Acquisitions

6 Months Ended

Jun. 30, 2013

Business Combinations [Abstract]

Acquisitions

Pending Acquisition of Randolph Bank and Trust Company

On May 31, 2013, the Companyentered into an Agreement and Plan of Merger with Randolph Bank and Trust Company(“Randolph”), a commercial bank with $302 million in assets serving small businesses and professionals in the Piedmont-Triad area of North Carolina.Randolph operates six branches and aligns with the Company's strategy of growth focused within existing markets.The Company anticipates that the acquisition will close in the fourth quarter of 2013, subject to customary closing conditions, including regulatory approval and approval of Randolph's shareholders.

Under the merger agreement, Randolph common shareholders will receive an amount of cash or shares of the Company's common stock equal to $10.00 per share, subject to certain collars, for an aggregate deal value for common shareholders of approximately $10.4 million. Eighty percent of the total consideration received by Randolph common shareholders will be the Company's voting common stock and the remainder will be cash. Randolph's three series of preferred stock will cease to exist and will be converted into the right to receive cash in the amount of $1,000 per share, plus any accrued dividends.

Acquisition of First Trust Bank

On November 30, 2012, the Companycompleted the acquisition of First Trust Bank (“First Trust”), which operated three branches in Charlotte, North Carolina. The acquisition of First Trust expanded and enhanced the BNC franchise in the metropolitan Charlotte market.

Subsequent to the initial reporting of the assets acquired and the liabilities assumed in the First Trust acquisition, the Company made additional measurement period adjustments to the fair value of assets acquired and liabilities assumed. As a result of these measurement period adjustments, the Company recognized $719,000 of additional bargain purchase gain during the first quarter of 2013, which was recorded as a component of non-interest income.

A summary of assets received and liabilities assumed for First Trust and the estimated fair value adjustments are as follows (dollars in thousands):

			As Recorded by First Trust		Fair Value Adjustments			As Initially Recorded by BNC		Measurement Period Adjustments			As Recorded by BNC
Assets
	Cash and due from banks		$	46,079	$	-		$	46,079	$	-		$	46,079
	Investment securities available-for-sale			124,616		-			124,616		-			124,616
	Federal Home Loan Bank stock, at cost			753		-			753		-			753
	Loans			179,702		(9,820)	(1)		169,882		-			169,882
	Premises and equipment			6,938		866	(2)		7,804		-			7,804
	Accrued interest receivable			1,565		-			1,565		-			1,565
	Other real estate owned			8,686		(535)	(3)		8,151		-			8,151
	Core deposit intangible			-		1,826	(4)		1,826		-			1,826
	Other assets			12,337		3,295	(5)		15,632		-			15,632
	Total assets acquired		$	380,676	$	(4,368)		$	376,308	$	-			376,308
Liabilities
	Deposits		$	(323,139)	$	(884)	(6)		(324,023)	$	-		$	(324,023)
	Short-term borrowings			(7,899)		-			(7,899)		-			(7,899)
	Other liabilities			(2,849)		-			(2,849)		719	(7)		(2,130)
	Total liabilities assumed		$	(333,887)	$	(884)		$	(334,771)	$	719			(334,052)
	Net assets acquired													42,256
	Total consideration paid													36,565
	Bargain purchase gain												$	5,691
Explanation of fair value adjustments:
(1)	-	Adjustment for the fair value of the acquired loan portfolio.
(2)	-	Adjustment for fair value of acquired premises and equipment.
(3)	-	Adjustment for the fair value of the acquired other real estate owned.
(4)	-	Adjustment for the estimated value of the core deposit intangible.
(5)	-	Adjustment for deferred tax asset recognized from acquisition.
(6)	-	Adjustment for the estimated fair value of time deposits.
(7)	-	Adjustment for cancellation of split dollar life insurance plan.
A summary of the consideration paid for First Trust is as follows (dollars in thousands):
	Common stock issued (3,276,101 shares)												$	26,177
	Cash payments to First Trust stockholders													10,388
	Total consideration paid												$	36,565

Acquisition of KeySource Financial, Inc.

OnSeptember 14, 2012, the Companycompleted the acquisition ofKeySource Financial, Inc. (“KeySource”), which operated one branch in Durham, North Carolina. The acquisition of KeySourceexpanded and enhanced the BNC franchise in the Raleigh-Durham market.

