in the accompanying Consolidated Balance Sheets and Statements of Changes in Shareholders’ Equity.

11. Stock-Based Compensation

As of ~~June~~September 30, 2017, the Company had two compensation plans, the 2010 Equity Incentive Plan (the "2010 Plan") and the 2013 Omnibus Compensation Plan (the “2013 Plan”) under which shares of its common stock are issuable in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, stock bonus awards, and other incentive awards. The 2010 Plan was replaced by the 2013 Plan and no further awards may be made pursuant to the 2010 Plan.

The 2013 Plan was effective May 22, 2013 and expires on May 22, 2023, the tenth anniversary of the effective date. The maximum number of shares of common stock of the Company that may be optioned or awarded under this plan is 2,639,000 shares. Awards under this plan may be made to any person selected by the Compensation Committee.

The following table summarizes the components and classification of stock-based compensation expense for the three and ~~six~~nine months ended ~~June~~September 30, 2017 and 2016:

(Dollars in thousands)

Three Months Ended

~~Six~~Nine Months Ended

June 30, 2017

June 30, 2016

June 30, 2017

June 30, 2016

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

Stock options

1214

5280

2135

Restricted stock

~~936~~1,413

~~455~~776

13,~~812~~225

~~763~~1,539

Total stock-based compensation expense

~~964~~1,441

~~467~~790

13,~~864~~305

~~784~~1,574

The tax benefit related to stock-based compensation expense arising from restricted stock awards and non-qualified stock options was $~~362~~0.5 ~~thousand~~million and $~~177~~0.3 ~~thousand~~million for the three months ended ~~June~~September 30, 2017 and 2016, respectively and $~~699~~1.2 ~~thousand~~million and $~~298~~0.6 ~~thousand~~million for the ~~six~~nine months ended ~~June~~September 30, 2017 and 2016, respectively.

Stock Options

Under the 2010 Plan and 2013 Plan, the exercise price for common stock must equal at least 100% of the fair market value of the stock on the day an option is granted. The exercise price under an incentive stock option granted to a person owning stock representing more than 10% of the common stock must equal at least 110% of the fair market value at the date of grant, and such option is not exercisable after five years from the date the incentive stock option was granted. The Board of Directors may, at its discretion, provide that an option not be exercised in whole or in part for any period or periods of time as specified in the option agreements. Stock options have an expiration of ten years from the date it is granted. Under these plans, 83112,~~729~~271 options were exercised and 15,623 stock options were granted during the ~~six~~nine months ended ~~June~~September 30, 2017.

The fair value of each option is estimated as of the date of the grant using the Black-Scholes Option Pricing Model. This model requires the input of subjective assumptions that will usually have a significant impact on the fair value estimate. The dividend yield assumption is consistent with management expectations of dividend distributions based upon the Company’s business plan at the date of grant. The risk-free interest rate was developed using the U.S. Treasury yield curve for a period equal to the expected life of the options on the grant date. The expected option life for the current period grants was estimated using the vesting period, the term of the option and estimates of future exercise behavior patterns. The expected volatility assumption was based on the historical volatility of the Company's stock price.

ASC 718 requires the recognition of stock-based compensation expense for the number of awards that are ultimately expected to vest. During the ~~six~~nine months ended ~~June~~September 30, 2017 and 2016, stock based compensation expense was recorded based upon assumptions that the Company would experience no forfeitures. This assumption of forfeitures will be reassessed in subsequent periods based on historical forfeiture rates and may change based on new facts and circumstances. Any changes in assumptions will be accounted for prospectively in the period of change.

A summary of the stock option activity for the ~~six~~nine months ended ~~June~~September 30, 2017 and 2016 is as follows:

	Six Months Ended
	Nine Months Ended
	June 30, 2017				June 30, 2016
	September 30, 2017				September 30, 2016
(Shares in thousands)	Shares		Weighted AverageExercise Price Per Share		Shares		Weighted AverageExercise Price Per Share
Balance, January 1,	3,180		$	20.86	3,075		$	20.12
Granted	15		39.55		30		30.54
Exercised	(84112	)	20.5537		(2736	)	18.00
Canceled, expired or forfeited	(34	)	7082.9809		(23	)	30.54
Balance, June 30,	3,108		$	20.92	3,076		$	20.23
Balance, September 30,	3,079		$	20.85	3,066		$	20.24

At ~~June~~September 30, 2017, the weighted average remaining contractual life for outstanding stock options was approximately 3.3410 years and the aggregate intrinsic values was $5160.50 million for stock options outstanding and exercisable.

The intrinsic value for stock options is calculated as the difference between the exercise price of the underlying awards and the market price of the Company’s common stock as of the reporting date.

