First NBC Bank Holding Co - FORM 10-Q

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EX-32.1 - EXHIBIT 32.1 - First NBC Bank Holding Co	nbcb-2015630xexh321.htm
EX-31.2 - EXHIBIT 31.2 - First NBC Bank Holding Co	nbcb-2015630xexh312.htm
EX-32.2 - EXHIBIT 32.2 - First NBC Bank Holding Co	nbcb-2015630xexh322.htm
XML - IDEA: XBRL DOCUMENT - First NBC Bank Holding Co	R9999.htm
EX-31.1 - EXHIBIT 31.1 - First NBC Bank Holding Co	nbcb-2015630xexh311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

FORM 10–Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

Commission file number:

001-35915




FIRST NBC BANK HOLDING COMPANY
	(Exact name of registrant as specified in its charter)



	Louisiana		14-1985604
	(State of incorporation or organization)		(I.R.S. Employer Identification Number)

	210 Baronne Street, New Orleans, Louisiana		70112
	(Address of principal executive offices)		(Zip code)

	Registrant’s telephone number, including area code: (504) 566-8000

Indicate by check mark whether the registrant: (i) 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 (ii) has been subject to such filing requirements for the past 90 days. Yes x No ¨

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

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



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

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

As of July 31, 2015, the registrant had 19,021,969 shares of common stock, par value $1.00 per share, outstanding.

FIRST NBC BANK HOLDING COMPANY

CONSOLIDATED BALANCE SHEETS



(In thousands)	(Unaudited) June 30, 2015			December 31, 2014
Assets
Cash and due from banks	$	55,926		$	32,484
Short-term investments	92,097			18,404
Investment in short-term receivables	250,575			237,135
Investment securities available for sale, at fair value	245,860			247,647
Investment securities held to maturity	84,804			89,076
Mortgage loans held for sale	4,945			1,622
Loans, net of allowance for loan losses of $50,351 and $42,336, respectively	2,882,962			2,731,928
Bank premises and equipment, net	57,065			52,881
Accrued interest receivable	12,655			11,451
Goodwill and other intangible assets	7,827			7,831
Investment in real estate properties	51,531			12,771
Investment in tax credit entities	174,265			140,913
Cash surrender value of bank-owned life insurance	47,994			47,289
Other real estate	4,459			5,549
Deferred tax asset	111,643			83,461
Other assets	41,895			30,175
Total assets	$	4,126,503		$	3,750,617
Liabilities and equity
Deposits:
Noninterest-bearing	$	390,001		$	364,534
Interest-bearing	3,006,744			2,756,316
Total deposits	3,396,745			3,120,850
Repurchase agreements	117,840			117,991
Long-term borrowings	103,392			40,000
Accrued interest payable	8,098			6,650
Other liabilities	30,508			28,752
Total liabilities	3,656,583			3,314,243
Shareholders’ equity:
Preferred stock
Convertible preferred stock Series C – no par value; 1,680,219 shares authorized; No shares outstanding at June 30, 2015 and 364,983 shares issued and outstanding at December 31, 2014	—			4,471
Preferred stock Series D – no par value; 37,935 shares authorized, issued and outstanding at June 30, 2015 and December 31, 2014	37,935			37,935
Common stock- par value $1 per share; 100,000,000 shares authorized; 19,021,721 shares issued and outstanding at June 30, 2015 and 18,576,488 shares issued and outstanding at December 31, 2014	19,022			18,576
Additional paid-in capital	241,437			239,528
Accumulated earnings	188,669			155,599
Accumulated other comprehensive loss, net	(17,145		)	(19,737		)
Total shareholders’ equity	469,918			436,372
Noncontrolling interest	2			2
Total equity	469,920			436,374
Total liabilities and equity	$	4,126,503		$	3,750,617

See accompanying notes.

FIRST NBC BANK HOLDING COMPANY

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(In thousands)	2015			2014			2015			2014
Interest income:
Loans, including fees	$	34,685		$	33,397		$	69,933		$	64,496
Investment securities	2,215			2,378			4,319			4,730
Investment in short-term receivables	1,514			1,391			3,204			3,086
Short-term investments	94			27			158			42
	38,508			37,193			77,614			72,354
Interest expense:
Deposits	10,662			9,994			20,906			19,653
Borrowings and securities sold under repurchase agreements	1,740			649			2,980			1,303
	12,402			10,643			23,886			20,956
Net interest income	26,106			26,550			53,728			51,398
Provision for loan losses	5,600			3,000			8,600			6,000
Net interest income after provision for loan losses	20,506			23,550			45,128			45,398
Noninterest income:
Service charges on deposit accounts	585			498			1,144			1,057
Investment securities gain (loss), net	—			56			(50		)	56
Gain (loss) on assets sold, net	(32		)	64			11			139
Gain on sale of loans, net	101			70			116			70
Cash surrender value income on bank-owned life insurance	353			237			705			396
Income from sales of state tax credits	668			728			1,187			1,761
Community Development Entity fees earned	133			196			256			875
ATM fee income	523			505			1,024			978
Other	1,226			579			1,674			960
	3,557			2,933			6,067			6,292
Noninterest expense:
Salaries and employee benefits	7,689			5,942			14,596			11,339
Occupancy and equipment expenses	3,009			2,684			5,937			5,268
Professional fees	1,701			1,511			3,842			3,410
Taxes, licenses and FDIC assessments	1,693			1,343			2,932			2,542
Impairment of investment in tax credit entities	2,647			3,377			7,499			6,204
Write-down of foreclosed assets	42			20			100			186
Data processing	1,581			1,141			3,003			2,239
Advertising and marketing	673			556			1,691			1,134
Other	4,064			1,994			6,003			3,583
	23,099			18,568			45,603			35,905
Income before income taxes	964			7,915			5,592			15,785
Income tax benefit	(16,228		)	(4,784		)	(27,668		)	(9,742		)
Net income attributable to Company	17,192			12,699			33,260			25,527
Less preferred stock dividends	(95		)	(95		)	(190		)	(190		)
Less earnings allocated to participating securities	(300		)	(243		)	(608		)	(489		)
Income available to common shareholders	$	16,797		$	12,361		$	32,462		$	24,848
Earnings per common share – basic	$	0.90		$	0.67		$	1.74		$	1.34
Earnings per common share – diluted	$	0.88		$	0.65		$	1.70		$	1.31

See accompanying notes.

FIRST NBC BANK HOLDING COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(In thousands)	2015			2014			2015			2014
Net income	$	17,192		$	12,699		$	33,260		$	25,527
Other comprehensive income (loss):
Fair value of derivative instruments designated as cash flow hedges:
Change in fair value of derivative instruments designated as cash flow hedges during the period, before tax	6,463			(3,661		)	2,690			(8,767		)
Less: reclassification adjustment for losses included in net income from terminated cash flow hedge	273			—			539			—
Unrealized gains (losses) on cash flow hedges, before tax	6,736			(3,661		)	3,229			(8,767		)

Unrealized gains (losses) on investment securities:
Unrealized gains (losses) on investment securities arising during the period	(3,311		)	4,213			472			9,724
Reclassification adjustment for losses included in net income	—			(56		)	—			(56		)
Amortization of unrealized net gain on securities transferred from available for sale to held to maturity	160			165			288			269
Unrealized gains (losses) on investment securities, before tax	(3,151		)	4,322			760			9,937
Other comprehensive income, before taxes	3,585			661			3,989			1,170
Income tax expense related to items of other comprehensive income	1,256			232			1,397			410
Other comprehensive income, net of tax	2,329			429			2,592			760
Comprehensive income	$	19,521		$	13,128		$	35,852		$	26,287
Comprehensive income attributable to preferred shareholders	(95		)	(95		)	(190		)	(190		)
Comprehensive income attributable to participating securities	(300		)	(243		)	(608		)	(489		)
Comprehensive income available to common shareholders	$	19,126		$	12,790		$	35,054		$	25,608

See accompanying notes.

FIRST NBC BANK HOLDING COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)



(In thousands)	Preferred Stock Series C			Preferred Stock Series D		Common Stock		Additional Paid-In Capital			Accumulated Earnings			Accumulated Other Comprehensive Income			Total Shareholders’ Equity			Non-Controlling Interest		Total Equity
Balance, December 31, 2013(1)	$	4,471		$	37,935	$	18,514	$	237,063		$	100,389		$	(16,515	)	$	381,857		$	2	$	381,859
Net income	—			—		—		—			25,527			—			25,527			—		25,527
Other comprehensive income	—			—		—		—			—			760			760			—		760
Share-based compensation	—			—		—		625			—			—			625			—		625
Issuance of common stock:
Stock option and director plans	—			—		40		553			—			—			593			—		593
Net tax benefit related to stock option plans	—			—		—		—			—			—			—			—		—
Preferred stock dividends	—			—		—		—			(190		)	—			(190		)	—		(190		)
Balance, June 30, 2014	$	4,471		$	37,935	$	18,554	$	238,241		$	125,726		$	(15,755	)	$	409,172		$	2	$	409,174

Balance, December 31, 2014(1)	$	4,471		$	37,935	$	18,576	$	239,528		$	155,599		$	(19,737	)	$	436,372		$	2	$	436,374
Net income	—			—		—		—			33,260			—			33,260			—		33,260
Other comprehensive income	—			—		—		—			—			2,592			2,592			—		2,592
Share-based compensation	—			—		—		298			—			—			298			—		298
Restricted stock awards compensation	—			—		—		(1,557		)	—			—			(1,557		)	—		(1,557		)
Issuance of common stock:
Stock option and director plans	—			—		26		388			—			—			414			—		414
Restricted stock awards, net	—			—		55		1,763			—			—			1,818			—		1,818
Net tax benefit related to stock option plans	—			—		—		121			—			—			121			—		121
Purchase of common shares by ESOP	—			—		—		(3,114		)	—			—			(3,114		)	—		(3,114		)
Allocation of ESOP shares	—			—		—		(96		)	—			—			(96		)	—		(96		)
Preferred stock conversion	(4,471		)	—		365		4,106			—			—			—			—		—
Preferred stock dividends	—			—		—		—			(190		)	—			(190		)	—		(190		)
Balance, June 30, 2015	$	—		$	37,935	$	19,022	$	241,437		$	188,669		$	(17,145	)	$	469,918		$	2	$	469,920


(1)	Balances as of December 31, 2013 and December 31, 2014 are audited.

See accompanying notes.

FIRST NBC BANK HOLDING COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



	For the Six Months Ended June 30,
(In thousands)	2015			2014
Operating activities
Net income	$	33,260		$	25,527
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred tax benefit	(29,579		)	(9,742		)
Impairment of tax credit investments	7,499			6,204
Accretion of market value adjustments related to acquisition	(85		)	(35		)
Net discount accretion or premium amortization	173			25
Loss (gain) on sale of investment securities	50			(56		)
Gain on assets sold	(11		)	(139		)
Write-down of foreclosed assets	100			186
Proceeds from sale of mortgage loans held for sale	19,674			34,919
Mortgage loans originated and held for sale	(22,997		)	(33,606		)
Gain on sale of loans	(116		)	(70		)
Derivative losses on terminated interest rate hedge	539			—
Provision for loan losses	8,600			6,000
Depreciation and amortization	1,667			1,751
Share-based and other compensation expense	559			625
Increase in cash surrender value of bank-owned life insurance	(705		)	(396		)
Changes in operating assets and liabilities:
Change in other assets	(10,800		)	(5,553		)
Change in accrued interest receivable	(1,204		)	(697		)
Change in accrued interest payable	1,448			164
Change in other liabilities	2,996			(2,752		)
Net cash provided by operating activities	11,068			22,355
Investing activities
Purchases of available for sale investment securities	—			(14,484		)
Proceeds from sales of available for sale investment securities	—			4,700
Proceeds from maturities, prepayments, and calls of available for sale investment securities	11,770			16,488
Proceeds from sales of held to maturity securities	—			2,650
Proceeds from maturities, prepayments, and calls of held to maturity securities	4,376			1,171
Net change in investments in short-term receivables	(13,440		)	(5,643		)
Reimbursement of investment in tax credit entities	—			8,000
Purchases of investments in tax credit entities	(6,560		)	(8,460		)
Loans originated, net of repayments	(166,599		)	(223,456		)
Cash received in acquisition	31,517			—
Purchases of bank premises and equipment	(2,727		)	(2,751		)
Proceeds from disposition of real estate owned	1,579			2,283
Purchases of investment in real estate properties	(37,613		)
Purchases of bank-owned life insurance	—			(20,000		)
Net cash used in investing activities	(177,697		)	(239,502		)
Financing activities
Net change in repurchase agreements	(151		)	30,436
Proceeds from borrowings	60,000			—
Proceeds from ESOP loan	3,392			—
Repayment of borrowings	—			(8,425		)
Purchase of common stock by ESOP	(3,210		)	—
Net increase in deposits	203,509			226,541
Proceeds from issuance of common stock	414			593
Dividends paid	(190		)	(190		)
Net cash provided by financing activities	263,764			248,955
Net change in cash, due from banks, and short-term investments	97,135			31,808
Cash, due from banks, and short-term investments at beginning of period	50,888			31,642
Cash, due from banks, and short-term investments at end of period	$	148,023		$	63,450
Supplemental Information for Non-Cash Investing Activities
Consolidation of Low-Income Housing Tax Credit entity	$	(28,879	)	$	—

See accompanying notes.

FIRST NBC BANK HOLDING COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited consolidated financial statements of First NBC Bank Holding Company (Company) have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include information or footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three-month and six-month periods ended June 30, 2015 are not necessarily indicative of the results that may be expected for the entire fiscal year. These statements should be read in conjunction with the Company’s audited financial statements, including the notes thereto, which were filed with the Securities and Exchange Commission as part of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

In preparing the financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Nature of Operations

The Company is a bank holding company that offers a broad range of financial services through First NBC Bank, a Louisiana state non-member bank, to businesses, institutions, and individuals in southeastern Louisiana, the Mississippi Gulf Coast, and the Florida panhandle. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States and to prevailing practices within the banking industry.

Correction of Immaterial Errors

The Company identified errors in the accounting for its investments in certain tax credit entities during its quarterly financial statement close process. The errors were corrected in the Company’s consolidated financial statements as of June 30, 2015 and for the three months then ended. The errors did not have a material impact to the consolidated financial statements for any prior periods as previously reported and were not material to the anticipated annual results for the year ended December 31, 2015.

The Company has historically accounted for the investments in tax credits entities using an amortized cost method over the related tax credit compliance period. The Company determined that based on its equity ownership structure in certain of these investments the equity method of accounting should have been applied. Under the equity method of accounting, the Company records its share of earnings (losses) as a component of noninterest expense and evaluates its investments in tax credit entities for impairment at the end of each reporting period. During the review of certain of its investments in tax credit entities, the Company also identified a single investment in a tax credit entity, determined to be a variable interest entity (VIE) that was not consolidated as required. The Company was deemed to have a controlling financial interest in the VIE because it had both the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE.

The Company utilized the guidance provided in Accounting Standards Codification (ASC) Topic 250 as well as SEC Staff Accounting Bulletins (SAB) No. 99 and No. 108. The guidance required the Company to evaluate and assess the materiality of these errors both qualitatively and quantitatively, and the Company concluded that these errors did not materially misstate previously issued financial statements for any prior periods. As a result, amendment of the Company’s previously filed Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K are not required. Such changes are reflected in the financial results for the three and six month periods ended June 30, 2015 and are summarized as follows:



	For the Three Months Ended June 30, 2015			For the Three Months Ended June 30, 2015			For the Six Months Ended June 30, 2015			For the Six Months Ended June 30, 2015
(In thousands)	Pre-Tax			Net of tax			Pre-Tax			Net of tax

Low-Income Housing (1)	$	(253	)	$	(164	)	$	(353	)	$	(229	)
Federal Historic Rehabilitation (1)	177			115			358			232
Total investment in tax credit entities impairment (1)	(76		)	(49		)	5			3

Low-Income Housing investment VIE consolidation loss (2)	(1,029		)	(669		)	(1,181		)	(768		)

Net loss impact of error corrections	$	(1,105	)	$	(718	)	$	(1,176	)	$	(765	)

Earnings Per Share (EPS)-Basic (3)	$	(0.06	)	$	(0.04	)	$	(0.06	)	$	(0.04	)

(1) The amounts above represent the cumulative net impact of the reversal of previously recorded amortization and equity income or loss and impairment that should have been recorded on the Company's consolidated statement of income and balance sheets as of and for the three and six month periods ended June 30, 2015.

(2) See Note 7 for the impact on the Company's consolidated balance sheets as of June 30, 2015.

(3) The amounts above represent the net impact of the cumulative errors in accounting for certain of the Company's investments in tax credit entities on the calculation of EPS for the three and six month periods ended June 30, 2015.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and First NBC Bank, and First NBC Bank’s wholly owned subsidiaries, which include First NBC Community Development, LLC (FNBC CDC) and First NBC Community Development Fund, LLC (FNBC CDE) (collectively referred to as the Bank), and any variable interest entities (VIE) of which the Company is primary beneficiary. Substantially all of the VIEs for which the Company is the primary beneficiary relate to tax credit investments. FNBC CDC is a Community Development Corporation formed to construct, purchase, and renovate affordable residential real estate properties in the New Orleans area. FNBC CDE is a Community Development Entity (CDE) formed to apply for and receive allocations of Federal New Markets Tax Credits (NMTC).

Investments in Tax Credit Entities

As part of its Community Reinvestment Act responsibilities and due to their favorable economics, the Company invests in tax credit-motivated projects. These projects are directed at tax credits issued under Low-Income Housing, Federal Historic Rehabilitation, and Federal New Markets Tax Credits. The Company generates its returns on tax credit motivated projects through the receipt of federal, and if applicable, state tax credits as well as equity returns. The federal tax credits are recorded as an offset to the income tax provision in the year that they are earned under federal income tax law – over 10 to 15 years, beginning in the year in which rental activity commences for Low-Income Housing credits, in the year of the issuance of the certificate of occupancy and the property is placed into service for Federal Historic Rehabilitation credits, and over 7 years for Federal NMTC upon the investment of funds into the CDE. These credits, if not used in the tax return for the year of origination, can be carried forward for 20 years.

The Company invests in Low-Income Housing credits, which the Company invests in a tax credit entity, usually a limited liability company, which owns the real estate. The Company receives a 99.99% nonvoting interest in the entity that must be retained during the compliance period for the credits (15 years). Control of the tax credit entity rests in the .01% interest general partner, who has the power and authority to make decisions that impact economic performance of the project and is required to oversee and manage the project. The Company accounts for its investment in Low-Income Housing credits utilizing the equity method of accounting and evaluates its investment at the end of each reporting period for impairment and any residual returns are expected to be minor.

For Federal Historic Rehabilitation credits, the Company invests in a tax credit entity, usually a limited liability company, which owns the real estate. The Company receives a 99% interest that must be retained during the compliance period for the credits (5 years). In most cases, the Company’s interest in the entity is generally reduced from a 99% interest to a 5% to 25%

interest at the end of the compliance period. Control of the tax credit entity rests in the 1% interest general partner, who has the power and authority to make decisions that impact economic performance of the project and is required to oversee and manage the project. The Company accounts for its investment in Federal Historic Rehabilitation credits utilizing the equity method of accounting and evaluates its investment at the end of each reporting period for impairment.

For Federal NMTC, a different structure is required by federal tax law. In order to distribute Federal NMTC, the federal government allocates such credits to CDEs. The Company invests in both CDEs formed by unaffiliated parties and in CDEs formed by the Company. Projects must be commercial or real estate operations and are qualified by their location in low- income areas or by their employment of, or service to, low-income citizens. A CDE, in most cases, creates a special-purpose subsidiary for each project through which the credits are allocated and through which the proceeds from the tax credit investor and a leverage lender, if applicable, flow through to the project, which in turn generate the credit. The credits are calculated at 39% of the total CDE allocation to the project at the rate of 5% for the first three years and 6% for the next four years. Federal tax law requires special terms benefiting the qualified project, which can include below-market interest rates. The Company evaluates its investment for impairment under the equity method of accounting at the end of each reporting period at the time the tax credits are earned on the project over the seven-year compliance period and any residual returns are expected to be minor. When the Company also has a loan to the project (commonly called a leveraged loan), it is reported as a loan in the consolidated balance sheet, as the Company has credit exposure to the project and the loan is repaid at the end of the compliance period (in general, the debt has no principal payments during the compliance period but the Company may require the project to fund a sinking fund over the compliance period to achieve the same risk reduction effect as if principal is being amortized).