A summary of assets received and liabilities assumed for KeySource and the estimated fair value adjustments are as follows (dollars in thousands):
			As Recorded by		Fair Value			As Recorded
			KeySource		Adjustments			by BNC
Assets
	Cash and due from banks		$	19,847	$	-		$	19,847
	Investment securities available-for-sale			3,445		-			3,445
	Federal Home Loan Bank stock, at cost			430		-			430
	Loans			148,295		(8,690)	(1)		139,605
	Premises and equipment			650		-			650
	Accrued interest receivable			547		-			547
	Other real estate owned			1,289		(150)	(2)		1,139
	Core deposit intangible			-		621	(3)		621
	Other assets			4,445		3,516	(4)		7,961
	Total assets acquired		$	178,948	$	(4,703)			174,245
Liabilities
	Deposits		$	(151,553)	$	(854)	(5)		(152,407)
	Short-term borrowings			(780)		-			(780)
	Long-term debt			(5,999)		(48)	(6)		(6,047)
	Other liabilities			(1,754)		102			(1,652)
	Total liabilities assumed		$	(160,086)	$	(800)			(160,886)
	Net assets acquired								13,359
	Total consideration paid								13,942
	Goodwill							$	583
Explanation of fair value adjustments:
(1)	-	Adjustment for the fair value of the acquired loan portfolio.
(2)	-	Adjustment for the fair value of the acquired other real estate owned.
(3)	-	Adjustment for the estimated value of the core deposit intangible.
(4)	-	Adjustment for deferred tax asset recognized from acquisition.
(5)	-	Adjustment for the estimated fair value of time deposits.
(6)	-	Adjustment for the fair value of the subordinated debt assumed.
A summary of the consideration paid for KeySource is as follows (dollars in thousands):
	Common stock issued (1,810,267 shares)							$	13,686
	Fair value of KeySource stock options assumed								256
	Total consideration paid							$	13,942
None of the goodwill is deductible for tax purposes.

Acquisition of Branches from The Bank of Hampton Roads

On September 21, 2012, the Company acquired two branches of Gateway Bank & Trust Company located in Cary and Chapel Hill, North Carolina, respectively, which were owned and operated by The Bank of Hampton Roads (“BHR”). The estimated fair value of the assets acquired, which included cash, premises and equipment, and other assets,totaled $24.1 million, while the estimated fair value of liabilities assumed, which included deposits and other liabilities, totaled $24.5 million. BNC recorded approximately $400,000 of goodwill related to this acquisition. None of the goodwill is deductible for tax purposes.

FDIC-Assisted Acquisition of Carolina Federal Savings Bank

On June 8, 2012, the Company acquired certain assets and liabilities of Carolina Federal Savings Bank(“Carolina Federal”), a federal thrift organized under the laws of the United States and headquartered in Charleston, South Carolina, from the Federal Deposit Insurance Corporation (the “FDIC”), as receiver of Carolina Federal. Carolina Federal operated two branches in the Charleston market.There is no loss-sharing arrangement with the FDIC with respect to this transaction. The FDIC paid the Company an asset discount in the amount of $10.7 million at closing and the deposits were acquired without a premium.

A summary of the assets received and liabilities assumed from the FDIC for Carolina Federal and the estimated fair value adjustments are as follows (dollars in thousands):
			As Recorded by		Fair Value			As Recorded
			Carolina Federal		Adjustments			by BNC
Assets
	Cash and due from banks		$	8,394	$	-		$	8,394
	Federal Home Loan Bank stock, at cost			112		-			112
	Loans			32,328		(2,862)	(1)		29,466
	Accrued interest receivable			124		-			124
	Core deposit intangible			-		93	(2)		93
	Other assets			35		1,291	(3)		1,326
	Total assets acquired		$	40,993	$	(1,478)		$	39,515
Liabilities
	Deposits		$	(52,992)	$	(148)	(4)	$	(53,140)
	Deferred tax liability			-		(2,981)	(5)		(2,981)
	Other liabilities			(42)		-			(42)
	Total liabilities assumed			(53,034)		(3,129)			(56,163)
Excess of liabilities assumed over assets acquired			$	(12,041)
Aggregate fair value adjustments					$	(4,607)
Cash received from the FDIC									21,400
Net assets acquired (net after-tax gain)									4,752
Income tax effect									2,982
Net assets acquired (bargain purchase gain)								$	7,734
Explanation of fair value adjustments:
(1)	-	Adjustment for the fair value of the acquired loan portfolio.
(2)	-	Adjustment for the estimated value of the core deposit intangible.
(3)	-	Adjustment for amount due to BNC from the FDIC.
(4)	-	Adjustment for the estimated fair value of time deposits.
(5)	-	Adjustment for the deferred tax liability from the acquisition gain.

The Company has determined the above noted acquisitionsconstitute a business combination as defined by FASB ASC Topic 805: Business Combinations (“ASC Topic 805”), which establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired and the liabilities assumed. The Company has recorded the assets purchased and liabilities assumed at their estimated fair value in accordance with ASC Topic 805.

The estimated fair values are subject to refinement for up to one year after the closing date of the acquisition as additional information regarding closing date fair value becomes available. During this one year period, the causes of any changes in cash flow estimates are considered to determine whether the change results from circumstances that existed as of the acquisition date or if the change results from an event that occurred after the date of acquisition.