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 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 to the operations of First Bank's Association Bank Services line of business and First Bank's Northern Florida and Northern Illinois Regions for the years ended December 31, 2013, 2012 and 2011, 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.

Association Bank Services. On May 13, 2013, First Bank entered into a Purchase and Assumption Agreement that provided for the sale of certain assets and the transfer of certain liabilities, primarily deposits, of First Bank's Association Bank Services (ABS) line of business, to Union Bank, N.A. (Union Bank), headquartered in San Francisco, California. ABS, previously headquartered in Vallejo, California, provided a full range of services to homeowners associations and community management companies. The transaction was completed on November 22, 2013. Under the terms of the agreement, Union Bank assumed $572.1 million of deposits, as well as certain other liabilities, and paid a premium on certain deposit accounts acquired in the transaction. Union Bank also purchased certain assets, including $20.8 million of loans, at par value. The transaction resulted in a gain of $28.6 million, after the write-off of goodwill of $18.0 million allocated to the transaction in the fourth quarter of 2013.

Northern Florida Region. On November 21, 2012, First Bank entered into a Branch Purchase and Assumption Agreement that provided 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. The transaction was completed on April 19, 2013. Under the terms of the agreement, HomeBanc assumed $120.3 million of deposits, purchased the premises and equipment, and assumed the leases associated with these eight retail branches. The transaction resulted in a gain of $408,000, after the write-off of goodwill of $700,000 allocated to the Northern Florida Region during the second quarter of 2013.

On April 5, 2013, First Bank closed its three remaining retail branches located in Hillsborough County and in Pasco County. The closure of these three remaining retail branches in the Northern Florida Region resulted in expense of $2.3 million during the second quarter of 2013 attributable to continuing obligations under facility leasing arrangements.

The eight branches sold and three branches closed during the second quarter of 2013 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.

First Bank presently continues to 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. 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 operate the branches. As a result of the Company’s change in its intent to 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. Two transactions were completed in 2010, resulting in the sale of 11 branch banking offices, and one transaction was completed in 2011, resulting in the sale of three branch banking offices. The 14 branches in the three separate transactions are collectively defined as the Northern Illinois Region (Northern Illinois Region). The transactions completed in 2010, 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 these branches. The transaction completed in 2011 resulted in a gain of $425,000, after the write-off of goodwill and intangible assets of $1.6 million allocated to these branches.

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



	December 31, 2012
	Northern Florida
	(dollars expressed in thousands)
Cash and due from banks	$	1,139
Total loans	—
Bank premises and equipment, net	4,837
Goodwill	700
Other assets	30
Assets of discontinued operations	$	6,706
Deposits:
Noninterest-bearing demand	$	12,488
Interest-bearing demand	10,480
Savings and money market	67,686
Time deposits of $100 or more	27,034
Other time deposits	37,964
Total deposits	155,652
Accrued expenses and other liabilities	59
Liabilities of discontinued operations	$	155,711

Income from discontinued operations, net of tax, for the year ended December 31, 2013 was as follows:



	Association Bank Services			Northern Florida		Total
	(dollars expressed in thousands)
Year ended December 31, 2013:
Interest income:
Interest and fees on loans	$	1,221		—		1,221
Interest expense:
Interest on deposits	292			233		525
Net interest income (loss)	929			(233	)	696
Provision for loan losses	—			—		—
Net interest income (loss) after provision for loan losses	929			(233	)	696
Noninterest income:
Service charges and customer service fees	85			134		219
Other	105			4		109
Total noninterest income	190			138		328
Noninterest expense:
Salaries and employee benefits	3,045			885		3,930
Occupancy, net of rental income	6			579		585
Furniture and equipment	41			40		81
Legal, examination and professional fees	68			—		68
FDIC insurance	671			53		724
Other	743			2,452		3,195
Total noninterest expense	4,574			4,009		8,583
Loss from operations of discontinued operations	(3,455		)	(4,104	)	(7,559	)
Net gain on sale of discontinued operations	28,615			408		29,023
Provision for income taxes	241			—		241
Net income (loss) from discontinued operations, net of tax	$	24,919		(3,696	)	21,223

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



	Association Bank Services			Northern Florida		Total
	(dollars expressed in thousands)
Year ended December 31, 2012:
Interest income:
Interest and fees on loans	$	1,762		—		1,762
Interest expense:
Interest on deposits	477			972		1,449
Net interest income (loss)	1,285			(972	)	313
Provision for loan losses	—			—		—
Net interest income (loss) after provision for loan losses	1,285			(972	)	313
Noninterest income:
Service charges and customer service fees	119			467		586
Other	109			13		122
Total noninterest income	228			480		708
Noninterest expense:
Salaries and employee benefits	2,583			2,279		4,862
Occupancy, net of rental income	12			1,760		1,772
Furniture and equipment	89			278		367
Legal, examination and professional fees	62			5		67
FDIC insurance	1,123			358		1,481
Other	942			351		1,293
Total noninterest expense	4,811			5,031		9,842
Loss from operations of discontinued operations	(3,298		)	(5,523	)	(8,821	)
Benefit for income taxes	—			—		—
Net loss from discontinued operations, net of tax	$	(3,298	)	(5,523	)	(8,821	)

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



	Association Bank Services			Northern Florida			Northern Illinois	Total
	(dollars expressed in thousands)
Year ended December 31, 2011:
Interest income:
Interest and fees on loans	$	2,237		—			895	3,132
Interest expense:
Interest on deposits	901			2,160			261	3,322
Net interest income (loss)	1,336			(2,160		)	634	(190	)
Provision for loan losses	—			—			—	—
Net interest income (loss) after provision for loan losses	1,336			(2,160		)	634	(190	)
Noninterest income:
Service charges and customer service fees	155			411			259	825
Other	115			8			5	128
Total noninterest income	270			419			264	953
Noninterest expense:
Salaries and employee benefits	2,519			2,325			357	5,201
Occupancy, net of rental income	10			1,746			68	1,824
Furniture and equipment	114			431			29	574
Legal, examination and professional fees	30			1			6	37
Amortization of intangible assets	—			63			—	63
FDIC insurance	1,227			469			100	1,796
Other	641			379			67	1,087
Total noninterest expense	4,541			5,414			627	10,582
(Loss) income from operations of discontinued operations	(2,935		)	(7,155		)	271	(9,819	)
Net gain on sale of discontinued operations	—			—			425	425
Benefit for income taxes	—			—			—	—
Net (loss) income from discontinued operations, net of tax	$	(2,935	)	$	(7,155	)	696	(9,394	)