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ACQUISITIONS (Tables)
 12 Months Ended
Dec. 31, 2016
Business Combinations [Abstract]  
Summary of Consideration Assets Acquired and Liabilities Assumed
The following table provides a summary of the assets acquired and liabilities assumed and the associated fair value adjustments as recorded by the Company at acquisition:
 
 
 
 
Fair Value
 
 
 
As Recorded by
(in thousands)
 
As Acquired
 
Adjustments
 
 
 
the Company
Consideration Paid:
 
 
 
 
 
 
 
 
Company common stock issued to First Choice Bank common and preferred shareholders
 
$
151,048

Total consideration paid
 
 
 
 
 
 
 
$
151,048

Recognized amounts of identifiable assets acquired and (liabilities) assumed, at fair value:
Cash and short-term investments
 
$
5,935

 
$
—

 
 
 
$
5,935

Investment securities
 
447,960

 
(6,009
)
 
(a)
 
441,951

Loans held for sale
 
112,669

 
—

 
 
 
112,669

Loans, net
 
437,832

 
(13,061
)
 
(b)
 
424,771

Premises and equipment
 
6,354

 
(878
)
 
(c)
 
5,476

Core deposit intangibles
 
—

 
7,690

 
(d)
 
7,690

Deferred tax assets, net
 
9,626

 
8,175

 
(e)
 
17,801

Other assets
 
42,200

 
(60
)
 
(f)
 
42,140

Deposits
 
(889,993
)
 
(2,804
)
 
(g)
 
(892,797
)
Borrowings
 
(51,796
)
 
68

 
(h)
 
(51,728
)
Other liabilities
 
(15,019
)
 
(5,877
)
 
(i)
 
(20,896
)
Total identifiable net assets
 
$
105,768

 
$
(12,756
)
 
 
 
$
93,012

 
 
 
 
 
 
 
 
 
Goodwill
 
 
 
 
 
 
 
$
58,036

________________________________
Explanation of Certain Fair Value Adjustments
(a)
The adjustment represents the write down of the book value of securities to their estimated fair value based on estimates at the date of acquisition.
(b)
The adjustment represents the write-off of the balance of $14.7 million in allowance for loan and lease losses and the write down of the book value of loans to their estimated fair value based on interest rates and expected cash flows as of the acquisition date, which includes an estimate of expected loan loss inherent in the portfolio. Loans with evidence of credit deterioration at acquisition are accounted for under ASC 310-30 and had a book value of $63.8 million and had a fair value of $36.4 million. Non-impaired loans accounted for under ASC 310-20 had a book value of $388.7 million and have a fair value of $388.3 million. ASC 310-30 loans have a $5.4 million fair value adjustment that is accretable in earnings over an estimated three-year life using the effective yield as determined on the date of acquisition. The effective yield is periodically adjusted for changes in expected flows. ASC 310-20 loans have a $5.8 million fair value adjustment premium that is amortized into expense over the remaining term of the loans using the effective interest method, or a straight-line method if the loan is a revolving credit facility.
(c)
The amount represents the adjustment of the book value of furniture, fixtures, and equipment, to their estimated fair value and the immediate expensing of equipment not meeting the thresholds for capitalization in accordance with Company policy. The adjustments will be depreciated over the remaining estimated economic lives of the assets.
(d)
The adjustment represents the value of the core deposit base assumed in the acquisition. The core deposit asset was recorded as an identifiable intangible asset and will be amortized over the estimated useful life of the deposit base (10 years).
(e)
Represents net deferred tax assets resulting from the fair value adjustments related to the acquired assets and liabilities, identifiable intangibles, and other purchase accounting adjustments.
(f)
The amount consists of a $0.5 million write-off of goodwill and intangible assets from a prior First Choice Bank acquisition, a $0.1 million fair value adjustment to write-down other real estate owned based on market report data, and a $0.1 million write-off of prepaid assets due to obsolescence. These adjustments are not accretable into earnings in the statement of income.
(g)
The adjustment is necessary because the weighted average interest rate of deposits exceeded the cost of similar funding at the time of acquisition. The amount will be amortized over the estimated useful life of one year.
(h)
Adjusts borrowings to their estimated fair value, which is calculated based on the expected future cash flow of the borrowings.
(i)
Adjusts the book value of other liabilities to their estimated fair value at the acquisition date. The adjustment consists of a $4.0 million increase for the fair value of the above/below market leases, a $3.4 million establishment of a reserve on certain acquired loans determined to have specific risk at the time of acquisition, a $0.9 million net decrease related to non-level leases, and a $0.6 million write-off of deferred revenue.
The following table provides a summary of the assets acquired and liabilities assumed and the associated fair value adjustments as recorded by the Company at acquisition:
 
