ACQUISITION OF CORNERSTONE BANCORP, INC. (Tables)

12 Months Ended

Dec. 31, 2016

ACQUISITION OF CORNERSTONE BANCORP, INC.

Summary of Assets Acquired and Liabilities Assumed

Summary of Assets Acquired and Liabilities Assumed
		May 17, 2016
	As Previously Reported					As Recasted
		As Recorded		Fair Value			Recast			As Recorded
(in thousands)		by Cornerstone		Adjustments			Adjustments			by Republic
Assets acquired:
Cash and cash equivalents	$	22,707	$	—		$	—		$	22,707
Investment securities		329		—			—			329
Loans		195,136		(5,525)	a		13	a		189,624
Allowance for loan and lease losses		(1,955)		1,955	a		—			—
Loans, net		193,181		(3,570)			13			189,624
Federal Home Loan Bank stock, at cost		224		—			—			224
Premises and equipment, net		7,770		4,457	b		—			12,227
Core deposit intangible		—		1,205	c		—			1,205
Deferred income taxes		3,714		(74)	d		—			3,640
Bank owned life insurance		7,461		—			—			7,461
Other assets and accrued interest receivable		658		—			—			658
Total assets acquired	$	236,044	$	2,018		$	13		$	238,075
Liabilities assumed:
Deposits:
Noninterest-bearing	$	52,908	$	—		$	—		$	52,908
Interest-bearing		152,257		92	e		—			152,349
Total deposits		205,165		92			—			205,257
Subordinated note		4,124		—			—			4,124
Other liabilities and accrued interest payable		2,244		787	f		—			3,031
Total liabilities assumed		211,533		879			—			212,412
Net assets acquired	$	24,511	$	1,139		$	13			25,663
Cash consideration paid										(31,795)
Goodwill									$	6,132

Explanation of preliminary fair value adjustments:

a. Reflects the fair value adjustment based on the Company’s evaluation of the acquired loan portfolio and to eliminate the acquiree’s recorded allowance for loan losses.

b. Reflects the fair value adjustment based on the Company’s evaluation of the premises and equipment acquired.

c. Reflects the fair value adjustment for the core deposit intangible asset recorded as a result of the acquisition.

d. Reflects the differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.

e. Reflects the fair value adjustment based on the Company’s evaluation of the assumed time deposits.

f. Reflects the amount needed to adjust other liabilities to estimated fair value and to record certain liabilities directly attributable to the acquisition of Cornerstone.

Summary of results of operations of the assets acquired and liabilities assumed in the Company’s Cornerstone acquisition, inclusive of any pre-acquisition related costs

Year Ended December 31, 2016 (in thousands)	Non-Acquisition Related		Acquisition-Related			Total
INTEREST INCOME:
Loans, including fees	$	5,663	$	240	a	$	5,903
Taxable investment securities		1,331		—			1,331
Total interest income		6,994		240			7,234
INTEREST EXPENSE:
Deposits		362		(14)	b		348
Borrowings		1,931		—			1,931
Subordinated note		37		—			37
Total interest expense		2,330		(14)			2,316
NET INTEREST INCOME		4,664		254			4,918
Provision for loan and lease losses		327		—			327
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES		4,337		254			4,591
NONINTEREST INCOME:
Service charges on deposit accounts		210		—			210
Interchange fee income		133		—			133
Other		192		—			192
Total noninterest income		535		—			535
NONINTEREST EXPENSES:
Salaries and employee benefits		1,822		274	c		2,096
Occupancy and equipment, net		532		—			532
Communication and transportation		186		10	d		196
Marketing and development		144		—			144
FDIC insurance expense		44		—			44
Data processing		11		617	e		628
Supplies		49		20	f		69
Legal and professional fees		73		138	g		211
Other		364		135	h		499
Total noninterest expenses		3,225		1,194			4,419
INCOME (LOSS) BEFORE INCOME TAX EXPENSE		1,647		(940)			707
INCOME TAX EXPENSE (BENEFIT)		506		(290)			216
NET INCOME (LOSS)	$	1,141	$	(650)		$	491

Explanation of acquisition-related items:

a. Accretion of loan discounts.

b. Amortization of deposit premiums.

c. Severance payouts and signing bonuses for former Cornerstone employees.

d. Notices to former Cornerstone stakeholders of change in ownership and merger-related travel.

e. Primarily core system conversion-related costs.

f. Costs to update forms and supplies to RB&T brand.

g. Includes legal, audit, tax and other acquisition related consulting costs.

h. Includes amortization of core deposit intangible asset.