BUSINESS COMBINATIONS

12 Months Ended

Dec. 31, 2011

BUSINESS COMBINATIONS

BUSINESS COMBINATIONS

16.  BUSINESS COMBINATIONS

On February 8, 2011, the Company announced a definitive merger agreement under which the Bank would acquire Hamptons State Bank (“HSB”). The HSB transaction closed on May 27, 2011 resulting in the addition of total acquired assets on a fair value basis of $68.9 million, with loans of $38.9 million, investment securities of $24.2 million and deposits of $56.9 million. The transaction augments the Bank’s franchise in eastern Long Island and the combined entity serves customers through a network of 20 branches. Under the terms of the Agreement, each share of Hamptons State Bank common stock was converted into 0.3434 shares of the Company’s common stock. The Company issued approximately 273,500 shares, with an aggregate value of $5.85 million and recorded goodwill of $2.03 million which is not tax deductible for tax purposes.

The acquisition was accounted for under the acquisition method of accounting in accordance with FASB ASC 805, “Business Combinations.” Accordingly, the assets acquired and liabilities assumed were recorded at their respective acquisition date fair values, and identifiable intangible assets were recorded at fair value.  The operating results of the Company for the year ended December 31, 2011, include the operating results of HSB since the acquisition date of May 27, 2011.

The following summarizes the preliminary fair value of the assets acquired and liabilities assumed on May 27, 2011:

(In thousands)	As Initially Reported		Measurement Period Adjustments			As Adjusted
Cash and due from banks	$	585	$	—		$	585
Interest earning deposits with banks	1,727		—			1,727
Securities	24,159		—			24,159
Loans	39,051		(137		)	38,914
Premises and equipment	300		—			300
Core deposit intangible	358		—			358
Other assets	2,781		54			2,835
Total Assets Acquired	$	68,961	$	(83	)	$	68,878
Deposits	$	56,940	$	—		$	56,940
Federal funds purchased and Federal Home Loan Bank overnight borrowings	2,000		—			2,000
Federal Home Loan Bank term advances	5,016		—			5,016
Other liabilities and accrued expenses	1,103		—			1,103
Total Liabilities Assumed	$	65,059	$	—		$	65,059
Net Assets Acquired	$	3,902	$	(83	)	$	3,819
Consideration Paid	5,853		—			5,853
Goodwill Recorded on Acquisition	$	1,951	$	83		$	2,034

The above fair values are finalized with the exception of purchased credit impaired loans which are subject to refinement for up to one year after the closing date of the acquisition as new information relative to closing date fair values become available.