XML 50 R31.htm IDEA: XBRL DOCUMENT

Acquisitions (Tables)

12 Months Ended

Dec. 31, 2017

Condensed Balance Sheet of Carolina Bank and Related Fair Value Adjustments

This acquisition was 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, and is currently awaiting information related to a contingent liability that was assumed in the acquisition. 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 $65.5 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)		(319	)	(m)		21,899
Core deposit intangible			—				8,790		(g)		—				8,790
Other			34,976				(4,804	)	(h)		2,225		(n)		32,397
Total			683,852				5,536				2,052				691,440

Liabilities
Deposits		$	584,950				431		(i)		—				585,381
Borrowings			21,855				(2,855	)	(j)		(262	)	(o)		18,738
Other			12,855				225		(k)		—				13,080
Total			619,660				(2,199	)			(262	)			617,199

Net identifiable assets acquired															74,241

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														$	65,516

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 miscellaneous adjustment to decrease the initial fair value of premises and equipment.

(n)

This fair value adjustment relates to changes in the estimate of deferred tax assets/liabilities associated with the acquisition and a miscellaneous adjustment to decrease the initial fair value of foreclosed real estate acquired in the transaction.

(o)

This fair value adjustment relates to miscellaneous adjustments to decrease the initial fair value of borrowings.

Pro Forma Combined Financial Results of the Company and Carolina Bank

The following unaudited pro forma financial information presents the combined results of the Company and Carolina Bank as if the acquisition had occurred as of January 1, 2016, after giving effect to certain adjustments, including amortization of the core deposit intangible, and related income tax effects. 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)		Pro Forma Combined Year Ended December 31, 2017				Pro Forma Combined Year Ended December 31, 2016
Net interest income		$	168,759				147,089
Noninterest income			50,098				36,684
Total revenue			218,857				183,773

Net income available to common shareholders			49,907				25,364

Earnings per common share
Basic		$	1.93				1.07
Diluted			1.92				1.03

Asheville Savings Bank [Member]

Condensed Balance Sheet of Carolina Bank and Related Fair Value Adjustments

This acquisition was accounted for using the purchase method of accounting for business combinations, and accordingly, the assets and liabilities of Asheville Savings Bank were recorded based on estimates of fair values as of October 1, 2017. The Company may change its valuations of acquired Asheville Savings 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 Asheville Savings Bank on October 1, 2017, and the related fair value adjustments recorded by the Company to reflect the acquisition. The $88.4 million in goodwill that resulted from this transaction is non-deductible for tax purposes.

($ in thousands)		As Recorded by Asheville Savings Bank				Initial Fair Value Adjustments				Measurement Period Adjustments				As Recorded by First Bancorp
Assets
Cash and cash equivalents		$	41,824				—				—				41,824
Securities			95,020				—				—				95,020
Loans, gross			617,159				(9,631	)	(a)		—				606,180
							(1,348	)	(b)		—
Allowance for loan losses			(6,685	)			6,685		(c)		—				—
Presold mortgages			3,785				—				—				3,785
Premises and equipment			10,697				9,857		(d)		—				20,554
Core deposit intangible			—				9,760		(e)		—				9,760
Other			35,944				(5,851	)	(f)		—				30,093
Total			797,744				9,472				—				807,216

Liabilities
Deposits		$	678,707				430		(g)		—				679,137
Borrowings			20,000				—				—				20,000
Other			8,943				298		(h)		—				9,241
Total			707,650				728				—				708,378

Net identifiable assets acquired															98,838

Total cost of acquisition
Value of stock issued						$	169,299
Cash paid in the acquisition							17,939
Total cost of acquisition															187,238

Goodwill recorded related to acquisition of Asheville Savings Bank														$	88,400

Explanation of Fair Value Adjustments

	(a)	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.
	(b)	This fair value adjustment was recorded to write-down purchased credit impairment loans assumed in the acquisition to their estimated fair market value.

(c)

This fair value adjustment reduced the allowance for loan losses to zero as required by relevant accounting guidance.

(d)

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.

(e)

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.

(f)

This fair value adjustment primarily represents the net deferred tax liability associated with the other fair value adjustments made to record the transaction.

(g)

This fair value adjustment was recorded because the weighted average interest rate of Asheville Savings 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.

(h)

This fair value adjustment represents miscellaneous adjustments needed to record assets and liabilities at their fair value.

The following unaudited pro forma financial information presents the combined results of the Company and Asheville Savings Bank as if the acquisition had occurred as of January 1, 2016, after giving effect to certain adjustments, including amortization of the core deposit intangible, and related income tax effects. The pro forma financial information does not necessarily reflect the results of operations that would have occurred had the Company and Asheville Savings Bank constituted a single entity during such period.

Pro Forma Combined Financial Results of the Company and Carolina Bank

The following unaudited pro forma financial information presents the combined results of the Company and Asheville Savings Bank as if the acquisition had occurred as of January 1, 2016, after giving effect to certain adjustments, including amortization of the core deposit intangible, and related income tax effects. The pro forma financial information does not necessarily reflect the results of operations that would have occurred had the Company and Asheville Savings Bank constituted a single entity during such period.

($ in thousands, except share data)		Pro Forma Combined Twelve Months Ended December 31, 2017				Pro Forma Combined Twelve Months Ended December 31, 2016
Net interest income		$	183,996				147,284
Noninterest income			54,523				34,307
Total revenue			238,391				181,591

Net income available to common shareholders			51,600				12,291

Earnings per common share
Basic		$	1.79				0.49
Diluted			1.78				0.48