 
 
 
Fair Value
 
 
 
As Recorded by
(in thousands)
 
As Acquired
 
Adjustments
 
 
 
the Company
Consideration paid:
 
 

 
 

 
 
 
 

Company common stock issued to certain 44 Business Capital shareholders (44,840 shares)
 
$
1,217

Cash paid to 44 Business Capital shareholders and Parke
 
 
 
 
 
 
 
55,649

Total consideration paid
 
 
 
 
 
 
 
$
56,866

Recognized amounts of identifiable assets acquired and (liabilities) assumed, at fair value:
Cash and short-term investments
 
$
107

 
$
—

 
 
 
$
107

Loans
 
42,627

 
(5,400
)
 
(a)
 
37,227

Premises and equipment
 
69

 
(36
)
 
(b)
 
33

Other assets
 
3,076

 
639

 
(c)
 
3,715

Other liabilities
 
(108
)
 
—

 

 
(108
)
Total identifiable net assets
 
$
45,771

 
$
(4,797
)
 
 
 
$
40,974

 
 
 
 
 
 
 
 
 
Goodwill
 
 
 
 
 
 
 
$
15,892

________________________________
Explanation of Certain Fair Value Adjustments
(a)
The adjustment represents the write down of the book value of loans to their estimated fair value based on current interest rates and expected cash flows, which includes an estimate of expected loan loss inherent in the portfolio. Loans with evidence of credit deterioration at acquisition are accounted for under ASC 310-30 and had a book value of $6.3 million and have a fair value $2.9 million. Non-impaired loans accounted for under ASC 310-10 had a book value of $36.4 million and have a fair value of $34.3 million. ASC 310-30 loans have a $708 thousand fair value adjustment discount that is accretable in earnings over an average estimated six-year life using the effective yield as determined on the date of acquisition. The effective yield is periodically adjusted for changes in expected cash flows. ASC 310-10 loans have a $2.1 million fair value adjustment discount that is amortized into income over the remaining term of the loans using the effective interest method.
(b)
The fair value of the equipment was assumed to approximate the net carrying value based on overall condition and age. The adjustment represents the immediate expensing of equipment not meeting the thresholds for capitalization in accordance with Company policy. The recorded amount will be depreciated over the remaining estimated economic lives of the assets.
(c)
The adjustment represents the fair value write up of book value of the loan servicing right asset to its estimated fair value based on current interest rates and expected cash flows, which includes an estimate of cost of service and conditional prepayment rates applied to the underlying unpaid loan pool balance over the remaining life of the loans. The balance includes accrued interest of $221 thousand.
Schedule of Acquired Loan Portfolio
Information about the First Choice Bank acquired loan portfolio subject to ASC 310-30 as of December 2, 2016 is as follows (in thousands):
 
ASC 310-30 Loans
Gross contractual receivable amounts at acquisition
$
63,820

Contractual cash flows not expected to be collected (nonaccretable discount)
(21,926
)
Expected cash flows at acquisition
41,894

Interest component of expected cash flows (accretable discount)
(5,417
)
Fair value of acquired loans
$
36,477

Information about the acquired loan portfolio subject to ASC 310-30 as of April 29, 2016 is, as follows (in thousands):
 
ASC 310-30 Loans
Gross contractual receivable amounts at acquisition
$
6,265

Contractual cash flows not expected to be collected (nonaccretable discount)
(2,623
)
Expected cash flows at acquisition
3,642

Interest component of expected cash flows (accretable discount)
(708
)
Fair value of acquired loans
$
2,934

 
ASC 310-30 Loans
Gross contractual receivable amounts at acquisition
$
6,265

Contractual cash flows not expected to be collected (nonaccretable discount)
(2,623
)
Expected cash flows at acquisition
3,642

Interest component of expected cash flows (accretable discount)
(708
)
Fair value of acquired loans
$
2,934
Pro Forma Financial Information
nformation in the following table is shown in thousands, except earnings per share:
 
 
Pro Forma (unaudited)
Years ended December 31,
 
 
2016
 
2015
Net interest income
 
$
259,494

 
$
249,533

Non-interest income
 
137,395

 
125,855

Net income
 
79,011

 
60,852

Pro forma earnings per share:
 
 

 
 

Basic
 
$
2.25

 
$
1.85

Diluted
 
$
2.24

 
$
1.84