As previously disclosed, on April 3, 2020, the Bank entered into a Purchase and Assumption Agreement with the Federal Deposit Insurance Corporation (“FDIC”), as receiver for The First State Bank, Barboursville, W.Va., providing for the assumption by the Bank of certain liabilities and the purchase by the Bank of certain assets of First State. This was deemed to be a strategic opportunity to acquire deposits and certain assets of an institution that operated in counties contiguous to the Company's Southern WV market and further solidified the strategy for growth within core commercial markets. The Company has accounted for this acquisition under the acquisition method of accounting in accordance with FASB ASC Topic 805, "Business Combinations," whereby the acquired assets and assumed liabilities were recorded by the Company at their estimated fair values as of their acquisition date. Fair value estimates were based on management's acceptance of a fair market valuation analysis performed by an independent third-party firm.

amount, and also assuming the deposits of First State with no deposit premium. The Bank was notified that it was the winning bidder in the process, and the net asset discount accepted by the FDIC was $33.2 million. Immediately after the closing of this transaction, the FDIC remitted these funds to the Bank. As part of this transaction the Bank acquired three branch locations in Barboursville, Teays Valley, and Huntington, W.Va. for aggregate consideration of approximately $1.5 million. Also included was other real estate owned (“OREO”) at 46.5% of the book value, along with deposits with an aggregate value of approximately $140.0 million, cash and investment securities of $37.0 million and loans with a book value of $83.5 million. Net proceeds received from the FDIC for the transaction was $39.6 million.

 The acquired assets and assumed liabilities of First State were measured at estimated fair value. Management made significant estimates and exercised significant judgement in accounting for the acquisition of First State. Management judgmentally assigned risk ratings to loans based on appraisals and estimated collateral values, expected cash flows, prepayment speeds, and estimated loss factors to measure fair values for the acquired loans. Premises and equipment was valued based on recent appraised values. Management used quoted or current market prices to determine the fair value of investment securities. These values are subject to change based on continued evaluations of appraisals and other loan-related assumptions.

The statement of net assets acquired and the resulting bargain purchase gain recorded is presented in the following tables. As explained in the notes that accompany the following table, the purchased assets and assumed liabilities were recorded at the acquisition date fair value.


(Dollars in thousands)	As recorded by The First State Bank		Fair Value Adjustments			As recorded by MVB
Assets
Cash and cash equivalents	$	26,053	$	—		$	26,053
Investment securities - available for sale at fair value	10,964		—			10,964
Loans	83,514		(22,861)		(a)	60,653
OREO	22,610		(10,520)		(b)	12,090
Premises and equipment, net	1,582		(12)		(c)	1,570
Accrued interest receivable and other assets	2,234		211		(d)	2,445
Total Assets	$	146,957	$	(33,182)		$	113,775

Liabilities
Deposits - transaction accounts	$	70,931	$	—		$	70,931
Deposits - certificates of deposit	$	69,029	$	2,560	(e)	$	71,589
Total deposits	$	139,960	$	2,560		$	142,520
FHLB and other borrowings	5,800		—			5,800
Accrued interest payable and other liabilities	411		—			411
Total Liabilities	$	146,171	$	2,560		$	148,731

Net identifiable assets acquired over/(under) liabilities assumed	$	786	$	(35,742)		$	(34,956)

The following table summarizes the acquired assets and assumed liabilities in the First State acquisition as of the acquisition date, and the pre-tax bargain purchase gain of $4.7 million recognized on the transaction.


(Dollars in thousands)
Assets acquired at fair value:
Cash and cash equivalents	$	26,053
Investment securities - available for sale at fair value	10,964
Loans	60,653
OREO	12,090
Premises and equipment, net	1,570
Accrued interest receivable and other assets	2,445
Total fair value of assets acquired	$	113,775

Liabilities acquired at fair value:
Deposits	$	142,520
FHLB and other borrowings	5,800
Accrued interest payable and other liabilities	411
Total fair value of liabilities acquired	$	148,731

Net assets assumed at fair value			$	(34,956)
Transaction cash consideration received from the FDIC			39,627
Bargain purchase gain, before tax			$	4,671

The following table outlines the contractually required payments receivable, cash flows the Company expects to receive, non-accretable credit adjustments, and the accretable yield for all First State loans as of the acquisition date:


