ACQUISITION OF CORNERSTONE BANCORP, INC. (Tables)
 12 Months Ended
Dec. 31, 2016
ACQUISITION OF CORNERSTONE BANCORP, INC.  
Summary of Assets Acquired and Liabilities Assumed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Summary of Assets Acquired and Liabilities Assumed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 17, 2016

 

 

As Previously Reported

 

As Recasted

 

 

 

As Recorded

 

 

Fair Value

 

 

 

 

Recast

 

 

 

As Recorded

(in thousands)

 

 

by Cornerstone

 

 

Adjustments

 

 

 

 

Adjustments

 

 

 

by Republic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets acquired:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$
22,707

 

$

 —

 

 

 

$

 —

 

 

$
22,707

Investment securities

 

 
329

 

 

 —

 

 

 

 

 —

 

 

 
329

Loans

 

 
195,136

 

 
(5,525)

 

a

 

 
13

 

a

 
189,624

Allowance for loan and lease losses

 

 
(1,955)

 

 
1,955

 

a

 

 

 —

 

 

 

 —

Loans, net

 

 
193,181

 

 
(3,570)

 

 

 

 
13

 

 

 
189,624

Federal Home Loan Bank stock, at cost

 

 
224

 

 

 —

 

 

 

 

 —

 

 

 
224

Premises and equipment, net

 

 
7,770

 

 
4,457

 

b

 

 

 —

 

 

 
12,227

Core deposit intangible

 

 

 —

 

 
1,205

 

c

 

 

 —

 

 

 
1,205

Deferred income taxes

 

 
3,714

 

 
(74)

 

d

 

 

 —

 

 

 
3,640

Bank owned life insurance

 

 
7,461

 

 

 —

 

 

 

 

 —

 

 

 
7,461

Other assets and accrued interest receivable

 

 
658

 

 

 —

 

 

 

 

 —

 

 

 
658

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets acquired

 

$
236,044

 

$
2,018

 

 

 

$
13

 

 

$
238,075

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities assumed:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Noninterest-bearing

 

$
52,908

 

$

 —

 

 

 

$

 —

 

 

$
52,908

   Interest-bearing

 

 
152,257

 

 
92

 

e

 

 

 —

 

 

 
152,349

Total deposits

 

 
205,165

 

 
92

 

 

 

 

 —

 

 

 
205,257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated note

 

 
4,124

 

 

 —

 

 

 

 

 —

 

 

 
4,124

Other liabilities and accrued interest payable

 

 
2,244

 

 
787

 

f

 

 

 —

 

 

 
3,031

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities assumed

 

 
211,533

 

 
879

 

 

 

 

 —

 

 

 
212,412

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets acquired

 

$
24,511

 

$
1,139

 

 

 

$
13

 

 

 
25,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash consideration paid

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(31,795)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

 

 

 

 

 

 

 

 

 

 

 

$
6,132

 

 

Explanation of preliminary fair value adjustments:

a.

 Reflects the fair value adjustment based on the Company’s evaluation of the acquired loan portfolio and to eliminate the acquiree’s recorded allowance for loan losses.

b.

Reflects the fair value adjustment based on the Company’s evaluation of the premises and equipment acquired.

c.

Reflects the fair value adjustment for the core deposit intangible asset recorded as a result of the acquisition.

d.

Reflects the differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.

e.

Reflects the fair value adjustment based on the Company’s evaluation of the assumed time deposits.

f.

Reflects the amount needed to adjust other liabilities to estimated fair value and to record certain liabilities directly attributable to the acquisition of Cornerstone.
Summary of results of operations of the assets acquired and liabilities assumed in the Company’s Cornerstone acquisition, inclusive of any pre-acquisition related costs

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2016 (in thousands)

    

Non-Acquisition Related

    

Acquisition-Related

    

Total

 

 

 

 

 

 

 

 

 

 

INTEREST INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$
5,663

 

$
240

a

$
5,903

Taxable investment securities

 

 
1,331

 

 

 —

 

 
1,331

Total interest income

 

 
6,994

 

 
240

 

 
7,234

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 
362

 

 
(14)

b

 
348

Borrowings

 

 
1,931

 

 

 —

 

 
1,931

Subordinated note

 

 
37

 

 

 —

 

 
37

Total interest expense

 

 
2,330

 

 
(14)

 

 
2,316

 

 

 

 

 

 

 

 

 

 

NET INTEREST INCOME

 

 
4,664

 

 
254

 

 
4,918

 

 

 

 

 

 

 

 

 

 

Provision for loan and lease losses

 

 
327

 

 

 —

 

 
327

 

 

 

 

 

 

 

 

 

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES

 

 
4,337

 

 
254

 

 
4,591

 

 

 

 

 

 

 

 

 

 

NONINTEREST INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 
210

 

 

 —

 

 
210

Interchange fee income

 

 
133

 

 

 —

 

 
133

Other

 

 
192

 

 

 —

 

 
192

Total noninterest income

 

 
535

 

 

 —

 

 
535

 

 

 

 

 

 

 

 

 

 

NONINTEREST EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 
1,822

 

 
274

c

 
2,096

Occupancy and equipment, net

 

 
532

 

 

 —

 

 
532

Communication and transportation

 

 
186

 

 
10

d

 
196

Marketing and development

 

 
144

 

 

 —

 

 
144

FDIC insurance expense

 

 
44

 

 

 —

 

 
44

Data processing

 

 
11

 

 
617

e

 
628

Supplies

 

 
49

 

 
20

f

 
69

Legal and professional fees

 

 
73

 

 
138

g

 
211

Other

 

 
364

 

 
135

h

 
499

Total noninterest expenses

 

 
3,225

 

 
1,194

 

 
4,419

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE INCOME TAX EXPENSE

 

 
1,647

 

 
(940)

 

 
707

INCOME TAX EXPENSE (BENEFIT)

 

 
506

 

 
(290)

 

 
216

NET INCOME (LOSS)

 

$
1,141

 

$
(650)

 

$
491

 

Explanation of acquisition-related items:

a.

Accretion of loan discounts.

b.

Amortization of deposit premiums.

c.

Severance payouts and signing bonuses for former Cornerstone employees.

d.

Notices to former Cornerstone stakeholders of change in ownership and merger-related travel.

e.

Primarily core system conversion-related costs.

f.

Costs to update forms and supplies to RB&T brand.

g.

Includes legal, audit, tax and other acquisition related consulting costs.

h.

Includes amortization of core deposit intangible asset.