When the Company is the tax credit investor in a CDE formed by an unaffiliated party, it has no control of the applicable CDE or the CDE’s special-purpose subsidiary. When a project is funded through FNBC CDE, the Company consolidates its CDE and the specifically formed special-purpose entities since it maintains control over these entities. As part of the activities of FNBC CDE, the Company makes investments in the CDE for purposes of providing equity to the projects sponsored by the FNBC CDE.

The Company has the risk of credit recapture if the project fails during the compliance period for Low-Income Housing and Federal Historic Rehabilitation transactions. For Federal NMTC transactions, the risk of credit recapture exists if investment requirements are not maintained during the compliance period. Such events, although rare, are accounted for when they occur and no such events have occurred to date.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are susceptible to a significant change in the near term are the allowance for loan losses, income tax provision, fair value adjustments, and share-based compensation.

Concentration of Credit Risk

The Company’s loan portfolio consists of the various types of loans described in Note 5. Real estate or other assets secure most loans. The majority of these loans have been made to individuals and businesses in the Company’s market area of southeastern Louisiana, southern Mississippi, and the Florida panhandle, which are dependent on the area economy for their livelihoods and servicing of their loan obligations. The Company does not have any significant concentrations to any one industry or customer.

The Company maintains deposits in other financial institutions that may, from time to time, exceed the federally insured deposit limits.

Reclassifications

Certain reclassifications have been made to prior period balances to conform to the current period presentation.

Recent Accounting Pronouncements

ASU No. 2014-09

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 205): An Amendment of the FASB Accounting Standards Codification, which clarifies the principles for recognizing revenue from contracts with customers. The new accounting guidance, which does not apply to financial instruments, is effective on a retrospective basis for annual reporting periods beginning after December 15, 2017, with early adoption permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company does not expect the new guidance to have a material impact on the Company's financial condition or results of operations.

ASU No. 2014-12

In June 2014, the FASB issued ASU No. 2014-12 Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period, which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12 is intended to resolve the diverse accounting treatments of these types of awards in practice and is effective for annual and interim periods beginning after December 15, 2015. The Company does not expect the new guidance to have a material impact on the Company's financial condition or results of operations.

ASU No. 2014-13

In August 2014, the FASB issued ASU No. 2014-13, Consolidation (Topic 810): Measuring the Financial Assets and Financial Liabilities of a Consolidated Collateralized Financing Entity, which will allow an alternative fair value measurement approach for consolidated collateralized financing entities (CFEs) to eliminate a practice issue that results in measuring the fair value of a CFE’s financial assets at a different amount from the fair value of its financial liabilities even when the financial liabilities have recourse to only the financial assets. The approach would permit the parent company of a consolidated CFE to measure the CFE’s financial assets and financial liabilities based on the more observable of the fair value of the financial assets and the fair value of the financial liabilities. The new accounting guidance is for the annual period ending after December 15, 2015, and for annual periods and interim periods thereafter, with early application permitted as of the beginning of an annual period. The Company does not expect the new guidance to have a material impact on the Company’s financial condition or results of operations.

ASU No. 2014-15

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which will require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards in connection with preparing financial statements for each annual and interim reporting period. The new accounting guidance is for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter, with early application permitted. The Company does not expect the new guidance to have a material impact on the Company's financial condition or results of operations.

ASU No. 2015-02

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which eliminates the deferral of FAS 167 and makes changes to both the variable interest model and the voting model. The new accounting guidance is for the annual period beginning after December 15, 2015, and for annual periods and interim periods thereafter, with early application permitted. The Company does not expect the new guidance to have a material impact on the Company's financial condition or results of operations.

ASU No. 2015-03

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The new accounting guidance is for the annual period beginning after December 15, 2015, and for annual periods and interim periods thereafter, with early application permitted. The Company does not expect the new guidance to have a material impact on the Company's financial condition or results of operations.

ASU No. 2015-05

In April 2015, the FASB issued ASU No. 2015-05, Intangibles-Goodwill and Other Internal-Use Software (Subtopic 350-40) Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, which provides guidance to clarify a customer’s accounting for fees paid in a cloud computing arrangement. The new accounting guidance is for the annual period beginning after December 15, 2015, and for annual periods and interim periods thereafter, with early application permitted. The Company does not expect the new guidance to have a material impact on the Company's financial condition or results of operations.

2. Acquisitions

On January 16, 2015, the Company acquired certain assets and assumed certain liabilities from the Federal Deposit Insurance Corporation ("FDIC"), as receiver for First National Bank of Crestview, a full-service commercial bank headquartered in Crestview, Florida, which was closed and placed into receivership. Under the terms of the agreement, the Company agreed to assume all of the deposit liabilities, and acquire approximately $62.3 million of assets, of the failed bank. The acquired assets included the failed bank's performing loans, substantially all of its investment securities portfolio, and its three banking facilities, with the FDIC retaining the remaining assets. The transaction did not include a loss-share agreement with the FDIC. The Company received an initial settlement amount from the FDIC of $10.1 million.

The acquisition was accounted for under the purchase method of accounting in accordance with ASC Topic 805. Both the purchased assets and liabilities were recorded at the acquisition date preliminary fair values. Identifiable intangible assets, including core deposit intangible assets will be recorded at fair value. The net cash received in the acquisition was included in the investing activities on the Company's consolidated statement of cash flows.

In accordance with ASC Topic 805, estimated fair values are subject to change up to one year after the acquisition date. This allows for adjustments to the initial purchase entries if additional information relative to closing date fair values becomes available. Material adjustments to acquisition date estimated fair values would be recorded in the period in which the acquisition occurred, and as a result, previously reported results are subject to change. Information regarding the amounts recorded in the acquisition may be adjusted as the Company refines its estimates of the fair value of loans acquired, core deposit intangible asset, and the deferred tax assets or liabilities created from the acquisition. Determining the fair value of assets and liabilities, particularly illiquid assets and liabilities, is a complicated process involving significant judgment regarding estimates and assumptions used to calculate estimated fair value. Fair value adjustments based on updated estimates could materially affect the goodwill, if any, recorded on the acquisition. The Company may incur losses on the acquired loans that are materially different from losses the Company originally projected.

The acquired assets and liabilities, as well as the adjustments to record the assets and liabilities at their estimated fair values, are presented in the following table:



(In thousands)	As Acquired		Preliminary Fair Value Adjustments		As recorded by First NBC Bank
Assets
Cash and due from banks	$	1,511	$	—	$	1,511
Short-term investments	19,971		—		19,971
Investment securities-available for sale	9,559		—		9,559
Loans(1)	27,647		—		27,647
Bank premises	3,120		—		3,120
Core deposit intangible(2)	—		188		188
Other assets	455		—		455
Total Assets	$	62,263	$	188	$	62,451

Liabilities
Deposits:
Non-interest bearing	$	22,680	$	—	$	22,680
Interest bearing	49,584		—		49,584
Total deposits	72,264		—		72,264
Other liabilities	34		—		34
Total Liabilities	$	72,298	$	—	$	72,298

(1) The Company is still evaluating the adjustment of the book value of loans acquired to their estimated fair value based on current interest rates and expected cash flows and, as such, has not recorded a fair value adjustment as of June 30, 2015.

(2) The amount represents the fair value of the core deposit intangible asset created in the acquisition.

3. Earnings Per Share

The following table sets forth the computation of basic net income per common share and diluted net income per common share:



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In thousands, except per share data)	2015		2014		2015		2014
Basic: Income available to common shareholders	$	16,797	$	12,361	$	32,462	$	24,848
Weighted-average common shares outstanding	18,620		18,527		18,611		18,518
Basic earnings per share	$	0.90	$	0.67	$	1.74	$	1.34
Diluted: Income available to common shareholders	$	16,797	$	12,361	$	32,462	$	24,848
Weighted-average common shares outstanding	18,620		18,527		18,611		18,518
Effect of dilutive securities:
Stock options outstanding	418		385		401		391
Restricted shares outstanding	3		—		2		—
Warrants	124		116		121		118
Weighted-average common shares outstanding – assuming dilution	19,165		19,028		19,135		19,027
Diluted earnings per share	$	0.88	$	0.65	$	1.70	$	1.31

4. Investment Securities

The amortized cost and market values of investment securities, with gross unrealized gains and losses, as of June 30, 2015 and December 31, 2014, were as follows (in thousands):



	June 30, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses						Estimated Market Value
	Amortized Cost		Gross Unrealized Gains		Less Than One Year			Greater Than One Year			Estimated Market Value
Available for sale:
U.S. government agency securities	$	158,002	$	723	$	(1,177	)	$	(2,225	)	$	155,323
U.S. Treasury securities	13,017		—		—			(314		)	12,703
Municipal securities	12,145		152		(63		)	—			12,234
Mortgage-backed securities	58,315		539		(1,293		)	(4		)	57,557
Corporate bonds	8,184		—		(164		)	—			8,020
Other equity securities	23		—		—			—			23
	$	249,686	$	1,414	$	(2,697	)	$	(2,543	)	$	245,860
Held to maturity:
Municipal securities	$	39,028	$	1,762	$	(17	)	$	—		$	40,773
Mortgage-backed securities	45,776		206		(2,382		)	(198		)	43,402
	$	84,804	$	1,968	$	(2,399	)	$	(198	)	$	84,175



	December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses						Estimated Market Value
	Amortized Cost		Gross Unrealized Gains		Less Than One Year			Greater Than One Year			Estimated Market Value
Available for sale:
U.S. government agency securities	$	161,461	$	891	$	—		$	(4,825	)	$	157,527
U.S. Treasury securities	13,019		—		—			(409		)	12,610
Municipal securities	12,175		107		(36		)	—			12,246
Mortgage-backed securities	57,025		635		(137		)	(436		)	57,087
Corporate bonds	8,263		—		—			(86		)	8,177
	$	251,943	$	1,633	$	(173	)	$	(5,756	)	$	247,647
Held to maturity:
Municipal securities	$	41,255	$	2,182	$	(62	)	$	—		$	43,375
Mortgage-backed securities	47,821		1,098		(208		)	(1,130		)	47,581
	$	89,076	$	3,280	$	(270	)	$	(1,130	)	$	90,956

During 2013, the Company transferred securities with a fair value of $95.4 million from available for sale to held to maturity. Management determined it had both the positive intent and ability to hold these securities until maturity. The reclassified securities consisted of municipal and mortgage-backed securities and were transferred due to movements in interest rates. The securities were reclassified at fair value at the time of transfer and represented a non-cash transaction. Accumulated other comprehensive income (loss) included pre-tax unrealized losses of $5.9 million on these securities at the date of transfer. As of June 30, 2015, $4.9 million of pre-tax unrealized losses on these securities were included in accumulated other comprehensive income. These unrealized losses and offsetting other comprehensive income components are being amortized into net interest income over the remaining life of the related securities as a yield adjustment, resulting in no impact on future net income.

As of June 30, 2015 and December 31, 2014, the Company had 53 and 38 securities, respectively, that were in a loss position. The unrealized losses for each of the 53 securities relate to market interest rate changes. The Company has considered the current market for the securities in a loss position, as well as the severity and duration of the impairments, and expects that the value will recover. As of June 30, 2015, management does not intend to sell these investment securities until the fair value exceeds amortized cost and it is more likely than not the Company will not be required to sell debt securities before the anticipated recovery of the amortized cost basis of the security; thus, the impairment is determined not to be other-than-temporary.

The amortized cost and estimated market values by contractual maturity of investment securities as of June 30, 2015 and December 31, 2014 are shown in the following table (in thousands). Mortgage-backed securities have been allocated based on expected maturities. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	June 30, 2015						December 31, 2014
	Weighted Average Yield		Amortized Cost		Estimated Market Value		Weighted Average Yield		Amortized Cost		Estimated Market Value
Available for sale:
Due in one year or less	2.00	%	$	15,829	$	16,082	1.78	%	$	571	$	573
Due after one year through five years	2.27		77,924		77,609		2.64		51,037		51,916
Due after five years through ten years	1.99		133,808		130,873		2.02		176,631		172,012
Due after ten years	3.36		22,125		21,296		3.34		23,704		23,146
Total securities	2.20	%	$	249,686	$	245,860	2.27	%	$	251,943	$	247,647
Held to maturity:
Due in one year or less	15.02	%	$	1,553	$	1,481	3.88	%	$	2,045	$	2,003
Due after one year through five years	3.50		30,832		30,645		4.16		20,921		21,875
Due after five years through ten years	3.90		28,144		28,792		3.39		32,618		33,898
Due after ten years	3.46		24,275		23,257		3.30		33,492		33,180
Total securities	3.83	%	$	84,804	$	84,175	3.55	%	$	89,076	$	90,956

Securities with estimated market values of $283.1 million and $279.1 million at June 30, 2015 and December 31, 2014, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase, and long-term borrowings.

5. Loans

Major classifications of loans at June 30, 2015 and December 31, 2014 were as follows (in thousands):



	June 30, 2015			December 31, 2014
Commercial real estate loans:
Construction	$	378,825		$	316,492
Mortgage(1)	1,275,521			1,252,225
	1,654,346			1,568,717
Consumer real estate loans:
Construction	9,768			10,393
Mortgage	146,355			131,031
	156,123			141,424
Commercial and industrial loans	1,045,132			1,016,414
Loans to individuals, excluding real estate	20,061			18,316
Nonaccrual loans	33,176			21,228
Other loans	24,475			8,165
	2,933,313			2,774,264
Less allowance for loan losses	(50,351		)	(42,336		)
Loans, net	$	2,882,962		$	2,731,928


(1)	Included in commercial real estate loans, mortgage, are owner-occupied real estate loans of $430.9 million at June 30, 2015 and $419.3 million at December 31, 2014.

A summary of changes in the allowance for loan losses during the three and six months ended June 30, 2015 and June 30, 2014 is as follows (in thousands):



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2015			2014			2015			2014
Balance, beginning of period	$	45,195		$	34,465		$	42,336		$	32,143
Provision charged to operations	5,600			3,000			8,600			6,000
Charge-offs	(698		)	(72		)	(905		)	(769		)
Recoveries	254			10			320			29
Balance, end of period	$	50,351		$	37,403		$	50,351		$	37,403

The allowance for loan losses and recorded investment in loans, including loans acquired with deteriorated credit quality, as of the dates indicated are as follows (in thousands):



	June 30, 2015
	Construction			Commercial Real Estate			Consumer Real Estate			Commercial and Industrial			Consumer			Total
Allowance for loan losses:
Balance, beginning of period	$	4,030		$	14,965		$	3,316		$	19,814		$	211		$	42,336
Charge-offs	(12		)	(530		)	(41		)	(272		)	(50		)	(905		)
Recoveries	—			243			2			66			9			320
Provision	1,333			2,141			257			4,868			1			8,600
Balance, end of period	$	5,351		$	16,819		$	3,534		$	24,476		$	171		$	50,351
Ending balances:
Individually evaluated for impairment	$	1		$	4,235		$	167		$	6,603		$	—		$	11,006
Collectively evaluated for impairment	$	5,350		$	12,584		$	3,367		$	17,873		$	171		$	39,345
Loans receivable:
Ending balance-total	$	389,552		$	1,287,105		$	149,273		$	1,087,224		$	20,159		$	2,933,313
Ending balances:
Individually evaluated for impairment	$	897		$	13,347		$	3,195		$	17,660		$	70		$	35,169
Collectively evaluated for impairment	$	388,655		$	1,273,758		$	146,078		$	1,069,564		$	20,089		$	2,898,144



	June 30, 2014
	Construction			Commercial Real Estate			Consumer Real Estate			Commercial and Industrial			Consumer			Total
Allowance for loan losses:
Balance, beginning of period	$	2,790		$	13,780		$	2,656		$	12,677		$	240		$	32,143
Charge-offs	(4		)	(396		)	(43		)	(254		)	(72		)	(769		)
Recoveries	—			1			—			18			10			29
Provision	1,276			1,278			676			2,690			80			6,000
Balance, end of period	$	4,062		$	14,663		$	3,289		$	15,131		$	258		$	37,403
Ending balances:
Individually evaluated for impairment	$	33		$	1,772		$	964		$	2,400		$	1		$	5,170
Collectively evaluated for impairment	$	4,029		$	12,891		$	2,325		$	12,731		$	257		$	32,233
Loans receivable:
Ending balance-total	$	289,382		$	1,178,199		$	126,368		$	961,908		$	21,227		$	2,577,084
Ending balances:
Individually evaluated for impairment	$	303		$	12,809		$	2,567		$	4,438		$	3		$	20,120
Collectively evaluated for impairment	$	289,079		$	1,165,390		$	123,801		$	957,470		$	21,224		$	2,556,964

Credit quality indicators on the Company’s loan portfolio, including loans acquired with deteriorated credit quality, as of the dates indicated were as follows (in thousands):



	June 30, 2015
	Pass and Pass/Watch		Special Mention		Substandard		Doubtful		Total
Construction	$	375,034	$	1	$	14,517	$	—	$	389,552
Commercial real estate	1,230,472		11,828		44,805		—		1,287,105
Consumer real estate	143,079		58		6,136		—		149,273
Commercial and industrial	988,594		6,724		76,906		15,000		1,087,224
Consumer	19,999		7		153		—		20,159
Total loans	$	2,757,178	$	18,618	$	142,517	$	15,000	$	2,933,313



	December 31, 2014
	Pass and Pass/Watch		Special Mention		Substandard		Doubtful		Total
Construction	$	313,987	$	2	$	13,688	$	—	$	327,677
Commercial real estate	1,215,673		1,613		47,085		—		1,264,371
Consumer real estate	128,507		60		4,383		—		132,950
Commercial and industrial	1,005,829		—		24,800		—		1,030,629
Consumer	18,247		7		383		—		18,637
Total loans	$	2,682,243	$	1,682	$	90,339	$	—	$	2,774,264

The table above as of June 30, 2015 included $5.3 million of substandard loans which are loans acquired with deteriorated credit quality. As of December 31, 2014, included in the above table were $5.4 million of substandard loans and $1.6 million of special mention loans all of which are loans acquired with deteriorated credit quality.

Included in the table above as of June 30, 2015 was $15.0 million in commercial loans classified as doubtful which were included in the loans identified as individually evaluated for a specific allowance and determined that no allowance was necessary as of June 30, 2015.

The above classifications follow regulatory guidelines and can generally be described as follows:


•	Pass and pass/watch loans are of satisfactory quality.


•	Special mention loans have an existing weakness that could cause future impairment, including the deterioration of financial ratios, past due status, questionable management capabilities, and possible reduction in the collateral values.


•	Substandard loans have an existing specific and well-defined weakness that may include poor liquidity and deterioration of financial ratios. The loan may be past due and related deposit accounts experiencing overdrafts. Immediate corrective action is necessary.


•	Doubtful loans have specific weaknesses that are severe enough to make collection or liquidation in full improbable.

