BUSINESS COMBINATION

6 Months Ended

Jun. 30, 2015

Business Combination, Description [Abstract]

BUSINESS COMBINATION

NOTE C – BUSINESS COMBINATION

BCB Holding Company, Inc.

On March 3, 2014, the Company entered into an Agreement and Plan of Merger (the “Agreement”) with BCB Holding Company, Inc., an Alabama corporation (“BCB”) and parent of Bay Bank, Mobile, Alabama. The Agreement provided that, upon the terms and subject to the conditions set forth in the Agreement, BCB will merge with and into the Company (the “Merger”) and Bay Bank will merge with and into The First, A National Banking Association (“Bank Merger”). Subject to the terms and conditions of the Agreement, which was approved by the Boards of Directors of the Company and BCB, each outstanding share of BCB common stock, other than shares held by the Company or BCB, or, shares with respect to which the holders thereof have perfected dissenters’ rights received (i) for the BCB common stock that was outstanding prior to August 1, 2013, $3.60 per share and one non-transferable contingent value right (“CVR”) of the CVR Consideration, and (ii) for the BCB common stock that was issued on August 1, 2013, $2.25 per share in cash. Each CVR is eligible to receive a cash payment equal to up to $0.40, with the exact amount based on the resolution of certain identified BCB loans over a three-year period following the closing of the transaction. Payout of the CVR will be overseen by a special committee of the Company’s Board of Directors. The total consideration to be paid in connection with the acquisition will range between approximately $6.2 million and $6.6 million depending upon the payout of the CVR. An estimated liability of $174,000 has been accrued for the CVR and a payment of $8 thousand dollars was made during the second quarter of 2015, leaving an accrual of $166,000.

As of the closing on July 1, 2014, the Company and BCB entered into an agreement and plan of merger pursuant to which BCB’s wholly-owned subsidiary, Bay Bank, was merged with and into the Company’s wholly-owned subsidiary, the Bank.

In connection with the acquisition, the Company recorded $1.7 million of goodwill and $.2 million of core deposit intangible. The core deposit intangible will be expensed over 10 years.

The Company acquired the $40.1 million loan portfolio at a fair value discount of $1.7 million. The discount represents expected credit losses, adjusted to market interest rates and liquidity adjustments.

The amounts of the acquired identifiable assets and liabilities as of the acquisition date were as follows(dollars in thousands):

Purchase price:
Cash and fair value of common stock	$	6,300
Total purchase price		6,300
Identifiable assets:
Cash and due from banks		8,307
Investments		23,423
Loans and leases		38,393
Other Real Estate		571
Core deposit intangible		225
Personal and real property		3,670
Deferred tax asset		2,502
Other assets		305
Total assets		77,396
Liabilities and equity:
Deposits		59,321
Borrowed funds		13,104
Other liabilities		326
Total liabilities		72,751
Net assets acquired		4,645
Goodwill resulting from acquisition	$	1,655

The outstanding principal balance and the carrying amount of these loans included in the consolidated balance sheet at June 30, 2015, are as follows: (dollars in thousands):

Outstanding principal balance	$	31,612
Carrying amount		29,915