| Condensed Balance Sheet of Bank and Related Fair Value Adjustments |
($ in thousands) | |
As
Recorded by
Carolina Bank | | |
Initial Fair
Value
Adjustments | | |
Measurement
Period
Adjustments | | |
As
Recorded by
First Bancorp | |
| Assets | |
| | | |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 81,466 | | |
| (2 | ) (a) | |
| — | | |
| 81,464 | |
| Securities | |
| 49,629 | | |
| (261 | ) (b) | |
| — | | |
| 49,368 | |
| Loans, gross | |
| 505,560 | | |
| (5,469 | ) (c) | |
| 146 | (l) | |
| 497,522 | |
| | |
| | | |
| (2,715 | ) (d) | |
| — | | |
| | |
| Allowance for loan losses | |
| (5,746 | ) | |
| 5,746 | (e) | |
| — | | |
| ̶ | |
| Premises and equipment | |
| 17,967 | | |
| 4,251 | (f) | |
| (319 | ) (m) | |
| 21,899 | |
| Core deposit intangible | |
| — | | |
| 8,790 | (g) | |
| — | | |
| 8,790 | |
| Other | |
| 34,976 | | |
| (4,804 | ) (h) | |
| 2,225 | (n) | |
| 32,397 | |
| Total | |
| 683,852 | | |
| 5,536 | | |
| 2,052 | | |
| 691,440 | |
| | |
| | | |
| | | |
| | | |
| | |
| Liabilities | |
| | | |
| | | |
| | | |
| | |
| Deposits | |
$ | 584,950 | | |
| 431 | (i) | |
| — | | |
| 585,381 | |
| Borrowings | |
| 21,855 | | |
| (2,855 | ) (j) | |
| (262 | ) (o) | |
| 18,738 | |
| Other | |
| 12,855 | | |
| 225 | (k) | |
| (444 | ) (p) | |
| 12,636 | |
| Total | |
| 619,660 | | |
| (2,199 | ) | |
| (706 | ) | |
| 616,755 | |
| | |
| | | |
| | | |
| | | |
| | |
| Net identifiable assets acquired | |
| | | |
| | | |
| | | |
| 74,685 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total cost of acquisition | |
| | | |
| | | |
| | | |
| | |
| Value of stock issued | |
| | | |
$ | 114,478 | | |
| | | |
| | |
| Cash paid in the acquisition | |
| | | |
| 25,279 | | |
| | | |
| | |
| Total cost of acquisition | |
| | | |
| | | |
| | | |
| 139,757 | |
| | |
| | | |
| | | |
| | | |
| | |
| Goodwill recorded related to acquisition of Carolina Bank | | | |
| | | |
$ | 65,072 | |
| | |
| | | |
| | | |
| | | |
| | |
Explanation of Fair Value Adjustments
| (a) | This adjustment was recorded to a short-term investment to its estimated fair value. |
| (b) | This fair value adjustment was recorded to adjust the securities portfolio to its estimated fair value. |
| (c) | This fair value adjustment represents the amount necessary to reduce performing loans to their fair value due to interest rate
factors and credit factors. Assuming the loans continue to perform, this amount will be amortized to increase interest income over
the remaining lives of the related loans. |
| (d) | This fair value adjustment was recorded to write-down purchased credit impaired loans assumed in the acquisition to their estimated
fair market value. |
| (e) | This fair value adjustment reduced the allowance for loan losses to zero as required by relevant accounting guidance. |
| (f) | This adjustment represents the amount necessary to increase premises and equipment from its book value on the date of acquisition
to its estimated fair market value. |
| (g) | This fair value adjustment represents the value of the core deposit base assumed in the acquisition based on a study performed
by an independent consulting firm. This amount was recorded by the Company as an identifiable intangible asset and will be amortized
as expense on an accelerated basis over seven years. |
| (h) | This fair value adjustment primarily represents the net deferred tax liability associated with the other fair value adjustments
made to record the transaction. |
| (i) | This fair value adjustment was recorded because the weighted average interest rate of Carolina Bank’s time deposits exceeded
the cost of similar wholesale funding at the time of the acquisition. This amount is being amortized to reduce interest expense
on an accelerated basis over the deposits’ remaining five year life. |
| (j) | This fair value adjustment was primarily recorded because the interest rate of Carolina Bank’s trust preferred securities
was less than the current interest rate on similar instruments. This amount is being amortized on approximately a straight-line
basis to increase interest expense over the remaining life of the related borrowing, which is 18 years. |
| (k) | This fair value adjustment represents miscellaneous adjustments needed to record assets and liabilities at their fair value. |
| (l) | This fair value adjustment was a miscellaneous adjustment to increase the initial fair value of gross loans. |
| (m) | This fair value adjustment relates to miscellaneous adjustment to decrease the initial fair value of premises and equipment. |
| (n) | This fair value adjustment relates to changes in the estimate of deferred tax assets/liabilities associated with the acquisition
and adjustments to decrease the initial fair value of the foreclosed real estate acquired in the transaction based on newly obtained
valuations. |
| (o) | This fair value adjustment relates to miscellaneous adjustments to decrease the initial fair value of borrowings. |
| (p) | This fair value adjustment relates to a change in the estimate of a contingent liability. |
The following unaudited pro forma financial information
presents the combined results of the Company and Carolina Bank as if the acquisition had occurred as of January 1, 2016, after
giving effect to certain adjustments, including amortization of the core deposit intangible, and related income tax effects. The
pro forma financial information does not necessarily reflect the results of operations that would have occurred had the Company
and Carolina Bank constituted a single entity during such period.
