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Acquisitions (Tables) | 6 Months Ended
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Jun. 30, 2017
Acquisitions Tables |
Condensed Balance Sheet of Carolina Bank and Related Fair Value Adjustments | This acquisition has been accounted for using the purchase method of accounting for business combinations, and accordingly, the assets and liabilities of Carolina Bank were recorded based on estimates of fair values as of March 3, 2017. The Company may change its valuations of acquired Carolina Bank assets and liabilities for up to one year after the acquisition date. The table below is a condensed balance sheet disclosing the amount assigned to each major asset and liability category of Carolina Bank on March 3, 2017, and the related fair value adjustments recorded by the Company to reflect the acquisition. The $65.3 million in goodwill that resulted from this transaction is non-deductible for tax purposes.
($ in thousands) |  | As Recorded by Carolina Bank |  |  | Initial Fair Value Adjustments |  |  | Measurement Period Adjustments |  |  | As Recorded by First Bancorp |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 81,466 |  |  |  | (2 | ) | (a) |  |  | — |  |  |  | 81,464 |
Securities |  |  | 49,629 |  |  |  | (261 | ) | (b) |  |  | — |  |  |  | 49,368 |
Loans, gross |  |  | 505,560 |  |  |  | (5,469 | ) | (c) |  |  | 146 |  | (l) |  |  | 497,522 |
|  |  |  |  |  |  | (2,715 | ) | (d) |  |  | — |  |  |  |  |
Allowance for loan losses |  |  | (5,746 | ) |  |  | 5,746 |  | (e) |  |  | — |  |  |  | — |
Premises and equipment |  |  | 17,967 |  |  |  | 4,251 |  | (f) |  |  | — |  |  |  | 22,218 |
Core deposit intangible |  |  | — |  |  |  | 8,790 |  | (g) |  |  | — |  |  |  | 8,790 |
Other |  |  | 34,976 |  |  |  | (4,804 | ) | (h) |  |  | 2,382 |  | (m) |  |  | 32,554 |
Total |  |  | 683,852 |  |  |  | 5,536 |  |  |  | 2,528 |  |  |  | 691,916 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | $ | 584,950 |  |  |  | 431 |  | (i) |  |  | — |  |  |  | 585,381 |
Borrowings |  |  | 21,855 |  |  |  | (2,855 | ) | (j) |  |  | — |  |  |  | 19,000 |
Other |  |  | 12,855 |  |  |  | 225 |  | (k) |  |  | — |  |  |  | 13,080 |
Total |  |  | 619,660 |  |  |  | (2,199 | ) |  |  | — |  |  |  | 617,461 |
Net identifiable assets acquired |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 74,455 |
Total cost of acquisition |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Value of stock issued |  |  |  |  |  | $ | 114,478 |  |  |  |  |  |  |  |  |
Cash paid in the acquisition |  |  |  |  |  |  | 25,279 |  |  |  |  |  |  |  |  |
Total cost of acquisition |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 139,757 |
Goodwill recorded related to acquisition of Carolina Bank |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 65,302 |
Explanation of Fair Value Adjustments
| (a) | This adjustment was recorded to a short-term investment to its estimated fair value.
| (b) | This fair value adjustment was recorded to adjust the securities portfolio to its estimated fair value.
| (c) | This fair value adjustment represents the amount necessary to reduce performing loans to their fair value due to interest rate factors and credit factors. Assuming the loans continue to perform, this amount will be amortized to increase interest income over the remaining lives of the related loans.
| (d) | This fair value adjustment was recorded to write-down purchased credit impaired loans assumed in the acquisition to their estimated fair market value.
| (e) | This fair value adjustment reduced the allowance for loan losses to zero as required by relevant accounting guidance.
| (f) | This adjustment represents the amount necessary to increase premises and equipment from its book value on the date of acquisition to its estimated fair market value.
| (g) | 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 expense on an accelerated basis over seven years.
| (h) | This fair value adjustment primarily represents the net deferred tax liability associated with the other fair value adjustments made to record the transaction.
| (i) | This fair value adjustment was recorded because the weighted average interest rate of Carolina Bank’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 an accelerated basis over their remaining five year life.
| (j) | This fair value adjustment was primarily recorded because the interest rate of Carolina Bank’s trust preferred security was less than the current interest rate on similar instruments. This amount will be amortized on approximately a straight-line basis to increase interest expense over the remaining life of the related borrowing, which is 18 years.
| (k) | This fair value adjustment represents miscellaneous adjustments needed to record assets and liabilities at their fair value.
| (l) | This fair value adjustment was a miscellaneous adjustment to increase the initial fair value of gross loans.
| (m) | This fair value adjustment relates to changes in the estimate of deferred tax assets/liabilities associated with the acquisition.
Pro Forma Combined Financial Results of the Company and Carolina Bank | The pro forma financial information does not necessarily reflect the results of operations that would have occurred had the Company and Carolina Bank constituted a single entity during such period.
($ in thousands, except share data) |  | Carolina Bank earnings - March 3, 2017 to June 30, 2017 - included in Company’s earnings for the six months ended June 30, 2017 |  |  | Pro Forma Combined Six Months Ended June 30, 2017 |  |  | Pro Forma Combined Six Months Ended June 30, 2016 |
Net interest income |  | $ | 8,778 |  |  |  | 78,260 |  |  |  | 73,533 |
Noninterest income |  |  | 1,871 |  |  |  | 22,874 |  |  |  | 16,479 |
Total revenue |  |  | 10,649 |  |  |  | 101,134 |  |  |  | 90,012 |
Net income available to common shareholders |  |  | 2,275 |  |  |  | 21,229 |  |  |  | 11,264 |
Earnings per common share |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  |  |  |  | $ | 0.86 |  |  |  | 0.48 |
Diluted |  |  |  |  |  |  | 0.86 |  |  |  | 0.46 |

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