NOTE C – BUSINESS COMBINATIONS

On July 20, 2017, the Company executed a merger agreement with Premara Financial, Inc. (“Premara”), a bank holding company headquartered in Charlotte, North Carolina, whose wholly owned subsidiary, Carolina Premier Bank, was a North Carolina state-chartered commercial bank. On December 15, 2017, the Company completed its previously announced acquisition of Premara and pursuant to the terms of the merger agreement, Premara was merged with and into the Company, followed immediately by the merger of Carolina Premier Bank with and into the Bank. Carolina Premier had approximately $279.6 million in assets as of the merger date, December 15, 2017. The merger expanded the Bank’s North Carolina presence with a branch in Charlotte and marked the Bank’s initial entry into South Carolina with the acquisition of branches in Rock Hill, Blacksburg and Six Mile, South Carolina. During 2019 the Bank sold the Six Mile location to another financial institution.

Premara had 3,179,808 shares of common stock outstanding as of the merger closing date. Under the terms of the merger agreement, 948,080 shares of Premara common stock (equivalent to 30% of Premara’s outstanding shares of common stock as of the date of the merger agreement) were converted to the $12.65 per share cash merger consideration, for aggregate cash consideration of $11,993,212 (exclusive of cash paid-in-lieu of fractional shares) which was paid out subsequent to year-end 2017. Pursuant to the merger agreement, each warrant or stock option to acquire shares of Premara common stock issued and outstanding as of the effective time of the merger was converted into the right to receive from the Company a cash payment equal to $12.65 less the exercise price of such warrant or option, as applicable and paid out prior to year-end 2017. The remaining 2,231,728 Premara common shares were converted into stock consideration at the merger exchange ratio of 1.0463 shares of Company common stock for each share of Premara common stock, resulting in the issuance of 2,334,999 new shares of Company common stock. The transaction was valued at approximately $40.6 million in the aggregate based on 3,179,808 shares of Premara common stock outstanding on December 15, 2017. The Premara common stock shares converted to Select common stock were valued at $12.14 per share, the low price of Select common stock on December 15, 2017.

The merger with Premara was accounted for under the acquisition method of accounting with the Company as the legal and accounting acquirer and Premara as the legal and accounting acquiree. The assets and liabilities of Premara, as of the effective date of the acquisition, are recorded at their respective fair values. For the acquisition of Premara, estimated fair values of assets acquired and liabilities assumed are based on the information that is available, and the Company believes this information provides a reasonable basis for determining fair values.

The following table provides the carrying value of acquired assets and assumed liabilities, as recorded by the Company, the fair value adjustments calculated at the time of the merger and the resulting fair value recorded by the Company.


	December 15, 2017
	As recorded by		Fair Value		As recorded by
	Premara		adjustments		the Company
(Dollars in thousands)
Assets
Cash and cash equivalents	$	28,513	$	—	$	28,513
Investment securities		32,939		(106)		32,833
Loans		203,780		(5,340)		198,440
Less: allowance for loan losses		(2,341)		2,341		—
Premises and equipment		928		(233)		695
Accrued interest receivable		853		(56)		797
Bank owned life insurance		5,673		—		5,673
Goodwill		325		(325)		—
Core deposit intangible		223		2,477		2,700
Other assets		8,701		790		9,491
Total assets acquired	$	279,594	$	(452)	$	279,142

Liabilities
Deposits:
Noninterest-bearing	$	55,617	$	—	$	55,617
Interest-bearing		170,873		171		171,044
Total deposits		226,490		171		226,661
Borrowings		29,000		14		29,014
Other liabilities		747		—		747
Total liabilities assumed	$	256,237	$	185	$	256,422
Fair value of net assets assumed						22,720
Value of common shares of Premara shareholders						40,693
Goodwill recorded for Premara					$	17,973

Goodwill recorded for Premara represents future revenues to be derived from the existing customer base, including efficiencies that will result from combining operations.

In determining the acquisition date fair value of purchased credit-impaired (“PCI”) loans, and in subsequent accounting, the Company generally aggregates loans into pools of loans with common risk characteristics. Expected cash flows at the acquisition date in excess of the fair value of loans are referred to as the “accretable yield” and recorded as interest income prospectively.

PCI loans acquired totaled $8.6 million at estimated fair value and acquired performing loans totaling $189.6 million at estimated fair value. For PCI loans acquired from Premara, the contractually required payments including principal and interest, cash flows expected to be collected and fair values as of the closing date of the merger were:


	December 15, 2017
(Dollars in thousands)
Contractually required payments	$	11,752
Nonaccretable difference		1,768
Cash flows expected to be collected		9,984
Accretable yield		1,392
Fair value at acquisition date	$	8,592

Merger-related expense in 2019, 2018 and 2017 totaled 406,000, $ 1.8 million and $2.2 million, respectively which were recorded as noninterest expense as incurred.