Age analysis of past due loans, including loans acquired with deteriorated credit quality, as of the dates indicated were as follows (in thousands):



	June 30, 2015
	Greater Than 30 and Fewer Than 90 Days Past Due		90 Days and Greater Past Due		Total Past Due		Current Loans		Total Loans
Real estate loans:
Construction	$	80	$	959	$	1,039	$	388,513	$	389,552
Commercial real estate	1,545		10,283		11,828		1,275,277		1,287,105
Consumer real estate	1,559		2,144		3,703		145,570		149,273
Total real estate loans	3,184		13,386		16,570		1,809,360		1,825,930
Other loans:
Commercial and industrial	507		4,863		5,370		1,081,854		1,087,224
Consumer	99		39		138		20,021		20,159
Total other loans	606		4,902		5,508		1,101,875		1,107,383
Total loans	$	3,790	$	18,288	$	22,078	$	2,911,235	$	2,933,313



	December 31, 2014
	Greater Than 30 and Fewer Than 90 Days Past Due		90 Days and Greater Past Due		Total Past Due		Current Loans		Total Loans
Real estate loans:
Construction	$	97	$	750	$	847	$	326,830	$	327,677
Commercial real estate	2,497		9,545		12,042		1,252,329		1,264,371
Consumer real estate	1,623		1,255		2,878		130,072		132,950
Total real estate loans	4,217		11,550		15,767		1,709,231		1,724,998
Other loans:
Commercial and industrial	159		4,426		4,585		1,026,044		1,030,629
Consumer	564		322		886		17,751		18,637
Total other loans	723		4,748		5,471		1,043,795		1,049,266
Total loans	$	4,940	$	16,298	$	21,238	$	2,753,026	$	2,774,264

The following is a summary of information pertaining to impaired loans excluding loans acquired with deteriorated credit quality, as of the periods indicated (in thousands):



	June 30, 2015
	Recorded Investment		Contractual Balance		Related Allowance
With no related allowance recorded:
Construction	$	854	$	854	$	—
Commercial real estate	1,882		1,933		—
Consumer real estate	2,611		2,658		—
Commercial and industrial	306		308		—
Consumer	70		70		—
Total	$	5,723	$	5,823	$	—
With an allowance recorded:
Construction	$	43	$	43	$	1
Commercial real estate	11,465		12,695		4,235
Consumer real estate	584		584		167
Commercial and industrial	17,354		17,406		6,603
Consumer	—		—		—
Total	$	29,446	$	30,728	$	11,006
Total impaired loans:
Construction	$	897	$	897	$	1
Commercial real estate	13,347		14,628		4,235
Consumer real estate	3,195		3,242		167
Commercial and industrial	17,660		17,714		6,603
Consumer	70		70		—
Total	$	35,169	$	36,551	$	11,006



	December 31, 2014
	Recorded Investment		Contractual Balance		Related Allowance
With no related allowance recorded:
Construction	$	927	$	927	$	—
Commercial real estate	7,175		7,453		—
Consumer real estate	2,085		2,097		—
Commercial and industrial	436		498		—
Consumer	256		256		—
Total	$	10,879	$	11,231	$	—
With an allowance recorded:
Construction	$	—	$	—	$	—
Commercial real estate	5,955		6,235		3,138
Consumer real estate	—		—		—
Commercial and industrial	14,721		14,774		5,889
Consumer	3		3		1
Total	$	20,679	$	21,012	$	9,028
Total impaired loans:
Construction	$	927	$	927	$	—
Commercial real estate	13,130		13,688		3,138
Consumer real estate	2,085		2,097		—
Commercial and industrial	15,157		15,272		5,889
Consumer	259		259		1
Total	$	31,558	$	32,243	$	9,028



	For the Three Months Ended
	June 30, 2015				June 30, 2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Construction	$	883	$	18	$	48	$	1
Commercial real estate	3,402		14		5,716		35
Consumer real estate	2,364		—		1,981		—
Commercial and industrial	7,514		—		782		5
Consumer	99		—		—		—
Total	$	14,262	$	32	$	8,527	$	41
With an allowance recorded:
Construction	$	22	$	—	$	311	$	3
Commercial real estate	10,143		60		6,408		—
Consumer real estate	318		—		652		3
Commercial and industrial	16,322		—		3,536		—
Consumer	1		—		3		—
Total	$	26,806	$	60	$	10,910	$	6
Total impaired loans:
Construction	$	905	$	18	$	359	$	4
Commercial real estate	13,545		74		12,124		35
Consumer real estate	2,682		—		2,633		3
Commercial and industrial	23,836		—		4,318		5
Consumer	100		—		3		—
Total	$	41,068	$	92	$	19,437	$	47



	For the Six Months Ended
	June 30, 2015				June 30, 2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Construction	$	891	$	18	$	24	$	1
Commercial real estate	4,529		14		5,549		116
Consumer real estate	2,348		3		1,977		—
Commercial and industrial	371		—		792		33
Consumer	163		—		—		—
Total	$	8,302	$	35	$	8,342	$	150
With an allowance recorded:
Construction	$	21	$	—	$	283	$	11
Commercial real estate	8,711		60		5,764		3
Consumer real estate	292		—		802		10
Commercial and industrial	16,038		4		3,430		—
Consumer	2		—		—		—
Total	$	25,064	$	64	$	10,279	$	24
Total impaired loans:
Construction	$	912	$	18	$	307	$	12
Commercial real estate	13,240		74		11,313		119
Consumer real estate	2,640		3		2,779		10
Commercial and industrial	16,409		4		4,222		33
Consumer	165		—		—		—
Total	$	33,366	$	99	$	18,621	$	174

Also presented in the above table is the average recorded investment of the impaired loans and the related amount of interest recognized during the time within the period that the impaired loans were impaired. When the ultimate collectability of the total

principal of an impaired loan is in doubt and the loan is on nonaccrual status, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the total principal of an impaired loan is not in doubt and the loan is in nonaccrual status, contractual interest is credited to interest income when received under the cash basis method. In the table above, all interest recognized represents cash collected. The average balances are calculated based on the month-end balances of the financing receivables of the period reported.

As of June 30, 2015, there were no loans that were past due 90 days or more that were still accruing interest, and $28 thousand in cash secured tuition loans that were past due 90 days or more still accruing interest as of December 31, 2014.

The following is a summary of information pertaining to nonaccrual loans as of the periods indicated (in thousands):



	June 30, 2015		December 31, 2014
Nonaccrual loans:
Construction	$	959	$	792
Commercial real estate	11,584		12,146
Consumer real estate	2,918		1,919
Commercial and industrial	17,617		6,051
Consumer	98		320
Total	$	33,176	$	21,228

As of June 30, 2015 and December 31, 2014, the average recorded investment in nonaccrual loans was $23.0 million and $19.6 million, respectively. The amount of interest income that would have been recognized on nonaccrual loans based on contractual terms was $0.6 million and $1.0 million at June 30, 2015 and December 31, 2014, respectively. As of June 30, 2015, the Company was not committed to lend additional funds to any customer whose loan was classified as impaired.

ASC 310-30 Loans

During 2011, the Company acquired certain loans from the Federal Deposit Insurance Corporation, as receiver for Central Progressive Bank, that are subject to ASC 310-30. ASC 310-30 provides recognition, measurement, and disclosure requirements for acquired loans that have evidence of deterioration of credit quality since origination for which it is probable, at acquisition, that the Company will be unable to collect all contractual amounts owed. The Company’s allowance for loan losses for all acquired loans subject to ASC 310-30 would reflect only those losses incurred after acquisition.

The following is a summary of changes in the accretable yields of acquired loans as of the periods indicated as follows (in thousands):



	June 30, 2015			June 30, 2014
Balance, beginning of period	$	115		$	170
Acquisition	—			—
Net transfers from nonaccretable difference to accretable yield	—			816
Accretion	(80		)	(777		)
Balance, end of period	$	35		$	209

Information about the Company’s troubled debt restructurings (TDRs) at June 30, 2015 and June 30, 2014 is presented in the following tables (in thousands):



	Current		Greater Than 30 Days Past Due		Nonaccrual TDRs		Total TDRs
As of June 30, 2015
Real estate loans:
Construction	$	198	$	—	$	—	$	198
Commercial real estate	2,238		—		—		2,238
Consumer real estate	591		—		132		723
Total real estate loans	3,027		—		132		3,159
Other loans:
Commercial and industrial	442		—		—		442
Total loans	$	3,469	$	—	$	132	$	3,601



	Current		Greater Than 30 Days Past Due		Nonaccrual TDRs		Total TDRs
As of June 30, 2014
Real estate loans:
Construction	$	303	$	—	$	—	$	303
Commercial real estate	355		—		102		457
Consumer real estate	616		—		139		755
Total real estate loans	1,274		—		241		1,515
Other loans:
Commercial and industrial	305		—		—		305
Total loans	$	1,579	$	—	$	241	$	1,820

There were no new TDRs which were modified during the three months ended June 30, 2015 and 2014.

A summary of information pertaining to modified terms of loans, as of the dates indicated, is as follows:



	As of June 30, 2015
	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Troubled debt restructuring:
Construction	3	$	198	$	198
Commercial real estate	2	2,238		2,238
Consumer real estate	3	723		723
Commercial and industrial	2	442		442
	10	$	3,601	$	3,601



	As of June 30, 2014
	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Troubled debt restructuring:
Construction	2	$	303	$	303
Commercial real estate	3	457		457
Consumer real estate	3	755		755
Commercial and industrial	1	305		305
	9	$	1,820	$	1,820

None of the performing TDRs defaulted subsequent to the restructuring through the date the financial statements were available to be issued.

As of June 30, 2015 and December 31, 2014, the Company was not committed to lend additional funds to any customer whose loan was classified as impaired or as a TDR.

6. Investments in Tax Credit Entities

Federal NMTC

Investment in Bank Owned CDE

The Federal NMTC program is administered by the Community Development Financial Institutions Fund of the U.S. Treasury and is aimed at stimulating economic and community development and job creation in low-income communities. The program

provides federal tax credits investors who make qualified equity investments (QEIs) in a Community Development Entity(CDE). The CDE is required to invest the proceeds of each QEI in projects located in or benefiting low-income communities, which are generally defined as those census tracts with poverty rates greater than 20% and/or median family incomes that are less than or equal to 80% of the area median family income. FNBC CDE has received allocations of Federal NMTC, totaling $118.0 million since 2011. These allocations generated $46.0 million in tax credits.

The credit provided to the investor totals 39% of each QEI in a CDE and is claimed over a seven-year credit allowance period. In each of the first three years, the investor receives a credit equal to 5% of the total QEI allocated to each project. For each of the remaining four years, the investor receives a credit equal to 6% of the total QEI allocated to each project. The Company is eligible to receive up to $46.0 million in tax credits over the seven-year credit allowance period, beginning with the period in which the QEI was made, for its total QEI of $118.0 million. Through June 30, 2015, FNBC CDE had invested in allocations of $118.0 million, of which $40.0 million was invested by the Company and $78.0 million was invested by leverage lenders, which include the Company. Of the $78.0 million invested by leverage lenders, $17.5 million was invested by the Company as the leverage lender. The Company's investment in the Company's subsidiary CDE is eliminated upon consolidation. While the leverage lender's portion of the investment in the CDE is classified as a loan, the remaining investment in the CDE is an equity investment included in investment in tax credit entities in the accompanying consolidated balance sheets and evaluated at each reporting date for impairment. The impairment is evaluated based on the remaining tax credits available along with any applicable equity income or loss allocations. Impairment, if any, is recorded in the consolidated statement of income as a component of noninterest expense as well as any applicable equity income or loss allocations. The Federal NMTC claimed by the Company, with respect to each QEI, remain subject to recapture over each QEI’s credit allowance period upon the occurrence of any of the following:


•	CDE does not invest substantially all (defined as a minimum of 85%) of the QEI proceeds in qualified low-income community investments;


•	CDE ceases to be a CDE; or


•	CDE redeems its QEI investment prior to the end of the current credit allowance period.

At June 30, 2015 and December 31, 2014, none of the above recapture events had occurred, nor, in the opinion of management, are such events anticipated to occur in the foreseeable future. As of June 30, 2015, FNBC CDE had total assets of $130.5 million, consisting of cash of $5.5 million, loans of $112.3 million and other assets of $12.7 million, with liabilities of $0.4 million and capital of $130.1 million. Based on the structure of these transactions, the Company expects to recover its investment solely through use of the tax credits that were generated by the investments and any equity returns received through the limited partnership.

Investments in Non-Bank Owned CDEs

The Company is also a limited partner in several tax-advantaged limited partnerships and a shareholder in several C corporations whose purpose is to invest in approved Federal NMTC projects through CDEs that are not associated with FNBC CDE. During 2014 and 2013, several of these partnerships in which the Company was a limited partner converted to C corporations. The Company’s ownership in the CDEs did not change based on the conversion. These investments are accounted for using the equity method of accounting and are included in investment in tax credit entities in the accompanying consolidated balance sheets. The limited partnerships and C corporations are considered VIEs. The VIEs have not been consolidated because the Company is not considered the primary beneficiary. The Company's investment in Federal NMTC partnerships and C corporations, net of the loans to the investment fund, are evaluated for impairment at the end of each reporting period based on the remaining tax credits available along with any equity income or loss allocations. Impairment, if any, is recorded in the consolidated statement of income as a component of noninterest expense as well as any applicable equity income or loss allocations. All of the Company’s investments in Federal NMTC structures are privately held, and their market values are not readily determinable. Based on the structure of these transactions, the Company expects to recover its investment solely through use of the tax credits that were generated by the investments and any equity returns received through the limited partnership.

Low-Income Housing Tax Credits

The Company is a limited partner in several tax-advantaged limited partnerships whose purpose is to invest in approved Low-Income Housing tax credit projects. The tax credits associated with these investments are typically received over a 10 to 15 year period subject to recapture. These investments are accounted for using the equity method of accounting and are included in investments in tax credit entities in the accompanying consolidated balance sheets. The limited partnerships are considered to be VIEs and are evaluated for consolidation based on the Company's determination if it is the primary beneficiary. The Company has determined that it is not the primary beneficiary, with respect to the limited partnerships and, thus, the VIEs have not been consolidated except for a single Low-Income Housing investment which was consolidated, see Note 7 for further

details. All of the Company’s investments in low-income housing partnerships are evaluated for impairment at the end of each reporting period. Impairment, if any, is recorded in the consolidated statement of income as a component of noninterest expense as well as any applicable equity income or loss allocations. Based on the structure of these transactions, the Company expects to recover its remaining investments at June 30, 2015 through the use of the tax credits that were generated by the investments and any equity returns received through the limited partnerships.

Federal Historic Rehabilitation Tax Credits

The Company is a limited partner in several tax-advantaged limited partnerships whose purpose is to invest in approved Federal Historic Rehabilitation tax credit projects. The tax credits received on these investments are received in the year that the project is placed in service and subject to recapture over a five year period. These investments are accounted for using the equity method of accounting and are included in investments in tax credit entities in the accompanying consolidated balance sheets. The limited partnerships are considered to be VIEs and are evaluated for consolidation based on the Company's determination if it is the primary beneficiary. The Company has determined that it is not the primary beneficiary with respect to any of the limited partnerships and, thus, the VIEs have not been consolidated. All of the Company’s investments in limited partnerships are evaluated for impairment at the end of each reporting period and the Company records impairment, if any, in its consolidated statement of income as a component of noninterest expense as well as any applicable equity income or loss allocations. Based on the structure of these transactions, the Company expects to recover its remaining investments in Federal Historic Rehabilitation tax credits at June 30, 2015 through the equity ownership in the underlying projects.

State Historic Rehabilitation Tax Credits

In connection with its limited partner interest in several tax-advantaged limited partnerships whose purpose is to invest in approved Federal Historic Rehabilitation tax credit projects, the Company has the ability to invest in Louisiana State Historic Rehabilitation tax credits. These credits are certified by the State of Louisiana and are purchased by the Company which it in turn, sells to investors after the State Historic Rehabilitation tax credits are transferred from the project to the Company. The Company holds these equity investments until the State Historic Rehabilitation tax credits are sold to a third party and evaluates its investment for impairment at the end of each reporting period. Impairment, if any, is recorded in its consolidated statement of income as a component of noninterest expense.

State NMTC

Investments in Non-Bank Owned CDEs

The Company is a limited partner in several tax-advantaged limited partnerships that are CDEs, whose purpose is to invest in approved state NMTC projects that are not associated with FNBC CDE. Based on the structure of these transactions, the Company expects to recover its remaining investments at June 30, 2015 in State NMTC through the transfer of its ownership interest to third party investors. The Company evaluates its investment for impairment at the end of each reporting period. Impairment, if any, is recorded in its consolidated statement of income as a component of noninterest expense.

The tables below set forth the Company's investment in Federal NMTC, State NMTC, Federal Low-Income Housing, Federal Historic Rehabilitation, and State Historic Rehabilitation tax credits, along with the credits expected to be generated through its participation in these programs as of June 30, 2015 and December 31, 2014 (in thousands). The amounts as of June 30, 2015 reflect the cumulative effect of the errors in the accounting for certain of its investments in tax credit entities and the net impact of the reversal of previously recorded amortization under the cost method and the net effect of the equity method and impairment charges.



	June 30, 2015
	Investment		Total Impairment(1)			Loans to Investment Funds(2)			Elimination			Net Investment		Tax Benefits Recognized Through December 31, 2014		Tax Benefits Expected to be Recognized in 2015		Tax Benefits Expected to be Recognized in 2016, and Thereafter		Total Tax Benefits Expected to be Recognized
NMTC:
Federal:
Bank Owned CDEs(3)	$	118,000	$	—		$	—		$	(118,000	)	$	—	$	16,490	$	6,580	$	22,949	$	46,019
Qualified Low-Income Community Investment (QLICI)(4)	34,291		(7,429		)	—			—			26,862		—		—		—		—
Bank Owned CDE Equity Investment(5)	5,700		—			—			—			5,700		—		—		—		—
Total Bank Owned CDEs	157,991		(7,429		)	—			(118,000		)	32,562		16,490		6,580		22,949		46,019
Non-Bank Owned CDEs	172,192		(19,780		)	(127,520		)	—			24,892		36,580		9,769		20,076		66,425
State	28,227		—			—			—			28,227		—		—		—		—
Total NMTC	358,410		(27,209		)	(127,520		)	(118,000		)	85,681		53,070		16,349		43,025		112,444

Low-Income Housing	35,965		(7,025		)	—			—			28,940		13,188		4,015		38,093		55,296

Historic Rehabilitation:
Federal(6)	55,278		(4,471		)	—			—			50,807		37,143		40,476		—		77,619
State	8,837		—			—			—			8,837		—		—		—		—
Total Historic Rehabilitation	64,115		(4,471		)	—			—			59,644		37,143		40,476		—		77,619
Total	$	458,490	$	(38,705	)	$	(127,520	)	$	(118,000	)	$	174,265	$	103,401	$	60,840	$	81,118	$	245,359

(1) Amount represents the net impact of the reversal of previously recorded amortization under the cost method net of the effect of the application of the equity method and impairment charges.

(2) Interest only loan made to the investment fund during the compliance period for Federal NMTC.

(3) Through June 30, 2015, FNBC CDE received allocations of Federal NMTC from the CDFI Fund of the U.S. Treasury totaling $118.0 million over a three year period beginning in 2011. These investments are eliminated upon consolidation by the Company.

(4) Amount represents equity investments in tax credit entities.

(5) The Company made an equity investment of $5.7 million in various Federal NMTC projects. This investment generated Federal NMTC. For its equity investment, the Company is a limited partner and will have the right to share in the activity of the partnerships.

(6) As of June 30, 2015, the Company had $16.9 million invested in Federal Rehabilitation Tax Credit projects which the Company expects to generate Federal Rehabilitation Tax Credits in 2015 and 2016 when the projects are completed, receive the certificates of occupancy, and the property is placed into service. The amount of tax credits to be received will be determined when the costs are certified.



	December 31, 2014
	Investment		Total Impairment(1)			Loans to Investment Funds(2)			Elimination			Net Investment		Tax Benefits Recognized Through December 31, 2013		Tax Benefits Recognized in 2014		Tax Benefits Expected to be Recognized in 2015, and Thereafter		Total Tax Benefits Expected to be Recognized
NMTC:
Federal:
Bank Owned CDEs(3)	$	118,000	$	—		$	—		$	(118,000	)	$	—	$	10,375	$	6,115	$	29,530	$	46,020
Bank Owned CDE Equity Investment(4)	5,700		—			—			—			5,700		—		—		—		—
Total Bank Owned CDEs	123,700		—			—			(118,000		)	5,700		10,375		6,115		29,530		46,020
Non-Bank Owned CDEs	162,192		(15,852		)	(120,540		)	—			25,800		27,213		9,367		25,945		62,525
State	28,227		—			—			—			28,227		—		—		—		—
Total NMTC	314,119		(15,852		)	(120,540		)	(118,000		)	59,727		37,588		15,482		55,475		108,545

Low-Income Housing	43,733		(7,264		)	—			—			36,469		9,546		3,642		42,109		55,297

Historic Rehabilitation:
Federal(5)	41,794		(3,412		)	—			—			38,382		17,823		19,321		37,295		74,439
State	6,335		—			—			—			6,335		—		—		—		—
Total Historic Rehabilitation	48,129		(3,412		)	—			—			44,717		17,823		19,321		37,295		74,439
Total	$	405,981	$	(26,528	)	$	(120,540	)	$	(118,000	)	$	140,913	$	64,957	$	38,445	$	134,879	$	238,281

(1) Amount represents impairment recorded from the date of original investment through the current period, as evaluated by the Company at the end of each reporting period.

(2) Interest only loan made to the investment fund during the compliance period for Federal NMTC.

