Note 2—Mergers and Acquisitions

The following mergers and acquisitions are referenced throughout this Form 10-K:

Community Bank & Trust (“CBT”) – January 29, 2010 – Federal Deposit Insurance Corporation (“FDIC”) purchase and assumption agreement

Habersham Bank (“Habersham”) – February 18, 2011 – FDIC purchase and assumption agreement

BankMeridian, N.A. (“BankMeridian”) – July 29, 2011 – FDIC purchase and assumption agreement

Peoples Bancorporation, Inc. (“Peoples”) – April 24, 2012 – Whole bank acquisition

The Savannah Bancorp, Inc. (“Savannah”) – December 13, 2012 – Whole bank acquisition

First Financial Holdings, Inc. (“FFHI”) – July 26, 2013 – Whole bank acquisition with FDIC purchase and assumption agreements of Cape Fear Bank (“Cape Fear”) – April 10, 2009 and Plantation Federal Bank (“Plantation”) – April 27, 2012

Bank of America, N.A. (“BOA”) – August 21, 2015 – Branch acquisition which resulted in the purchase of 12 South Carolina branch locations and one Georgia branch location from BOA

“FDIC purchase and assumption agreement” means that only certain assets and liabilities were acquired by the bank from the FDIC. A “whole bank acquisition” means that the two parties in the transaction agreed to the transaction, and there was no involvement of the FDIC. A “whole bank acquisition with FDIC purchase and assumption agreements” means that the two parties in the transaction agreed to the merger, and there were existing FDIC purchase and assumption agreements. A “branch acquisition” means that the Company purchased specific branches, including certain deposits and loans associated with such branches, from the seller at an agreed upon price.

BOA Branch Acquisition

On August 21, 2015, the Bank completed its acquisition from BOA of 12 South Carolina branches located in Florence, Greenwood, Orangeburg, Sumter, Newberry, Batesburg-Leesville, Abbeville and Hartsville, South Carolina, and one Georgia branch located in Hartwell, Georgia. Under the terms of the Purchase and Assumption Agreement dated April 22, 2015, the Bank paid a deposit premium of $25.0 million, equal to 5.5% of the average daily deposits for the 30- day period immediately prior to the acquisition date. In addition, the Bank acquired approximately $3.1 million in loans and $4.1 million in premises and equipment. This transaction was fully taxable and there were no deferred tax assets or liabilities recorded as a result of this transaction.

The branch acquisition 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 August 21, 2015 and their initial fair value estimates:


	As Recorded		Fair Value			As Recorded by
(Dollars in thousands)	by BOA		Adjustments			the Company
Assets
Cash and cash equivalents	$	428,567	$	—		$	428,567
Loans		3,445		(295)	(a)		3,150
Premises and equipment		6,267		(2,138)	(b)		4,129
Intangible assets		—		6,800	(c)		6,800
Other assets		66		—			66
Total assets	$	438,345	$	4,367		$	442,712

Liabilities
Deposits:
Noninterest-bearing	$	97,440	$	—		$	97,440
Interest-bearing		340,849		—			340,849
Total deposits		438,289		—			438,289
Other liabilities		56		—			56
Total liabilities		438,345		—			438,345
Net identifiable assets acquired over (under) liabilities assumed		—		4,367			4,367
Goodwill		—		20,652			20,652
Net assets acquired over (under) liabilities assumed	$	—	$	25,019		$	25,019

Consideration:
Cash paid as deposit premium	$	25,019
Fair value of total consideration transferred	$	25,019

Explanation of fair value adjustments

(a)—Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.

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

(c)—Adjustment reflects the recording of the core deposit intangible on the acquired core deposit accounts.

First Financial Holdings, Inc. Merger

On July 26, 2013, the Company acquired all of the outstanding common stock of FFHI, of Charleston, South Carolina, the bank holding company for First Federal Bank (“First Federal”), in a stock transaction. FFHI common shareholders received 0.4237 shares of the Company’s common stock in exchange for each share of FFHI common stock, resulting in the Company issuing 7,018,274 shares of its common stock. Each outstanding share of FFHI Fixed Rate Cumulative Perpetual Preferred Stock, Series A (“FFHI Preferred Stock”), was converted into the right to receive one share of preferred stock of the Company, 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 FFHI Preferred Stock. In total, the purchase price for the FFHI 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. On March 28, 2014, the Company redeemed all 65,000 outstanding shares of the Series A Fixed Rate Cumulative Perpetual Preferred Stock. The shares had a liquidation preference of $1,000 per share and dividends were accruing at 9% per annum.

