8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

Amendment No. 1

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): March 5, 2010

FIRST CITIZENS BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	001-16715	56-1528994
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

4300 Six Forks Road Raleigh, North Carolina	27609
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (919) 716-7000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

On March 11, 2010, First Citizens BancShares, Inc. (BancShares) filed a Current Report on Form 8-K to report that its wholly-owned subsidiary, First-Citizens Bank & Trust Company (FCB), had entered into a definitive Purchase and Assumption Agreement (Agreement) with the Federal Deposit Insurance Corporation (FDIC) on March 5, 2010, pursuant to which FCB purchased substantially all of the assets and assumed the majority of the liabilities of Sun American Bank (Sun American) of Boca Raton, Florida.

This Current Report on Form 8-K/A is being filed to update the disclosures in Item 2.01 and to provide the financial information required by Item 9.01. In reliance on guidance provided in Staff Accounting Bulletin, Topic 1:K, Financial Statements of Acquired Troubled Financial Institutions (SAB 1:K), BancShares has omitted certain financial information of Sun American required by Rule 3-05 of Regulation S-X and the related proforma information under Article 11 of Regulation S-X. SAB 1:K provides relief from the requirements of Rule 3-05 of Regulation S-X under certain circumstances, including a transaction such as the one set forth in the Agreement, in which the Registrant engages in an acquisition of a troubled financial institution for which historical financial statements are not reasonably available and in which federal assistance is an essential and significant part of the transaction.

Item 2.01 – Completion of an Acquisition or Disposition of Assets

The Agreement provides that assets be purchased and liabilities be assumed by FCB at Sun American’s carrying value. Pursuant to the Agreement, FCB received a discount of $69.4 million on the assets and paid no deposit premium.

As required under accounting principles generally accepted in the United States (US GAAP) and as discussed in further detail in Item 9.01, the acquired assets and assumed liabilities were recorded at their estimated fair values. Except where otherwise indicated, the accompanying discussion of assets acquired and liabilities assumed are based on estimated fair values on the date of the Agreement.

Sun American operated through 12 offices in the state of Florida, primarily serving South Florida. The fair value of assets purchased by FCB totaled $530.7 million, including $287.6 million in loans and $8.0 million in other real estate acquired through foreclosure (OREO). FCB assumed liabilities with a fair value of $514.2 million, including $420.0 million in deposits, $42.5 million in short-term borrowings and $40.1 million in long-term obligations.

The loans and OREO purchased from Sun American are covered by two loss share agreements between the FDIC and FCB (one for residential real estate loans and the other for all other loans and OREO), which affords FCB significant loss protection. Under the loss share agreements, the FDIC will cover 80 percent of covered loan and OREO losses up to $99.0 million and 95 percent of losses in excess of that amount. The term for loss share on residential real estate loans is ten years, while the term for loss share on non-residential real estate loans is five years with respect to losses and eight years with respect to loss recoveries. The losses reimbursable by the FDIC are based on the book value of the relevant loan as determined by the FDIC at the date of the transaction. New loans made after that date are not covered by the loss share agreements.

Within 30 days after the end of each calendar quarter beginning June 30, 2010 to February 28, 2020, FCB will deliver to the FDIC a certificate documenting the losses on single family residential mortgage loans, all other loans and OREO and any recoveries offsetting prior losses on such loans.

Within 15 days after the FDIC accepts a certificate as described above, the FDIC will remit payment for the covered portion of a net loss reflected in such certificate. If a certificate reflects a net recovery, then FCB will remit to the FDIC the covered percentages at the time the certificate is submitted.

The Agreement includes a true-up payment in the event FCB’s losses do not reach the stated threshold of $99.0 million. On May 15, 2020, the true-up measurement date, FCB is required to make a true-up payment to the FDIC equal to 50 percent of the excess, if any, of (i) 20 percent of the stated threshold, or $19.8 million, less (ii) the sum of (a) 25 percent of the asset discount, or $17.5 million, plus (b) 25 percent of the cumulative loss share payments plus (c) the cumulative servicing amount. The cumulative servicing amount is 1 percent of the average covered assets for each year during the terms of the loss share agreements.

An analysis of the likely short-term and long-term effects of the loss share agreements on FCB’s cash flows and reported results is included in Item 9.01 below.

The foregoing description of the Agreement, including the loss share agreements, is a summary and is qualified in its entirety by reference to the Agreement. A copy of the Agreement, including the loss share agreements, was attached as Exhibit 2.1 to the Form 8-K filed March 11, 2010.