(3) Through December 31, 2014, FNBC CDE received allocations of Federal NMTC from the CDFI Fund of the U.S. Treasury totaling $118.0 million over a three year period beginning in 2011. These investments are eliminated upon consolidation by the Company.

(4) The Company made an equity investment of $5.7 million in various Federal NMTC projects. This investment generated Federal NMTC. For its equity investment, the Company is a limited partner and will have the right to share in the activity of the partnerships.

(5) As of December 31, 2014, the Company had $12.6 million invested in Federal Historic Rehabilitation Tax Credit projects which the Company expects to generate Federal Historic Rehabilitation Tax Credits in 2015 and 2016 when the projects are completed, receive the certificate of occupancy, and the property is placed in service. The amount of tax credits to be received will be determined when the costs are certified.

The impairment of tax credit investments for the three and six month periods ended June 30, 2015 reflect the net impact of the cumulative errors in accounting for certain of its investments in tax credit entities and the net impact of the reversal of previously recorded amortization under the cost method and the net effect of the appropriate recording of the equity method and impairment charges were as follows (in thousands) :



	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2015			2014		2015			2014
Federal NMTC	$	3,374		$	2,447	$	6,679		$	4,361
Low-Income Housing	(963		)	542		(239		)	1,083
Federal Historic Rehabilitation	236			388		1,059			760
Total impairment	$	2,647		$	3,377	$	7,499		$	6,204

The amount of basis reduction recorded related to the Company's investment in tax credit entities for the three and six month periods ended June 30, 2015 and June 30, 2014 were as follows (in thousands):



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2015		2014		2015		2014
Federal NMTC	$	368	$	284	$	736	$	701
Federal Historic Rehabilitation	139		709		277		709
Total basis reduction	$	507	$	993	$	1,013	$	1,410

The Company also made loans and leverage loans in the normal course of business to the developers of the tax credit related projects. These loans are subject to the Company's underwriting criteria and all loans were performing according to their contractual terms at June 30, 2015. These loans were classified in the Company's loan portfolio at June 30, 2015 and December 31, 2014 as follows (in thousands):



	June 30, 2015		December 31, 2014
Construction	$	77,305	$	80,741
Commercial real estate	50,722		67,520
Commercial and industrial	128,137		117,191
Total loans	$	256,164	$	265,452

7. Variable Interest Entities

A subsidiary of the Bank, FNBC CDC, is the managing member of a tax-advantaged limited partnership whose purpose is to invest in approved Low-Income Housing tax credit projects. This limited partnership is considered to be a VIE, whereby the Company is considered the primary beneficiary and must consolidate the VIE and, as such, no impairment charges have been recorded with respect to this investment. The initial recognition of this VIE relationship was accounted for using acquisition accounting. Under acquisition accounting, the assets and liabilities acquired are accounted for at market and intercompany balances are eliminated. As of June 30, 2015, the Company included in its consolidated financial statements, total assets of $41.0 million, consisting of real estate of $37.6 million and other assets of $3.4 million, with liabilities of $3.0 million and capital of $38.0 million.

8. Long-term Borrowings

Subordinated Notes Due 2025

In February 2015, the Company issued $60.0 million in aggregate principal amount of subordinated notes to certain qualified institutional investors. Unless earlier redeemed, the notes have a maturity date of February 18, 2025 and bear interest, payable semiannually in arrears on February 18 and August 18 of each year, commencing August 18, 2015, at a fixed interest rate of 5.75% per year.

The notes are not convertible into common stock or preferred stock of the Company and are not subject to redemption at the option of the holders. The notes may be redeemed by the Company, in whole or in part, on or after November 18, 2024 or, in whole but not in part, under certain limited circumstances set forth in the Indenture. Any redemption by the Company would be at a redemption price equal to 100% of the principal balance being redeemed, together with any accrued and unpaid interest to the date of redemption.

Principal and interest on the notes are not subject to acceleration, except upon certain bankruptcy-related events. The notes are the unsecured, subordinated obligations of the Company and rank junior in right of payment to the Company’s current and future senior indebtedness and to the Company’s obligations to its general creditors.

The Company plans to use the net proceeds from the sale of the subordinated notes for general corporate purposes, which may include supporting the continued growth of its business, acquisitions, and the redemption or repayment of other fixed obligations.

Employee Stock Ownership Plan Loan

In March 2015, the Company sponsored Employee Stock Ownership Trust entered into a loan from First National Bankers Bank (FNBB) in order to purchase 100,000 shares of Company stock for $3.3 million. This borrowing is required to be recorded on the Company’s balance sheet, with an offsetting entry to additional paid-in capital. The loan matures on

December 5, 2024, and bears interest at a floating rate equal to the Wall Street Journal Prime rate, which was 3.25% as of June 30, 2015. The loan is subject to a pledge of 96,000 shares of the Company stock, owned by the Trust, as of June 30, 2015.

The $40.0 million borrowing included within long-term borrowings at June 30, 2015 and December 31, 2014 consists of a borrowing by the Company from Credit Suisse which is in the legal form of a long-term repurchase agreement. The borrowing matures on April 1, 2019, and bears interest at a floating rate equal to three-month USD LIBOR plus 1.35%, and was 1.62% at June 30, 2015.

The following table includes a summary of long-term borrowings as of June 30, 2015 and December 31, 2014 (in thousands):



	June 30, 2015		December 31, 2014
FNBB	$	3,392	$	—
Credit Suisse Securities (USA) LLC	40,000		40,000
5.75% Subordinated Notes due 2025	60,000		—
Total long-term borrowings	$	103,392	$	40,000

9. Derivative - Interest Rate Swap Agreements

Interest Rate Swaps. During 2014, the Company entered into three delayed interest rate swaps with Counterparty C to manage exposure against the variability in the expected future cash flows attributed to changes in the benchmark interest rate on a portion of its variable-rate debt. The Company entered into these interest rate swap agreements to convert a portion of its forecasted variable-rate debt to a fixed rate, which is a cash flow hedge of a forecasted transaction. The total notional amount of the three derivative contracts is $165.0 million.

During 2014, the Company terminated its cash flow hedge with Counterparty A, which the Company had entered into in 2012, as internal forecasts for future interest rates changed since this transaction was initiated. The total notional amount of the derivative contract was $115.0 million. The termination of the cash flow hedge resulted in a loss of $8.0 million which had been reflected in the Company’s operating cash flows and will be reclassified from accumulated other comprehensive income (loss) to net income as interest expense as it is amortized over a multi-year period consistent with the original maturity dates of the hedge which began in January 2015 and terminates in January 2022.

The Company entered into a delayed interest rate swap with Counterparty B in 2013 to manage exposure against the variability in the expected future cash flows attributed to changes in the benchmark interest rate on a portion of its variable-rate debt. The Company entered into this interest rate swap agreement to convert a portion of its variable-rate debt to a fixed rate, which is a cash flow hedge of a forecasted transaction. The total notional amount of the derivative contract is $150.0 million.

Interest Rate-Prime Swaps. In March 2015, the Company entered into four interest rate swaps with Counterparty C to manage exposure against the variability in the expected future cash flows on the designated Prime plus 1% floored at 5%, Prime plus 2%, Prime plus 2% actual/365, and Prime plus 2.25% pools of its floating rate loan portfolio (the Prime Hedges). The Company entered into the interest rate-prime swap agreements to hedge the cash flows from these pools of its floating rate loan portfolio, which is expected to offset the variability in the expected future cash flows attributable to the fluctuations in the daily weighted average Wall Street Journal Prime index, which is a cash flow hedge of a forecasted transaction. The notional amount of the contracts are Prime plus 1% floored at 5% tranche of $40.0 million, Prime plus 2% tranche of $15.0 million, Prime plus 2% actual/365 tranche of $10.0 million, and Prime plus 2.25% tranche of $10.0 million for a total notional amount of $75.0 million. The Company will receive payments from the counterparty at a fixed rate of interest and pay the counterparty at the Prime rate associated with each tranche on its notional amount. The Prime plus 1% floored at 5% tranche will receive payments at a fixed rate of 5.81% and pay the counterparty at Prime plus 1%, floored at 5% on the notional amount. The Prime plus 2% and Prime plus 2% actual/365 tranches will receive payments at a fixed rate of 6.56% and pay the counterparty at Prime plus 2% on the notional amounts. The Prime plus 2.25% tranche will receive payments at a fixed rate of 6.81% and pay the counterparty at Prime plus 2.25% on the notional amount. The cash flow payments on the derivatives begin March 2015 and terminate March 2021.

During 2013, the Company entered into four interest rate swaps with Counterparty B to manage exposure against the variability in the expected future cash flows on the designated Prime, Prime plus 1%, Prime plus 1% floored at 5% and Prime plus 1% floored at 5.5% pools of its floating rate loan portfolio (the Prime Hedges). The Company entered into the interest rate swap agreements to hedge the cash flows from these pools of its floating rate loan portfolio, which is expected to offset the variability in the expected future cash flows attributable to the fluctuations in the daily weighted average Wall Street Journal Prime index, which is a cash flow hedge of a forecasted transaction. The total notional amount of the prime hedges is $250.0 million. The cash flow payments on the derivatives began September 2013 and terminate September 2019.

Information pertaining to outstanding derivative instruments is as follows (in thousands):



		Derivative Assets Fair Value					Derivative Liabilities Fair Value
	Balance Sheet Location	June 30, 2015		December 31, 2014		Balance Sheet Location	June 30, 2015		December 31, 2014
Derivatives designated as hedging instruments under ASC Topic 815:
Interest rate swaps - Counterparty B	Other Assets	$	—	$	—	Other Liabilities	$	16,051	$	15,995
Interest rate-prime swaps - Counterparty B	Other Assets	4,371		3,042		Other Liabilities	—		—
Interest rate swaps - Counterparty C	Other Assets	1,750		37		Other Liabilities	—		—
Interest rate-prime swaps - Counterparty C	Other Assets	—		—		Other Liabilities	296		—
		$	6,121	$	3,079		$	16,347	$	15,995

The Company entered into master netting arrangements with both Counterparty B and Counterparty C whereby the delayed interest rate swaps and Prime Hedges would be settled net. Net fair values of the Counterparty B and Counterparty C delayed interest rate swaps and Prime Hedges as of June 30, 2015 and December 31, 2014 are as follows (in thousands):



	June 30, 2015
	Gross Amounts Presented in the Balance Sheet		Gross Amounts Not Offset in the Balance Sheet
	Gross Amounts Presented in the Balance Sheet		Derivatives		Collateral		Net
Derivatives subject to master netting arrangements:
Derivative assets:
Counterparty C	$	1,454	$	—	$	—	$	1,454
Net derivative asset	$	1,454	$	—	$	—	$	1,454

Derivative liabilities:
Counterparty B	$	11,680	$	—	$	—	$	11,680
Net derivative liability	$	11,680	$	—	$	—	$	11,680



	December 31, 2014
	Gross Amounts Presented in the Balance Sheet		Gross Amounts Not Offset in the Balance Sheet
	Gross Amounts Presented in the Balance Sheet		Derivatives		Collateral		Net
Derivatives subject to master netting arrangements:
Derivative liabilities:
Counterparty B	$	12,953	$	—	$	—	$	12,953
Net derivative liability	$	12,953	$	—	$	—	$	12,953

Pursuant to the interest rate swap agreements described above with Counterparty B, the Company pledged collateral in the form of investment securities totaling $16.2 million (with a fair value at June 30, 2015 of $16.6 million), which has been presented gross in the Company’s balance sheet. Pursuant to the interest rate swap agreements described above with Counterparty C, the Company pledged collateral in the form of investment securities totaling $4.6 million (with a fair value at June 30, 2015 of $4.0 million), which has been presented gross in the Company’s balance sheet. There was no collateral posted from the counterparties to the Company as of June 30, 2015.

For the three and six month periods ended June 30, 2015, the Company reclassified $0.3 million and $0.5 million, respectively, from accumulated other comprehensive income (loss) into interest expense as a result of the discontinuance of the cash flow hedge with Counterparty A. No amounts were reclassified into earnings for the three or six month periods ended June 30, 2014.

As of June 30, 2015 and 2014, no amounts of gains or losses have been reclassified from accumulated comprehensive income (loss), nor have any amounts of gains or losses been recognized due to ineffectiveness of a portion of the derivatives. At

June 30, 2015, no amount of the derivatives will mature within the next 12 months. The Company does not expect to reclassify any amount from accumulated other comprehensive income (loss) into interest income over the next 12 months for derivatives that will be settled.

At June 30, 2015 and 2014, and for the six months then ended, information pertaining to the effect of the hedging instruments on the consolidated financial statements is as follows (in thousands):



	Amount of Gain (Loss) Recognized in OCI, net of taxes (Effective Portion)
	As of June 30,
Derivatives in ASC Topic 815 Cash Flow Hedging Relationships:	2015			2014
Interest rate swap with Counterparty A	$	(4,844	)	$	(2,506	)
Interest rate swap and prime swaps with Counterparty B	(7,592		)	(5,246		)
Interest rate swap and prime swaps with Counterparty C	944			$	—
Total	$	(11,492	)	$	(7,752	)

10. Income Taxes

The income tax benefit on the statement of income for the six months ended June 30, 2015 and 2014 was as follows (in thousands):



	June 30, 2015			June 30, 2014
Current tax expense	$	1,911		$	—
Deferred tax benefit	(29,579		)	(9,742		)
Total tax benefit	$	(27,668	)	$	(9,742	)

The amount of taxes in the accompanying consolidated statements of income is different from the expected amount using statutory federal income tax rates primarily due to the effect of various tax credits. As discussed in Note 6, the Company earns Federal NMTC, Federal Historic Rehabilitation, and Low-Income Housing tax credits, which reduce the Company’s federal income tax liability or create a carryforward as applicable. The Company is also required to reduce its tax basis of the investment in certain of the projects that generated the Federal NMTC or Federal Historic Rehabilitation tax credits by the amount of the credit generated in that year. No valuation allowance was recorded for the net deferred tax assets at June 30, 2015 and December 31, 2014, as the amounts will more likely than not be realized as reductions of future taxable income or by utilizing available tax planning strategies.

11. Commitments and Contingencies

Off-Balance-Sheet Arrangements

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These transactions include commitments to extend credit in the ordinary course of business to approved customers. Generally, loan commitments have been granted on a temporary basis for working capital or commercial real estate financing requirements or may be reflective of loans in various stages of funding. These commitments are recorded on the Company’s financial statements as they are funded. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Loan commitments include unused commitments for open-end lines secured by one to four family residential properties and commercial properties, commitments to fund loans secured by commercial real estate, construction loans, business lines of credit, and other unused commitments. Standby letters of credit are written conditional commitments issued by the Company to guarantee the performance of a customer to a third party. In the event the customer does not perform in accordance with the terms of the agreement with the third party, the Company would be required to fund the commitment. The maximum potential amount of future payments the Company could be required to make is represented by the contractual amount of the commitment. If the commitment is funded, the Company would be entitled to seek recovery from the customer. The Company minimizes its exposure to loss under loan commitments and standby letters of credit by subjecting them to credit approval and monitoring procedures. The effect on the Company’s revenues, expenses, cash flows, and liquidity of the unused portions of these commitments cannot be reasonably predicted because there is no guarantee that the lines of credit will be used.

The following is a summary of the total notional amount of loan commitments and standby letters of credit outstanding at June 30, 2015 and December 31, 2014 (in thousands):



	June 30, 2015		December 31, 2014
Standby letters of credit	$	104,342	$	110,636
Unused loan commitments	650,700		509,665
Total	$	755,042	$	620,301

12. Shareholders' Equity

Series C Convertible Perpetual Preferred Stock

In June 2015, the holder of the Series C preferred stock exchanged 364,983 shares of Series C preferred stock for an equivalent number of shares of common stock. During 2013, the holder of the Series C preferred stock converted 551,858 shares into an equivalent number of shares of common stock. The Company issued 916,841 shares of Series C preferred stock to the holder in 2011. There were no shares of the Company's Series C preferred stock outstanding as of June 30, 2015.

13. Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income (loss) and changes in those components are presented in the following table (in thousands):



	Cash Flow Hedges(1)			Terminated Cash Flow Hedge(2)			Transfers of Available for Sale Securities to Held to Maturity			Available for Sale Securities			Total
Balance at January 1, 2015	$	(8,396	)	$	(5,194	)	$	(3,354	)	$	(2,793	)	$	(19,737	)
Other comprehensive income (loss) before income taxes:
Net change in unrealized gain	2,690			—			—			472			3,162
Reclassification of net losses realized and included in earnings	—			539			—			—			539
Amortization of unrealized net gain	—			—			288			—			288
Income tax expense (benefit)	942			189			101			165			1,397
Balance at June 30, 2015	$	(6,648	)	$	(4,844	)	$	(3,167	)	$	(2,486	)	$	(17,145	)



	Cash Flow Hedges(1)			Terminated Cash Flow Hedge(2)		Transfers of Available for Sale Securities to Held to Maturity			Available for Sale Securities			Total
Balance at January 1, 2014	$	(2,054	)	$	—	$	(3,710	)	$	(10,751	)	$	(16,515	)
Other comprehensive income (loss) before income taxes:
Net change in unrealized gain (loss)	(8,767		)	—		—			9,724			957
Reclassification of net losses realized and included in earnings	—			—		—			(56		)	(56		)
Amortization of unrealized net gain	—			—		269			—			269
Income tax expense (benefit)	(3,069		)	—		94			3,385			410
Balance at June 30, 2014	$	(7,752	)	$	—	$	(3,535	)	$	(4,468	)	$	(15,755	)

(1) Balances in the Cash Flow Hedge column represent the net operating changes in all of the Company's cash flow hedge relationships as of the dates stated.

(2) Balances in the Terminated Cash Flow Hedge column represent the net unrealized loss at termination of a certain cash flow hedge relationship. See Note 9 for further explanation on the terminated cash flow hedge.

14. Capital Requirements and Other Regulatory Matters

The Company and the Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements of the Company and the Bank. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets, Tier 1 capital to average assets, and common equity tier 1 to risk-weighted assets. Management believes, as of June 30, 2015 and December 31, 2014, that the Company and the Bank met all capital adequacy requirements to which they are subject.

As of June 30, 2015, the Bank was in compliance with all regulatory requirements and the Bank was classified as “well capitalized” for purposes of the Federal Deposit Insurance Corporation's prompt corrective action requirements. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage, and common equity tier 1 ratios as set forth in the following table. There are no conditions or events since the notification that management believes have changed that categorization.

The following tables present the actual capital amounts and regulatory capital ratios for the Company and the Bank as of June 30, 2015 and December 31, 2014:



			June 30, 2015
	"Well Capitalized" Minimums		Actual
(in thousands)	"Well Capitalized" Minimums		Ratio		Amount
First NBC Bank Holding Company
Tier 1 leverage capital			9.80	%	$	391,775
Tier 1 risk-based capital			10.79	%	391,775
Total risk-based capital			13.72	%	497,893
Common equity tier 1 risk-based capital			10.79	%	391,775
First NBC Bank
Tier 1 leverage capital	5.00	%	10.52	%	$	419,853
Tier 1 risk-based capital	8.00	%	11.58	%	419,853
Total risk-based capital	10.00	%	12.85	%	465,915
Common equity tier 1 risk-based capital	6.50	%	11.58	%	419,853



			December 31, 2014
	"Well Capitalized" Minimums		Actual
(in thousands)	"Well Capitalized" Minimums		Ratio		Amount
First NBC Bank Holding Company
Tier 1 leverage capital			10.66	%	$	387,224
Tier 1 risk-based capital			11.59	%	387,224
Total risk-based capital			12.84	%	428,962
Common equity tier 1 risk-based capital			NA		NA
First NBC Bank
Tier 1 leverage capital	5.00	%	9.95	%	$	361,078
Tier 1 risk-based capital	6.00	%	10.82	%	361,078
Total risk-based capital	10.00	%	12.07	%	402,816
Common equity tier 1 risk-based capital	NA		NA		NA

15. Fair Value of Financial Instruments

ASC 820, Fair Value Measurements and Disclosures, clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing the asset or liability and establishes a fair value hierarchy that prioritizes the inputs used to develop those assumptions and measure fair value. The hierarchy requires companies to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:


•	Level 1 – Quoted prices in active markets for identical assets or liabilities.


•	Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.


