Branch Acquisition

12 Months Ended

Dec. 31, 2012

Branch Acquisition [Abstract]

Branch Acquisition

2. Branch Acquisition

On October 26, 2012, the Bank acquired 15 full-service branches from Bank of America, National Association ("Branch Acquisition"), pursuant to the terms and conditions of the Purchase and Assumption Agreement, dated April 23, 2012. The purchase price was $12.0 million less the premium received upon the sale of one of these branches of $3.3 million as agreed with the U.S. Department of Justice. While the Branch Acquisition is considered a purchase of a business for accounting purposes, revenues and expenses of the acquired branches and pro forma income statement information are not presented as the effect would not be material.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition: Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value:

Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value:
Cash and cash equivalents(1)	$	267,689
Loans		5,664
Premises and equipment		5,177
Core deposit intangible		2,856
Other assets		45
Total assets acquired		281,431
Deposits		(287,559	)
Other liabilities		(54	)
Total liabilities acquired		(287,613	)
Goodwill	$	6,182

(1) Amount is net of $8.7 million deposit premium paid.

The above recognized amounts of goodwill, loans, core deposit intangible, other assets and other liabilities, at fair value, are preliminary estimates and are subject to adjustment. Actual amounts are not expected to differ materially from those shown.

The Company estimated the fair value of loans acquired by utilizing a methodology which approximates the projected cash flows for each aggregated loan pool by estimating future credit losses and the rate of prepayments and discounting to present value based on a market rate for similar loans. There was no allowance for loan losses recorded for the acquired loans as the loans were initially recorded at fair value. The Company acquired $6.0 million in performing commercial loans and recorded a fair value mark of $317,000.

The $2.9 million core deposit intangible asset recognized as part of the Branch Acquisition is being amortized over its estimated useful life of five years using a straight-line method. The goodwill, which is not amortized for financial statement purposes, is deductible for tax purposes.

The fair value of savings and transaction deposit accounts acquired was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. Certificates of deposit were valued by projecting the expected cash flows based on the remaining contractual terms of the certificate of deposit. These cash flows were discounted based on a market rate for a certificate of deposit with a corresponding remaining maturity. The Company acquired $286.7 million of deposits and recorded a fair value mark of $900,000.

Direct costs related to the Branch Acquisition were expensed as incurred and amounted to $2.3 million for 2012. These acquisition integration expenses included technology costs related to system conversions, customer communications and professional fees.

The Company expects the Branch Acquisition to provide additional business opportunities in these acquired branch locations by increasing the Bank's presence in these key growth markets. Future revenue opportunities include providing commercial and retail loans within the local communities and expanding our wealth management and investment advisory services.