|
| Condensed Balance Sheet of Bank and Related Fair Value Adjustments |
($ in thousands) | |
As Recorded by
Asheville Savings
Bank | | |
Initial Fair
Value
Adjustments | | |
Measurement
Period
Adjustments | | |
As
Recorded by
First Bancorp | |
| Assets | |
| | | |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 41,824 | | |
| — | | |
| — | | |
| 41,824 | |
| Securities | |
| 95,020 | | |
| — | | |
| — | | |
| 95,020 | |
| Loans, gross | |
| 617,159 | | |
| (9,631 | ) (a) | |
| — | | |
| 606,180 | |
| | |
| | | |
| (1,348 | ) (b) | |
| — | | |
| | |
| Allowance for loan losses | |
| (6,685 | ) | |
| 6,685 | (c) | |
| — | | |
| — | |
| Presold mortgages | |
| 3,785 | | |
| — | | |
| — | | |
| 3,785 | |
| Premises and equipment | |
| 10,697 | | |
| 9,857 | (d) | |
| — | | |
| 20,554 | |
| Core deposit intangible | |
| — | | |
| 9,760 | (e) | |
| 120 | (i) | |
| 9,880 | |
| Other | |
| 35,944 | | |
| (5,851 | ) (f) | |
| (777 | ) (j) | |
| 29,316 | |
| Total | |
| 797,744 | | |
| 9,472 | | |
| (657 | ) | |
| 806,559 | |
| | |
| | | |
| | | |
| | | |
| | |
| Liabilities | |
| | | |
| | | |
| | | |
| | |
| Deposits | |
$ | 678,707 | | |
| 430 | (g) | |
| — | | |
| 679,137 | |
| Borrowings | |
| 20,000 | | |
| — | | |
| — | | |
| 20,000 | |
| Other | |
| 8,943 | | |
| 298 | (h) | |
| (822 | ) (k) | |
| 8,419 | |
| Total | |
| 707,650 | | |
| 728 | | |
| (822 | ) | |
| 707,556 | |
| | |
| | | |
| | | |
| | | |
| | |
| Net identifiable assets acquired | |
| | | |
| | | |
| | | |
| 99,003 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total cost of acquisition | |
| | | |
| | | |
| | | |
| | |
| Value of stock issued | |
| | | |
$ | 169,299 | | |
| | | |
| | |
| Cash paid in the acquisition | |
| | | |
| 17,939 | | |
| | | |
| | |
| Total cost of acquisition | |
| | | |
| | | |
| | | |
| 187,238 | |
| | |
| | | |
| | | |
| | | |
| | |
| Goodwill recorded related to acquisition of Asheville Savings Bank | |
| | | |
$ | 88,235 | |
Explanation of Fair Value Adjustments
| (a) | This fair value adjustment represents the amount necessary to reduce performing loans to their fair value due to interest rate
factors and credit factors. Assuming the loans continue to perform, this amount will be amortized to increase interest income over
the remaining lives of the related loans. |
| (b) | This fair value adjustment was recorded to write-down purchased credit impaired loans assumed in the acquisition to their estimated
fair market value. |
| (c) | This fair value adjustment reduced the allowance for loan losses to zero as required by relevant accounting guidance. |
| (d) | This adjustment represents the amount necessary to increase premises and equipment from its book value on the date of acquisition
to its estimated fair market value. |
| (e) | This fair value adjustment represents the value of the core deposit base assumed in the acquisition based on a study performed
by an independent consulting firm. This amount was recorded by the Company as an identifiable intangible asset and is being amortized
as expense on an accelerated basis over seven years. |
| (f) | This fair value adjustment primarily represents the net deferred tax liability associated with the other fair value adjustments
made to record the transaction. |
| (g) | This fair value adjustment was recorded because the weighted average interest rate of Asheville Savings Bank’s time deposits
exceeded the cost of similar wholesale funding at the time of the acquisition. This amount is being amortized to reduce interest
expense on an accelerated basis over their remaining five year life. |
| (h) | This fair value adjustment represents miscellaneous adjustments needed to record assets and liabilities at their fair value. |
| (i) | This fair value adjustment relates to a change in the final amount of the core deposit intangible asset from the amount originally
estimated. |
| (j) | This fair value adjustment relates to the write-down of a foreclosed property based on an updated appraisal and the related
deferred tax asset adjustment. |
| (k) | This fair value adjustment was recorded to adjust the tax liability assumed on the acquisition date based on updated information. |
|