•	Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

A description of the valuation methodologies used for instruments measured at fair value follows, as well as the classification of such instruments within the valuation hierarchy. Securities are classified within Level 1 when quoted market prices are available in an active market. Inputs include securities that have quoted prices in active markets for identical assets. If quoted market prices are unavailable, fair value is estimated using pricing models or quoted prices of securities with similar characteristics, at which point the securities would be classified within Level 2 of the hierarchy. Examples include certain available for sale securities. The Company’s investment portfolio did not include Level 3 securities as of June 30, 2015 and December 31, 2014.

The Company has segregated all financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy, based on the inputs used to determine the fair value at the measurement date in the tables below (in thousands):



			June 30, 2015
			Fair Value Measurement Using
	Total		Quoted Prices in Active Markets for Identical Assets ( Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Available for sale securities:
U.S. government agency securities	$	155,323	$	—	$	155,323	$	—
U.S. Treasury securities	12,703		—		12,703		—
Municipal securities	12,234		—		12,234		—
Mortgage-backed securities	57,557		—		57,557		—
Corporate bonds	8,020		—		8,020		—
Other equity securities	23		23		—		—
	$	245,860	$	23	$	245,837	$	—
Derivative instruments	1,454		—		1,454		—
Total	$	247,314	$	23	$	247,291	$	—
Liabilities
Derivative instruments	$	11,680	$	—	$	11,680	$	—



			December 31, 2014
			Fair Value Measurement Using
	Total		Quoted Prices in Active Markets for Identical Assets ( Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Available for sale securities:
U.S. government agency securities	$	157,527	$	—	$	157,527	$	—
U.S. Treasury securities	12,610		—		12,610		—
Municipal securities	12,246		—		12,246		—
Mortgage-backed securities	57,087		—		57,087		—
Corporate bonds	8,177		—		8,177		—
	$	247,647	$	—	$	247,647	$	—
Derivative instruments	37		—		37		—
Total	$	247,684	$	—	$	247,684	$	—
Liabilities
Derivative instruments	$	12,953	$	—	$	12,953	$	—

The Company has segregated all financial assets and liabilities that are measured at fair value on a nonrecurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the tables below (in thousands):



			June 30, 2015
			Fair Value Measurement Using
	Total		Quoted Prices in Active Markets for Identical Assets ( Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Loans	$	29,446	$	—	$	—	$	29,446
Other real estate owned	3,014		—		—		3,014
	$	32,460	$	—	$	—	$	32,460



			December 31, 2014
			Fair Value Measurement Using
	Total		Quoted Prices in Active Markets for Identical Assets ( Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Loans	$	20,679	$	—	$	—	$	20,679
Other real estate owned	3,022		—		—		3,022
	$	23,701	$	—	$	—	$	23,701

In accordance with ASC Topic 310, the Company records loans and other real estate considered impaired at the lower of cost or fair value. Impaired loans, recorded at fair value, are Level 3 assets measured using appraisals from external parties of the collateral, less any prior liens primarily using the market or income approach.

The Company did not record any liabilities at fair value for which measurement of the fair value was made on a nonrecurring basis during the six months ended June 30, 2015 or the year ended December 31, 2014.

ASC 820 requires the disclosure of the fair value for each class of financial instruments for which it is practicable to estimate. The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no

quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. ASC 820 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value.

Cash and Due from Banks and Short-Term Investments

The carrying amounts of these short-term instruments approximate their fair values and would be classified within Level 1 of the hierarchy.

Investment in Short-Term Receivables

The carrying amounts of these short-term receivables approximate their fair value and would be classified within Level 1 of the hierarchy.

Investment Securities

Securities are classified within Level 1 where quoted market prices are available in the active market. If quoted market prices are unavailable, fair value is estimated using pricing models or quoted prices of securities with similar characteristics, at which point the securities would be classified within Level 2 of the hierarchy. Inputs include securities that have quoted prices in active markets for identical assets.

Loans

For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values are based on carrying values. Fair values for fixed-rate commercial real estate, commercial loans, and consumer loans are estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms and borrowers of similar credit quality. Fair value of mortgage loans held for sale is based on commitments on hand from investors or prevailing market rates. The fair value associated with the loans includes estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows, which would be classified as Level 3 of the hierarchy.

Bank-Owned Life Insurance

The carrying amounts of the bank-owned life insurance policies are recorded at cash surrender value, which approximate their fair values and would be classified within Level 1 of the hierarchy.

Deposits

The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts) and would be categorized within Level 2 of the fair value hierarchy. The carrying amounts of variable-rate, fixed-term money market accounts approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits. The fair value of the Company’s interest-bearing deposits would, therefore, be categorized within Level 3 of the fair value hierarchy.

Short-Term Borrowings and Repurchase Agreements

The carrying amounts of these short-term instruments approximate their fair values and would be classified within Level 2 of the hierarchy.

Long-Term Borrowings

The fair values of long-term borrowings are estimated using discounted cash flows analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. The fair value of the Company’s long-term debt would, therefore, be categorized within Level 3 of the fair value hierarchy.

Derivative Instruments

Fair values for interest rate swap agreements are based upon the amounts required to settle the contracts. The derivative instruments are classified within Level 2 of the fair value hierarchy.

The estimated fair values of the Company’s financial instruments were as follows as of the dates indicated (in thousands):



	Fair Value Measurements at June 30, 2015
	Carrying Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from banks	$	55,926	$	55,926	$	55,926	$	—	$	—
Short-term investments	92,097		92,097		92,097		—		—
Investment in short-term receivables	250,575		250,575		250,575		—		—
Investment securities available for sale	245,860		245,860		23		245,837		—
Investment securities held to maturity	84,804		84,175		—		84,175		—
Loans and loans held for sale	2,938,258		2,953,306		—		—		2,953,306
Cash surrender value of bank-owned life insurance	47,994		47,994		47,994		—		—
Derivative instruments	1,454		1,454		—		1,454		—
Financial Liabilities:
Deposits, noninterest-bearing	390,001		390,001		—		390,001		—
Deposits, interest-bearing	3,006,744		2,959,423		—		—		2,959,423
Repurchase agreements	117,840		117,840		—		117,840		—
Long-term borrowings	103,392		104,677		—		—		104,677
Derivative instruments	11,680		11,680		—		11,680		—



	Fair Value Measurements at December 31, 2014
	Carrying Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from banks	$	32,484	$	32,484	$	32,484	$	—	$	—
Short-term investments	18,404		18,404		18,404		—		—
Investment in short-term receivables	237,135		237,135		237,135		—		—
Investment securities available for sale	247,647		247,647		—		247,647		—
Investment securities held to maturity	89,076		90,956		—		90,956		—
Loans and loans held for sale	2,775,886		3,003,280		—		—		3,003,280
Cash surrender value of bank-owned life insurance	47,289		47,289		47,289		—		—
Derivative instruments	37		37		—		37		—
Financial Liabilities:
Deposits, noninterest-bearing	364,534		364,534		—		364,534		—
Deposits, interest-bearing	2,756,316		2,722,134		—		—		2,722,134
Repurchase agreements	117,991		117,991		—		117,991		—
Long-term borrowings	40,000		42,270		—		—		42,270
Derivative instruments	12,953		12,953		—		12,953		—

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to assist readers in understanding the consolidated financial condition and results of operations of First NBC Bank Holding Company and its wholly owned subsidiary, First NBC Bank, as of June 30, 2015 and December 31, 2014 and for the three and six month periods ended June 30, 2015 and June 30, 2014. This discussion and analysis should be read in conjunction with the unaudited consolidated financial statements, the accompanying footnotes and supplemental data included herein.

To the extent that statements in this Form 10-Q relate to future plans, objectives, financial results or performance of the Company, these statements are deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which are based on management’s current information, estimates and assumptions and the current economic environment, are generally identified by the use of words such as “plan,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions, or by future or conditional terms such as “will,” “would,” “should,” “could,” “may,” “likely,” “probably,” or “possibly”. The Company’s actual strategies and results in future periods may differ materially from those currently expected due to various risks and uncertainties.

Forward-looking statements are not historical facts and may be affected by numerous factors, many of which are uncertain and beyond the Company’s control. Factors that may cause actual results to differ materially from these forward-looking statements are discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 and other filings with the Securities and Exchange Commission (“SEC”). The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

EXECUTIVE OVERVIEW

The Company is a bank holding company, which operates through one segment, community banking, and offers a broad range of financial services to businesses, institutions, and individuals in its market area of southeastern Louisiana, the Mississippi Gulf Coast, and the Florida panhandle. The Company generates most of its revenue from interest on loans and investments, service charges, income from sales of state tax credits and CDE fees earned. The Company’s primary source of funding for its loans is deposits. The largest expenses are interest on these deposits and salaries and related employee benefits. The Company measures its performance through its net interest margin, return on average assets and return on average common equity, while maintaining appropriate regulatory leverage and risk-based capital ratios.

For the six months ended June 30, 2015, the Company’s income available to common shareholders totaled $32.5 million, an increase of $7.6 million, or 30.6%, compared to the six months ended June 30, 2014. Diluted earnings per share for the six months ended June 30, 2015 were $1.70, an increase of $0.39, or 29.8%, compared to the six months ended June 30, 2014. During the second quarter of 2015, the Company’s income available to common shareholders totaled $16.8 million, an increase of $4.4 million, or 35.9%, compared to the second quarter of 2014. Diluted earnings per share for the second quarter of 2015 were $0.88, an increase of $0.23, or 35.4%, compared to the second quarter of 2014.

During the Company's quarterly financial statement close process, errors were identified in its accounting for certain of its investments in tax credit entities that related to historical and current financial information which were corrected in the Company's consolidated financial statements as of June 30, 2015 and for the three months then ended. The errors did not have a material impact to the consolidated financial statements for any prior periods as previously reported and were not material to the anticipated annual results for the year ended December 31, 2015. The impact of those errors are discussed in the applicable Financial Condition and Results of Operations sections of this document.

Key components of the Company’s performance during the first six months of 2015 are summarized below.


•	Total assets at June 30, 2015 were $4.1 billion, an increase of $375.9 million, or 10.0%, from December 31, 2014.


•	Total loans at June 30, 2015 were $2.9 billion, an increase of $159.0 million, or 5.7%, from December 31, 2014. The increase in loans was primarily due to increases of $61.9 million, or 18.9%, in construction loans and $56.6 million, or 5.5%, in commercial loans from December 31, 2014.


•	Total deposits increased $275.9 million, or 8.8%, from December 31, 2014. The increase was due primarily to increases in NOW deposits of $109.8 million, or 23.0%, money market deposits of $63.2 million, or 6.0%, and noninterest-bearing demand deposits of $25.5 million, or 7.0%, from December 31, 2014.


•	Shareholders’ equity increased $33.5 million, or 7.7%, to $469.9 million from December 31, 2014. The increase was primarily attributable to the Company’s retained earnings over the period.


•	Interest income increased $1.3 million, or 3.5%, in the second quarter of 2015 compared to the second quarter of 2014. For the six months ended June 30, 2015, interest income increased $5.3 million, or 7.3%, compared to the six months ended June 30, 2014. The increases were driven primarily by higher volume on loans.

•

Interest expense increased $1.8 million, or 16.5%, in the second quarter of 2015 compared to the second quarter of 2014. For the six months ended June 30, 2015, interest expense increased $2.9 million, or 14.0%, compared to the six months ended June 30, 2014. The increases were primarily due to higher average balances of interest-bearing deposits and the issuance of $60.0 million in subordinated debentures during the first quarter of 2015 which bear interest at 5.75%. The Company’s cost of funds increased 1 basis point compared to the second quarter of 2014 and decreased 3 basis points compared to the six month period of 2014.


•	The Company’s ratio of allowance for loan losses to total loans was 1.72%, compared to 1.56% at December 31, 2014 and 1.45% at June 30, 2014.


•	Net charge-offs for the second quarter of 2015 were $0.4 million, compared to net charge-offs of $0.1 million for the second quarter of 2014. Net charge-offs for the six months ended June 30, 2015 were $0.6 million compared to $0.7 million for the same period of 2014.

•

Noninterest income for the second quarter of 2015 increased $0.6 million, or 21.3%, compared to the second quarter of 2014 due primarily to an increase of $0.6 million in other noninterest income offset by a decrease in gains on other assets sold of $0.1 million. For the six months ended June 30, 2015, noninterest income decreased $0.2 million, or 3.6%, compared to the six months ended June 30, 2014, primarily due to increases of $0.7 million in other noninterest income and $0.3 million in cash surrender value income on bank-owned life insurance offset by decreases in Community Development Entity fees earned of $0.6 million and income from sales of state tax credits of $0.6 million.

•

Noninterest expense for the second quarter of 2015 increased $4.5 million, or 24.4%, compared to the second quarter of 2014. The increase in noninterest expense in the second quarter of 2015 compared to the second quarter of 2014 resulted from increases in all components of noninterest expense, primarily salaries and employee benefits of $1.7 million and other noninterest expense of $2.1 million offset by a decrease in impairment of investment in tax credit entities of $0.7 million. For the six months ended June 30, 2015, noninterest expense increased $9.7 million, or 27.0%, compared to the six months ended June 30, 2014, due to increases in all components of noninterest expense, primarily increases in salaries and employee benefits of $3.3 million, impairment of investment in tax credit entities of $1.3 million, and other noninterest expense of $2.4 million.

NON-GAAP FINANCIAL MEASURES

This discussion and analysis contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. The Company’s management uses these non-GAAP financial measures in their analysis of the Company’s performance.

As a material part of its business plan, the Company invests in entities that generate federal income tax credits, and management believes that understanding the impact of the Company’s investment in tax credit entities is critical to understanding its financial performance on a standalone basis and in relation to its peers. Like its investments in loans and investment securities, the Company’s investment in tax credit entities generates a return for the Company. However, unlike the income generated by its loans and investment securities, service charges or other noninterest income, which under GAAP are taken into account in the determination of income before income taxes, the return generated by the Company’s investment in tax credit entities is reflected only as a reduction of income tax expense.

Under current GAAP accounting, the returns generated from the Company’s investment in tax credit entities are a component of the Company’s income tax provision whereas all of the expenses, primarily impairment of investment in tax credit entities, are recorded in noninterest expense. Because of the level of the Company’s investment in tax credit entities, management believes that the effect of adjusting the relevant GAAP measures to account for returns generated by the Company’s investment in tax credit entities is meaningful to a more complete understanding of the Company’s financial performance.

In measuring the Company’s financial performance, in addition to financial measures that are prepared in accordance with GAAP, management utilizes non-GAAP performance measures that adjust noninterest income and expense to reflect the effect of the federal income taxes generated from the Company’s investment in tax credit entities to derive at an adjusted income before income taxes non-GAAP measure and a performance measure that adjusts noninterest income and noninterest expense to reflect the effect of the noninterest income and noninterest expense generated from the Company's investment in tax credit entities to derive at an adjusted efficiency ratio. The non-GAAP measures of adjusted income before income taxes and adjusted efficiency ratio are reconciled to the corresponding measures determined in accordance with GAAP on “Table 1-Reconciliations of Non-GAAP Financial Measures.” Management believes that these non-GAAP financial measures should

facilitate an investor’s understanding and analysis of the Company’s underlying financial performance and trends, in addition to the corresponding financial information prepared and reported in accordance with GAAP.

Tangible book value per common share and the ratio of tangible common equity to tangible assets are not financial measures recognized under GAAP and, therefore, are considered non-GAAP financial measures. The Company’s management, banking regulators, many financial analysts and other investors use these non-GAAP financial measures to compare the capital adequacy of banking organizations with significant amounts of preferred equity and/or goodwill or other intangible assets, which typically stem from the use of the purchase accounting method of accounting for mergers and acquisitions. Tangible common equity, tangible assets, tangible book value per share or related measures should not be considered in isolation or as a substitute for total shareholders’ equity, total assets, book value per share or any other measure calculated in accordance with GAAP. Moreover, the manner in which the Company calculates tangible common equity, tangible assets, tangible book value per share and any other related measures may differ from that of other companies reporting measures with similar names.

These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP. The following tables reconcile, as of the dates set forth below, income before income taxes (on a GAAP basis) to income before income taxes adjusted for investments in federal tax credit programs, shareholders’ equity (on a GAAP basis) to tangible common equity and total assets (on a GAAP basis) to tangible assets and tangible book value per share, and calculate an adjusted efficiency ratio (non-GAAP).

TABLE 1-RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES



	For the Six Months Ended
(In thousands, except per share data)	June 30, 2015			June 30, 2014
Income before income taxes:
Income before income taxes (GAAP)	$	5,592		$	15,785
Income adjustment before income taxes related to the impact of tax credit related activities (Non-GAAP)
Tax equivalent income associated with investment in federal tax credit programs(1)	45,309			23,014
Income before income taxes (Non-GAAP)	50,901			38,799
Income tax expense-adjusted (Non-GAAP)	(17,641		)	(13,272		)
Net income (GAAP)	$	33,260		$	25,527


Adjusted Efficiency Ratio:
Non-interest expense (GAAP)	$	45,603		$	35,905
Adjustments:
Impairment of investment in tax credit entities(2)	7,499			6,204
Other direct expenses(3)	1,316			1,383
Adjusted noninterest expense (Non-GAAP)	36,788			28,318
Net interest income (GAAP)	53,728			51,398
Noninterest income (GAAP)	6,067			6,292
Adjustments:
Income from sales of state tax credits	1,187			1,761
Community Development Entity fees earned	256			875
Adjusted noninterest income (Non-GAAP)	4,624			3,656
Adjusted total revenue (Non-GAAP)	$	58,352		$	55,054
Adjusted efficiency ratio	63.04		%	51.44		%


(1)	Tax equivalent income associated with investment in federal tax credit programs represents the gross amount of tax benefit from federal tax credits.


(2)	Impairment of investment in tax credit entities represents impairment recorded during the current period, as evaluated by the Company at the end of each reporting period.


(3)	Other direct expenses represent fees and expenses incurred as a result of the Company's investment in federal tax credit programs.



	As of
	June 30, 2015			December 31, 2014
Tangible equity and asset calculations:
Total equity (GAAP)	$	469,920		$	436,374
Adjustments:
Preferred equity	37,935			42,406
Goodwill	4,808			4,808
Other intangibles	3,019			3,023
Tangible common equity	$	424,158		$	386,137

Total assets (GAAP)	$	4,126,503		$	3,750,617
Adjustments:
Goodwill	4,808			4,808
Other intangibles	3,019			3,023
Tangible assets	$	4,118,676		$	3,742,786

Total common shares	19,022			18,576
Book value per common share	$	22.71		$	21.21
Effect of adjustment	0.41			0.42
Tangible book value per common share	$	22.30		$	20.79
Total equity to assets	11.39		%	11.63		%
Effect of adjustment	1.09		%	1.31		%
Tangible common equity to tangible assets	10.30		%	10.32		%

FINANCIAL CONDITION

Assets increased $375.9 million, or 10.0%, to $4.1 billion as of June 30, 2015 compared to $3.8 billion as of December 31, 2014 as the Company continued to experience strong growth in the New Orleans market area. Net loans increased $151.0 million, or 5.5%, to $2.9 billion as of June 30, 2015, compared to $2.7 billion as of December 31, 2014. The Company’s investment securities portfolio totaled $330.7 million compared to $336.7 million as of December 31, 2014, a decrease of 1.8%. Deposits increased $275.9 million, or 8.8%, to $3.4 billion as of June 30, 2015, compared to $3.1 billion as of December 31, 2014. Total shareholders’ equity increased $33.5 million, or 7.7%, to $469.9 million as of June 30, 2015, compared to $436.4 million as of December 31, 2014.

Loan Portfolio

The Company’s primary source of income is interest on loans to small-and medium-sized businesses, real estate owners in its market area and its private banking clients. The loan portfolio consists primarily of commercial loans and real estate loans secured by commercial real estate properties located in the Company’s primary market area. The Company’s loan portfolio represents the highest yielding component of its earning asset base.

The following table sets forth the amount of loans, by category, as of the respective periods:

TABLE 2-TOTAL LOANS BY LOAN TYPE



	June 30, 2015				December 31, 2014
(In thousands)	Amount		Percent		Amount		Percent
Construction	$	389,552	13.3	%	$	327,677	11.8	%
Commercial real estate	1,287,105		43.9	%	1,264,371		45.6	%
Consumer real estate	149,273		5.1	%	132,950		4.8	%
Commercial and industrial	1,087,224		37.1	%	1,030,629		37.2	%
Consumer	20,159		0.6	%	18,637		0.6	%
Total loans	$	2,933,313	100	%	$	2,774,264	100	%

The Company’s primary focus has been on commercial real estate and commercial lending, which represented approximately 81% and 83% of the loan portfolio as of June 30, 2015 and December 31, 2014, respectively. Although management expects

continued growth with respect to the loan portfolio, it does not expect any significant changes over the foreseeable future in the composition of the loan portfolio or in the emphasis on commercial real estate and commercial lending.