Item 9.01 – Financial Statements and Exhibits

As set forth in Item 2.01 above, on March 5, 2010, FCB purchased substantially all of the assets and assumed the majority of the liabilities of Sun American pursuant to the Agreement. The following discussion should be read in conjunction with the historical financial statements and the related notes of BancShares, which have been filed with the Securities and Exchange Commission and the audited statement of assets acquired and liabilities assumed, which is included as Exhibit 99.2 to this filing.

FAIR VALUE ESTIMATES

The determination of the fair value of assets acquired and liabilities assumed involves a high degree of judgment and complexity. Management estimated fair values of the acquired assets and assumed liabilities in accordance with US GAAP. However, the amount that BancShares realizes on these assets and liabilities could differ materially from the carrying value reflected in the financial statements. The fair value of the acquired loans, OREO and the FDIC receivable for loss share agreements reflects management’s best estimate of the amount to be realized on each of these assets. To the extent the actual values realized for the acquired loans and OREO are different from the estimates, the FDIC loss share receivable will generally be impacted in an offsetting manner due to the terms of loss share support from the FDIC.

SUMMARY

Including the impact of all fair value adjustments, acquired assets totaled $530.7 million or 2.5 percent of BancShares’ consolidated assets as of March 31, 2010. The fair value of loans acquired totaled $287.6 million, which represented 2.0 percent of gross loans and leases as of March 31, 2010. The fair value of OREO and other assets acquired through foreclosure totaled $8.0 million. FCB recorded a $92.4 million receivable that was based on the present value of projected amounts to be received from the FDIC under the Sun American loss share agreements. BancShares also received cash of $32.0 million from the FDIC as a part of the initial settlement process.

The fair value of liabilities assumed equaled $514.2 million or 2.6 percent of BancShares’ liabilities at March 31, 2010. Deposit liabilities assumed totaled $420.0 million or 2.4 percent of deposit liabilities at March 31, 2010. Short-term borrowings assumed from Sun American totaled $42.5 million or 7.2 percent of short-term borrowings at March 31, 2010 and long-term obligations assumed from Sun American totaled $40.1 million or 4.3 percent of long-term obligations at March 31, 2010.

INVESTMENTS

The following table presents information regarding the securities portfolio acquired on March 5, 2010.

Type of Security	Par Value		Fair Value		Weighted average coupon rate		Average  maturity (years/months)
	(dollars in thousands)
U.S. Government Agency	$	11,850	$	11,852	4.33	%	10/9
GNMA and FNMA mortgage-backed securities		42,465		43,262	4.37	%	28/10
CMO/REMIC mortgage-backed securities		11,697		11,854	4.67	%	19/1
Total	$	66,012	$	66,968

LOANS

The following table presents information regarding the loan portfolio acquired on March 5, 2010:

	March 5, 2010
	(thousands)
Loans covered by loss share agreements
Contractual balance of acquired loans:
Construction/land development	$	91,817
Commercial mortgage		198,147
Residential mortgage		96,861
Commercial and industrial		22,613
Consumer		1,877
Total contractual balance of acquired loans		411,315
Fair value adjustment		(123,707	)
Fair value of loans acquired	$	287,608

The weighted average contractual loan yield was 5.44 percent as of March 5, 2010.

The following table provides the contractual maturity and concentration of loans acquired as of March 5, 2010:

Maturing:	Within 1 year		1 - 5 years		After 5 years		Total		Percentage of total portfolio
Construction/land development	$	62,314	$	23,481	$	6,022	$	91,817	22.32	%
Commercial mortgage		32,822		46,814		118,511		198,147	48.17	%
Residential mortgage		23,586		27,946		45,329		96,861	23.55	%
Commercial and Industrial		10,526		9,314		2,773		22,613	5.50	%
Consumer		1,483		344		50		1,877	0.46	%
Total	$	130,731	$	107,899	$	172,685	$	411,315	100.00	%

Loans maturing later than one year after the acquisition date with variable contractual interest rates have a total contractual balance of $138.7 million and loans with a fixed contractual interest rate have a total contractual balance of $141.9 million.

See Note 6 to the statement of assets acquired and liabilities assumed for discussion of impaired loans.

DEPOSITS

The following table presents information regarding the Sun American deposits assumed by FCB:

	March 5, 2010
	(thousands)
Demand	$	130,595
Savings		59,547
Time		229,870
Total assumed deposits	$	420,012

All brokered deposits of Sun American were retained by the FDIC.

