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MERGERS AND ACQUISITIONS (Tables)
 6 Months Ended
Jun. 30, 2015
Business Combinations [Abstract]  
Schedule of Business Acquisitions by Acquisition, Equity Interest Issued or Issuable
The equivalent Piedmont market price per share was calculated based on the 6.28597 exchange ratio in the Mergers.
 
 
Calculation of Purchase Price
 
 
 
Equivalent Piedmont market price per share
 
$
122.01

Number of Piedmont shares issued to Yadkin shareholders
 
2,287,654

Purchase price (in thousands)
 
$
279,115

The table below summarizes, for each shareholder group immediately prior to the Mergers, the ownership of Yadkin common stock immediately following the Mergers as well as the market capitalization of the combined institution using Yadkin’s stock price at the time of the Mergers.
 
 
 
Yadkin Financial Corporation Ownership and Market Value Table
Shareholder Groups Immediately Prior to Mergers
 
Number of Outstanding YDKN Shares
 
Percentage Ownership
 
Market Value at $19.41 YDKN Share Price
 
 
 
 
 
 
 
 
Piedmont shareholders
 
 
9,219,406

 
29.1
%
 
$
178,949

VantageSouth shareholders (excluding Piedmont)
 
 
7,195,127

 
22.7
%
 
139,657

Shares issued and held in Rabbi Trust
 
 
856,447

 
2.7
%
 
16,624

Total Piedmont and VantageSouth shareholders
 
 
17,270,980

 
54.6
%
 
335,230

Yadkin shareholders
 
 
14,380,127

 
45.4
%
 
279,118

Total
 
 
31,651,107

 
100.0
%
 
$
614,348



Next, the number of shares Piedmont would have had to issue to give Yadkin and other owners the same percentage ownership in the combined institution is calculated in the table below.
 
 
 
Hypothetical Piedmont Ownership
Shareholder Groups Immediately Prior to Mergers
 
Number of Outstanding Piedmont Shares
 
Percentage Ownership
 
 
 
 
 
 
Piedmont shareholders
 
 
1,466,664

 
29.1
%
VantageSouth shareholders (excluding Piedmont)
 
 
1,144,633

 
22.7
%
Shares issued and held in Rabbi Trust
 
 
136,247

 
2.7
%
Total Piedmont and VantageSouth shareholders
 
 
2,747,544

 
54.6
%
Yadkin shareholders
 
 
2,287,654

 
45.4
%
Total
 
 
5,035,198

 
100.0
%
Schedule of assets acquired, liabilities assumed and other equity interest
The following table presents the Yadkin assets acquired, liabilities assumed and other equity interests as of July 4, 2014 as well as the related purchase price allocation and calculation of the residual goodwill.
 
As Reported by Yadkin at
July 4, 2014
 
Initial
Fair Value Adjustments
 
Measurement Period Adjustments
 
As Reported by the Company at
July 4, 2014
Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
36,116

 
$
—

 
$
—

 
$
36,116

Investment securities available for sale
259,143

 
(1,488
)
(a)
—

 
257,655

Loans held for sale
15,696

 
—

(b)
—

 
15,696

Loans, net
1,403,419

 
(30,740
)
 
—

 
1,372,679

Federal Home Loan Bank stock, at cost
3,778

 
—

 
—

 
3,778

Premises and equipment
40,204

 
(2,344
)
(c)
—

 
37,860

Bank-owned life insurance
27,306

 
—

 
—

 
27,306

Foreclosed assets
2,271

 
(601
)
(d)
—

 
1,670

Deferred tax asset, net
16,955

 
5,939

(e)
1,197

(p)
24,091

Goodwill
—

 
124,172

(f)
1,727

(n)
125,899

Other intangible assets
1,665

 
10,965

(g)
321

(o)
12,951

Accrued interest receivable and other assets
16,330

 
(2,229
)
(h)
—


14,101

Total assets
1,822,883

 
103,674

 
3,245

 
1,929,802

Liabilities:
 
 
 
 
 
 
 
Deposits
1,509,581

 
5,019

(i)
—

 
1,514,600

Short-term borrowings
72,879

 
—

 
—

 
72,879

Long-term debt
38,217

 
(15,486
)
(j)
—

 
22,731

Accrued interest payable and other liabilities
8,448

 
(338
)
(k)
3,245

(q)
11,355

Total liabilities
1,629,125

 
(10,805
)
 