A significant portion, $430.9 million, or 33.5%, as of June 30, 2015, compared to $419.3 million, or 33.5%, as of December 31, 2014, of the commercial real estate exposure represented loans to commercial businesses secured by owner occupied real estate which, in effect, are commercial loans with the borrowers’ real estate providing a secondary source of repayment. The Company's construction portfolio increased $61.9 million, or 18.9%, compared to December 31, 2014. The increase in the construction portfolio has been due to the funding of construction loans related to hotels, residential real estate development, and federal tax credit related projects.

Commercial loans, which represent 37.1% of total loans in the portfolio, increased $56.6 million, or 5.5%, compared to December 31, 2014. The Company attributes its commercial loan growth to increases in all segments of the portfolio. The Company does have exposure to the oil and gas industry in its commercial loan portfolio. At June 30, 2015, the Company's direct oil and gas commercial loan portfolio was approximately $108.0 million, or 3.6% of its total loan portfolio, with an additional $6.5 million in outstanding loan commitments. Of this amount, the Company's exposure to exploration and production in its oil and gas portfolio was approximately $61.2 million with outstanding commitments of $3.0 million. The Company also had indirect oil and gas loan exposure in its portfolio of $71.9 million with outstanding commitments of $8.0 million. The Company is actively monitoring both its direct and indirect oil and gas related credits.

The consumer real estate loan portfolio increased $16.3 million, or 12.3%, compared to December 31, 2014. The increase in consumer real estate loans was attributable to the acquisition of $21.5 million in consumer real estate loans in the Crestview bank transaction offset by the payoff of $5.2 million from a large consumer real estate loan.

Nonperforming Assets

Nonperforming assets consist of nonperforming loans, other real estate owned and other repossessed assets. Nonperforming loans consist of loans that are on nonaccrual status and restructured loans, which are loans on which the Company has granted a concession on the interest rate or original repayment terms due to financial difficulties of the borrower. Other real estate owned consists of real property acquired through foreclosure. The Company initially records other real estate owned at the lower of carrying value or fair value, less estimated costs to sell the assets. Estimated losses that result from the ongoing periodic valuations of these assets are charged to earnings as noninterest expense in the period in which they are identified. Once the Company owns the property, it is maintained, marketed, rented and sold in satisfaction of the original loan. Historically, foreclosure trends have been low due to the seasoning of the portfolio. The Company accounts for troubled debt restructurings in accordance with ASC 310, “Receivables.”

The Company generally will place loans on nonaccrual status when they become 90 days past due, unless they are well secured and in the process of collection. The Company also places loans on nonaccrual status if they are less than 90 days past due if the collection of principal or interest is in doubt. When a loan is placed on nonaccrual status, any interest previously accrued, but not collected, is reversed from income.

Any loans that are modified or extended are reviewed for classification as a restructured loan in accordance with regulatory guidelines. The Company completes the process that outlines the modification, the reasons for the proposed modification and documents the current status of the borrower.

The following table sets forth information regarding nonperforming assets as of the dates indicated:

TABLE 3-NONPERFORMING ASSETS



(In thousands)	June 30, 2015			December 31, 2014
Nonaccrual loans:
Construction	$	959		$	792
Commercial real estate	11,584			12,146
Consumer real estate	2,918			1,919
Commercial and industrial	17,617			6,051
Consumer	98			320
Total nonaccrual loans	33,176			21,228
Restructured loans	3,469			1,571
Total nonperforming loans	36,645			22,799
Other assets owned(1)	293			290
Other real estate owned	4,459			5,549
Total nonperforming assets	$	41,397		$	28,638
Accruing loans past due 90+ days	$	—		$	28
Nonperforming loans to total loans	1.25		%	0.82		%
Nonperforming loans to total assets	0.89		%	0.61		%
Nonperforming assets to total assets	1.00		%	0.76		%
Nonperforming assets to loans, other real estate owned and other assets owned	1.41		%	1.03		%


(1)	Represents repossessed property other than real estate.

Approximately $0.6 million and $1.0 million of gross interest income would have been accrued if all loans on nonaccrual status had been current in accordance with their original terms at June 30, 2015 and December 31, 2014.

Total nonperforming assets increased $12.8 million, or 44.6%, as compared to December 31, 2014, and total nonperforming assets as a percentage of loans and other real estate owned increased by 38 basis points over the period. The increase resulted primarily from an increase in nonaccrual loans of $11.9 million, restructured loans of $1.9 million offset by decreases in other real estate owned of $1.1 million compared to December 31, 2014.

Potential problem loans are those loans that are not categorized as nonperforming loans, but where current information indicates that the borrower may not be able to comply with present loan repayment terms. These are generally referred to as its watch list loans. The Company monitors these loans closely and reviews their performance on a regular basis. At June 30, 2015, the Company had classified loans in its commercial loan portfolio of $15.0 million classified as doubtful, $76.9 million as substandard and $6.7 million as special mention. At December 31, 2014 the Company had classified loans in its commercial loan portfolio of $24.8 million classified as substandard. The increase in the Company's classified commercial loan portfolio compared to December 31, 2014 was due primarily to one exploration and production credit which was affected by the fluctuations in energy commodity prices and the level of production from its shallow-water well. The Company continues to monitor this credit as the borrower has experienced issues with the distribution and production from its shallow-water well. The Company anticipates that production will resume in the near future. The Company will continue to monitor its exposure in its oil and gas portfolio as well as the changes in energy commodity prices and related risks throughout 2015.

The Company monitors past due status as an indicator of credit deterioration and potential problem loans. A loan is considered past due when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. To the extent that loans become past due, management assesses the potential for loss on such loans as it would with other problem loans and considers the effect of any potential loss in determining its provision for probable loan losses. Management also assesses alternatives to maximize collection of any past due loans, including, without limitation, restructuring loan terms, requiring additional loan guarantee(s) or collateral or other planned action. Additional information regarding past due loans as of June 30, 2015 is included in Note 5 to the Company’s financial statements included in this report.

Allowance for Loan Losses

The Company maintains an allowance for loan losses that represents management’s best estimate of the loan losses inherent in the loan portfolio. In determining the allowance for loan losses, management estimates losses on specific loans, or groups of loans, where the probable loss can be identified and reasonably determined. The balance of the allowance for loan losses is based on internally assigned risk classifications of loans, historical loan loss rates, changes in the nature of the loan portfolio, overall portfolio quality, industry concentrations, delinquency trends, current economic factors and the estimated impact of current economic conditions on certain historical loan loss rates.

The allowance for loan losses is increased by provisions charged against earnings and reduced by net loan charge-offs. Loans are charged-off when it is determined that collection has become unlikely. Recoveries are recorded only when cash payments are received.

The allowance for loan losses was $50.4 million, or 1.72%, of total loans, as of June 30, 2015, compared to $37.4 million, or 1.45% of total loans, as of June 30, 2014, an increase of 27 basis points over the period.

The following table provides an analysis of the allowance for loan losses and net charge-offs for the respective periods:

TABLE 4-SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES



	For the Six Months Ended June 30,
(In thousands)	2015			2014
Balance, beginning of period	$	42,336		$	32,143
Charge-offs:
Construction	12			4
Commercial real estate	530			396
Consumer real estate	41			43
Commercial and industrial	272			254
Consumer	50			72
Total charge-offs	905			769
Recoveries:
Construction	—			—
Commercial real estate	243			1
Consumer real estate	2			—
Commercial and industrial	66			18
Consumer	9			10
Total recoveries	320			29
Net charge-offs	585			740
Provision for loan loss	8,600			6,000
Balance, end of period	$	50,351		$	37,403
Net charge-offs to average loans	0.02		%	0.03		%
Allowance for loan losses to total loans	1.72		%	1.45		%

Although management believes that the allowance for loan losses has been established in accordance with accounting principles generally accepted in the United States and that the allowance for loan losses was appropriate to provide for incurred losses in the portfolio at all times shown above, future provisions will be subject to ongoing evaluations of the risks in the loan portfolio. If the economy declines or if asset quality deteriorates, material additional provisions could be required.

The allowance for loan losses is allocated to loan categories based on the relative risk characteristics, asset classifications, and actual loss experience of the loan portfolio. Note 5 of the footnotes to the consolidated financial statements provides further information on the Company’s allowance for loan losses.

Securities

The securities portfolio is used to provide a source of interest income, maintain a source of liquidity and serve as collateral for certain types of deposits and borrowings. The Company manages its investment portfolio according to a written investment policy approved by the Board of Directors. Investment balances in the securities portfolio are subject to change over time based on the Company’s funding needs and interest rate risk management objectives. Liquidity levels take into account anticipated future cash flows and all available sources of credits and are maintained at levels management believes are appropriate to assure future flexibility in meeting anticipated funding needs.

The securities portfolio consists primarily of U.S. government agency obligations, mortgage-backed securities, and municipal securities, although the Company also holds corporate bonds. All of the securities have varying contractual maturities. However, these maturities do not necessarily represent the expected life of the securities as the securities may be called or paid down with or without penalty prior to their stated maturities, and the targeted duration for the investment portfolios is in the three to four year range. No investment in any of these securities exceeds any applicable limitation imposed by law or regulation. The Asset Liability Committee reviews the investment portfolio on an ongoing basis to ensure that the investments conform to the Company’s investment policy. All securities, except for the other equity securities, as of June 30, 2015 were classified as Level 2 assets, as their fair value was estimated using pricing models or quoted prices of securities with similar characteristics. The other equity securities as of June 30, 2015 were classified as Level 1 assets, as their fair value was estimated using quoted prices in active markets for identical assets.

The investment portfolio consists of available for sale and held to maturity securities. The carrying values of the Company’s available for sale securities are adjusted for unrealized gain or loss, and any gain or loss is reported on an after-tax basis as a component of other comprehensive income. Any expected credit loss due to the inability to collect all amounts due according to the security’s contractual terms is recognized as a charge against earnings. Any remaining unrealized loss related to other factors would be recognized in other comprehensive income, net of taxes. The Company’s held to maturity securities are securities that the Company both positively intends and has the ability to hold to maturity and are carried at amortized cost.

The Company’s investment securities portfolio totaled $330.7 million at June 30, 2015, a decrease of $6.0 million, or 1.8%, from December 31, 2014. The decrease was due primarily to $6.7 million in securities calls as of June 30, 2015. As of June 30, 2015, investment securities having a carrying value of $283.1 million were pledged to secure public deposits, securities sold under agreements to repurchase and borrowings.

The following table presents a summary of the amortized cost and estimated fair value of the investment portfolio:

TABLE 5-CARRYING VALUE OF SECURITIES



	June 30, 2015							December 31, 2014
(In thousands)	Amortized Cost		Unrealized Gain (Loss)			Estimated Fair Value		Amortized Cost		Unrealized Gain (Loss)			Estimated Fair Value
Available for sale:
U.S. government agency securities	$	158,002	$	(2,679	)	$	155,323	$	161,461	$	(3,934	)	$	157,527
U.S. Treasury securities	13,017		(314		)	12,703		13,019		(409		)	12,610
Municipal securities	12,145		89			12,234		12,175		71			12,246
Mortgage-backed securities	58,315		(758		)	57,557		57,025		62			57,087
Corporate bonds	8,184		(164		)	8,020		8,263		(86		)	8,177
Other equity securities	23		—			23		—		—			—
Total available for sale	$	249,686	$	(3,826	)	$	245,860	$	251,943	$	(4,296	)	$	247,647
Held to maturity:
Municipal securities	$	39,028	$	1,745		$	40,773	$	41,255	$	2,120		$	43,375
Mortgage-backed securities	45,776		(2,374		)	43,402		47,821		(240		)	47,581
Total held to maturity	$	84,804	$	(629	)	$	84,175	$	89,076	$	1,880		$	90,956

As of June 30, 2015, all of the Company’s mortgage-backed securities were agency securities and the Company did not hold any Fannie Mae or Freddie Mac preferred stock, corporate equity, collateralized debt obligations, collateralized loan obligations, structured investment vehicles, private label collateralized mortgage obligations, sub-prime, Alt-A, or second lien elements in the investment portfolio.

The funds generated as a result of sales and prepayments are used to fund loan growth and purchase other securities. The Company monitors the market conditions to take advantage of market opportunities with the appropriate interest rate risk management objectives.

Note 4 to the consolidated financial statements included in this report provides further information on the Company’s investment securities.

Investments in Short-term Receivables

The Company invests in short-term trade receivables. These receivables are traded on an exchange and are covered by a repurchase agreement of the seller of the receivables, if not paid within a specified period of time. The Company invests in these receivables since they provide a higher short-term return for the Company. The Company had $250.6 million invested in short-term receivables at June 30, 2015, an increase of $13.4 million, or 5.7%, compared to December 31, 2014.

Short-term Investments

Short-term investments result from excess funds that fluctuate daily depending on the funding needs of the Company and are currently invested overnight in interest-bearing deposit accounts at the Federal Reserve Bank of Atlanta, First National Bankers Bank, JP Morgan Chase Bank, Texas Capital Bank, TIB-The Independent Bankers Bank and Comerica Bank. The balance in interest-bearing deposits at other institutions increased $73.7 million, to $92.1 million at June 30, 2015, from $18.4 million at December 31, 2014. The primary cause of the increase at June 30, 2015 was the existence of cash that had not been reinvested from calls of investment securities and proceeds from the issuance of the subordinated debentures which had not been invested at June 30, 2015. The Company’s cash activity is further discussed in the “Liquidity and Capital Resources” section below.

Investment in Real Estate Properties

The balance in investment in real estate properties totaled $51.5 million as of June 30, 2015, an increase of $38.8 million compared to December 31, 2014. The increase was due primarily to an error related to the consolidation of the Low-Income Housing investment VIE that owned Low-Income Housing units. The increase represents the value of the property of $37.6 million.

Investment in Tax Credit Entities

The Company’s investment in tax credit entities totaled $174.3 million as of June 30, 2015, an increase of $33.4 million, or 23.7%, compared to December 31, 2014. The Company identified errors in the accounting for certain of its investment in tax credit entities which the Company corrected in the consolidated financial statements as of June 30, 2015. The impact of the errors on the investment in tax credit entities balance was an increase of $0.4 million to the investment in tax credit entities, which included the reversal of previously recorded amortization amounts recorded under the cost method of accounting offset by the net effect of equity accounting gains and losses and impairment charges. The investment in tax credit entities balance was also impacted by an error related to the consolidation of the Low-Income Housing investment VIE which decreased the investment in tax credit entities balance by $9.2 million and increased for the correction of an error in the presentation of $34.3 million in Qualified Low-Income Community Investment (QLICI) investments which were previously included in loans. The Company's Federal Historic Rehabilitation Tax credit investment increased $9.7 million during the period.

The Company has seen increasing demand in its markets for investment in tax credit projects. The Company anticipates its investment in tax credit entities to be driven by increases in Federal Historic Rehabilitation Tax Credit project investments in 2015 and 2016. The Low-Income Housing and Federal NMTC associated with the Company's investment in tax credit entities are recognized over the contract periods of the respective projects, which range from seven to 15 years. Federal NMTC projects for which an investment was made during 2011 to 2013 from the Company's own tax credit allocation substantially increased the Company's supply of credits recognizable over future periods.

The Company has received a total of $118.0 million in Federal New Markets Tax Credits (NMTC) allocations since 2011. The Company received allocations of $50.0 million in 2013, $40.0 million in 2012, and $28.0 million in 2011. The Company was notified during 2015 and 2014 by the Community Development Financial Institutions Fund (CDFI) of the U.S. Treasury that it did not receive an allocation of Federal NMTC in those allocation years. Notwithstanding, the lack of allocations during the last two Federal NMTC award cycles has not hindered the Company's ability to utilize Federal tax credit programs and make investments in tax credit projects as the Company invested in Federal NMTC projects and utilized Federal NMTC allocations of other CDEs as was common practice for the Company when it began its tax credit investment program. The Company has made and will continue to make material investments in tax credit-motivated projects. The Company generates returns on tax credit-motivated projects through the receipt of federal and, if applicable, state tax credits and any applicable equity income or loss. The Company maintains a pipeline of tax credit eligible projects which it may invest in to generate federal tax credits.

Table 14-Future Tax Credits provides information on tax credits the Company expects to generate in future years based on investments the Company has made.

Deferred Tax Asset

The Company had a net deferred tax asset of $111.6 million as of June 30, 2015 due to its tax net operating losses, carryforwards related to unused tax credits, and the non-deductibility of the loan loss provision for tax purposes. The Company assesses the recoverability of its deferred tax asset quarterly, and the current and projected level of taxable income provides for the ultimate realization of the carrying value of these deferred tax assets. Net deferred tax assets as of June 30, 2015 increased $28.2 million, or 33.8%, from December 31, 2014, primarily as a result of $30.5 million in estimated tax credits generated during the first six months of 2015 offset by tax credit basis adjustment of $1.0 million and current income tax expense of $1.9 million.

Deposits

Deposits are the Company’s primary source of funds to support earning assets. Total deposits were $3.4 billion at June 30, 2015, compared to $3.1 billion at December 31, 2014, an increase of $275.9 million, or 8.8%, as total interest-bearing deposits were up $250.4 million, or 9.1%. The increase in deposits was due to organic deposit growth of 6.5%, which occurred across all deposit categories, coupled with growth of 2.3% attributable to the assumption of deposit liabilities from the Crestview bank transaction during the first quarter of 2015. The growth in the Company's interest-bearing deposit products continues to be driven by the Company's tiered pricing strategy. The increase in noninterest-bearing demand deposits of $25.5 million, or 7.0%, was due primarily to the growth initiatives commencing during the fourth quarter of 2014 and the assumption of $22.8 million in deposits from the Crestview bank transaction.

The following table sets forth the composition of the Company’s deposits as of June 30, 2015 and December 31, 2014:

TABLE 6-DEPOSIT COMPOSITION BY PRODUCT



									Increase/(Decrease)
(In thousands)	June 30, 2015				December 31, 2014				Amount		Percent
Noninterest-bearing demand	$	390,001	11.5	%	$	364,534	11.7	%	$	25,467	7.0	%
NOW accounts	586,596		17.3	%	476,825		15.3	%	109,771		23.0	%
Money market accounts	1,118,679		32.9	%	1,055,505		33.8	%	63,174		6.0	%
Savings deposits	55,982		1.6	%	49,634		1.6	%	6,348		12.8	%
Certificates of deposit	1,245,487		36.7	%	1,174,352		37.6	%	71,135		6.1	%
Total deposits	$	3,396,745	100.0	%	$	3,120,850	100.0	%	$	275,895	8.8	%

Short-term Borrowings

Although deposits are the primary source of funds for lending, investment activities and general business purposes, as an alternative source of liquidity, the Company may obtain advances from the Federal Home Loan Bank of Dallas, sell investment securities subject to its obligation to repurchase them, purchase Federal funds, and engage in overnight borrowings from the Federal Home Loan Bank or its correspondent banks. The level of short-term borrowings can fluctuate on a daily basis depending on the funding needs and the source of funds to satisfy the needs. The Company had no short-term borrowings outstanding at June 30, 2015 or at December 31, 2014.

The Company also enters into repurchase agreements to facilitate customer transactions that are accounted for as secured borrowings. These transactions typically involve the receipt of deposits from customers that the Company collateralizes with its investment portfolio and had average rates of 1.39% for the six months ended June 30, 2015.

The following table details the average and ending balances of repurchase transactions as of and for the six months ended June 30, 2015 and 2014:

TABLE 7-REPURCHASE TRANSACTIONS



(In thousands)	2015		2014
Average balance	$	120,382	$	95,667
Ending balance	117,840		106,393

Long-term Borrowings

The Company's long-term borrowings consisted of $60.0 million in subordinated debentures, a $3.4 million loan related to the Company's sponsored Employee Stock Ownership Trust and a $40.0 million borrowing which is in the legal form of a long-term repurchase agreement. The Company issued the subordinated debentures during the first quarter of 2015 due to the favorable rate environment and the opportunity to inject additional capital into the Company to fund growth. The debentures were issued with a rate of 5.75%. The loan related to the Company's sponsored Employee Stock Ownership Trust was entered into during the first quarter of 2015 to purchase 100,000 shares of Company stock. The $40.0 million borrowing was entered into in connection with the Company’s asset liability management as a hedge against rising interest rates.

