Note 4 — Mergers and Acquisitions

First Financial Holdings, Inc. Merger

On July 26, 2013, the Company acquired all of the outstanding common stock of First Financial Holdings, Inc. (“First Financial” or “FFCH”), of Charleston, South Carolina, the bank holding company for First Federal Bank (“First Federal”), in a stock transaction. First Financial common shareholders received 0.4237 shares of the Company’s common stock in exchange for each share of First Financial common stock, resulting in the Company issuing 7,018,274 shares of its common stock. Each outstanding share of First Financial Fixed Rate Cumulative Perpetual Preferred Stock, Series A (“First Financial Preferred Stock”), was converted into the right to receive one share of preferred stock of SCBT, designated Series A Fixed Rate Cumulative Perpetual Preferred Stock and having such rights, preferences and privileges as are not materially less favorable than the rights, preferences and privileges of the First Financial Preferred Stock. In total, the purchase price for the First Financial acquisition was $447.0 million including $65.0 million in preferred stock and the value of “in the money” outstanding stock options (i.e., stock options for which the exercise price of the stock option is below the market price of the underlying stock) totaling $530,000.

The First Financial transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date. Fair values are preliminary and subject to refinement for up to a year after the closing date of the acquisition.

The following table presents the assets acquired and liabilities assumed as of July 26, 2013, as recorded by First Financial on the acquisition date and initial fair value adjustments.

	As Recorded by		Fair Value			As Recorded
(Dollars in thousands)	FFCH		Adjustments			by SCBT
Assets
Cash and cash equivalents	$	174,082	$	—		$	174,082
Investment securities	313,200		(1,388		)(a)	311,812
Loans held for sale	19,858		6		(b)	19,864
Loans	2,355,527		(92,720		)(b)	2,262,807
Premises and equipment	82,399		(5,435		)(c)	76,964
Intangible assets	7,037		33,738		(d)	40,775
Other real estate owned and repossessed assets	14,569		(2,660		)(e)	11,909
FDIC receivable for loss sharing agreement	47,459		(18,122		)(f)(k)	29,337
Bank owned life insurance	51,513		—			51,513
Deferred tax asset	2,595		42,741		(g)	45,336
Other assets	66,834		(5,530		)(h)	61,304
Total assets	$	3,135,073	$	(49,370	)	$	3,085,703

Liabilities
Deposits:
Noninterest-bearing	$	430,517	$	—		$	430,517
Interest-bearing	2,083,495		7,801		(i)	2,091,296
Total deposits	2,514,012		7,801			2,521,813
Federal funds purchased and securities sold under agreements to repurchase	—		—			—
Other borrowings	280,187		21,526		(j)	301,713
Other liabilities	35,177		(2,059		)(k)	33,118
Total liabilities	2,829,376		27,268			2,856,644
Net identifiable assets acquired over (under) liabilities assumed	305,697		(76,638		)	229,059
Goodwill	—		217,894			217,894
Net assets acquired over liabilities assumed	$	305,697	$	141,256		$	446,953

Consideration:
SCBT Financial Corporation common shares issued	7,018,274
Purchase price per share of the Company’s common stock	$	54.34
Company common stock issued and cash exchanged for fractional shares	381,423
Cash paid for stock options outstanding	530
Assumption of preferred stock	65,000
Fair value of total consideration transferred	$	446,953

Explanation of fair value adjustments

(a)—Adjustment reflects marking the securities portfolio to fair value as of the acquisition date.

(b)—Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio and excludes the allowance for loan losses recorded by First Financial.

(c)—Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired premises and equipment.

(d)—Adjustment reflects the recording of the core deposit intangible on the acquired deposit accounts and other intangibles for credit cards and customer lists.

(e)—Adjustment reflects the fair value adjustments to OREO based on the Company’s evaluation of the acquired OREO portfolio.

(f)—Adjustment reflects the fair value adjustments to the FDIC receivable for loss sharing agreements based on the Company’s evaluation of the losses on the acquired assets covered under loss share agreements with the FDIC net of any clawback.

(g) —Adjustment to record deferred tax asset related to fair value adjustments at 35.8% income tax rate.

(h)—Adjustment reflects uncollectible portion of accrued interest receivable and loan fees receivable.

(i)—Adjustment arises since the rates on interest-bearing deposits are higher than rates available on similar deposits as of the acquisition date.

(j)— Adjustment reflects the fair value adjustment which was equal to the prepayment fee paid to fully pay off the FHLB advances on July 26, 2013. This fair value adjustment and the fair value adjustment of the junior subordinated debt was determined based upon interest rates.

(k)— Adjustment reflects the reclassification of the clawback to net against the FDIC receivable, the incremental accrual for employee related benefits, lease liabilities, and adjustment of other miscellaneous accruals.