Options outstanding at ~~June~~September 30, 2017 were as follows:

(Shares in thousands)	Outstanding Options				Exercisable Options
Range of Exercise Prices	Shares	WeightedAverageRemainingContractual Life	WeightedAverageExercise PricePer Share		Shares	WeightedAverageExercise PricePer Share
$18.00	~~121~~119	5.8964 years	$	18.00	~~121~~119	$	18.00
$18.01 - $20.00	2,~~819~~793	2.9874 years	20.00		2,~~819~~794	20.00
$20.01 - $2,026.00	168	7.67 years	37.31		113	38.11
$20.98 - $1,095.00	167	7.45 years	37.08		114	37.75
$18.00 - $2,026.00	3,108	3.34 years	$	20.85	3,053	$	20.59
$18.00 - $1,095.00	3,079	3.10 years	$	20.85	3,027	$	20.59

Restricted Stock

Restricted stock provides the grantee with voting, dividend and anti-dilution rights equivalent to common shareholders, but is restricted from transfer until vested, at which time all restrictions are removed. The restricted stock vests ratably over a three-year period subject to continued employment with the company. The value of the restricted stock is being amortized on a straight-line basis over the implied service periods. There were ~~165~~175,~~063~~287 restricted stock awards granted under the 2013 Plan during the ~~six~~nine months ended ~~June~~September 30, 2017.

The following table summarizes unvested restricted stock activity for the ~~six~~nine months ended ~~June~~September 30, 2017 and 2016:

	Six Months Ended
	Nine Months Ended
	June 30, 2017				June 30, 2016
	September 30, 2017				September 30, 2016
(Shares in thousands)	Shares		WeightedAverageGrant-DateFair Value Per Share		Shares		WeightedAverageGrant-DateFair Value Per Share
Balance, January 1,	197		$	30.10	—		$	—
Granted	~~165~~175		39.5653		~~198~~199		30.3054
Vested or released	(6453	)	3031.5671		—		—
Canceled, expired or forfeited	(326	)	3435.0728		(14	)	30.54
Balance, June 30	295		$	35.25	197		$	30.30
Balance, September 30	293		$	35.59	195		$	30.54

12. Income Taxes

A reconciliation of income tax computed at applicable Federal statutory income tax rates to total income tax expense reported for the three and ~~six~~nine months ended ~~June~~September 30, 2017 and 2016 is as follows:

(Dollars in thousands)

Three Months Ended

~~Six~~Nine Months Ended

June 30, 2017

June 30, 2016

June 30, 2017

June 30, 2016

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

Income before income taxes

3740,~~954~~663

2726,~~729~~881

69110,~~827~~490

4370,~~349~~230

Income taxes computed at Federal statutory tax rate

1314,~~283~~232

9,~~705~~408

2438,~~439~~671

1524,~~172~~581

Effect of:

State taxes (net of federal benefit)

~~976~~767

~~851~~822

12,~~773~~540

12,~~321~~143

State statutory rate change

~~461~~66

—356

~~461~~527

—356

Tax-exempt interest income, net

(~~382~~435

)

(~~311~~327

)

(~~716~~1,151

)

(~~481~~808

)

Other, net

~~(190~~275

)

43(1,889

)

(~~819~~544

)

36(1,854

)

Total income tax expense

14,~~148~~905

108,~~288~~370

2540,~~138~~043

1624,~~048~~418

The Company uses an estimated annual effective tax rate method of computing its interim tax provision. The effective tax rate is based on forecasted annual pre-tax income, permanent differences and statutory tax rates. For the three and ~~six~~nine months ended ~~June~~September 30, 2017, the effective income tax rates were 37% and 36%, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2016, the effective income tax rates were 3731%. ~~The change in effective income tax rate was mainly due to higher state income taxes, higher tax exempt interest income~~ and ~~other favorable adjustments~~35%.

The Company and its subsidiaries are subject to U.S. federal income tax, as well as income tax of the states of Florida, New York, South Carolina, North Carolina, and Tennessee. The net deferred tax assets as of ~~June~~September 30, 2017 and December 31, 2016 were $~~134~~113.51 million and $150.3 million, respectively. A valuation allowance related to deferred tax assets is required when it is considered more likely than not that all or part of the benefit related to such assets will not be realized. In assessing the need for a valuation allowance, the Company considered both positive and negative evidence in concluding that no valuation allowance was necessary at ~~June~~September 30, 2017 and December 31, 2016.

At ~~June~~September 30, 2017 and December 31, 2016, the Company had $~~464~~480.67 million and $478.6 million of gross federal net operating loss carry-forwards, respectively, which begin to expire after 2028 and are subject to annual cumulative limitation of $2728.85 million for tax year 2017.

At ~~June~~September 30, 2017 and December 31, 2016 the company had $~~506~~499.53 million and $507.0 million of gross state net operating loss carry-forwards expected to be utilized, respectively.

At ~~June~~September 30, 2017 and December 31, 2016, the Company had no unrecognized tax benefits and no material amounts recorded for uncertain tax positions.

13. Fair Value

FASB guidance on fair value measurements defines fair value, establishes a framework for measuring fair value, and requires fair value disclosures for certain assets and liabilities measured at fair value on a recurring and non-recurring basis.

This guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability.

This guidance establishes a fair value hierarchy for disclosure of fair value measurements to maximize the use of observable inputs, that is, inputs that reflect the assumptions market participants would use in pricing an asset or liability based on market data obtained from sources independent of the reporting entity. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.


Level 1:	Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity can access as of the measurement date.

Filing Compare · Capital Bank Financial Corp.