BUSINESS COMBINATIONS

6 Months Ended

Jun. 30, 2021

BUSINESS COMBINATIONS

BUSINESS COMBINATIONS

NOTE 4 – BUSINESS COMBINATIONS

Acquisitions

Southwest Georgia Financial Corporation

On April 3, 2020, the Company completed its acquisition of Southwest Georgia Financial Corporation (“SWG”), and immediately thereafter merged its wholly-owned subsidiary, Southwest Georgia Bank with and into The First. The Company paid a total consideration of $47.9 million to the SWG shareholders as consideration in the merger, which included 2,546,967 shares of Company common stock and approximately $2 thousand in cash. As a result of the acquisition, the Company was able to increase its loan and deposit base and reduce costs through economies of scale. The merger strengthened the Company’s market share and brought forth additional opportunities by adding a new market area in the Company’s footprint.

In connection with the acquisition, the Company recorded a $7.8 million bargain purchase gain and $4.6 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, which is reflected as an adjustment to retained earnings. 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 acquired the $394.6 million loan portfolio at an estimated fair value discount of $2.3 million. The discount represents expected credit losses, adjusted for market interest rates and liquidity adjustments.

Expenses associated with the SWG acquisition were $2.1 million and $2.3 million for the three and six months period ended June 30, 2020. These costs included system conversion and integrating operations charges and legal and consulting expenses, which have been expensed as incurred.

The following table summarizes the finalized fair values of the assets acquired, liabilities assumed and the bargain purchase gain assumed in the SWG transaction, as of the acquisition date ($ in thousands):

			Measurement
	As Initially		Period
	Reported		Adjustments	As Adjusted
Identifiable assets:
Cash and due from banks	$	29,247	—	$	29,247
Investments		89,737	—		89,737
Loans		392,292	—		392,292
Core deposit intangible		4,556	—		4,556
Personal and real property		18,558	—		18,558
Bank owned life insurance		6,963	—		6,963
Other assets		2,589	813		3,402
Total assets		543,942	813		544,755
Liabilities and equity:
Deposits		476,099	—		476,099
Borrowed funds		9,500	—		9,500
Other liabilities		3,461	—		3,461
Total liabilities		489,060	—		489,060
Net assets acquired		54,882	813		55,695
Consideration paid		47,859	(1)		47,858
Bargain purchase gain	$	(7,023)	812	$	(7,835)

During the second quarter of 2021, the Company finalized its analysis and valuation adjustments have been made to other assets since initially reported.

The outstanding principal balance and the carrying amount of these loans included in the consolidated balance sheet as of the date of acquisition are as follows ($ in thousands):

	April 3, 2020
Outstanding principal balance	$	394,621
Carrying amount		392,292