The FFHI 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.

The following table presents the assets acquired and liabilities assumed as of July 26, 2013, as recorded by FFHI 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)	FFHI		Adjustments			Adjustments			by the Company
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)		12,875	(b)		2,275,682
Premises and equipment		82,399		(5,435)	(c)		(597)	(c)		76,367
Intangible assets		7,037		33,738	(d)		(2,542)	(d)		38,233
Mortgage servicing rights		19,156		—			—			19,156
Other real estate owned		13,271		(2,065)	(e)		1,972	(e)		13,178
FDIC receivable for loss sharing agreement		47,459		(18,122)	(f),(k)		(7,624)	(f)		21,713
Bank owned life insurance		51,513		—			(493)	(m)		51,020
Deferred tax asset		(5,279)		42,741	(g)		(4,585)	(g)		32,877
Other assets		47,257		(6,125)	(h)		4,247	(l)		45,379
Total assets	$	3,125,480	$	(49,370)		$	3,253		$	3,079,363
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
Other borrowings		280,187		21,526	(j)		—			301,713
Other liabilities		25,584		(2,059)	(k)		(245)	(k)		23,280
Total liabilities		2,819,783		27,268			(245)			2,846,806
Net identifiable assets acquired over (under) liabilities assumed		305,697		(76,638)			3,498			232,557
Goodwill		—		217,894			(3,498)			214,396
Net assets acquired over liabilities assumed	$	305,697	$	141,256		$	—		$	446,953
Consideration:
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 FFHI.

(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.

(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 Federal Home Loan Bank (the “FHLB”) advances on July 26, 2013. This fair value adjustment and the fair value adjustment of the junior subordinated debt were 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.

(l)—Adjustment reflects the change in insurance-related receivable and increase in the current income tax receivable for the short-period income tax returns filed.

(m)—Adjustment reflects the fair value adjustments to bank owned life insurance based on the Company’s evaluation of the policies.

The operating results of the Company include the operating results of the acquired assets and assumed liabilities since the acquisition date of July 26, 2013. For the year ended December 31, 2015, branch consolidation and acquisition expense of $6.9 million is recorded in the consolidated statement of income. Merger and branding related charges of $23.9 million are recorded in the consolidated statement of income for the year ended December 31, 2014 and include incremental costs related to closing of certain branches, employment related cost, professional cost (legal, accounting and audit related), travel, printing and supplies, advertising and brand related, and other cost. These charges in 2015 and 2014 were excluded from net operating income available to common shareholders.

The following table discloses the impact of the merger with FFHI (excluding the impact of merger-related expenses) for the years ended December 31, 2015 and December 31, 2014. The table also presents certain pro forma information as if FFHI had been acquired on January, 1 2013. These results combine the historical results of FFHI 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.

Merger‑related costs of $22.5 million from the Savannah and FFHI acquisitions are included in the Company’s consolidated statements of income for the year ended December 31, 2013, and are not included in the pro forma information below. In particular, no adjustments have been made to the pro forma information to eliminate the provision for loan losses for the year ended December 31, 2013 of FFHI in the amount of $6.4 million. No adjustments have been made to reduce the impact of any OREO write downs recognized by FFHI in the year ended December 31, 2013. The pro forma results below for December 31, 2013 do not reflect the operating cost savings and other business synergies related to the acquisition of FFHI:


	Actual results for		Actual results for		Pro Forma
	the Year Ended		Year Ended		Year Ended
(Dollars in thousands)	December 31, 2015		December 31, 2014		December 31, 2013
Total revenues (net interest income plus noninterest income)	$	443,328	$	421,056	$	438,625
Net operating income available to the common shareholder	$	104,391	$	90,573	$	80,624