On June 1, 2024, the Company acquired 100% of FCB, a Virginia chartered commercial bank, in accordance with the definitive merger agreement that was entered into on January 23, 2024, by and among the Company, the Bank and FCB. The acquisition enabled to Company to expand its branch footprint and improve market penetration in attractive banking markets, increase earnings and realize cost synergies. Immediately following the acquisition, FCB was merged with and into NBB. Upon completion of the merger, former FCB shareholders received a combination of the Company's common stock and cash.

The acquisition of FCB was accounted for as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations, and accordingly, assets acquired, liabilities assumed, and consideration paid were recorded at fair value on the acquisition date. The fair values of assets and liabilities were preliminary and subject to refinement for up to one year after acquisition date as additional information relative to the acquisition date fair values becomes available. The excess of the purchase price over the fair value of the net assets was recorded as provisional goodwill and represents the benefit from the transaction that is not otherwise quantifiable, including expected management and operational synergies and intangible assets that do not qualify for separate recognition.

The following table presents the consideration paid, the fair value of the identifiable assets acquired and liabilities assumed, and the resulting goodwill.


June 1, 2024	As Recorded by FCB			Estimated Fair Value Adjustments			Estimated Fair Values as Recorded by NBI
Purchase Price Consideration:
Stock consideration(1)							$	14,299
Cash consideration (2)								2,050
Total purchase price consideration							$	16,349

Identifiable assets:
Cash and cash equivalents	$	8,993		$	(59	)	$	8,934
Securities		9,325			(5	)		9,320
Loans, gross, purchased performing		115,589			(7,720	)		107,869
Loans, gross, purchased credit deteriorated		11,157			(822	)		10,335
Loans in process		539			–			539
Deferred fees and costs on loans		34			(34	)		–
Allowance for credit losses on loans		(881	)		881			–
Premises and equipment		3,003			449			3,452
Core deposit intangible		–			2,100			2,100
Other assets		4,998			966			5,964
Total identifiable assets acquired	$	152,757		$	(4,244	)	$	148,513

Identifiable Liabilities
Deposits	$	130,323		$	(606	)	$	129,717
Borrowings		5,250			(20	)		5,230
Other liabilities		1,960			131			2,091
Total identifiable liabilities assumed	$	137,533		$	(495	)	$	137,038

Provisional fair value of net assets acquired							$	11,475

Provisional goodwill							$	4,874

(1)

The Company issued 464,855 shares of its common stock valued at $30.76 per share, which was the closing price of the Company’s common stock on May 31, 2024, the last day of trading prior to the consummation of the acquisition.

(2)

Cash consideration was paid for shareholder elections, fractional shares and to settle outstanding vested stock options. The merger agreement provided for up to 10% of consideration to be paid in cash of $14.48 per FCB common share, at the shareholders’ election. Payments for shareholder elections and fractional shares totaled $1,769. Outstanding and vested options were settled at the difference between $14.48 and the strike price and totaled $281.

Management made significant estimates and exercised significant judgment in accounting for the acquisition of FCB. The following is a brief description of the valuation methodologies used to estimate the fair values of major categories of assets acquired and liabilities assumed. The Company utilized a valuation specialist to assist with the determination of fair values for certain acquired assets and assumed liabilities.

Included in cash and equivalents are an investment in time deposits of other financial institutions, valued at the present value of the expected contractual payments discounted at market rates for instruments with similar terms.

The estimated fair value of the acquired portfolio of debt securities was based on quoted market prices. All of the acquired portfolio was sold upon completion of the acquisition.

The fair valuation process identified loans with credit risk indicators that qualified for PCD status. PCD and non-PCD loans were then evaluated for credit risk and other fair value indicators. Credit risk was quantified using a PD/LGD methodology from a market participant perspective and applied to each loan’s outstanding principal balance. PD/LGD rates were tailored to PCD or non-PCD status. Other fair value indicators were quantified using a discounted cash flow methodology, with discounts applied for current market rates, credit risk and liquidity. Cash flows were generated based upon the loans’ underlying characteristics and estimated prepayment speeds.

The fair value of premises acquired was based on a recent third-party appraisal. Acquired equipment was based on the remaining net book value of FCB, which approximated fair value.

The core deposit intangible represents the value of long-term deposit relationships acquired in this transaction. Core deposit relationships provide a stable source of funds for lending and contribute to profitability. The core deposit intangible was valued using an income approach focused on cost savings, which recognizes the cost savings represented by the expense of maintaining the core deposit base versus the cost of an alternative funding source. The valuation incorporates assumptions related to account retention, discount rates, deposit interest rates, deposit maintenance costs and alternative funding rates.

Right of use assets (included in other assets) and lease liabilities (included in other liabilities) for branch locations were measured at the acquisition date. The fair value of leases was determined by applying a discounted cash flow methodology discounted by current lease rates within the appropriate market.

Deposits were valued using methods appropriate to their characteristics. The fair value of noninterest bearing demand deposits, interest bearing demand deposits, money market and savings deposit accounts were assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. Time deposits were valued at the present value of the expected contractual payments discounted at market rates for instruments with comparable terms.

The estimated fair value of borrowings was determined by obtaining payoff quotes from the lender. Borrowings were paid off upon completion of the acquisition.

Application of fair value measurements resulted in an increase to the deferred tax asset, included in other assets.