Effective as of July 1, 2018, the Company completed the acquisition of Grandpoint, the holding company of Grandpoint Bank, a California-chartered bank, with $3.1 billion in total assets, $2.4 billion in gross loans and $2.5 billion in total deposits as of June 30, 2018.

Pursuant to the terms of the merger agreement, each outstanding share of Grandpoint voting common stock and Grandpoint non-voting common stock was converted into the right to receive 0.4750 shares of the Corporation’s common stock. The value of the total transaction consideration was approximately $602.2 million, after approximately $28.1 million in aggregate cash consideration payable to holders of Grandpoint share-based compensation awards by Grandpoint. The transaction consideration represented the issuance of 15,758,089 shares of the Corporation’s common stock, valued at $38.15 per share, which was the closing price of the Corporation’s common stock on June 29, 2018, the last trading day prior to the consummation of the acquisition.

Goodwill in the amount of $312.6 million was recognized in the Grandpoint acquisition. Goodwill represents the future economic benefits rising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of the two entities. Goodwill recognized in this transaction is not deductible for income tax purposes.

The following table represents the Grandpoint assets acquired and liabilities assumed as of July 1, 2018 and the fair value adjustments and amounts recorded by the Company under the acquisition method of accounting:



	Grandpoint			Fair Value			Fair
	Book Value			Adjustment			Value
	(dollars in thousands)
ASSETS ACQUIRED
Cash and cash equivalents	$	147,551		$	—		$	147,551
Investment securities	395,905			(3,047		)	392,858
Loans, gross	2,404,042			(51,325		)	2,352,717
Allowance for loan losses	(18,665		)	18,665			—
Fixed assets	6,015			3,107			9,122
Core deposit intangible	5,093			66,850			71,943
Deferred tax assets	14,185			(9,157		)	5,028
Other assets	97,441			(436		)	97,005
Total assets acquired	$	3,051,567		$	24,657		$	3,076,224
LIABILITIES ASSUMED
Deposits	$	2,506,663		$	266		$	2,506,929
Borrowings	255,155			(232		)	254,923
Other Liabilities	23,687			1,172			24,859
Total liabilities assumed	2,785,505			1,206			2,786,711
Excess of assets acquired over liabilities assumed	$	266,062		$	23,451		289,513
Consideration paid							602,152
Goodwill recognized							$	312,639

Such fair values are preliminary estimates and subject to refinement for up to one year after the closing date of acquisition as additional information relative to the closing date fair values becomes available and such information is considered final, whichever is earlier. Since the acquisition, the Company has made net adjustments of $580,000 related to deferred tax assets and other assets. During the second quarter of 2019, the Company finalized its fair values with this acquisition.

Effective as of November 1, 2017, the Company completed the acquisition of PLZZ, the holding company of Plaza Bank, a California chartered banking corporation headquartered in Irvine, California with $1.25 billion in total assets, $1.06 billion in gross loans and $1.08 billion in total deposits at October 31, 2017.

Pursuant to the terms of the merger agreement, each outstanding share of PLZZ common stock was converted into the right to receive 0.2000 shares of the Corporation’s common stock. The value of the total deal consideration was approximately $245.8 million after approximately $6.5 million of aggregate cash consideration payable to holders of unexercised options and warrants exercisable for shares of PLZZ common stock by PLZZ. The transaction consideration represented the issuance of 6,049,373 shares of the Corporation’s common stock, which had a value of $40.40 per share, which was the closing price of the Corporation’s common stock on October 31, 2017, the last trading day prior to the consummation of the acquisition.

Goodwill in the amount of $124.0 million was recognized in the PLZZ acquisition. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of the two entities. Goodwill recognized in this transaction is not deductible for income tax purposes.

The following table represents the PLZZ assets acquired and liabilities assumed as of November 1, 2017 and the fair value adjustments and amounts recorded by the Company under the acquisition method of accounting:



	PLZZ			Fair Value			Fair
	Book Value			Adjustment			Value
	(dollars in thousands)
ASSETS ACQUIRED
Cash and cash equivalents	$	150,459		$	—		$	150,459
Loans, gross	1,069,359			(6,458		)	1,062,901
Allowance for loan losses	(13,009		)	13,009			—
Fixed assets	7,389			(1,424		)	5,965
Core deposit intangible	198			10,575			10,773
Deferred tax assets	11,849			(6,123		)	5,726
Other assets	19,495			(589		)	18,906
Total assets acquired	$	1,245,740		$	8,990		$	1,254,730
LIABILITIES ASSUMED
Deposits	$	1,081,727		$	1,224		$	1,082,951
Borrowings	40,755			397			41,152
Other Liabilities	8,956			(450		)	8,506
Total liabilities assumed	1,131,438			1,171			1,132,609
Excess of assets acquired over liabilities assumed	$	114,302		$	7,819		122,121
Consideration paid							245,761
Goodwill recognized							$	123,640

The fair values are estimates and are subject to adjustment for up to one year after the merger date. Since the acquisition, the Company has made net adjustments of $1.8 million related to core deposit intangibles, deferred tax assets, loans and other assets and liabilities. During the fourth quarter of 2018, the Company finalized its fair values with this acquisition.

Effective as of April 1, 2017, the Company completed the acquisition of HEOP, the holding company of Heritage Oaks Bank, a California state-chartered bank based in Paso Robles, California (“Heritage Oaks Bank”) with $2.01 billion in total assets, $1.36 billion in gross loans and $1.67 billion in total deposits at March 31, 2017.