FCB recorded a core deposit intangible asset based on an estimated value of transaction accounts assumed from Sun American. The $629,000 core deposit intangible will be amortized on an accelerated basis over its estimated average life, which was determined to be four years. Non-transaction deposit balances were determined to have no value.

The following table provides the scheduled maturity of all time deposits assumed:

	March 5, 2010
	(thousands)
Maturing during 12-month period ending March 5,
2011	$	213,993
2012		11,924
2013		2,321
2014		843
2015		789
Total	$	229,870

The weighted average contractual interest rate for assumed time deposits is 2.41 percent.

As of March 5, 2010, Sun American had $129.3 million in time deposits of $100,000 or more. The following table provides the scheduled maturity of these time deposits:

	March 5, 2010
	(thousands)
Maturing:
3 months or less	$	21,216
Over 3 through 6 months		35,076
Over 6 through 12 months		65,489
Over 12 months		7,479
Total	$	129,260

SHORT-TERM BORROWINGS

As of March 5, 2010, Sun American had $35.0 million in contractual short-term borrowings from the Federal Home Loan Bank of Atlanta (FHLB). Based on interest rates on comparable borrowings available on March 5, 2010, a premium of $48,000 was recorded on the short-term borrowings from the FHLB. At March 5, 2010, the FHLB short-term borrowings had a weighted average rate of 2.0 percent, and mature on various dates through April 26, 2010. These borrowings are secured by FHLB stock and $113.4 million contractual balance in loans.

At March 5, 2010, Sun American also had $7.5 million in overnight repurchase obligations with the Federal Reserve Bank of Atlanta. Due to the short-term nature of these agreements, no fair value adjustment was recorded for these borrowings.

LONG-TERM OBLIGATIONS

As of March 5, 2010, Sun American had a $7.0 million long-term obligation to the FHLB. Based on interest rates on comparable borrowings available on March 5, 2010, a premium of $336 was recorded on the long-term obligation. The long-term obligation had a contractual rate of 3.9 percent and matures on June 30, 2011.

FCB also assumed $30.0 million of term repurchase agreements. These repurchase agreements are subject to an early termination penalty. Based on the early termination penalty, a fair value adjustment of $2.7 million was recorded on the long-term obligation. The term repurchase agreements mature in March, 2018 and carry a rate of 3.5 percent.

RESULTS OF OPERATIONS

BancShares believes the transaction will improve net interest income, as interest earned on acquired loans and investments will exceed interest paid on assumed deposits and borrowings. The extent to which net interest income may be adversely affected by acquired loans that may be designated as nonaccrual loans at a later date will likely be offset by the loss share agreements and the related discounts recorded upon the purchase of the loans.

Based upon the acquisition date fair values of the net assets acquired, no goodwill was recorded. The transaction resulted in a gain of $27.1 million, which is included in noninterest income in the March 31, 2010 consolidated statement of income in BancShares’ Quarterly Report on Form 10-Q. The gain resulted from the difference between the estimated fair values of acquired assets and assumed liabilities.

Purchased loans and OREO are covered by loss share agreements between the FDIC and FCB, which provide FCB with significant loss protection. Under the loss share agreements, the FDIC will cover 80 percent of covered loan and OREO losses up to $99.0 million and 95 percent of losses in excess of $99.0 million. BancShares expects to be reimbursed by the FDIC for 80 percent of the post-acquisition losses incurred on loans and OREO. In addition, at the end of the loss share agreements, FCB may be required to make a true-up payment to the FDIC.

The loss share agreements will likely have a material impact on the cash flows and operating results of BancShares. It is likely that significant covered loan balances will experience deterioration in payment performance or will be determined to have inadequate collateral values to repay the contractual obligation. If the borrower is unable to make the contractual payments, cash flows will be affected. If a loan is subsequently charged-off after BancShares exhausts its collection efforts, the loss share agreements will cover a substantial portion of the loss associated with the covered assets.

BancShares does not currently expect to record significant loan loss provisions in the foreseeable future related to Sun American’s loan portfolio because the loans were written down to estimated fair value as of the acquisition date. Nevertheless, in the event acquired loan quality deteriorates further in future periods, FCB will record provisions for loan losses and increases in the FDIC receivable.

BancShares believes that noninterest income and expense will both increase as a result of the Sun American transaction. Noninterest income will benefit from the service charge income and other fees generated by new customer relationships. Noninterest expenses will increase due to the personnel, occupancy and other operating costs resulting from the new markets.

