NOTE 4  BUSINESS COMBINATIONS Acquisitions Sunshine Financial, Inc. On April 1, 2018, the Company completed its acquisition of Sunshine Financial, Inc., (Sunshine), and immediately thereafter merged its wholly-owned subsidiary, Sunshine Community Bank, with and into The First. The Company paid a total consideration of approximately $30.5 million to the Sunshine shareholders as consideration in the merger which included 726,461 shares of Company common stock and approximately $7 million in cash. In connection with the acquisition, preliminarily, the Company recorded approximately $10.0 million of goodwill and $2.8 million of core deposit intangible. The core deposit intangible will be expensed over 10 years. The Company acquired the $173.1 million loan portfolio at an estimated fair value discount of $2.2 million. The discount represents expected credit losses, adjusted for market interest rates and liquidity adjustments. Expenses associated with the acquisition were $3.7 million and $4.9 million for the three month and nine month periods ended September 30, 2018, respectively. These costs included system conversion and integrating operations charges as well as legal and consulting expenses, which have been expensed as incurred. The preliminary amounts of the acquired identifiable assets and liabilities as of the acquisition date were as follows: ($ In Thousands) Purchase price: Cash and stock $ 30,461 Total purchase price 30,461 Identifiable assets: Cash and due from banks 16,099 Investments 13,812 Loans 170,843 Bank owned life insurance 3,284 Core deposit intangible 2,831 Personal and real property 4,121 Other assets 2,614 Total assets 213,604 Liabilities and equity: Deposits 151,973 Borrowed funds 38,250 Other liabilities 2,920 Total liabilities 193,143 Net assets acquired 20,461 Goodwill resulting from acquisition $ 10,000 The outstanding principal balance and the carrying amount of these loans included in the consolidated balance sheet as of the date of acquisition and at September 30, 2018, are as follows ($ In Thousands): Nine Months Ended September 30, April 1, 2018 2018 Outstanding principal balance $ 173,052 $ 168,212 Carrying amount 170,843 165,895 Southwest Banc Shares, Inc. On March 1, 2018, the Company completed its acquisition of Southwest Banc Shares, Inc., (Southwest), and immediately thereafter merged its wholly-owned subsidiary, First Community Bank, with and into The First. The Company paid a total consideration of approximately $60.0 million to the Southwest shareholders as consideration in the merger which included 1,134,010 shares of Company common stock and $24 million in cash. In connection with the acquisition, preliminarily, the Company recorded approximately $24.6 million of goodwill and $4.2 million of core deposit intangible. The core deposit intangible will be expensed over 10 years. The Company acquired the $274.7 million loan portfolio at an estimated fair value discount of $8.4 million. The discount represents expected credit losses, adjusted for market interest rates, and liquidity adjustments. Expenses associated with the acquisition were $0.4 million and $ 4.4 million for the three month and nine month periods ended September 30, 2018, respectively. These costs included systems conversions and integrating operations charges, as well as legal and consulting expenses, which have been expensed as incurred. The preliminary amounts of the acquired identifiable assets and liabilities as of the acquisition date were as follows: ($ In Thousands) Purchase price: Cash and stock $ 60,005 Total purchase price 60,005 Identifiable assets: Cash and due from banks 44,836 Investments 66,940 Loans 266,307 Bank owned life insurance 5,885 Core deposit intangible 4,177 Personal and real property 10,500 Other assets 3,433 Total assets 402,078 Liabilities and equity: Deposits 357,221 Borrowed funds 6,858 Other liabilities 2,561 Total liabilities 366,640 Net assets acquired 35,438 Goodwill resulting from acquisition $ 24,567 The outstanding principal balance and the carrying amount of these loans included in the consolidated balance sheet as of the date of acquisition and at September 30, 2018, are as follows ($ In Thousands): Nine Months Ended September 30, March 1, 2018 2018 Outstanding principal balance $ 274,669 $ 212,695 Carrying amount 266,307 209,538 The following unaudited pro-forma financial information for the nine months ended September 30, 2018 and September 30, 2017 gives effect to the acquisitions of Southwest Banc Shares and Sunshine Financial as if the acquisitions had occurred on January 1, 2017. 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) Pro-Forma Pro-Forma Pro-Forma Pro-Forma Three Months Ended September 30, 2018 Three Months Ended September 30, 2017 Nine Months Ended September 30, 2018 Nine Months Ended September 30, 2017 (unaudited) (unaudited) (unaudited) (unaudited) Net interest income $ 21,669 $ 20,731 $ 64,025 $ 60,040 Non-interest income 5,074 3,943 14,941 13,524 Total revenue 26,743 24,674 78,966 73,564 Income before income taxes 10,604 10,669 29,178 24,170 Supplemental pro-forma earnings were adjusted to exclude acquisition costs incurred. Iberville Bank On January 1, 2017, the Company completed its acquisition of 100% of the common stock of Iberville Bank, Plaquemine, Louisiana, from A. Wilberts Sons Lumber and Shingle Co. (Iberville Parent), and immediately thereafter merged Iberville Bank (Iberville), the wholly-owned subsidiary of Iberville Parent, with and into The First. The Company paid a total of $31.1 million in cash. Approximately $2.5 million of the purchase price was held in escrow as contingency for flood-related losses in the loan portfolio incurred due to flooding in Ibervilles market area in the fall of 2016. The Company received $498,207 from the escrow for settlement of flood-related loans. Goodwill at September 30, 2018, reflects the escrow settlement. In connection with the acquisition, the Company recorded $5.1 million of goodwill and $2.7 million of core deposit intangible. The core deposit intangible will be amortized to expense over 10 years. The Company acquired Ibervilles $149.4 million loan portfolio at an estimated fair value discount of $0.8 million. The discount represents expected credit losses, adjusted for market interest rates and liquidity adjustments. Expenses associated with the acquisition were $0 and $3.5 million for the nine months ended September 30, 2018 and 2017, respectively. These costs included system conversion and integrating operations charges, as well as legal and consulting expenses, which have been expensed as incurred. Gulf Coast Community Bank Also on January 1, 2017, the Company completed the merger of Gulf Coast Community Bank (GCCB), Pensacola, Florida, with and into The First. The Company issued to GCCBs shareholders shares of the Companys common stock which, for purposes of the GCCB acquisition, were valued through averaging the trading price of the Companys common stock price over a 30 day trading period ending on the fifth business day prior to the closing of the acquisition. Fractional shares were acquired with cash. The consideration totaled $2.3 million. In connection with the acquisition, the Company recorded $1.1 million of goodwill and $1.0 million of core deposit intangible. The core deposit intangible will be amortized to expense over 10 years. The Company acquired GCCBs $91.0 million loan portfolio at a fair value discount of approximately $2.2 million. The discount represents expected credit losses, adjusted for market interest rates and liquidity adjustments. Expenses associated with the acquisition were $0 and $2.8 million for the nine months ended September 30, 2018 and 2017, respectively. These costs included systems conversion and integrating operations charges, as well as legal and consulting expenses, which have been expensed as incurred. On March 3, 2017, $5.0 million of loans acquired in the acquisition were sold. In connection with the sale, the acquisition credit mark was decreased by $2.2 million, the amount of which was included in the credit mark at acquisition. Loans acquired in the two acquisitions discussed in Note 4  Business Combinations were accounted for in accordance with ASC 310-20, Receivables-Nonrefundable Fees and Other Costs .