Item 1.01 Entry Into a Material Definitive Agreement.
Effective October 19, 2012, the Bank purchased a significant portion of the assets and assumed all of the deposits and substantially all other liabilities of Excel from the FDIC, as receiver for Excel (the “Acquisition”), pursuant to the terms of the Agreement.
Under the terms of the Agreement, the Bank acquired approximately $184.1 million in assets, including approximately $147.2 million in loans and other real estate, approximately $18.7 million cash and cash equivalents and approximately $8.6 million in investment securities. The Bank also assumed approximately $177.4 million in liabilities, including approximately $168.6 million in deposits. In connection with the Acquisition, the FDIC made a payment to the Bank in the amount of approximately $13.8 million. This amount is subject to customary post-closing adjustments based upon the final closing date balance sheet for Excel. The terms of the Agreement provide for the FDIC to indemnify the Bank against certain claims, including claims with respect to liabilities of Excel not assumed or otherwise purchased by the Bank, claims made by shareholders of Excel, and claims based on any prior action or inaction by Excel’s directors, officers and other employees.
Pursuant to the terms of the purchase and assumption agreement’s loss sharing arrangements, the FDIC will cover 80% of the Bank’s losses on the disposition of approximately $126.6 million of loans and foreclosed real estate attributable to the Acquisition. The deposits were acquired with no deposit premium, and assets were acquired at a discount to Excel’s historic book value as of October 19, 2012, of $21.0 million, subject to customary adjustments. The Bank will reimburse the FDIC for 80% of its recoveries with respect to losses for which the FDIC paid the Bank 80% reimbursement under the loss sharing agreement.
In addition, on November 19, 2020 (the “True-Up Measurement Date”), the Bank has agreed to pay to the FDIC 50% of the excess, if any, of (A) 25% of the product of (i) a fraction, the numerator which is the total shared loss recoveries, and the denominator is the net loss amount (the sum of all losses less the sum of all recoveries on the covered assets) plus (ii) a fraction, the numerator which is the total shared loss assets as of closing date, and the denominator is the total loans and other real estate acquired as of closing date, times (B) (i) the intrinsic loss estimate of $51.3 million minus the net loss amount less (ii) the asset discount bid of $21.0 million times a fraction, the numerator which is the intrinsic shared loss estimate of $51.3 million, and the denominator is the intrinsic loss estimate of $39.2 million, less (C) 2.5% of the total shared loss assets as of the bank closing date, as specific in the Agreement.
The Bank acquired approximately $2.6 million of real estate, furniture and equipment of Excel as part of the Acquisition from the FDIC. The Bank may exercise its option under the Agreement within 90 days after the Acquisition to be assigned any or all leases for leased banking facilities.
The forgoing summary of the Agreement is not complete and is qualified in its entirety by reference to the full text of the Agreement and certain exhibits attached thereto, a copy of which is attached hereto as Exhibit 2.1 and incorporated by reference herein.