LIQUIDITY

Assets acquired from Sun American include $82.4 million of highly-liquid assets (cash and investment securities available for sale), which represent 15.5 percent of total acquired assets. These assets provide liquidity for various operating needs, including the funding of deposit runoff. In addition, the FDIC-assisted transaction provides access to new customers, and allows BancShares the opportunity to generate new deposit balances as needed to support its liquidity position.

BancShares’ residual liquidity is held in cash or invested in overnight investments and investment securities available for sale. Net of amounts pledged for various purposes, the amount of such immediately available balance sheet liquidity amounted to $2.36 billion at March 31, 2010, compared to $1.42 billion at December 31, 2009. The $940 million increase in highly-liquid assets reflects the robust growth in overnight investments and unpledged investment securities.

CAPITAL

At March 31, 2010, BancShares and FCB were “well-capitalized.” The ratios shown below reflect the impact of the First Regional and Sun American acquisitions. The impact of the acquisitions of First Regional or Sun American was not material to the risk-based capital ratios or the leverage ratios of BancShares or FCB.

	March 31, 2010
	BancShares		FCB		Well-capitalized requirement
Tier 1 risk-based capital ratio	13.83	%	13.61	%	5.00	%
Total risk-based capital ratio	16.07	%	16.00	%	10.00	%
Tier 1 leverage capital ratio	9.36	%	8.48	%	6.00	%

RISK FACTORS

Mergers and acquisitions

We must receive federal and state regulatory approvals before we can acquire a bank or bank holding company or acquire assets and assume liabilities of failed banks in FDIC-assisted transactions. Prior to granting approval, bank regulators consider, among other factors, the effect of the acquisition on competition, financial condition and future prospects including current and projected capital ratios, the competence, experience and integrity of management, our record of compliance with laws and regulations and the convenience and needs of the communities to be served, including our record of compliance under the Community Reinvestment Act. We cannot be certain when or if any required regulatory approvals will be granted or what conditions may be imposed by the approving authority.

In addition to the risks related to regulatory approvals, complications in the conversion of operating systems, data systems and products may result in the loss of customers, damage to our reputation, operational problems, one-time costs currently not anticipated or reduced cost savings resulting from a merger or acquisition. The integration could result in higher than expected deposit attrition, loss of key employees, disruption of our businesses or the businesses of the acquired company or otherwise adversely affect our ability to maintain relationships with customers and employees or achieve the anticipated benefits of the acquisition.

With respect to the 2010 acquisitions, the exposures to prospective losses on certain assets are covered under loss share agreements with the FDIC. These loss share agreements impose certain obligations on us that, in the event of noncompliance, could result in the disallowance of our rights under those agreements.

Unfavorable changes in economic conditions

BancShares’ business is highly affected by national, regional and local economic conditions. These conditions cannot be predicted or controlled, and may have a material impact on our operations and financial condition. Unfavorable economic developments such as an increase in unemployment rates, decreases in real estate values, rapid changes in interest rates, higher default and bankruptcy rates and various other factors could weaken the national economy as well as the economies of specific communities that we serve. Weakness in our market areas, continuation or deepening of the current recession or a prolonged recovery could depress our earnings and financial condition because borrowers may not be able to repay their loans, collateral values may fall, and loans that are currently performing and other long-lived assets may become impaired.

Instability in real estate markets

Disruption in residential housing markets including reduced sales activity and falling market prices have adversely affected collateral values and customer demand, particularly with respect to our operations in Atlanta, Georgia and Southwest Florida. Instability in residential and commercial real estate markets could result in higher credit losses in the future if customers default on loans that, as a result of lower property values, are no longer adequately collateralized. The weak real estate markets could also affect our ability to sell real estate acquired through foreclosure.

Operational and data security risk

We are exposed to many types of operational risks, including reputation risk, legal and compliance risk, the risk of illegal activities conducted by employees or outsiders, data security risk and operational errors. Our dependence on automated systems, including the automated systems used by acquired entities and third parties, to record and process transactions may further increase the risk that technical failures or tampering of those systems will result in losses that are difficult to detect. We are also subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control.

Liquidity

Liquidity is essential to our businesses. Our deposit base represents our primary source of liquidity, and we normally have the ability to stimulate deposit growth through our pricing strategies. However, in circumstances where our ability to generate needed liquidity is impaired, we would need access to alternative liquidity sources such as overnight or other short-term borrowings. While we maintain access to alternative funding sources, we are dependent on the availability of collateral, the counterparty’s willingness to lend to us and their liquidity capacity.

