Business Combination

9 Months Ended

Sep. 30, 2011

Business Combination [Abstract]

BUSINESS COMBINATION

Note 2. BUSINESS COMBINATION

     On October 28, 2010, the Company acquired 100% of the outstanding common shares of Service1st Bank of Nevada in exchange for approximately 2.4 million shares of common stock. Under the terms of the acquisition, Service1st Bank common shareholders received 47.5975 shares of the Company’s common stock in exchange for each share of Service1st Bank common stock. In addition, the Service1st Bank shareholders are eligible to receive additional common shares equal to twenty percent of Service1st Bank’s tangible capital at August 31, 2010, if the price of the Company’s common stock exceeds $12.75 per share for 30 days during the subsequent two year period. The Company also injected $25 million of cash into its subsidiary bank. With the acquisition, the Company became a bank holding company with its sole operating bank located in Southern Nevada.

     The transaction was recorded as an acquisition under the current accounting rules and as a result the balance sheet of Service1st was revalued to fair value as of the acquisition date. Any purchase price in excess of net assets acquired is recorded as goodwill. Based on a purchase price of $17.1 million and the $16.4 million fair value of net assets acquired, the transaction resulted in $5.6 million of goodwill.

     The most significant fair value adjustment resulting from the application of purchase accounting adjustment for this acquisition was made to loans. As of the acquisition date, the gross loan portfolio at Service1st Bank was approximately $125.4 million with a related Allowance for Loan and Lease Losses (“ALLL”) of approximately $9.4 million. The valuation of the loan portfolio resulted in a discount of approximately $15.8 million at October 28, 2010 which was subsequently adjusted to approximately $15.1 million based on additional information after the measurement date, but before the adjustments were considered final. This discount consists of two components; credit discount and yield discount. Loans purchased with credit impairments are loans with credit deterioration since origination and it is probable that not all contractually required principal and interest payments would be collected. The performing loan portfolio was approximately $89.9 million and was discounted by $49,000 for yield and $3.6 million for credit discounts. The remaining $35.6 million of loans were identified as loans with purchased credit impairment (PCI) and those loans had a discount of $576,000 for yield and $10.9 million for credit discounts. The discounts on performing loans are recognized by a “level yield” method over the remaining life of the loans or loan pools. The loans identified as containing purchase credit impairment are treated somewhat differently. The discount associated with yield is accreted as yield discount and the credit discount is not accreted but is left on the books to reduce the current carrying value of the applicable loans.

     In order to assist WLBC in gaining the requisite approval of certain bank regulatory authorities in connection with the Acquisition, each of the 48,067,758 warrants outstanding when the Acquisition occurred was exchanged for one thirty-second (1/32) of one share of WLBC common stock. Warrant holders also received $0.06 per warrant as a consent fee, or $2.9 million in total. Accordingly, we issued 1,502,088 shares on October 28, 2010 in the exchange of outstanding warrants for common stock.

     On October 28, 2010, the 900 Bank Stock Warrants were converted to 42,834 WLBC stock warrants with an exercise price of $21.01 per stock warrant and all were exercisable at that time. The exercise price was determined in accordance with the Merger Agreement, dated November 6, 2009. The exercise price is calculated by the common stock exchange ratio of 47.5975. Each Service1st stock warrant had an exercise price of $1,000.00. The $1,000.00 is divided by the exchange ratio to create the equivalent exercise price for the Company’s stock warrant ($1,000.00 divided by 47.5975 equals $21.01). As of September 30, 2011, the aggregate intrinsic value of outstanding and vested stock warrants is $0.