Pursuant to the terms of the merger agreement, each outstanding share of HEOP common stock was converted into the right to receive 0.3471 shares of the Corporation’s common stock. The value of the total deal consideration was approximately $467.4 million, which included approximately $3.9 million of aggregate cash consideration payable to holders of Heritage Oaks share-based compensation awards, and the issuance of 11,959,022 shares of the Corporation’s common stock, which had a value of $38.55 per share, which was the closing price of the Corporation’s common stock on March 31, 2017, the last trading day prior to the consummation of the acquisition.

Goodwill in the amount of $270.0 million was recognized in the HEOP acquisition. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of the two entities. Goodwill recognized in this transaction is not deductible for income tax purposes.

The following table represents the HEOP assets acquired and liabilities assumed as of April 1, 2017 and the fair value adjustments and amounts recorded by the Company under the acquisition method of accounting:



	HEOP Book Value			Fair Value Adjustments			Fair Value
ASSETS ACQUIRED	(dollars in thousands)
Cash and cash equivalents	$	78,728		$	—		$	78,728
Investment securities	445,299			(2,376		)	442,923
Loans, gross	1,384,949			(20,261		)	1,364,688
Allowance for loan losses	(17,200		)	17,200			—
Fixed assets	35,567			(665		)	34,902
Core deposit intangible	3,207			24,916			28,123
Deferred tax assets	17,850			(7,606		)	10,244
Other assets	55,235			(21		)	55,214
Total assets acquired	$	2,003,635		$	11,187		$	2,014,822
LIABILITIES ASSUMED
Deposits	$	1,668,085		$	1,465		$	1,669,550
Borrowings	139,150			(116		)	139,034
Other Liabilities	8,059			293			8,352
Total liabilities assumed	1,815,294			1,642			1,816,936
Excess of assets acquired over liabilities assumed	$	188,341		$	9,545		197,886
Consideration paid							467,439
Goodwill recognized							$	269,553

The fair values are estimates and are subject to adjustment for up to one year after the merger date. Since the acquisition, the Company made net adjustments of $600,000 to deferred tax assets and other liabilities. During the second quarter of 2018, the Company finalized its fair values with this acquisition.

The loan portfolios of Grandpoint, PLZZ and HEOP’s were recorded at fair value at the date of each acquisition. The valuation of loan portfolios of Grandpoint, PLZZ, and HEOP’s were performed as of the acquisition dates to assess their fair values. The loan portfolios were split into two groups: loan with credit deterioration and loans without credit deterioration, and then segmented further by loan type. The fair value was calculated on an individual loan basis using a discounted cash flow analysis. The discount rate utilized was based on a weighted average cost of capital, considering the cost of equity and cost of debt. Also factored into the fair value estimates were loss rates, recovery period and prepayment rates based on industry standards.

For loans acquired from Grandpoint, PLZZ and HEOP, the contractual amounts due, expected cash flows to be collected, interest component and fair value as of the respective acquisition dates were as follows:



	Acquired Loans
	Grandpoint		PLZZ		HEOP
	(dollars in thousands)
Contractual amounts due	$	3,496,905	$	1,708,685	$	1,717,230
Cash flows not expected to be collected	39,071		20,152		4,442
Expected cash flows	3,457,834		1,688,533		1,712,788
Interest component of expected cash flows	1,105,117		625,632		348,100
Fair value of acquired loans	$	2,352,717	$	1,062,901	$	1,364,688

In accordance with generally accepted accounting principles, there was no carryover of the allowance for loan losses that had been previously recorded by Grandpoint, PLZZ and HEOP.

The Company also determined the fair value of the core deposit intangible, securities and deposits with the assistance of third-party valuations and determined the fair value of OREO from recent appraisals of the properties less estimated costs to sell. Since the fair value of intangible assets is calculated as if they were stand-alone assets, the presumption is that a hypothetical buyer of the intangible asset would be able to take advantage of potential after tax benefits resulting from the asset purchase.

The core deposit intangible on non-maturing deposit represents future benefits arising from savings on source of funding and was determined by evaluating the underlying characteristics of the deposit relationships, including customer attrition, deposit interest rates, service charge income, overhead expense and costs of alternative funding. The value of the after tax savings on cost of fund is the present value over an estimated fifty-year horizon, using the discount rate applicable to the asset.

In determining the fair value of certificates of deposit, a discounted cash flow analysis was used, which involved present valuing the contractual payments over the remaining life of the certificates of deposit at market-based interest rates.

The operating results of the Company for the year ended December 31, 2018 include the operating results of Grandpoint, PLZZ and HEOP since their respective acquisition dates. The following table presents the net interest and other income, net income and earnings per share as if the merger with Grandpoint, PLZZ and HEOP were effective as of January 1, 2017. The unaudited pro forma information in the following table is intended for informational purposes only and is not necessarily indicative of our future operating results or operating results that would have occurred had the mergers been completed at the beginning of each respective year. No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, expense efficiencies or asset dispositions.



	Year Ended December 31,
	2018		2017
	(dollars in thousands, except per share data)
Net interest and other income	$	473,748	$	465,400
Net income	133,565		96,758
Basic earnings per share	2.16		1.58
Diluted earnings per share	2.14		1.56