Litigation

The frequency of claims and amount of damages and penalties claimed in acquisition-related litigation and regulatory proceedings against financial institutions remain high. Substantial legal liability or significant regulatory action against us may have material adverse financial effects or cause significant reputational harm.

Financial Statements

The following financial statements are attached hereto as Exhibit 99.2 and incorporated by reference into this Item 9.01:

Statement of Assets Acquired and Liabilities Assumed at March 5, 2010

(d) Exhibits

99.2 Statement of Assets Acquired and Liabilities Assumed at March 5, 2010

FORWARD-LOOKING STATEMENTS

Statements in this document and exhibits relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments, expectations or beliefs about future events or results, and other statements that are not descriptions of historical facts, may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in our annual report on Form 10-K, our quarterly reports on Form 10-Q, and in other documents filed by us from time to time with the Securities and Exchange Commission.

Forward-looking statements may be identified by terms such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “forecasts,” “projects,” “potential” or “continue,” or similar terms or the negative of these terms, or other statements concerning opinions or judgments of BancShares’ management about future events.

Factors that could influence the accuracy of those forward-looking statements include, but are not limited to, the financial success or changing strategies of our customers, customer acceptance of our services, products and fee structure, the competitive nature of the financial services industry, our ability to compete effectively against other financial institutions in our banking markets, actions of government regulators, the level of market interest rates and our ability to manage our interest rate risk, changes in general economic conditions that affect our loan and lease portfolio, the abilities of our borrowers to repay their loans and leases, the values of real estate and other collateral, the impact of the FDIC-assisted transactions of Temecula Valley Bank, Venture Bank, First Regional Bank, Sun American Bank and other developments or changes in our business that we do not expect.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We have no obligation to update these forward-looking statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, we have duly caused this Report to be signed on our behalf by the undersigned thereunto duly authorized.

		FIRST CITIZENS BANCSHARES, INC.
		(Registrant)
Date: May 21, 2010	By:	/s/    Kenneth A. Black
		Kenneth A. Black         Chief Financial Officer

EX-99.2

Exhibit 99.2

- Report of Independent Registered Public Accounting Firm -

Board of Directors and Shareholders

First Citizens BancShares, Inc.

We have audited the accompanying statement of assets acquired and liabilities assumed by First-Citizens Bank & Trust Company (a wholly-owned subsidiary of First Citizens BancShares, Inc.) pursuant to the Purchase and Assumption Agreement dated March 5, 2010. This financial statement is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the accompanying statement of assets acquired and liabilities assumed referred to above is presented fairly, in all material respects, as of March 5, 2010, in conformity with accounting principles generally accepted in the United States of America.

Charlotte, North Carolina

May 21, 2010

Statement of Assets Acquired and Liabilities Assumed

by First-Citizens Bank & Trust Company

(a wholly-owned subsidiary of First Citizens BancShares, Inc.)

(in thousands)

	March 5, 2010
Assets
Cash and due from banks	$	68,981
Investment securities available for sale		66,968
Loans covered under loss share agreements		287,608
Other real estate owned covered under loss share agreements		8,020
Income earned not collected		1,612
FDIC receivable for loss share agreements		92,360
Intangible assets		629
Other assets		4,473
Total assets acquired	$	530,651
Liabilities
Deposits:
Noninterest-bearing	$	39,435
Interest-bearing		380,577
Total deposits		420,012
Short-term borrowings		42,533
Long-term obligations		40,082
Deferred tax liability		10,620
Other liabilities		904
Total liabilities assumed		514,151
Net assets acquired	$	16,500

The accompanying notes are an integral part of this financial statement.

Notes to Statement of Assets Acquired and Liabilities Assumed

by First-Citizens Bank & Trust Company

(dollars in thousands)

Note 1 — FDIC-Assisted Acquisition of Certain Assets and Liabilities of Sun American Bank

On March 5, 2010, First-Citizens Bank & Trust Company (FCB), a wholly-owned subsidiary of First Citizens BancShares, Inc. (BancShares), entered into a Purchase and Assumption Agreement (Agreement) with the Federal Deposit Insurance Corporation (FDIC) to assume the deposits (excluding certain brokered deposits) and certain other liabilities and acquire certain assets of Sun American Bank (Sun American), headquartered in Boca Raton, Florida.

Sun American operated in Southern Florida in 12 locations. Prior to purchase accounting adjustments, FCB purchased $411,315 in loans and $15,220 of other real estate acquired through foreclosure (OREO) and assumed $420,012 of deposits. In addition, FCB also purchased cash and due from banks, investment securities and various other assets. FCB also assumed Sun American’s borrowings from the Federal Home Loan Bank of Atlanta (FHLB) and long-term repurchase agreements in addition to various other liabilities.

