DISCONTINUED OPERATIONS

Discontinued Operations. The assets and liabilities associated with the transactions described (and defined) below were previously reported in the First Bank segment and were sold, or are expected to be sold, as part of the Company’s Capital Optimization Plan (Capital Plan). The Company applied discontinued operations accounting in accordance with ASC Topic 205-20, “Presentation of Financial Statements – Discontinued Operations,” to the assets and liabilities associated with the Northern Florida Region as of December 31, 2012 and 2011, and to the operations of First Bank’s Northern Florida, Northern Illinois, Chicago and Texas Regions, in addition to the operations of WIUS and MVP, for the years ended December 31, 2012, 2011 and 2010, as applicable. The Company did not allocate any consolidated interest that is not directly attributable to or related to discontinued operations. All financial information in the consolidated financial statements and notes to the consolidated financial statements is reported on a continuing operations basis, unless otherwise noted.

Northern Florida Region. On November 21, 2012, First Bank entered into a Branch Purchase and Assumption Agreement that provides for the sale of certain assets and the transfer of certain liabilities associated with eight of First Bank’s retail branches located in Pinellas County, Florida to HomeBanc National Association (HomeBanc), headquartered in Lake Mary, Florida. Under the terms of the agreement, HomeBanc is to assume approximately $133.4 million of deposits, purchase the premises and equipment and assume the leases associated with these eight retail branches. The transaction, which is subject to certain closing conditions, is expected to be completed during the second quarter of 2013. The transaction is not expected to result in a significant gain or loss.

First Bank also announced its intention to close its two retail branches in Hillsborough County and its single retail branch located in Pasco County. The closure of these three Northern Florida retail branches is also expected to be completed during the second quarter of 2013. The eight branches being sold and three branches being closed are collectively defined as the Northern Florida Region. The assets and liabilities associated with the Northern Florida Region are reflected in assets and liabilities of discontinued operations in the consolidated balance sheets as of December 31, 2012 and 2011.

First Bank intends to continue to hold and operate its remaining eight retail branches in Manatee County’s communities of Bradenton, Palmetto and Longboat Key, Florida. These eight branches were previously reported as discontinued operations but were reclassified to continuing operations during the fourth quarter of 2012. The related assets and liabilities associated with these eight retail branches were reclassified from assets and liabilities of discontinued operations to continuing operations in the consolidated balance sheets as of December 31, 2012 and 2011. Upon reclassification of the assets of these branches from assets of discontinued operations to continuing operations, the assets were recorded at the lower of their carrying amount and their fair value at the time of the Company’s change in its intent to continue to hold and operate the branches. As a result of the Company’s change in its intent to hold and operate these branches, the Company recorded a write-down of $2.3 million during the fourth quarter of 2012 associated with a fair value adjustment on the premises and equipment of these branches, which is included in other noninterest expense in the consolidated statements of operations.

Northern Illinois Region. During 2010, First Bank entered into three Branch Purchase and Assumption Agreements that provided for the sale of certain assets and the transfer of certain liabilities associated with 14 of First Bank’s branch banking offices in Northern Illinois, as further described below.

On December 21, 2010, First Bank entered into a Branch Purchase and Assumption Agreement with United Community Bank (United Community) that provided for the sale of certain assets and the transfer of certain liabilities associated with First Bank’s three retail branches in Pittsfield, Roodhouse and Winchester, Illinois to United Community. The transaction was completed on May 13, 2011. Under the terms of the agreement, United Community assumed $92.2 million of deposits associated with these branches for a weighted average premium of approximately 2.4%, or $2.2 million. United Community also purchased $37.5 million of loans as well as certain other assets at par value, including premises and equipment, associated with these branches.

On June 7, 2010, First Bank entered into a Branch Purchase and Assumption Agreement with Bank of Springfield that provided for the sale of certain assets and the transfer of certain liabilities of First Bank’s branch banking office located in Jacksonville, Illinois (Jacksonville Branch) to Bank of Springfield. The transaction was completed on September 24, 2010. Under the terms of the agreement, Bank of Springfield assumed $28.9 million of deposits associated with the Jacksonville Branch for a premium of approximately 4.00%, or $1.2 million. Bank of Springfield also purchased $2.2 million of loans as well as certain other assets at par value, including premises and equipment, associated with the Jacksonville Branch.