Shareholders’ Equity

Shareholders’ equity provides a source of permanent funding, allows for future growth, and provides the Company with a cushion to withstand unforeseen adverse developments. Shareholders’ equity increased $33.5 million, or 7.7%, from $436.4 million as of December 31, 2014, primarily as a result of the Company’s retained earnings over the period.

During June 2015, the holder of the Company's Series C preferred stock exchanged its remaining 364,983 shares for an equivalent number of common shares.

Regulatory Capital

As of June 30, 2015, the Company and First NBC Bank were in compliance with all regulatory requirements and First NBC Bank was classified as “well capitalized” for purposes of the FDIC’s prompt corrective action requirements.

The following table presents the actual capital amounts and regulatory capital ratios for the Company and First NBC Bank as of June 30, 2015:

TABLE 8-REGULATORY CAPITAL RATIOS



	“Well Capitalized” Minimums		June 30, 2015
(In thousands)	“Well Capitalized” Minimums		Actual		Amount
First NBC Bank Holding Company
Tier 1 leverage capital			9.80	%	$	391,775
Tier 1 risk-based capital			10.79	%	391,775
Total risk-based capital			13.72	%	497,893
Common equity tier 1 risk-based capital			10.79	%	391,775
First NBC Bank
Tier 1 leverage capital	5.00	%	10.52	%	419,853
Tier 1 risk-based capital	8.00	%	11.58	%	419,853
Total risk-based capital	10.00	%	12.85	%	465,915
Common equity tier 1 risk-based capital	6.50	%	11.58	%	419,853

RESULTS OF OPERATIONS

Income available to common shareholders was $16.8 million and $12.4 million for the three months ended June 30, 2015 and 2014, respectively. Earnings per share on a diluted basis were $0.88 and $0.65 for the second quarters of 2015 and 2014, respectively. For the three months ended June 30, 2015, net interest income decreased $0.4 million, or 1.7%, over the same period of 2014, as interest income increased $1.3 million, or 3.5%, and interest expense increased $1.8 million, or 16.5%. The increase in interest income of $1.3 million, compared to the same period of 2014, was due primarily to an increase in average interest-earning assets of $478.1 million, which increased interest income due to volume of $5.1 million. Net interest income was also impacted by an increase in interest expense of $1.8 million during the second quarter of 2015 compared to the second quarter of 2014. The increase was attributable to an increase in average interest-bearing liabilities of $436.5 million, which increased interest expense volume to $1.7 million. Interest expense was also impacted by the subordinated debentures that were issued in February 2015 which bear interest at 5.75% and had a $0.9 million impact on interest expense.

Income available to common shareholders was $32.5 million and $24.8 million for the six months ended June 30, 2015 and 2014, respectively. Earnings per share on a diluted basis were $1.70 and $1.31 for the six months ended June 30, 2015 and 2014, respectively. For the six months ended June 30, 2015, net interest income increased $2.3 million, or 4.5%, over the same period of 2014, as interest income increased $5.3 million, or 7.3%, and interest expense increased $2.9 million, or 14.0%. The

increase in interest income of $5.3 million, compared to the same period of 2014, was due primarily to an increase in average interest-earning assets of $480.3 million, which increased interest income due to volume of $10.5 million. Net interest income was also impacted by an increase in interest expense of $2.9 million during the six months ended June 30, 2015 compared to the same period of 2014. The increase was attributable to an increase in average interest-bearing liabilities of $429.2 million, which increased interest expense volume to $3.2 million. Interest expense was also impacted by the subordinated debentures that were issued in February 2015 which bear interest at 5.75% and had a $1.2 million impact on interest expense.

Net Interest Income

Net interest income, the primary contributor to the Company’s earnings, represents the difference between the income that the Company earns on interest-earning assets and the cost of interest-bearing liabilities. Net interest income depends upon the volume of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them. Net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as “volume changes.” It is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing deposits and other borrowed funds, referred to as “rate changes.”

The Company’s net interest spread, which is the difference between the average yield earned on average earning assets and the average rates paid on average interest-bearing liabilities, was 2.67% and 3.15% during the three months ended June 30, 2015 and 2014, respectively, a decrease of 48 basis points. The Company’s net interest margin was 2.86% for the second quarter of 2015, compared to 3.35% for the second quarter of 2014, a decrease of 49 basis points. On a year-to-date basis, the Company’s net interest spread of 2.81% was 30 basis points lower than the 3.11% earned during the six months of 2014. The Company’s year-to-date net interest margin of 3.01% was 32 basis points lower than the 3.33% earned during the first six months of 2014.

Net interest income decreased $0.4 million to $26.1 million, or 1.7%, for the three months ended June 30, 2015, from $26.6 million for the same period in 2014. The primary driver of the decrease in net interest income was an increase of $1.8 million, or 16.5%, in interest expense during the second quarter of 2015, as compared to the same period in 2014, which was partially offset by an increase of $1.3 million, or 3.5%, increase in interest income over the same periods. The increase in interest income was due primarily to the significant growth in average interest-earning assets during the second quarter of 2015 to $3.7 billion from $3.2 billion during the second quarter of 2014, which was offset by a decrease in the earning asset yield of 47 basis points to 4.23% from 4.70% over the same period in 2014.

Net interest income increased to $53.7 million, or 4.5%, for the six months ended June 30, 2015, from $51.4 million for the same period in 2014. The primary driver of the decrease in net interest income was a $5.3 million, or 7.3%, increase in interest income during the first six month period of 2015, as compared to the same period in 2014, which was partially offset by a $2.9 million, or 14.0%, increase in interest expense over the same periods. The increase in interest income was due primarily to the significant growth in average interest-earning assets for the six months ended June 30, 2015 to $3.6 billion from $3.1 billion during the same period of 2014, which was offset by a decrease in the earning asset yield of 33 basis points to 4.35% from 4.68% over the same period in 2014.

The decrease in the earning asset yield for the six months ended June 30, 2015 was due primarily to a 5 basis points impact from the excess liquidity from the net proceeds from the subordinated debt issuance substantially contributed to the increase in the average short-term investments balance by $82.9 million compared to the prior year. The excess liquidity from the subordinated debt issuance will continue to be a drag on the Company's net interest margin until the funds are fully deployed. The Company invested some of the excess liquidity in higher yield accounts which increased the yield 6 basis points compared to the same period of 2014. The Company issued the debentures during the first quarter of 2015 due to the favorable rate environment and as a good source of capital to continue its growth. Also impacting the earning asset yield was a decrease of 38 basis points in the loan yield compared to the same period of 2014. This was due primarily to the loan portfolio mix of fixed and variable rate loans compared to the prior year which was more heavily weighted to fixed rate loans which had higher rates. The Company entered into four additional Prime rate swaps with a notional amount of $75.0 million during the first quarter of 2015, and the Company has a total notional value on all its Prime cash flow hedges of $325.0 million. The Company entered into the additional Prime hedges to continue to mitigate the fixed and variable rate loan shift in its portfolio to a more evenly balanced portfolio. The Company has started to experience a shift in its customer behavior to more fixed rate loans. The Company anticipates with this shift in behavior and the additional Prime hedges that these will have a positive impact on its loan yield in future periods. The decrease in the earning asset yield was offset by a 3 basis points increase in the average yield of the investment in short-term receivables. The increase in interest expense was due primarily to an increase in average interest-bearing deposits for the six months period ended June 30, 2015 to $2.9 billion, as compared to $2.5 billion for the same period in 2014, while the Company's cost of deposits decreased 11 basis points. The decrease in the cost of deposits was due to the Company's tiered pricing strategy on all of its deposit products (including certificates of deposit). The Company's cost of funds decreased 3 basis points compared to the same period in 2014. The decrease in the cost of funds was offset by a 7 basis point increase in the cost of borrowings due to the issuance of the subordinated debentures in February 2015.

The trends discussed above for the six month periods ended June 30, 2015 and 2014 were the same trends for the second quarter of 2015 compared to the second quarter of 2014.

The following tables present, for the periods indicated, the distribution of average assets, liabilities and equity, interest income and resulting yields earned on average interest-earning assets and interest expense and rates paid on average interest-bearing liabilities. Nonaccrual loans are included in the calculation of the average loan balances and interest on nonaccrual loans is included only to the extent recognized on a cash basis.

TABLE 9-AVERAGE BALANCES, NET INTEREST INCOME AND INTEREST YIELDS/RATE



	For the Three Months Ended June 30,
	2015							2014
(In thousands)	Average Balance			Interest		Average Yield/Rate		Average Balance			Interest		Average Yield/Rate
Assets:
Interest-earning assets:
Short-term investments	$	140,189		$	94	0.27	%	$	53,592		$	27	0.20	%
Investment in short-term receivables	229,804			1,514		2.64	%	213,262			1,391		2.62	%
Investment securities	339,041			2,215		2.62	%	372,932			2,378		2.56	%
Loans (including fee income)	2,946,483			34,685		4.72	%	2,537,666			33,397		5.28	%
Total interest-earning assets	3,655,517			38,508		4.23	%	3,177,452			37,193		4.70	%
Less: Allowance for loan losses	(46,034		)					(35,523		)
Noninterest-earning assets	481,848							377,922
Total assets	$	4,091,331						$	3,519,851
Liabilities and shareholders’ equity:
Interest-bearing liabilities:
Savings deposits	$	55,475		$	87	0.63	%	$	54,713		$	113	0.83	%
Money market accounts	1,114,547			3,334		1.20	%	804,232			2,743		1.37	%
NOW accounts	568,084			1,459		1.03	%	512,685			1,451		1.14	%
Certificates of deposit	1,002,521			4,542		1.82	%	1,010,782			4,584		1.82	%
CDARS®	221,870			1,240		2.24	%	202,345			1,103		2.19	%
Total interest-bearing deposits	2,962,497			10,662		1.44	%	2,584,757			9,994		1.55	%
Fed funds purchased and repurchase agreements	118,935			416		1.40	%	108,498			411		1.52	%
Borrowings	103,392			1,324		5.14	%	55,110			238		1.73	%
Total interest-bearing liabilities	3,184,824			12,402		1.56	%	2,748,365			10,643		1.55	%
Noninterest-bearing liabilities:
Non-interest-bearing deposits	410,502							331,804
Other liabilities	38,460							38,219
Total liabilities	3,633,786							3,118,388
Shareholders’ equity	457,545							401,463
Total liabilities and equity	$	4,091,331						$	3,519,851
Net interest income				$	26,106						$	26,550
Net interest spread(1)						2.67	%						3.15	%
Net interest margin(2)						2.86	%						3.35	%



	For the Six Months Ended June 30,
	2015							2014
(dollars in thousands)	Average Outstanding Balance			Interest Earned/Paid		Average Yield/Rate		Average Outstanding Balance			Interest Earned/Paid		Average Yield/Rate
Assets:
Interest-earning assets:
Short term investments	$	124,768		$	158	0.26	%	$	41,842		$	42	0.20	%
Investment in short-term receivables	231,735			3,204		2.79	%	225,321			3,086		2.76	%
Investment securities	342,068			4,319		2.55	%	371,457			4,730		2.57	%
Loans (including fee income)	2,896,747			69,933		4.87	%	2,476,421			64,496		5.25	%
Total interest-earning assets	3,595,318			77,614		4.35	%	3,115,041			72,354		4.68	%
Less: Allowance for loan losses	(44,674		)					(34,066		)
Noninterest-earning assets	469,437							363,213
Total assets	$	4,020,081						$	3,444,188
Liabilities and shareholders’ equity:
Interest-bearing liabilities:
Savings deposits	$	54,422		$	169	0.63	%	$	53,970		$	219	0.82	%
Money market deposits	1,103,806			6,622		1.21	%	758,004			5,223		1.39	%
NOW accounts	548,936			2,767		1.02	%	515,465			2,890		1.13	%
Certificates of deposit	989,470			8,893		1.81	%	1,024,684			9,251		1.82	%
CDARS®	220,718			2,455		2.24	%	190,705			2,070		2.19	%
Total interest-bearing deposits	2,917,352			20,906		1.45	%	2,542,828			19,653		1.56	%
Fed funds purchased and repurchase agreements	120,382			843		1.41	%	95,785			717		1.51	%
Borrowings	87,039			2,137		4.95	%	56,923			587		2.08	%
Total interest-bearing liabilities	3,124,773			23,886		1.54	%	2,695,536			20,957		1.57	%
Noninterest-bearing liabilities:
Non-interest-bearing deposits	405,935							316,806
Other liabilities	39,768							36,587
Total liabilities	3,570,476							3,048,929
Shareholders’ equity	449,605							395,259
Total liabilities and equity	$	4,020,081						$	3,444,188
Net interest income				$	53,728						$	51,397
Net interest spread(1)						2.81	%						3.11	%
Net interest margin(2)						3.01	%						3.33	%


(1)	Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.


(2)	Net interest margin is net interest income divided by average interest-earning assets.

The following table analyzes the dollar amount of change in interest income and interest expense with respect to the primary components of interest-earning assets and interest-bearing liabilities. The table shows the amount of the change in interest income or interest expense caused by either changes in outstanding balances or changes in interest rates. The effect of a change in balances is measured by applying the average rate during the first period to the average balance (“volume”) change between the two periods. The effect of changes in rate is measured by applying the change in rate between the two periods to the average volume during the first period. Changes attributable to both rate and volume that cannot be segregated have been allocated proportionately to the absolute value of the change due to volume and the change due to rate.

TABLE 10-SUMMARY OF CHANGES IN NET INTEREST INCOME



	For the Three Months Ended June 30,
	2015/2014 Change Attributable To
(In thousands)	Volume			Rate			Total
Interest-earning assets:
Short-term investments	$	48		$	19		$	67
Investment in short-term receivables	108			15			123
Investment securities	(217		)	54			(163		)
Loans (including fee income)	5,120			(3,832		)	1,288
Total increase (decrease) in interest income	$	5,059		$	(3,744	)	$	1,315
Interest-bearing liabilities:
Savings deposits	$	1		$	(27	)	$	(26	)
Money market accounts	1,015			(424		)	591
NOW accounts	149			(141		)	8
Certificates of deposit	69			26			95
Borrowed funds	487			604			1,091
Total increase (decrease) in interest expense	1,721			38			1,759
Increase (decrease) in net interest income	$	3,338		$	(3,782	)	$	(444	)

	For the Six Months Ended June 30,
	2015/2014 Change Attributable To
(dollars in thousands)	Volume			Rate			Total
Interest-earning assets:
Short-term investments	$	89		$	27		$	116
Investment in short-term receivables	89			29			118
Investment securities	(374		)	(37		)	(411		)
Loans (including fee income)	10,648			(5,211		)	5,437
Total increase (decrease) in interest income	$	10,452		$	(5,192	)	$	5,260
Interest-bearing liabilities:
Savings deposits	$	1		$	(51	)	$	(50	)
Money market deposits	2,284			(885		)	1,399
NOW accounts	176			(299		)	(123		)
Certificates of deposit	9			18			27
Borrowed funds	760			916			1,676
Total increase (decrease) in interest expense	3,230			(301		)	2,929
Increase (decrease) in net interest income	$	7,222		$	(4,891	)	$	2,331

Provision for Loan Losses

The provision for loan losses represents management’s determination of the amount necessary to be charged against the current period’s earnings to maintain the allowance for loan losses at a level that is considered appropriate in relation to the estimated losses inherent in the loan portfolio. The Company assesses the allowance for loan losses monthly and will make provisions for loan losses as deemed appropriate.

For the three months ended June 30, 2015, the provision for loan losses was $5.6 million, an 86.7% increase from the same period in 2014. For the six months ended June 30, 2015, the provision for loan losses was $8.6 million, a 43.3% increase from the same period in 2014. The Company increased its provision for loan losses $2.6 million during the second quarter of 2015

compared to the same period of 2014 was due primarily to an increase in the qualitative risk associated with its oil and gas portfolio due in part to the fact that oil and gas prices have continued to remain depressed for an extended period of time. As of June 30, 2015, the ratio of allowance for loan losses to total loans was 1.72%, compared to 1.53% at December 31, 2014 and 1.45% at June 30, 2014.

Noninterest Income

For the three months ended June 30, 2015, noninterest income was $3.6 million compared to $2.9 million for the same period in 2014, an increase of $0.6 million, or 21.3%. The increase was driven by increases of $0.1 million in cash surrender value income on bank-owned life insurance and $0.6 million related to other noninterest income, offset by an increase of $0.1 million in gains in other assets sold. For the first six months of 2015, noninterest income decreased $0.2 million, or 3.6%, for the same period in 2014. The decrease in noninterest income compared to the first six months of 2014 was due primarily to decreases in income from sales of state tax credits of $0.6 million and CDE fees of $0.6 million offset by increases of in other noninterest income of $0.7 million and cash surrender value income on bank-owned life insurance of $0.3 million.

The following table presents the components of noninterest income for the respective periods:

TABLE 11-NONINTEREST INCOME



	For the Three Months Ended							For the Six Months Ended
	June 30,					Percent Increase (Decrease)		June 30,					Percent Increase (Decrease)
(In thousands)	2015			2014		Percent Increase (Decrease)		2015			2014		Percent Increase (Decrease)
Service charges on deposit accounts	$	585		$	498	17.5	%	$	1,144		$	1,057	8.2	%
Investment securities gain (loss), net	—			56		(100	)	(50		)	56		NM
Gain (loss) on assets sold, net	(32		)	64		NM		11			139		(92.1	)
Gain on sale of loans, net	101			70		44.3		116			70		65.7
Cash surrender value income on bank-owned life insurance	353			237		48.9		705			396		78.0
Income from sale of state tax credits	668			728		(8.2	)	1,187			1,761		(32.6	)
Community Development Entity fees earned	133			196		(32.1	)	256			875		(70.7	)
ATM fee income	523			505		3.6		1,024			978		4.7
Other	1,226			579		NM		1,674			960		NM
Total noninterest income	$	3,557		$	2,933	21.3	%	$	6,067		$	6,292	(3.6	)%

Service charges on deposit accounts. The Company earns fees from its customers for deposit-related services and these fees comprise a significant and predictable component of the Company’s noninterest income. The increase for the three month and six month period of 2015 compared to 2014 was due primarily to an increase in NSF charges.

Investment securities gain (loss). The Company experienced a decrease in investment securities gain (loss) during the second quarter of 2015 and for the year-to-date period when compared to the same periods of 2014. From time to time, the Company sells investments which the proceeds are used to fund loan demand, manage its asset liability sensitivity or for other business purposes.

Gain on sale of loans. The Company has historically been an active participant in Small Business Administration and USDA loan programs as a preferred lender and typically sells the guaranteed portion of the loans it originates. The Company believes these government guaranteed loan programs are an important part of its service to the businesses in its communities and expects to continue expanding its efforts and income related to these programs.

Cash surrender value income on bank-owned life insurance. The income earned from bank-owned life insurance increased $0.1 million in the second quarter of 2015 when compared to the second quarter of 2014. For the six months ended June 30, 2015, the balance increased $0.3 million compared to the same period in 2014. The increase compared to the prior year three month and six month periods was due to the timing of the additional investment during the second quarter 2014 which the prior year amounts only reflects a partial quarter increase from the additional investment.

Income from sales of state tax credits. As part of the Company’s investment in projects that generate federal income tax credits, the Company may receive state tax credits along with federal credits. Although the Company cannot utilize most state tax credits to offset its own tax liability, the Company earns income on the sale of state tax credits. The balance decreased $0.1 million for the second quarter of 2015, compared to the second quarter of 2014 due to the syndication fees in income from sales

of state tax credits generated in the prior year from the $23.9 million in qualified equity investment authority that the Company was awarded under the State of Louisiana New Markets Jobs Act in 2013. For the six months ended June 30, 2015, the Company experienced a decrease of $0.6 million in income from sales of state tax credits compared to the same period in 2014, which was due to the above.

Community Development Entity fees earned. The Company earns management fees through its subsidiary, First NBC Community Development Fund, LLC, related to the Fund’s New Markets Tax Credit investments. The Company’s results are impacted on a quarterly basis by seasonal factors related to its participation in federal and state tax credit programs. The Company’s fee income reflects this timing as it earns fees as each project closes; the fee is a percentage of the award. The Company recognizes the fees related to the tax credit projects when they are earned. For the second quarter of 2015, the management fees recognized were $0.1 million compared to $0.2 million for the same period of 2014. For the six months ended June 30, 2015, the management fees decreased $0.6 million compared to the same period of 2014. The decrease was due to the timing of several projects which closed during the first quarter of 2014. The Company receives CDE fees on an annual basis for projects which are still within the compliance period.