Under the terms of the Agreement, FCB and the FDIC entered into two loss share agreements – one for residential real estate loans and one for all other loans and OREO. Under the loss share agreements, the FDIC will cover 80 percent of covered loan and OREO losses up to $99,000 and 95 percent of losses in excess of the stated threshold of $99,000. The term for loss share on residential real estate loans is ten years, while the term for loss share on non-residential real estate loans and OREO is five years in respect to losses and eight years for loss recoveries. The reimbursable losses from the FDIC are based on the book value of the relevant loan as determined by the FDIC at the date of the transaction, accrued interest on loans for up to 90 days, the book value of OREO and certain direct costs. New loans made after the date of the transaction are not covered by the loss share agreements.

The Agreement between FCB and the FDIC includes a true-up payment in the event FCB’s losses do not reach the stated threshold of $99,000. Based on estimated fair values reflected on the statement of assets acquired and liabilities assumed included in this filing, a true-up payment was not included in the FDIC receivable calculation. Adjustments to the true-up payment will be made, when applicable, as the FDIC receivable amount is updated.

Note 2 — Basis of Presentation

FCB has determined that the acquisition of the net assets of Sun American constitutes a business acquisition as defined under accounting principles generally accepted in the United States of America (US GAAP). As required under US GAAP, the assets acquired and liabilities assumed are recorded at their fair values. In many cases the determination of these fair values requires management to make estimates about discount rates, market conditions, expected cash flows and other future events that are highly subjective in nature and subject to change. Following is a description of the methods used to determine the fair values of significant assets and liabilities.

Cash and due from banks

These items are very liquid and short-term in nature. The contractual amount of these assets approximates their fair values.

Investment securities available for sale

Fair values for investment securities are based on quoted market prices, where available. All acquired investment securities were US Government agencies and US Government sponsored enterprise securities with readily-available quoted market prices.

(dollars in thousands)

Loans covered under loss share agreements

Fair values for loans are based on a discounted cash flow methodology that is considered a level 3 valuation in the fair value hierarchy. Factors considered in determining the fair value of acquired loans include projected cash flows, type of loan and related collateral, classification status, contractual interest rate, term of loan, amortization status, current market conditions, market illiquidity and discount rates. Loans were grouped together according to similar characteristics and were evaluated in the aggregate when applying various valuation techniques. The present values of projected cash flows are measured using discount rates that are based on current market rates for new originations of comparable loans. The discount rates do not include adjustments for credit losses that are included in the estimated cash flows.

The fair value of loans with evidence of credit deterioration (impaired loans) are recorded net of a nonaccretable difference and, if appropriate, an accretable yield. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is the nonaccretable difference, which is included in the carrying amount of acquired loans. Subsequent decreases to the expected cash flows will generally result in a provision for loan and lease losses. Subsequent increases in cash flows result in a reversal of the provision for loan and lease losses to the extent of prior charges, or a reclassification of the difference from nonaccretable to accretable with a positive impact on accretion of interest income in future periods. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of those cash flows.

FDIC receivable for loss share agreements

The FDIC receivable for loss share agreements is measured separately from the related covered assets as it is not contractually embedded in the assets and is not transferable with the assets should the assets be sold. Fair value was estimated using projected cash flows related to the loss share agreements based on the expected reimbursements for losses using the applicable loss share percentages and the estimated true-up payment. These cash flows were discounted to reflect the estimated timing of the receipt of the loss share reimbursement from the FDIC. Although no true-up payment is currently anticipated under the Sun American loss share agreements, those projections are subject to change.

Other real estate acquired through foreclosure covered under loss share agreements

Other real estate acquired through foreclosure is presented at the estimated present value that management expects to receive when the property is sold, net of related costs of disposal. Management used appraisals of properties to determine fair values and applied additional discounts where appropriate for passage of time or, in certain cases, for subsequent events occurring after the appraisal date.

Intangible assets

Intangible assets include the estimated value for deposit relationships. The core deposit intangible, which represents the estimated fair value of the core deposit base that was established at acquisition, is being amortized on an accelerated basis over a four-year life.

Other assets

Other assets include $4,011 of FHLB stock. The FHLB requires member banks to purchase its stock as a condition of membership and to purchase additional shares based on the level of FHLB advances and other factors. This stock is generally redeemable based on guidelines established by the FHLB and is presented at the redemption value.

