Branch Acquisition and Divestiture

12 Months Ended

Dec. 31, 2013

Business Combinations [Abstract]

Branch Acquisition

Branch Divestiture and Acquisition

On October 4, 2013, the Bank completed its divestiture of its Franklin County branches, including the Farmington, Kingfield, Phillips, Rangeley and Stratton branches. Included in the transaction are branch deposits and borrowings of $85.9 million, business loans and certain consumer loans of $46.0 million and real estate and equipment of $602,000. The sales price represents a 3.5% premium on deposits, par value on the loan portfolio and book value for the real estate. The Company recognized a pre-tax gain on the sale of $2.7 million. The Company incurred costs of $374,000 related to the Branch Divestiture.

On October 26, 2012, the Bank acquired 15 full-service branches from Bank of America, National Association, pursuant to the terms and conditions of the Purchase and Assumption Agreement, dated April 23, 2012. The purchase price was $12.0 million less the premium received upon the sale of one of these branches of $3.3 million as agreed with the U.S. Department of Justice. While the Branch Acquisition is considered a purchase of a business for accounting purposes, revenues and expenses of the acquired branches and pro forma income statement information are not presented as the effect would not be material.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value:	Fair Value
Cash and cash equivalents(1)	$	267,689
Loans	5,664
Premises and equipment	5,177
Core deposit intangible	2,856
Other assets	45
Total assets acquired	281,431
Deposits	(287,559		)
Other liabilities	(54		)
Total liabilities acquired	(287,613		)
Goodwill	$	(6,182	)

(1) Amount is net of $8.7 million deposit premium paid.

In 2013, the Company finalized its accounting for the Branch Acquisition. There were no material changes to the Company's initial estimates of fair value for the identifiable assets and liabilities assumed as previously recorded and disclosed as a result.

The Company estimated the fair value of loans acquired by utilizing a methodology which approximates the projected cash flows for each aggregated loan pool by estimating future credit losses and the rate of prepayments and discounting to present value based on a market rate for similar loans. There was no allowance for loan losses recorded for the acquired loans as the loans were initially recorded at fair value. The Company acquired $6.0 million in performing commercial loans and recorded a fair value mark of $317,000.

The $2.9 million core deposit intangible asset recognized as part of the Branch Acquisition is being amortized over its estimated useful life of five years using a straight-line method. The goodwill, which is not amortized for financial statement purposes, is deductible for tax purposes.

The fair value of savings and transaction deposit accounts acquired was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. Certificates of deposit were valued by projecting the expected cash flows based on the remaining contractual terms of the certificate of deposit. These cash flows were discounted based on a market rate for a certificate of deposit with a corresponding remaining maturity. The Company acquired $286.7 million of deposits and recorded a fair value mark of $900,000.

Direct costs related to the Branch Acquisition were expensed as incurred and amounted to $2.3 million for 2012. These acquisition integration expenses included technology costs related to system conversions, customer communications and professional fees.

The Company completed the Branch Acquisition to provide additional business opportunities in these acquired branch locations by increasing the Bank’s presence in these key growth markets. Future revenue opportunities include providing commercial and retail loans within the local communities and expanding our wealth management and investment advisory services.