The operating results of the Company for the period ended September 30, 2013, include the operating results of the acquired assets and assumed liabilities for the 66 days subsequent to the acquisition date of July 26, 2013. Merger-related charges of $10.4 million are recorded in the consolidated statement of income and include incremental costs related to closing the acquisition, including legal, accounting and auditing, investment banker cost, termination of certain employment related contracts, travel costs, printing, supplies and other costs.

The following table discloses the impact of the merger with First Financial (excluding the impact of merger-related expenses) since the acquisition on July 26, 2013 through September 30, 2013. The table also presents certain proforma information as if FFCH had been acquired on January 1, 2013 and January 1, 2012. These results combine the historical results of FFCH in the Company’s consolidated statement of income and, while certain adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place on January 1, 2013 or January 1, 2012.

Merger-related costs of $13.2 million from the Savannah and FFCH acquisitions are included in the Company’s consolidated statements of income for the nine months ended September 30, 2013, and are not included in the pro forma information below. In particular, no adjustments have been made to the pro formas to eliminate the provision for loan losses for the nine months ended September 30, 2013 and 2012 of FFCH in the amount of $8.3 million and $16.0 million, respectively. No adjustments have been made to reduce the impact of any OREO write downs recognized by FFCH in either the nine month periods of 2013 or 2012. In addition, expenses related to systems conversions and other costs of integration are expected to be recorded in the remainder of 2013 and during 2014. The Company expects to achieve further operating cost savings and other business synergies as a result of the acquisition which are not reflected in the proforma amounts below:

	Actual since
	Acquisition		Pro Forma		Pro Forma
	(July 26, 2013 through		Nine Months		Nine Months
(Dollars in thousands)	September 30, 2013)		Ended September 30, 2013		Ended September 30, 2012

Total revenues (net interest income plus noninterest income)	$	30,244	$	329,046	$	362,666
Net income available to the common shareholder	$	7,012	$	58,163	$	34,119

The Savannah Bancorp, Inc. Acquisition

On December 13, 2012, the Company acquired all of the outstanding common stock of The Savannah Bancorp, Inc. (“Savannah”), a bank holding company based in Savannah, Georgia, in a stock transaction. Savannah common shareholders received 0.2503 shares of the Company’s common stock in exchange for each share of Savannah common stock, resulting in the Company issuing 1,802,137 shares of common stock. In total, the purchase price for the Savannah acquisition was $68.9 million including the value of “in the money” outstanding stock options (i.e., stock options for which the exercise price of the stock option is below the market price of the underlying stock) totaling $63,000.

The Savannah transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date. Fair values are preliminary and subject to refinement for up to a year after the closing date of the acquisition.

The following table presents the assets acquired and liabilities assumed as of December 13, 2012, as recorded by Savannah on the acquisition date and initial and subsequent fair value adjustments.

							Subsequent
	As Recorded by			Fair Value			Fair Value			As Recorded
(Dollars in thousands)	Savannah			Adjustments			Adjustments			by SCBT
Assets
Cash and cash equivalents	$	86,244		$	—		$	—		$	86,244
Investment securities	75,460			(1,288		)(a)	31		(a)	74,203
Loans	660,555			(59,196		)(b)	—			601,359
Premises and equipment	12,555			(1,843		)(c)	(260		)(c)	10,452
Intangible assets	3,357			9,546		(d)	15		(d)	12,918
Other real estate owned and repossessed assets	13,934			(5,315		)(e)	(881		)(e)	7,738
Bank owned life insurance	6,705			—			—			6,705
Deferred tax asset	(790		)	39,143		(f)	280		(f)	38,633
Other assets	8,497			(2,348		)(g)	—			6,149
Total assets	$	866,517		$	(21,301	)	$	(815	)	$	844,401

Liabilities
Deposits:
Noninterest-bearing	$	129,902		$	—		$	—		$	129,902
Interest-bearing	619,198			2,530		(h)	—			621,728
Total deposits	749,100			2,530			—			751,630
Federal funds purchased and securities sold under agreements to repurchase	13,491			—			—			13,491
Other borrowings	30,613			(232		)(i)	—			30,381
Other liabilities	8,026			6,657		(j)	(311		)(j)	14,372
Total liabilities	801,230			8,955			(311		)	809,874
Net identifiable assets acquired over (under) liabilities assumed	65,287			(30,256		)	(504		)	34,527
Goodwill	—			33,886			504			34,390
Net assets acquired over liabilities assumed	$	65,287		$	3,630		$	—		$	68,917

Consideration:
SCBT Financial Corporation common shares issued	1,802,137
Purchase price per share of the Company’s common stock	$	38.20
Company common stock issued and cash exchanged for fractional shares	68,854
Cash paid for stock options outstanding	63
Fair value of total consideration transferred	$	68,917

Explanation of fair value adjustments

(a)—Adjustment reflects marking the securities portfolio to fair value as of the acquisition date.