(dollars in thousands)

Deposits

Under the terms of the Agreement, FCB had the right to adjust various terms, including interest rates, on deposit liabilities. FCB adjusted interest rates on time deposits with maturity dates extending beyond 90 days after the assumption date when the contractual interest rate exceeded March 5, 2010 market rates. With this adjustment, the carrying value of all deposits is considered to be a reasonable estimate of fair value.

Short-term borrowings

All short-term borrowings assumed from Sun American were at fixed rates. The estimated cash flows for those borrowings were discounted at rates for borrowings under similar terms at March 5, 2010.

Long-term obligations

Long-term obligations assumed from Sun American include $7,000 with the FHLB and $30,000 of term repurchase agreements. The estimated cash flows for the FHLB borrowings were discounted at a rate for borrowings under similar terms at March 5, 2010. The term repurchase agreements were discounted using the early termination penalty on these borrowings.

Deferred tax liability

The deferred tax liability of $10,620 relates to the differences between the financial statement and tax bases of assets acquired and liabilities assumed in this transaction.

(dollars in thousands)

Note 3 — Fair Value Adjustments

The following table presents the assets acquired and liabilities assumed, as recorded by Sun American on the acquisition date and as adjusted for purchase accounting adjustments.

	March 5, 2010
	As recorded by Sun American		Fair value adjustments			As recorded  by FCB
	($ in thousands)
Assets
Cash and due from banks	$	37,016	$	—		$	37,016
Investment securities available for sale		66,968		—			66,968
Loans covered under loss share agreements		411,315		(123,707	)		287,608
Other real estate owned covered under loss share agreements		15,220		(7,200	)		8,020
Income earned not collected		1,612		—			1,612
FDIC receivable for loss share agreements		—		92,360			92,360
Intangible assets		—		629			629
Other assets		4,473		—			4,473
Total assets acquired	$	536,604	$	(37,918	)	$	498,686
Liabilities
Deposits:
Noninterest-bearing	$	39,435	$	—		$	39,435
Interest-bearing		380,577		—			380,577
Total deposits		420,012		—			420,012
Short-term borrowings		42,485		48			42,533
Long-term obligations		37,000		3,082			40,082
Deferred tax liability		—		10,620			10,620
Other liabilities		853		51			904
Total liabilities assumed		500,350		13,801			514,151
Excess of assets acquired over liabilities assumed	$	36,254
Aggregate fair value adjustments			$	(51,719	)
Cash received from the FDIC						$	31,965
Net assets acquired						$	16,500

Note 4 — Premises and Equipment

FCB did not acquire the real estate, banking facilities, furniture or equipment of Sun American as part of the Agreement. Under the terms of the Agreement, all banking facilities and equipment are leased from the FDIC on a month-to-month basis at an approximate monthly cost of $244.

Under the terms of the Agreement, FCB has the option to purchase the real estate, furniture and equipment from the FDIC based on appraised values or, in the case of leased facilities, to either assume or repudiate the existing lease obligation. This option expires 90 days after the acquisition date.

(dollars in thousands)

Note 5 — Investment Securities Available for Sale

The fair value of investment securities acquired was as follows at March 5, 2010:

	Par Value		Fair Value		Weighted average coupon rate
U.S. Government Agency	$	11,850	$	11,852	4.33	%
GNMA and FNMA mortgage-backed securities		42,465		43,262	4.37	%
CMO/REMIC mortgage-backed securities		11,697		11,854	4.67	%
Total investment securities	$	66,012	$	66,968

The maturities of the investment securities vary and all are over one year. Approximately $53,544 of the securities are pledged to secure borrowings.

Note 6 — Loans

The contractual balance and fair value of acquired loans at March 5, 2010 is provided below.

Contractual balance of acquired loans:
Construction/land development	$	91,817
Commercial mortgage		198,147
Residential mortgage		96,861
Commercial and industrial		22,613
Consumer		1,877
Total contractual balance of acquired loans		411,315
Fair value adjustment		(123,707	)
Fair value of loans acquired	$	287,608

Loans covered under loss share agreements with the FDIC (Covered Loans) are reported in loans exclusive of the expected reimbursement from the FDIC. Covered Loans are initially recorded at fair value at the acquisition date. At the acquisition date, BancShares estimated the fair value of the loan portfolio at $287,608.

Prospective losses incurred on Covered Loans are eligible for partial reimbursement by the FDIC. Subsequent decreases in the amount expected to be collected result in a provision for loan and lease losses, an increase in the allowance for loan and lease losses, and a proportional adjustment to the FDIC receivable for the estimated amount to be reimbursed. Subsequent increases in the amount expected to be collected result in the reversal of any previously-recorded provision for loan and lease losses and related allowance for loan and lease losses and adjustments to the FDIC receivable, or accretion of certain fair value amounts into interest income in future periods if no provision for loan and lease losses had been recorded.

