Business Combination (Tables)

6 Months Ended

Jun. 30, 2017

Schedule of Fair Value of Assets Acquired and Liabilities Assumed

The following table details the total consideration paid by the Company on April 1, 2017 in connection with the acquisition of Virginia BanCorp, the fair value of the assets acquired and liabilities assumed, and the resulting goodwill.


(Dollars in thousands)	As Recorded by VCB		Fair Value Adjustments			As Recorded by the Company
Consideration paid:
Bay Banks of Virginia, Inc. common stock						$	42,247

Identifiable assets acquired:
Cash and due from banks	$	2,356	$	—		$	2,356
Interest-bearing deposits		12,342		—			12,342
Securities available-for-sale		22,088		—			22,088
Restricted securities		1,543		—			1,543
Loans receivable		216,831		(4,259	)		212,572
Loans held for sale		55,648		—			55,648
Deferred income taxes		1,325		(500	)		825
Premises and equipment		3,333		2,703			6,036
Accrued interest receivable		1,253		(24	)		1,229
Other real estate owned		3,113		—			3,113
Core deposit intangible		—		3,670			3,670
Bank owned life insurance		8,430		—			8,430
Mortgage servicing rights		324		—			324
Other assets		367		—			367

Total identified assets acquired		328,953		1,590			330,543

Identifiable liabilities assumed:
Noninterest-bearing deposits		21,119		—			21,119
Savings and interest-bearing demand deposits		124,640		—			124,640
Time deposits		121,437		733			122,170
Federal Home Loan Bank advances		25,000		—			25,000
Other liabilities		1,525		—			1,525

Total identifiable liabilities assumed		293,721		733			294,454

Total identifiable assets assumed	$	35,232	$	857		$	36,089

Goodwill resulting from acquisition						$	6,158

Schedule of Information about the PCI Impaired Loan

Information about the PCI loan portfolio at April 1, 2017 is as follows:


(Dollars in thousands)	April 1, 2017
Contractual principal and interest due	$	8,303
Nonaccretable difference		869

Expected cash flows		7,434
Accretable yield		1,354

Purchase credit impaired loans - estimated fair value	$	6,080

Schedule of Unaudited Pro Forma Financial Information

Additionally, the Company expects to achieve further operational cost savings and other efficiencies as a result of the acquisition which are not reflected in the unaudited pro forma amounts below:


	Unaudited Pro Forma For the Three Months Ended				Unaudited Pro Forma For the Six Months Ended
(Dollars in thousand)	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016
Net interest income	$	7,719	$	6,564	$	11,845	$	12,954
Net income		870		1,223		1,464		2,371

Schedule of Impact of Certain Acquisition Accounting Adjustments

The net effect of the amortization and accretion of premiums and discounts associated with the Company’s acquisition accounting adjustments to assets acquired and liabilities assumed from Virginia BanCorp had the following impact on the consolidated statements of income for the three and six months ended June 30, 2017.


(Dollars in thousands)	Three Months Ended June 30, 2017			Six Months Ended June 30, 2017
Loans¹	$	451		$	451
Core deposit intangible²		(234	)		(234	)
Time deposits³		117			117
Depreciation⁴		(10	)		(10	)

Net impact to income before income taxes	$	324		$	324

¹	Loan discount accretion is included in the “Loans, including fees” section of “Interest Income” in the consolidated statements of income.

²	Core deposit intangible premium amortization is included in “Other expense” section of “Non-Interest Expenses in the consolidated statements of income.

³	Time deposit premium amortization is included in the “Deposits” section of “Interest Expense” in the consolidated statements of income.

⁴	Depreciation on the fair value mark up of fixed assets is included in “Occupancy expense” section of “Non-Interest Expense” in the consolidated statements of income.