On May 7, 2010, First Bank entered into a Branch Purchase and Assumption Agreement with First Mid-Illinois Bank & Trust, N.A. (First Mid-Illinois) that provided for the sale of certain assets and the transfer of certain liabilities associated with 10 of First Bank’s retail branches in Peoria, Galesburg, Quincy, Bartonville, Knoxville and Bloomington, Illinois to First Mid-Illinois. The transaction was completed on September 10, 2010. Under the terms of the agreement, First Mid-Illinois assumed $336.0 million of deposits for a premium of 4.77%, or $15.6 million. First Mid-Illinois also purchased $135.2 million of loans as well as certain other assets at par value, including premises and equipment, associated with these branches.

The 14 branches in the transactions with United Community, Bank of Springfield and First Mid-Illinois are collectively defined as the Northern Illinois Region (Northern Illinois Region). The Bank of Springfield and First Mid-Illinois transactions, in the aggregate, resulted in a gain of $6.4 million, after the write-off of goodwill and intangible assets of $9.7 million allocated to the Northern Illinois Region, during the third quarter of 2010. The United Community transaction resulted in a gain of $425,000, after the write-off of goodwill and intangible assets of $1.6 million allocated to the Northern Illinois Region, during the second quarter of 2011.

Missouri Valley Partners, Inc. On March 5, 2010, First Bank entered into a Stock Purchase Letter Agreement that provided for the sale of First Bank’s subsidiary, Missouri Valley Partners, Inc. (MVP) to Stifel Financial Corp. The transaction was completed on April 15, 2010. Under the terms of the agreement, First Bank sold all of the capital stock of MVP for a purchase price of $515,000. The transaction resulted in a loss of $156,000 during the second quarter of 2010.

Texas Region. On February 8, 2010, First Bank entered into a Purchase and Assumption Agreement with Prosperity Bank (Prosperity), headquartered in Houston, Texas, that provided for the sale of certain assets and the transfer of certain liabilities of First Bank’s Texas franchise (Texas Region) to Prosperity. The transaction was completed on April 30, 2010. Under the terms of the agreement, Prosperity assumed substantially all of the deposits associated with First Bank’s 19 Texas retail branches which totaled $492.2 million, for a premium of 5.50%, or $26.9 million. Prosperity also purchased $96.7 million of loans as well as certain other assets, including premises and equipment, associated with First Bank’s Texas Region. The transaction resulted in a gain of $5.0 million, after the write-off of goodwill and intangible assets of $20.0 million allocated to the Texas Region, during the second quarter of 2010.

WIUS, Inc. and WIUS of California, Inc. On December 3, 2009, First Bank and Universal Premium Acceptance Corporation, predecessor to WIUS, Inc., and its wholly owned subsidiary, WIUS of California, Inc. (collectively, WIUS), entered into a Purchase and Sale Agreement that provided for the sale of certain assets and the transfer of certain liabilities of WIUS to PFS Holding Company, Inc., Premium Financing Specialists, Inc., Premium Financing Specialists of California, Inc. and Premium Financing Specialists of the South, Inc. (collectively, PFS). Under the terms of the agreement, PFS purchased $141.3 million of loans as well as certain other assets, including premises and equipment, associated with WIUS, and assumed certain other liabilities associated with WIUS upon completion of the transaction on December 31, 2009. In conjunction with this transaction, WIUS sold $1.5 million of additional loans to PFS on February 26, 2010. On August 31, 2010, First Bank sold all of the capital stock of WIUS to an unrelated third party for a purchase price of $100,000, which resulted in a loss of $29,000 during the third quarter of 2010.

Chicago Region. On November 11, 2009, First Bank entered into a Purchase and Assumption Agreement that provided for the sale of certain assets and the transfer of certain liabilities of First Bank’s Chicago franchise (Chicago Region) to FirstMerit Bank, N.A. (FirstMerit). The transaction was completed on February 19, 2010. Under the terms of the agreement, FirstMerit assumed substantially all of the deposits associated with First Bank’s 24 Chicago retail branches which totaled $1.20 billion, for a premium of 3.50%, or $42.1 million. FirstMerit also purchased $301.2 million of loans as well as certain other assets, including premises and equipment, associated with First Bank’s Chicago Region. The transaction resulted in a gain of $8.4 million, after the write-off of goodwill and intangible assets of $26.3 million allocated to the Chicago Region, during the first quarter of 2010.