Under US GAAP, loans that have experienced deterioration since origination such that it is probable that the borrower will not be able to make all contractually required payments are considered to be impaired. Cash flow analyses were performed on all loans deemed impaired at date of acquisition in order to determine the cash flows expected to be collected. Loans deemed 100 percent impaired are placed on nonaccrual and no accretable yield will be recognized. For the remaining impaired loans, the accretable yield calculation is used to determine the amount of interest income recognized on each impaired loan, and the accretion method is being applied with respect to recognition of accretable yield.

(dollars in thousands)

The following table presents the impaired loans as of March 5, 2010:

Contractually required payments receivable	$	214,875
Nonaccretable difference		(119,901	)
Cash flows expected to be collected		94,974
Accretable yield		(16,308	)
Fair value of impaired loans acquired	$	78,666

The following table presents the nonimpaired loans as of March 5, 2010:

Nonimpaired loans receivable	$	263,882
Discount to reflect fair value		(54,940	)
Fair value of nonimpaired loans acquired	$	208,942

Note 7 — Deposits

Deposit liabilities assumed are composed of the following at March 5, 2010:

Demand:
Noninterest-bearing	$	39,435
Interest-bearing		91,160
Savings		59,547
Time		229,870
Total assumed deposits	$	420,012

At March 5, 2010, scheduled maturities of time deposits were as follows:

Maturing during 12-month period ending March 5,
2011	$	213,993
2012		11,924
2013		2,321
2014		843
2015		789
Total	$	229,870

As of March 5, 2010, Sun American had $129,300 in time deposits of $100 or more. The following table provides the scheduled maturity of these time deposits:

Maturing:
3 months or less	$	21,216
Over 3 through 6 months		35,076
Over 6 through 12 months		65,489
Over 12 months		7,479
Total	$	129,260

(dollars in thousands)

Note 8 — Short-term Borrowings

As of March 5, 2010, Sun American had $35,000 in contractual short-term borrowings from the FHLB. These borrowings were secured by FHLB stock and loans with a contractual balance of $113,400. The FHLB borrowings, most of which mature on various days through April 26, 2010, had a weighted average coupon rate of 2.0 percent. Based on a comparison of interest rates on similar borrowings, a premium for the short-term FHLB borrowings was recorded in the amount of $48.

Sun American also had $7,500 in overnight repurchase agreements with the Federal Reserve Bank of Atlanta as of March 5, 2010. Due to the short-term nature of these overnight repurchase agreements, no fair value adjustment was recorded for these borrowings.

Note 9 — Long-term Obligations

As of March 5, 2010, Sun American had a long-term obligation of $7,000 to the FHLB. This borrowing was secured by FHLB stock and loans with a contractual balance of $113,400. Based on interest rates on comparable borrowings available on March 5, 2010, a premium of $336 was recorded on the long-term obligation. The long-term obligation had a contractual rate of 3.9 percent and matures on June 30, 2011.

Sun American also had $30,000 of term repurchase agreements. The repurchase agreements are subject to an early termination penalty. This termination value was used to adjust the value of the obligations to a fair value for purchase accounting purposes. The premium recorded for these obligations of $2,746 resulted in a fair value of the obligations of $32,746. The term repurchase agreements mature in March, 2018 and carry a rate of 3.5 percent.

Note 10 — Deferred Tax Liability

The deferred tax liability of $10,620 as of March 5, 2010, is related to differences between the financial statement and tax bases of assets acquired and liabilities assumed in this transaction. For income tax purposes, the transaction will be accounted for as an asset purchase and the tax bases of assets acquired and liabilities assumed will be allocated based on fair values in accordance with the appropriate tax rates. FCB acquired none of the tax attributes of Sun American.

Note 11 — Contingencies

BancShares, FCB (as successor to Sun American) and various subsidiaries of BancShares and FCB have been named as defendants in various legal actions related to normal business activities of Sun American in which damages in various amounts are claimed. Although the amount of any ultimate liability with respect to those other matters cannot be determined, in the opinion of management, any such liability will not have a material effect on the Statement of Assets Acquired and Liabilities Assumed.

Note 12 — Subsequent Events

Management has evaluated subsequent events through the date of issuance of the Statement of Assets Acquired and Liabilities Assumed.