Note 4 — Mergers and Acquisitions
Savannah Bancorp, Inc. — Definitive Agreement
On August 8, 2012, SCBT entered into an Agreement and Plan of Merger (the “Agreement”) with Savannah Bancorp, Inc. (“SAVB”), a bank holding company headquartered in Savannah, Georgia. The Savannah Bank, N.A. and Bryan Bank and Trust are two wholly-owned bank subsidiaries of SAVB. Minis & Company is one of the oldest retail investment advisory firms in the Southeast, and is a wholly-owned subsidiary of SAVB. At June 30, 2012, SAVB reported $952.2 million in total assets, $725.3 million in loans and $818.0 million in deposits. SAVB has a total of eleven branches in Coastal Georgia and South Carolina. The two subsidiary banks will initially become divisions of the Bank, and Minis & Company will become a wholly-owned subsidiary of the Bank.
Under the terms of Agreement, SAVB shareholders will receive aggregate consideration of approximately 1,802,000 shares of SCBT common stock. The stock consideration is based upon a fixed exchange ratio of 0.2503 shares of SCBT common stock for each of the outstanding shares of SAVB common stock, which as of October 24, 2012, totaled 7,199,237 shares. Based on SCBT’s closing stock price of $39.38, as of October 24, 2012, the transaction is valued at approximately $71.0 million in the aggregate or $9.86 per SAVB share.
The transaction is subject to regulatory and shareholders’ approvals. The transaction is expected to close during the fourth quarter of 2012.
Peoples Bancorporation Acquisition
On April 24, 2012, the Company acquired all of the outstanding common stock of Peoples Bancorporation (“Peoples”), a bank holding company based in Easley, South Carolina, in a stock transaction. Peoples common shareholders received 0.1413 shares of the Company’s common stock in exchange for each share of Peoples stock, resulting in the Company issuing 1,002,741 common shares at a fair value of $31.1 million. Peoples’ preferred stock (including accrued and unpaid dividend) issued under the U.S. Treasury’s Troubled Asset Relief Program (“TARP”) were purchased by the Company for $13.4 million and retired as part of the merger transaction. In total, the purchase price was approximately $44.5 million including the value of the outstanding options to purchase common stock assumed in the merger.
The Peoples transaction was accounted for using the purchase method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date. Fair values are preliminary and subject to refinement for up to a year after the closing date of the acquisition. The fair value of assets acquired, excluding goodwill, totaled $491.9 million, including $234.2 million in loans, $175.9 million of investment securities, and $2.9 million of identifiable intangible assets. The fair value of liabilities assumed were $451.0 million, including $435.1 million of deposits.
Goodwill of $3.6 million was calculated as the excess of the consideration exchanged over the net fair value of identifiable assets acquired.
The following table presents the assets acquired and liabilities assumed as of April 24, 2012, as recorded by Peoples on the acquisition date and as adjusted for purchase accounting adjustments.
|
|
|
|
Initial |
|
Subsequent |
|
|
|
|
|
As Recorded by |
|
Fair Value |
|
Fair Value |
|
As Recorded |
|
(Dollars in thousands) |
|
Peoples |
|
Adjustments |
|
Adjustments |
|
by SCBT |
|
Assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
24,459 |
|
$ |
— |
|
$ |
— |
|
$ |
24,459 |
|
Investment securities |
|
176,334 |
|
(442 |
)(a) |
— |
|
175,892 |
|
Loans |
|
262,858 |
|
(28,613 |
)(b) |
— |
|
234,245 |
|
Premises and equipment |
|
10,094 |
|
3,240 |
(c) |
(38 |
)(c) |
13,296 |
|
Intangible assets |
|
— |
|
2,930 |
(d) |
— |
|
2,930 |
|
Other real estate owned and repossessed assets |
|
13,257 |
|
(5,341 |
)(e) |
114 |
(e) |
8,030 |
|
Deferred tax asset |
|
4,702 |
|
11,669 |
(f) |
— |
|
16,371 |
|
Other assets |
|
17,588 |
|
(883 |
)(g) |
(6 |
) |
16,699 |
|
Total assets |
|
$ |
509,292 |
|
$ |
(17,440 |
) |
$ |
70 |
|
$ |
491,922 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
Noninterest-bearing |
|
$ |
54,884 |
|
$ |
— |
|
$ |
— |
|
$ |
54,884 |
|
Interest-bearing |
|
378,781 |
|
1,405 |
(h) |
— |
|
380,186 |
|
Total deposits |
|
433,665 |
|
1,405 |
|
— |
|
435,070 |
|
Other borrowings |
|
9,542 |
|
— |
|
— |
|
9,542 |
|
Other liabilities |
|
4,291 |
|
2,054 |
(i) |
57 |
(i) |
6,402 |
|
Total liabilities |
|
447,498 |
|
3,459 |
|
57 |
|
451,014 |
|
Net identifiable assets acquired over (under) liabilities assumed |
|
61,794 |
|
(20,899 |
) |
13 |
|
40,908 |
|
Goodwill |
|
— |
|
3,654 |
|
(13 |
) |
3,641 |
|
Net assets acquired over (under) liabilities assumed |
|
$ |
61,794 |
|
$ |
(17,245 |
) |
$ |
— |
|
$ |
44,549 |
|
|
|
|
|
|
|
|
|
|
|
Consideration: |
|
|
|
|
|
|
|
|
|
SCBT Financial Corporation common shares issued |
|
1,002,741 |
|
|
|
|
|
|
|
Purchase price per share of the Company’s common stock |
|
$ |
31.06 |
|
|
|
|
|
|
|
Company common stock issued and cash exchanged for fractional shares |
|
31,160 |
|
|
|
|
|
|
|
Stock options converted |
|
96 |
|
|
|
|
|
|
|
Cash paid for TARP preferred stock |
|
13,293 |
|
|
|
|
|
|
|
Fair value of total consideration transferred |
|
$ |
44,549 |
|
|
|
|
|
|
|
Explanation of fair value adjustments
(a)—Adjustment reflects marking the available-for-sale portfolio to fair value as of the acquisition date.
(b)—Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio and excludes the allowance for loan losses recorded by Peoples Bancorporation, Inc.
(c)—Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired premises and equipment.
(d)—Adjustment reflects the recording of the core deposit intangible on the acquired deposit accounts and other intangibles for non-compete agreements.
(e)—Adjustment reflects the fair value adjustments to OREO based on the Company’s evaluation of the acquired OREO portfolio.
(f)—Adjustment to record deferred tax asset related to purchase accounting adjustments at 35.8% income tax rate.
(g)—Adjustment reflects uncollectible portion of accrued interest receivable.
(h)—Adjustment arises since the rates on interest-bearing deposits are higher than rates available on similar deposits as of the acquisition date.
(i)—Adjustment reflects the incremental accrual for SERP termination, other employee related benefits, and other liabilities.
The following table provides a reconciliation of goodwill for the nine months ended September 30, 2012:
(Dollars in thousands) |
|
|
|
|
|
|
|
Balance, December 31, 2011 |
|
$ |
62,888 |
|
Additions: |
|
|
|
Goodwill from Peoples acquisition |
|
3,641 |
|
Balance, September 30, 2012 |
|
$ |
66,529 |
|
|