Assets and liabilities of discontinued operations at December 31, 2012 and 2011 were as follows:



	December 31, 2012		December 31, 2011
	Florida		Florida
	(dollars expressed in thousands)
Cash and due from banks	$	1,139	1,018
Total loans	—		—
Bank premises and equipment, net	4,837		5,165
Goodwill and other intangible assets	700		700
Other assets	30		30
Assets of discontinued operations	$	6,706	6,913
Deposits:
Noninterest-bearing demand	$	12,488	9,103
Interest-bearing demand	10,480		8,198
Savings and money market	67,686		86,983
Time deposits of $100 or more	27,034		24,242
Other time deposits	37,964		46,123
Total deposits	155,652		174,649
Other borrowings	—		12
Accrued expenses and other liabilities	59		76
Liabilities of discontinued operations	$	155,711	174,737

Loss from discontinued operations, net of tax, for the year ended December 31, 2012 was as follows:



	Florida
	(dollars expressed in thousands)
Year ended December 31, 2012:
Interest income:
Interest and fees on loans	$	—
Interest expense:
Interest on deposits	972
Net interest loss	(972		)
Provision for loan losses	—
Net interest loss after provision for loan losses	(972		)
Noninterest income:
Service charges and customer service fees	467
Other	13
Total noninterest income	480
Noninterest expense:
Salaries and employee benefits	2,279
Occupancy, net of rental income	1,760
Furniture and equipment	278
Legal, examination and professional fees	5
FDIC insurance	358
Other	351
Total noninterest expense	5,031
Loss from operations of discontinued operations	(5,523		)
Benefit for income taxes	—
Net loss from discontinued operations, net of tax	$	(5,523	)

Loss from discontinued operations, net of tax, for the year ended December 31, 2011 was as follows:



	Florida			Northern Illinois	Total
	(dollars expressed in thousands)
Year ended December 31, 2011:
Interest income:
Interest and fees on loans	$	—		895	895
Interest expense:
Interest on deposits	2,160			261	2,421
Net interest (loss) income	(2,160		)	634	(1,526	)
Provision for loan losses	—			—	—
Net interest (loss) income after provision for loan losses	(2,160		)	634	(1,526	)
Noninterest income:
Service charges and customer service fees	411			259	670
Other	8			5	13
Total noninterest income	419			264	683
Noninterest expense:
Salaries and employee benefits	2,325			357	2,682
Occupancy, net of rental income	1,746			68	1,814
Furniture and equipment	431			29	460
Legal, examination and professional fees	1			6	7
Amortization of intangible assets	63			—	63
FDIC insurance	469			100	569
Other	379			67	446
Total noninterest expense	5,414			627	6,041
(Loss) income from operations of discontinued operations	(7,155		)	271	(6,884	)
Net gain on sale of discontinued operations	—			425	425
Benefit for income taxes	—			—	—
Net (loss) income from discontinued operations, net of tax	$	(7,155	)	696	(6,459	)

Income from discontinued operations, net of tax, for the year ended December 31, 2010 was as follows:



	Florida			Northern Illinois	Chicago		Texas		WIUS		MVP		Total
	(dollars expressed in thousands)
Year ended December 31, 2010:
Interest income:
Interest and fees on loans	$	—		9,629	2,391		1,816		33		—		13,869
Interest expense:
Interest on deposits	3,305			4,232	2,550		1,796		—		—		11,883
Other borrowings	—			—	—		3		(2	)	—		1
Total interest expense	3,305			4,232	2,550		1,799		(2	)	—		11,884
Net interest (loss) income	(3,305		)	5,397	(159	)	17		35		—		1,985
Provision for loan losses	—			—	—		—		—		—		—
Net interest (loss) income after provision for loan losses	(3,305		)	5,397	(159	)	17		35		—		1,985
Noninterest income:
Service charges and customer service fees	400			2,500	523		1,192		—		—		4,615
Investment management income	—			—	—		—		—		787		787
Other	5			30	254		161		—		(1	)	449
Total noninterest income	405			2,530	777		1,353		—		786		5,851
Noninterest expense:
Salaries and employee benefits	2,325			3,403	2,137		2,843		32		517		11,257
Occupancy, net of rental income	1,734			1,115	606		1,148		—		59		4,662
Furniture and equipment	652			365	178		345		—		17		1,557
Legal, examination and professional fees	—			62	123		111		153		115		564
Amortization of intangible assets	33			319	—		—		—		—		352
FDIC insurance	636			1,650	292		478		—		—		3,056
Other	345			709	424		860		184		29		2,551
Total noninterest expense	5,725			7,623	3,760		5,785		369		737		23,999
(Loss) income from operations of discontinued operations	(8,625		)	304	(3,142	)	(4,415	)	(334	)	49		(16,163	)
Net gain (loss) on sale of discontinued operations	—			6,355	8,414		4,984		(29	)	(156	)	19,568
Benefit for income taxes	—			—	—		—		(157	)	—		(157	)
Net (loss) income from discontinued operations, net of tax	$	(8,625	)	6,659	5,272		569		(206	)	(107	)	3,562