3,245

 
1,621,565

Net assets acquired
193,758

 
114,479

 
—

 
308,237

Other equity interests:
 
 
 
 
 
 
 
Preferred stock
28,405

 
—

(l)
—

 
28,405

Common stock warrants
1,850

 
(1,133
)
(m)
—

 
717

Total other equity interests
30,255

 
(1,133
)
 
—

 
29,122

Purchase price
 
 
 
 
 
 
$
279,115


Explanation of fair value adjustments
(a) Adjustment reflects opening fair value of securities portfolio, which was established as the new book basis of the portfolio.
(b) Adjustment reflects the elimination of Yadkin's historical allowance for loan losses of $16,449 and the recording of a fair value discount of $47,189 on the loan portfolio. The fair value discount was calculated by forecasting cash flows over the expected remaining life of each loan and discounting those cash flows to present value using current market rates for similar loans. Forecasted cash flows include an estimate of lifetime credit losses on the loan portfolio.
(c) Adjustment reflects fair value adjustments on certain acquired branch offices as well as certain software and computer equipment.
(d) Adjustment reflects the write down of certain foreclosed assets based on current estimates of property values given current market conditions and additional discounts based on the Company's planned disposition strategy.
(e) Adjustment reflects the tax impact of acquisition accounting fair value adjustments.
(f) Goodwill represents the excess of the purchase price over the fair value of acquired net assets.
(g) Adjustment reflects the fair value of the acquired core deposit intangible.
(h) Adjustment reflects the impact of fair value adjustments on other assets, which include mortgage servicing assets, certain unusable prepaid expenses, and the elimination of accrued interest on purchased credit-impaired loans.
(i) Adjustment reflects the fair value premium on time deposits, which was calculated by discounting future contractual interest payments at a current market interest rate.
(j) Adjustments reflect the fair value adjustments for subordinated debt issued to fund trust preferred securities and long-term Federal Home Loan Bank ("FHLB") advances, which were calculated by discounting future contractual interest payments at a current market interest rate for similar instruments. For FHLB advances, the fair value adjustment is consistent with the prepayment penalty the FHLB would charge to terminate the advance.
(k) Adjustments reflect accruals and fair value adjustments for other liabilities, which include the write-off of unearned income, deferred gains, and accrued liabilities that will not be paid.
(l) No fair value adjustments were made to Yadkin's outstanding preferred stock. The acquisition date preferred dividend rate of 9.0 percent approximated the then-current market yield for issuances of similar perpetual preferred stock. The preferred stock was redeemable at the liquidation value on the acquisition date, and the Company expected the remaining life of the preferred stock would be relatively short.
(m) The fair value of the common stock warrants was estimated using a Black-Scholes option pricing model assuming all 91,178 warrants will remain outstanding through expiration on July 24, 2019. Assumptions and inputs used in the option pricing model included stock price volatility of 48.6 percent, no dividends, a risk free interest rate of 1.74 percent, and an exercise price of $21.90 per common warrant.
(n) Amount reflects adjustments to goodwill resulting from adjustments (o), (p) and (q).
(o) Amount reflects an adjustment to estimated fair value of the acquired core deposit intangible.
(p) Amount reflects adjustments to acquired deferred tax assets and the tax impact of adjustments (o) and (q).
(q) Amount reflects the adjustment of change in control obligations existing under various employment agreements that were triggered by the Mergers, an increase in reserves for unfunded letters of credit, and additional accruals for certain legal matters and other liabilities.
Pro forma information
The table below presents supplemental pro forma information as if the Mergers with VantageSouth and Piedmont had occurred at the beginning of the earliest period presented, which was January 1, 2014. Pro forma results include adjustments for amortization and accretion of fair value adjustments and do not include any projected cost savings or other anticipated benefits of the Mergers. Therefore, the pro forma financial information is not indicative of the results of operations that would have occurred had the transactions been effected on the assumed date.
 
Three months ended
June 30, 2014
 
Six months ended
June 30, 2014
 
 
 
 
 
 
Net interest income
$
38,537

 
$
77,622

 
 
 
 
Net income
10,059

 
19,011

 
 
 
 
Net income available to common shareholders
9,451

 
17,844

 
 
 
 
Basic income per common share
0.30

 
0.58

 
 
 
 
Diluted income per common share
0.30

 
0.57

 
 
 
 
Weighted average basic common shares outstanding
31,486,304

 
30,985,323

 
 
 
 
Weighted average diluted common shares outstanding
31,642,902

 
31,135,613