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Acquisitions (Tables)

12 Months Ended

Dec. 31, 2013

Notes to Financial Statements

Statement of net assets acquired

The statement of net assets acquired as of January 21, 2011 and the resulting gain that was recorded are presented in the following table.

($ in thousands)		As Recorded by The Bank of Asheville				Fair Value Adjustments				As Recorded by the Company
Assets
Cash and cash equivalents		$	27,297				—				27,297
Securities			4,461				—				4,461
Loans			153,994				(51,726	)(a)			102,268
Core deposit intangible			—				277	(b)			277
FDIC indemnification asset			—				42,218	(c)			42,218
Foreclosed properties			3,501				(2,159	)(d)			1,342
Other assets			1,146				(370	)(e)			776
Total			190,399				(11,760	)			178,639

Liabilities
Deposits		$	192,284				460	(f)			192,744
Borrowings			4,004				77	(g)			4,081
Other			111				1,447	(h)			1,558
Total			196,399				1,984				198,383

Excess of liabilities received over assets		$	(6,000	)			(13,744	)			(19,744	)
Less: Asset discount			(23,940	)
Cash received/receivable from FDIC at closing			29,940								29,940

Total gain recorded										$	10,196

Explanation of Fair Value Adjustments

(a)

This estimated adjustment is necessary as of the acquisition date to write down The Bank of Asheville’s book value of loans to the estimated fair value as a result of future expected loan losses.

(b)

This fair value adjustment represents the value of the core deposit base assumed in the acquisition based on a study performed by an independent consulting firm. This amount was recorded by the Company as an identifiable intangible asset and will be amortized as an expense on a straight-line basis over the average life of the core deposit base, which is estimated to be seven years.

(c)

This adjustment is the estimated fair value of the amount that the Company expects to receive from the FDIC under its loss share agreements as a result of future loan losses.

(d)

This is the estimated adjustment necessary to write down The Bank of Asheville’s book value of foreclosed real estate properties to their estimated fair value as of the acquisition date.

(e)

This is an immaterial adjustment made to reflect fair value.

(f)

This fair value adjustment was recorded because the weighted average interest rate of The Bank of Asheville’s time deposits exceeded the cost of similar wholesale funding at the time of the acquisition. This amount will be amortized to reduce interest expense on a declining basis over the life of the portfolio of approximately 48 months.

(g)

This fair value adjustment was recorded because the interest rates of The Bank of Asheville’s fixed rate borrowings exceeded current interest rates on similar borrowings. This amount was realized shortly after the acquisition by prepaying the borrowings at a premium and thus there will be no future amortization related to this adjustment.

(h)

This adjustment relates primarily to the estimate of what the Company will owe to the FDIC at the conclusion of the loss share agreements based on a pre-established formula set forth in those agreements that is based on total expected losses in relation to the amount of the discount bid.