ATM fee income. This category includes income generated by automated teller machines, or ATMs. The income earned from ATMs increased for the three and six month periods ended June 30, 2015 compared to the same periods in 2014 due primarily to decreased transaction volume.

Other. This category includes a variety of other income producing activities, including income generated from trust services, credit cards and wire transfers. The Company experienced an increase for the three and six month periods of 2015 compared to the three and six month periods of 2014 due to the errors identified related to a single Low-Income Housing investment which the Company determined it was the primary beneficiary and the activity of the entity required consolidation in the Company's financial results. The increase was due to the year to date 2015 revenue recorded for the entity of $0.8 million.

Noninterest Expense

Noninterest expense consists primarily of salary and employee benefits, occupancy and other expenses related to the Company’s operation and expansion. Noninterest expense increased by $4.5 million, or 24.4%, in the second quarter of 2015, compared to the same period in 2014. For the six months ended June 30, 2015, noninterest expense increased $9.7 million, or 27.0%, compared to the six months ended June 30, 2014.

The following table presents the components of noninterest expense for the respective periods:

TABLE 12-NONINTEREST EXPENSE



	Three Months Ended						Six Months Ended
	June 30,				Percent Increase (Decrease)		June 30,				Percent Increase (Decrease)
(In thousands)	2015		2014		Percent Increase (Decrease)		2015		2014		Percent Increase (Decrease)
Salaries and employee benefits	$	7,689	$	5,942	29.4	%	$	14,596	$	11,339	28.7	%
Occupancy and equipment expenses	3,009		2,684		12.1		5,937		5,268		12.7
Professional fees	1,701		1,511		12.6		3,842		3,410		12.7
Taxes, licenses, and FDIC assessments	1,693		1,343		26.1		2,932		2,542		15.3
Impairment of investment in tax credit entities	2,647		3,377		(21.6	)	7,499		6,204		20.9
Write-down of other real estate	42		20		NM		100		186		(46.2	)
Data processing	1,581		1,141		38.6		3,003		2,239		34.1
Advertising and marketing	673		556		21.0		1,691		1,134		49.1
Other	4,064		1,994		NM		6,003		3,583		NM
Total noninterest expense	$	23,099	$	18,568	24.4	%	$	45,603	$	35,905	27.0	%

Salaries and employee benefits. These expenses increased $1.7 million, or 29.4%, during the second quarter of 2015 compared to the same period of 2014. For the six months ended June 30, 2015, these expenses increased $3.3 million, or 28.7%, compared to the same period in 2014. The increase is primarily due to merit increases and bonuses awarded during the first quarter of 2015, as well as the increase in the Company’s headcount compared to the same period of 2014. The increase in salaries and bonuses for the three month and six month periods of 2015 compared to the same periods of 2014 were $1.4 million and $2.7 million, respectively. The Company had 539 full-time equivalent employees at June 30, 2015, compared to 501 employees as of June 30, 2014, an increase of 38 full-time equivalent employees, or 7.6%. The increase in headcount was due to the Crestview acquisition and the continued growth of the Company.

Occupancy and equipment expenses. Occupancy and equipment expenses, consisting primarily of rent and depreciation, increased $0.3 million, or 12.1%, between the second quarter of 2015 and 2014. For the six months ended June 30, 2015, occupancy and equipment expenses increased $0.7 million, or 12.7%, compared to the same period in 2014. The level of the Company’s occupancy expenses is related to the number of branch offices that it maintains,which increased during 2015 with the acquisition of three branches in the Crestview acquisition, and management expects that these expenses will increase as the Company continues to implement its strategic growth plan.

Professional fees. Professional fees increased $0.2 million, or 12.6%, between the second quarter of 2015 and 2014. For the six months ended June 30, 2015, professional fees increased $0.4 million, or 12.7%, compared to $3.4 million for the same period of 2014. The increase for the three month and six month periods of 2015 compared to 2014 was due primarily to an increase in external audit fees of $0.2 million and $0.3 million, respectively.

Taxes, licenses and FDIC assessments. The expenses related to taxes, licenses and FDIC insurance premiums and assessments for the second quarter of 2015 increased 26.1% from the same period of 2014. For the six months ended June 30, 2015, these expenses increased $0.4 million, or 15.3%, from the same period in 2014. The increase over the comparable three month and six month periods was primarily attributable to increases in the FDIC assessment due to the strong growth in the Company’s deposits, the acquisition of deposit liabilities in the Crestview acquisition during the first quarter of 2015, and increases in the bank shares tax expense.

Impairment of investment in tax credit entities. Impairment of investment in tax credit entities represents impairment recorded during the current period for investments in entities that undertake projects that qualify for tax credits against federal income taxes as well as any applicable equity income or loss on its equity investment. At this time, investments are directed at tax credits issued under the Federal New Markets, Federal Historic Rehabilitation and Low-Income Housing Tax Credit programs. All of the Company’s investments in tax credit entities are evaluated for impairment at the end of each reporting period and the Company records impairment, if any, in its consolidated statement of income as a component of noninterest expense.

The following table presents the impairment of investment in tax credit entities by type of credit for the respective periods:

TABLE 13-TAX CREDIT INVESTMENT IMPAIRMENT BY CREDIT TYPE



	For the Three Months Ended June 30,					For the Six Months Ended June 30,
(In thousands)	2015			2014		2015			2014
Low-Income Housing	$	(963	)	$	542	$	(239	)	$	1,083
Federal Historic Rehabilitation	236			388		1,059			760
Federal NMTC	3,374			2,447		6,679			4,361
Total impairment of investment in tax credit entities	$	2,647		$	3,377	$	7,499		$	6,204

The decrease in impairment of investment in tax credit entities for the three month period of 2015 compared to the same period of 2014, was due to the cumulative effect of the correction of the error in accounting for its investments in tax credit entities of $0.4 million. During the second quarter of 2015, the Company began accounting for its investment in tax credit entities utilizing the equity method of accounting and evaluating its investments for impairment. The balances for the three month and six month period reflect this change to the equity method from the cost method whereby the Company previously had amortized the cost of its investment over the compliance period.

Data processing. Data processing expenses increased $0.4 million for the second quarter of 2015 compared to the same period of 2014. For the six months ended June 30, 2015, these expenses increased $0.8 million, or 34.1%, from the same period in 2014. The increase was a result of increased transaction volume due to the Company's organic growth and conversion cost during the second quarter of 2015 related to the Crestview acquisition.

Advertising and marketing. Advertising and marketing expenses increased $0.1 million over the three month period ended June 30, 2015 and 2014. The balance increased $0.6 million, or 49.1%, for the six months ended June 30, 2015 compared to the same period in 2014. The increase was due primarily to an increases in sponsorships in the markets it operates of $0.3 million and contributions of $0.2 million.

Other. These expenses include costs related to insurance, customer service, communications, supplies and other operations. The Company experienced an increase for the three and six month periods of 2015 compared to the three and six month periods of 2014 due to the errors identified related to a single Low-Income Housing investment which the Company determined it was the primary beneficiary and the activity of the entity required consolidation in the Company's financial results. The increase was due to the cumulative impact of the net expenses recorded for the entity of $1.4 million and $0.4 million in year to date 2015 expenses.

Provision for Income Taxes

The provision for income taxes varies due to the amount of income recognized under generally accepted accounting principles and for tax purposes and as a result of the tax benefits derived from the Company’s investments in tax-advantaged securities and tax credit projects. The Company engages in material investments in entities that are designed to generate tax credits, which it utilizes to reduce its current and future taxes. These credits are recognized when earned as a benefit in the provision for income taxes.

The Company recognized an income tax benefit for the quarterly period ended June 30, 2015 of $16.2 million, compared to $4.8 million for the same quarterly period in 2014. The Company's income tax benefit was offset by $0.4 million and $0.3 million of Federal NMTC basis reduction for the quarterly periods ended June 30, 2015 and 2014, respectively and $0.1 million and $0.7 million in Federal Historic Rehabilitation basis reduction for the quarterly period ended June 30, 2015 and 2014, respectively. The Company recognized an income tax benefit for the year-to-date period ended June 30, 2015 of $27.7 million, compared to $9.7 million for the same period of 2014. The income tax benefit for the year-to-date periods ended June 30, 2015 and 2014 were offset by Federal NMTC basis reduction of $0.7 million. The year-to-date income tax benefit for the six months ended June 30, 2015 and 2014 was also offset by Federal Historic Rehabilitation basis reduction of $0.3 million and $0.7 million, respectively. The increase in income tax benefit for the periods presented was due primarily to the increase in Federal Historic Rehabilitation Tax Credit investment activity in 2015 compared to 2014. The Company's investment in Federal Historic Rehabilitation Tax credit entities increased $34.6 million as of June 30, 2015 compared to the same period of 2014.

The Company expects to experience an effective tax rate below the statutory rate of 35% due primarily to the receipt of Federal New Markets Tax Credits, Low-Income Housing Tax Credits and Federal Historic Rehabilitation Tax Credits.

Although the Company’s ability to continue to access new tax credits in the future will depend, among other factors, on federal and state tax policies, as well as the level of competition for future tax credits, the following table represents the federal income tax credits the Company expects to receive in the years indicated. The Company has made investments in Federal Historic Rehabilitation tax credit projects which have not been placed in service and as such have not received the credits. The table below in future periods for Federal Historic Rehabilitation tax credits includes amounts the Company expects to receive from those investments. The gross Federal Historic Rehabilitation credits, depending on the tax structure, could be offset by basis reduction of 35%.

TABLE 14-FUTURE TAX CREDITS



(In thousands)	Federal New Markets		Low-Income Housing		Federal Historic Rehabilitation(1)
2015	$	16,349	$	4,015	$	40,476
2016	15,872		4,968		36,797
2017	13,852		5,443		1,192
2018	7,902		5,443		—
2019	3,899		5,443		—
2020 and thereafter	1,500		16,796		—
Total	$	59,374	$	42,108	$	78,465

(1) The Federal Historic Rehabilitation balance in future periods includes $36.7 million in 2016 and $1.2 million in 2017 of tax credits the Company expects to generate from projects which an investment has been made as of June 30, 2015.

Liquidity and Capital Resources

Liquidity refers to the Company’s ability to maintain cash flow that is adequate to fund operations and meet present and future financial obligations through either the sale or maturity of existing assets or by obtaining additional funding through liability management. Management believes that the sources of available liquidity are adequate to meet all reasonably foreseeable short-term and intermediate-term demands.

The Company evaluates liquidity both at the parent company level and at the bank level. Because First NBC Bank represents the Company’s only material asset, other than cash, the primary sources of funds at the parent company level are cash on hand, dividends paid to the Company from First NBC Bank, the net proceeds of capital offerings, and net proceeds from the issuance of subordinated debentures. The primary sources of funds at First NBC Bank are deposits, short and long-term funding from

the Federal Home Loan Bank (FHLB) or other financial institutions, and principal and interest payments on loans and securities. While maturities and scheduled payments on loans and securities provide an indication of the timing of the receipt of funds, other sources of funds such as loan prepayments and deposit inflows are less predictable as they depend on the effects of changes in interest rates, economic conditions and competition. The primary investing activities are the origination of loans and the purchase of investment securities. If necessary, First NBC Bank has the ability to raise liquidity through additional collateralized borrowings, FHLB advances or the sale of its available for sale investment portfolio.

Investing activities are funded primarily by net deposit inflows, principal repayments on loans and securities, and borrowed funds. Gross loans increased to $2.9 billion as of June 30, 2015, from $2.8 billion as of December 31, 2014. At June 30, 2015, First NBC Bank had total commitments to make loans of approximately $755.0 million which include un-advanced lines of credit and loans of approximately $650.7 million. The Company anticipates that First NBC Bank will have sufficient funds available to meet its current loan originations and other commitments.

At June 30, 2015, total deposits were approximately $3.4 billion, of which approximately $900.0 million were in certificates of deposits of $100,000 or more. Certificates of deposits scheduled to mature in one year or less as of June 30, 2015 totaled approximately $643.7 million while certificates of deposits of $100,000 or more with a maturity of one year or less totaled approximately $470.4 million.

In general, the Company monitors and manages liquidity on a regular basis by maintaining appropriate levels of liquid assets so that funds are available when needed. Excess liquidity is invested in overnight federal funds sold and other short-term investments. As a member of the Federal Home Loan Bank of Dallas, First NBC Bank had access to approximately $436.7 million of available lines of credit secured by a blanket lien of its real estate loans as of June 30, 2015. In addition, First NBC Bank maintained $85.0 million in lines of credit with its correspondent banks to support its liquidity.

Asset/Liability Management

The Company’s asset/liability management policy provides guidelines for effective funds management and the Company has established a measurement system for monitoring its net interest rate sensitivity position. The Company seeks to maintain a sensitivity position within established guidelines.

As a financial institution, the primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of the assets and liabilities, other than those which have a short term to maturity. Because of the nature of its operations, the Company is not subject to foreign exchange or commodity price risk. The Company does not own any trading assets.

Interest rate risk is the potential of economic loss due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income. The Company recognizes that certain risks are inherent and that the goal is to identify and understand the risks.

The Company actively manages exposure to adverse changes in interest rates through asset and liability management activities within guidelines established by the asset/liability management committee. The committee, which is composed primarily of senior officers and directors of First NBC Bank and First NBC Bank Holding Company, has the responsibility for ensuring compliance with asset/liability management policies. Interest rate risk is the exposure to adverse changes in net interest income as a result of market fluctuations in interest rates. On a regular basis, the committee monitors interest rate and liquidity risk in order to implement appropriate funding and balance sheet strategies.

The Company utilizes a net interest income simulation model to analyze net interest income sensitivity. Potential changes in market interest rates and their subsequent effects on net interest income are then evaluated. The model projects the effect of instantaneous movements in interest rates. Decreases in interest rates apply primarily to long-term rates, as short-term rates are not modeled to decrease below zero. Assumptions based on the historical behavior of the Company’s deposit rates and balances in relation to changes in interest rates are also incorporated into the model. These assumptions are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various management strategies.

The Company’s interest sensitivity profile was somewhat asset sensitive as of June 30, 2015, though its base net interest income would increase in the case of either an interest rate increase or decrease. Hedging instruments utilized by First NBC Bank, which consist primarily of interest rate swaps and options, protect the bank in a rising interest rate environment by

providing long term funding costs at a fixed interest rate to allow the bank to continue to fund its projected loan growth. In addition, the bank utilizes interest rate floors in loan pricing to manage interest rate risk in a declining rate environment.

The following table sets forth the net interest income simulation analysis as of June 30, 2015:

TABLE 15-CHANGE IN NET INTEREST INCOME FROM INTEREST RATE CHANGES



Interest Rate Scenario	% Change in Net Interest Income
+300 basis points	7.0	%
+200 basis points	6.8	%
+100 basis points	3.1	%
Base	—

The Company also manages exposure to interest rates by structuring its balance sheet in the ordinary course of business. An important measure of interest rate risk is the relationship of the repricing period of earning assets and interest-bearing liabilities. The more closely the repricing periods are correlated, the less interest rate risk it has. From time to time, the Company may use instruments such as leveraged derivatives, structured notes, interest rate swaps, caps, floors, financial options, financial futures contracts or forward delivery contracts to reduce interest rate risk. As of June 30, 2015, the Company had hedging instruments in the notional amount of $315.0 million with a fair value liability of $16.1 million and a fair value asset of $1.7 million.

An interest rate sensitive asset or liability is one that, within a defined time period, either matures or experiences an interest rate change in line with general market interest rates. A measurement of interest rate risk is performed by analyzing the maturity and repricing relationships between interest earning assets and interest bearing liabilities at specific points in time (gap). Interest rate sensitivity reflects the potential effect on net interest income of a movement in interest rates. An institution is considered to be asset sensitive, or having a positive gap, when the amount of its interest-earning assets maturing or repricing within a given period exceeds the amount of its interest-bearing liabilities also maturing or repricing within that time period. Conversely, an institution is considered to be liability sensitive, or having a negative gap, when the amount of its interest-bearing liabilities maturing or repricing within a given period exceeds the amount of its interest-earning assets also maturing or repricing within that time period. During a period of rising interest rates, a negative gap would tend to affect net interest income adversely, while a positive gap would tend to increase net interest income. During a period of falling interest rates, a negative gap would tend to result in an increase in net interest income, while a positive gap would tend to affect net interest income adversely.

Although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates.

Additionally, certain assets, such as adjustable-rate loans, have features that restrict changes in interest rates, both on a short-term basis and over the life of the asset. More importantly, changes in interest rates, prepayments and early withdrawal levels may deviate significantly from those assumed in the calculations in the table. As a result of these shortcomings, management focuses more on a net interest income simulation model than on gap analysis. Although the gap analysis reflects a ratio of cumulative gap to total earning assets within acceptable limits, the net interest income simulation model is considered by management to be more informative in forecasting future income at risk.

The Company faces the risk that borrowers might repay their loans sooner than the contractual maturity. If interest rates fall, the borrower might repay their loan, forcing the bank to reinvest in a potentially lower yielding asset. This prepayment would have the effect of lowering the overall portfolio yield which may result in lower net interest income. The Company has assumed that these loans will prepay, if the borrower has sufficient incentive to do so, using prepayment tables provided by third party consultants. In addition, some assets, such as mortgage-backed securities or purchased loans, are held at a premium, and if these assets prepay, the Company would have to write down the premium, which would temporarily reduce the yield. Conversely, as interest rates rise, borrowers might prepay their loans more slowly, which would leave lower yielding assets as interest rates rise.

Impact of Inflation

The Company’s financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles in the United States, which require the measure of financial position and operating results in terms of historic dollars, without considering changes in the relative purchasing power of money over time due to inflation.

Inflation generally increases the costs of funds and operating overhead, and to the extent loans and other assets bear variable rates, the yields on such assets. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant effect on the performance of a

financial institution than the effects of general levels of inflation. In addition, inflation affects a financial institution’s cost of goods and services purchased, the cost of salaries and benefits, occupancy expense and similar items. Inflation and related increases in interest rates generally decrease the market value of investments and loans held and may adversely affect liquidity, earnings and shareholders’ equity.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Since December 31, 2014, there has been no material change in the quantitative or qualitative aspect of the Company’s market risk profile. Quantitative and qualitative disclosures about market risk are presented at December 31, 2014 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. Additional information at June 30, 2015 is included herein under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 4. Controls and Procedures

An evaluation of the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2015 was carried out under the supervision, and with the participation of, the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”).

Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed by the Company under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosures. Disclosure controls include review of internal controls that are designed to provide reasonable assurance that transactions are properly authorized, assets are safeguarded against unauthorized or improper use and transactions are properly recorded and reported. There have not been any change in the Company’s internal controls over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Any control system, no matter how well conceived and operated, can provide only reasonable assurance that its objectives are achieved. The design of a control system inherently has limitations, including the controls’ cost relative to their benefits. Additionally, controls can be circumvented. No cost-effective control system can provide absolute assurance that all control issues and instances of fraud, if any, will be detected.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company and its direct and indirect subsidiaries are parties to lawsuits arising in the ordinary course of business. However, there are no material lawsuits pending to which the Company, any of its direct and indirect subsidiaries, or any of their respective properties are currently subject.

Item 1A. Risk Factors

None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits



Exhibit No. 31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit No. 31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit No. 32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit No. 32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit No. 101.INS		XBRL Instance Document

Exhibit No. 101.SCH		XBRL Taxonomy Extension Schema Document

Exhibit No. 101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit No. 101.LAB		XBRL Taxonomy Extension Label Linkbase Document

Exhibit No. 101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit No. 101.DEF		XBRL Taxonomy Extension Definitions Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




	First NBC Bank Holding Company

Date: August 17, 2015	By:	/s/ Ashton J. Ryan, Jr.
		Ashton J. Ryan, Jr.
		President and Chief Executive Officer

Date: August 17, 2015	By:	/s/ Mary Beth Verdigets
		Mary Beth Verdigets
		Executive Vice President and Chief Financial Officer

First NBC Bank Holding Co - FORM 10-Q - August 17, 2015

Attached files

First NBC Bank Holding Co Reports