(b)—Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio and excludes the allowance for loan losses recorded by Savannah.

(c)—Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired premises and equipment.

(d)—Adjustment reflects the recording of the core deposit intangible on the acquired deposit accounts and other intangibles for non-compete agreements and customer lists.

(e)—Adjustment reflects the fair value adjustments to OREO based on the Company’s evaluation of the acquired OREO portfolio.

(f) —Adjustment to record deferred tax asset related to fair value adjustments at 35.8% income tax rate.

(g)—Adjustment reflects uncollectible portion of accrued interest receivable.

(h)—Adjustment arises since the rates on interest-bearing deposits are higher than rates available on similar deposits as of the acquisition date.

(i)— Adjustment reflects the prepayment fee paid when FHLB advances were completely paid off in December of 2012 and the fair value adjustment based on the Company’s evaluation of the junior subordinated debt.

(j)— Adjustment reflects the incremental accrual for employee related benefits, asset sale termination fee and other liabilities.

Peoples Bancorporation, Inc. Acquisition

On April 24, 2012, the Company acquired all of the outstanding common stock of Peoples Bancorporation, Inc. (“Peoples”), a bank holding company based in Easley, South Carolina, in a stock transaction. Peoples common shareholders received 0.1413 shares of the Company’s common stock in exchange for each share of Peoples common stock, resulting in the Company issuing 1,002,741 common shares at a fair value of $31.1 million. Peoples’ outstanding shares of preferred stock (including accrued and unpaid dividends) issued under the U.S. Treasury’s Troubled Asset Relief Program (“TARP”) were purchased by the Company for $13.4 million and retired as part of the merger transaction. In total, the purchase price for the Peoples acquisition was $44.5 million including the value of outstanding stock options totaling $96,000.

The Peoples transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at fair value on the acquisition date.

The following table presents the assets acquired and liabilities assumed as of April 24, 2012, as recorded by Peoples on the acquisition date and initial and subsequent fair value adjustments.

			Initial			Subsequent
	As Recorded by		Fair Value			Fair Value			As Recorded
(Dollars in thousands)	Peoples		Adjustments			Adjustments			by SCBT
Assets
Cash and cash equivalents	$	24,459	$	—		$	—		$	24,459
Investment securities	176,334		(442		)(a)	—			175,892
Loans	262,858		(28,613		)(b)	—			234,245
Premises and equipment	10,094		3,240		(c)	(38		)(c)	13,296
Intangible assets	—		2,930		(d)	—			2,930
Other real estate owned and repossessed assets	13,257		(5,341		)(e)	188		(e)	8,104
Deferred tax asset	4,702		11,669		(f)	197		(f)	16,568
Other assets	17,588		(883		)(g)	—			16,705
Total assets	$	509,292	$	(17,440	)	$	347		$	492,199

Liabilities
Deposits:
Noninterest-bearing	$	54,884	$	—		$	—		$	54,884
Interest-bearing	378,781		1,405		(h)	—			380,186
Total deposits	433,665		1,405			—			435,070
Other borrowings	9,542		—			—			9,542
Other liabilities	4,291		2,054		(i)	700		(i)	7,045
Total liabilities	447,498		3,459			700			451,657
Net identifiable assets acquired over (under) liabilities assumed	61,794		(20,899		)	(353		)	40,542
Goodwill	—		3,654			353			4,007
Net assets acquired over (under) liabilities assumed	$	61,794	$	(17,245	)	$	—		$	44,549

Consideration:
SCBT Financial Corporation common shares issued	1,002,741
Purchase price per share of the Company’s common stock	$	31.06
Company common stock issued and cash exchanged for fractional shares	31,160
Cash paid for stock options outstanding	96
Cash paid for TARP preferred stock	13,293
Fair value of total consideration transferred	$	44,549

Explanation of fair value adjustments

(a)—Adjustment reflects marking the securities portfolio to fair value as of the acquisition date.

(b)—Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio and excludes the allowance for loan losses recorded by Peoples Bancorporation, Inc.

(c)—Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired premises and equipment.

(d)—Adjustment reflects the recording of the core deposit intangible on the acquired deposit accounts and other intangibles for non-compete agreements.

(e)—Adjustment reflects the fair value adjustments to OREO based on the Company’s evaluation of the acquired OREO portfolio.

(f) —Adjustment to record deferred tax asset related to fair value adjustments at 35.8% income tax rate.

(g)—Adjustment reflects uncollectible portion of accrued interest receivable.

(h)—Adjustment arises since the rates on interest-bearing deposits are higher than rates available on similar deposits as of the acquisition date.

(i)—Adjustment reflects the incremental accrual for SERP termination, other employee related benefits, and other liabilities.