BUSINESS COMBINATIONS

6 Months Ended

Jun. 30, 2022

Acquisitions

Cadence Bank Branches

On December 3, 2021, The First completed its acquisition of seven Cadence Bank, N.A. (“Cadence”) branches in Northeast Mississippi (the “Cadence Branches”). In connection with the acquisition of the Cadence Branches, The First assumed $410.2 million in deposits, acquired $40.3 million in loans at fair value, acquired certain assets associated with the Cadence Branches at their book value, and paid a deposit premium of $1.0 million to Cadence. As a result of the acquisition, the Company will have an opportunity to increase its deposit base and reduce transaction costs. The Company also expects to reduce costs through economies of scale.

In connection with the acquisition of the Cadence Branches, the Company recorded a $1.6 million bargain purchase gain and $2.9 million core deposit intangible. The bargain purchase gain was generated as a result of the estimated fair value of net assets acquired exceeding the merger consideration, based on provisional fair values. The bargain purchase gain is considered non-taxable for income taxes purposes. The core deposit intangible will be amortized to expense over 10 years. The Company also incurred $370 thousand of provision for credit losses on credit marks from the loans acquired.

Expenses associated with the branch acquisition of the Cadence Branches were $232 thousand and $444 thousand for the three months and six months period ended June 30, 2022, respectively. These costs included charges associated with legal and consulting expenses, which have been expensed as incurred.

The assets acquired and liabilities assumed and consideration paid in the acquisition of the Cadence Branches were recorded at their estimated fair values based on management’s best estimates using information available at the date of the acquisition and are subject to adjustment for up to one year after the closing date of the acquisition. While the fair values are not expected to be materially different from the estimates, accounting guidance provides that an acquirer must recognize adjustments to provisional amounts that are identified during the measurement period, which will run through December 3, 2022 in respect of the Cadence Branches, in the measurement period in which the adjustment amounts are determined. The acquirer must record in the financial statements, the effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of changes to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The items most susceptible to adjustment are the credit fair value adjustments on loans, core deposit intangible and the deferred income tax assets resulting from the acquisition.

The following table summarizes the provisional fair values of the assets acquired and liabilities assumed and the goodwill (bargain purchase gain) generated from the transaction ($ in thousands):


Purchase price:
Cash	$	1,000
Total purchase price	1,000
Identifiable assets:
Cash	$	359,916
Loans	40,262
Core deposit intangible	2,890
Personal and real property	9,675
Other assets	135
Total assets	412,878
Liabilities and equity:
Deposits	410,171
Other liabilities	126
Total liabilities	410,297
Net assets acquired	2,581
Bargain purchase gain	$	(1,581)

Supplemental Pro Forma Information

The following table presents certain supplemental pro forma information, for illustrative purposes only, for the six months ended June 30, 2022 and 2021 as if the Cadence Branches acquisitions had occurred on January 1, 2021. The pro forma financial information is not necessarily indicative of the results of operations had the acquisitions been effective as of this date.


($ in thousands)	(unaudited)		(unaudited)
	Pro-Forma		Pro-Forma
	Six Months Ended June 30, 2022		Six Months Ended June 30, 2021
Net interest income	$	80,740	$	77,279
Non-interest income	19,821		18,295
Total revenue	100,561		95,574
Income before income taxes	41,996		40,857

Supplemental pro-forma earnings were adjusted to exclude acquisition costs incurred. The Company’s operating results for the six months ended June 30, 2022, include the operating results of the acquired assets and assumed liabilities of the Cadence Branches subsequent to the acquisition date. Due to the timing of the data conversion and the integration of operations of the branches onto the Company’s existing operations, historical reporting of the acquired branches is impracticable, and therefore, disclosure of the amounts of revenue and expenses attributable to the acquired branches since the acquisition date are not available.