(Dollars in thousands)	Contractually Required Payments Receivable		Non-Accretable Credit Adjustments		Cash Flows Expected to be Collected		Accretable FMV Adjustments		Carrying Value of Loans Receivable
Purchased credit impaired loans	$	86,823	$	24,842	$	61,981	$	11,746	$	50,235
Purchased performing loans	12,818		2,561		10,257		1,817		8,440
Other purchased loans	1,978		—		1,978		—		1,978
Total	$	101,620	$	27,403	$	74,217	$	13,563	$	60,653

At the acquisition of First State, the Company recorded all loans acquired at the estimated fair value on the purchase date with no carryover of the related allowance for loan losses. On the acquisition date, the Company segmented the loan portfolio into six loan pools: performing commercial, performing commercial real estate, performing consumer and residential real estate, classified commercial, classified commercial real estate, and classified consumer and residential real estate. Of the 934 loans acquired, 663 were determined to be of deteriorated credit and will be accounted for under ASC 310-30 and considered purchased credit impaired loans. The 271 remaining loans acquired will be accounted for under ASC 310-20 and considered purchased performing loans. Other purchased loans include premium finance loans, credit cards, and overdrawn escrow accounts.

The Company had an independent third party determine the net discounted value of cash flows on approximately 718 performing loans totaling $39.5 million. The valuation took into consideration the loans' underlying characteristics, including account types, remaining terms, annual interest rates, interest types, past delinquencies, timing of principal and interest payments, current market rates, loan to value ratios, loss exposures, and remaining balances. These performing loans were segmented into pools based on loan and payment type and in some cases, risk grade.

The Company established a credit risk-related non-accretable difference of $24.8 million relating to these acquired, credit-impaired loans, reflected in the recorded net fair value. We further estimated the timing and amount of expected cash flows in excess of the estimated fair value and established an accretable discount adjustment of $11.7 million at acquisition relating to these impaired loans.

The following table discloses the impact of the FDIC-assisted acquisition of First State since the acquisition date through June 30, 2020. This table also presents certain pro forma information (net interest income and noninterest income ("Revenue") and net income) as of the First State acquisition had occurred on January 1, 2019. The pro forma financial information is not necessarily indicative of the results of operations had the acquisitions been effective as of these dates.

Deal-related costs from the First State acquisition of $1.2 million have been excluded from the three and six-month periods of 2020 pro forma information presented below and included in the three and six-month periods of 2019 pro forma information below. The actual results and pro forma information were as follows:


	Six Months Ended June 30,						Three Months Ended June 30,
(Dollars in thousands)	Revenue		Net Income		Revenue		Net Income
2020:
Actual First State results included in Consolidated Statements of Income since acquisition date	$	5,851	$	2,944	$	5,851	$	2,944
Supplemental consolidation pro forma as if First State had been acquired January 1, 2019	$	95,509	$	16,345	$	62,616	$	15,404

2019:
Supplemental consolidation pro forma as if First State had been acquired January 1, 2019	$	82,603	$	21,045	$	48,200	$	15,288

As previously disclosed, on April 17, 2020, Paladin Fraud, LLC, a newly-formed West Virginia limited liability company and wholly-owned subsidiary of MVB Bank, entered into an Asset Purchase Agreement by and among Paladin Fraud, Paladin, LLC, a Washington limited liability company, James Houlihan, and Jamon Whitehead. Pursuant to the Purchase Agreement, Paladin Fraud acquired substantially all of the assets and certain liabilities of Paladin and the purchase price of the transaction consisted of 19,278 unregistered shares of MVB common stock and an undisclosed amount of cash. Paladin is a respected leader in the fraud prevention industry and has formed a specialty niche that aligns well with the MVB as a preferred bank for Fintech companies.

As previously disclosed, on April 24, 2020, the Company completed the previously announced sale of certain assets and liabilities of four branch locations to Summit Financial Group, Inc. Summit assumed $188.1 million in deposits and acquired $36.8 million in loans, as well as cash, real property, personal property and other fixed assets. The Company recognized a gain of $9.6 million related to this transaction and was recorded in noninterest income for the three and six months ended June 30, 2020. The associated assets and liabilities were included in assets and deposits of branches held for sale, respectively, as of December 31, 2019 and March 31, 2020. Assets and deposits of branches held for sale were $0 as of June 30, 2020. The completion of this sale resulted in the Company exiting the Eastern Panhandle, WV market.

For further discussion on deal-related costs, see "Noninterest Expense" section of Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this Quarterly Report on Form 10-Q.