22. BUSINESS COMBINATIONS

On October 1, 2017, the Company acquired 100% of the outstanding common shares of Ojai Community Bancorp (OCB) in exchange for $809,000 in cash and 1,376,431 shares of stock. OCB results of operations were included in the Company’s results beginning October 1, 2017. Acquisition related costs of $22,000 and $41,000 are included in other operating expense in the Company’s income statement for the years ended December 31, 2019 and 2018.

In accordance with GAAP, the Company recorded $18,464,000 of goodwill and $3,453,000 of core deposit intangibles. Goodwill represents the excess of the consideration transferred (cash) at the acquisition date over the fair values of the identifiable net assets acquired. The core deposit intangible is being amortized using a straight line basis over eight years. For tax purposes goodwill and core deposit intangibles are both non-deductible.

The acquisition has provided the Company an opportunity to expand its market presence further in Ventura County and into Santa Barbara. Synergies and cost savings resulting from the combined operations along with the introduction of the Company’s existing products and services into the new region have provided growth opportunities and the potential to increase profitability.

The following table summarizes the consideration paid for OCB and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date (dollars in thousands):


Consideration
Cash	$	809
Equity Instruments		37,370
Fair value of total consideration transferred	$	38,179


Recognized amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalents	$	37,108
Securities		5,492
Loans		217,800
Premises and equipment		873
Real estate owned		3,072
Core deposit intangibles		3,453
Other assets		10,479
Total assets acquired		278,277

Deposits		230,950
Borrowed funds		24,400
Other liabilities		3,212
Total liabilities assumed		258,562
Total identifiable net assets		19,715

Goodwill		18,464
	$	38,179

On November 3, 2017, the Company acquired certain deposits of the Woodlake branch of Citizen’s Business Bank (CBB). Results of operations were included in the Company’s results beginning November 3, 2017. Acquisition related costs of $-0- and $2,000 are included in other operating expense in the Company’s income statement for the years ended December 31, 2019 and 2018.

In accordance with GAAP, the Company recorded $625,000 of goodwill and $486,000 of core deposit intangibles. Goodwill represents the excess of the consideration transferred (cash) at the acquisition date over the fair values of the identifiable net assets acquired. The core deposit intangible is being amortized using a straight line basis over eight years. For tax purposes goodwill and core deposit intangibles are both non-deductible.

The acquisition has provided the Company an opportunity to expand its market presence in Tulare County. Synergies and cost savings resulting from the combined operations along with the introduction of the Company’s existing products and services into the new region have provided growth opportunities and the potential to increase profitability.

The following table summarizes the amounts of the assets acquired and liabilities assumed recognized at the acquisition date (dollars in thousands):


Consideration
Cash	$	—
Equity instruments		—
Fair value of total consideration transferred	$	—


Recognized amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalents	$	25,266
Loans		7
Premises and equipment		469
Core deposit intangibles		486
Total assets acquired		26,228

Deposits		26,661
Other liabilities		192
Total liabilities assumed		26,853
Total identifiable net assets		(625)

Goodwill		625
	$	—

In many cases, the fair values of assets acquired and liabilities assumed were determined by estimating the cash flows expected to result from those assets and liabilities and discounting them at appropriate market rates. The most significant category of assets for which this procedure was used was that of acquired loans. The excess of expected cash flows above the fair value of the majority of loans will be accreted to interest income over the remaining lives of the loans in accordance with FASB Accounting Standards Codification (ASC) 310‑20 (formerly SFAS 91). The Company believes that all contractual cash flows related to these loans will be collected. As such, these loans were not considered impaired at the acquisition date and were not subject to the guidance relating to purchased credit impaired loans, which have shown evidence of credit deterioration since origination. Loans acquired from OCB that were not subject to these requirements had a fair value and gross contractual amounts receivable of $217,800,000 and $223,036,000, as of the date of acquisition.

Certain loans, for which specific credit-related deterioration, since origination, was identified, are recorded at fair value, reflecting the present value of the amounts expected to be collected. Income recognition on these “purchased credit-impaired” loans is based on a reasonable expectation about the timing and amount of cash flows to be collected. Acquired loans deemed impaired and considered collateral dependent, with the timing of the sale of loan collateral indeterminate, remain on non-accrual status and have no accretable yield. These loans are discussed in further detail in Note 4 Purchased Credit Impaired Loans.

In accordance with GAAP, there was no carryover of the allowance for loan losses that had been previously recorded by OCB.

The Company recorded a deferred income tax asset of $741,000 for OCB. The deferred income tax asset was related to net operating loss carry-forward, as well as other tax attributes of OCB, along with the effects of fair value adjustments resulting from applying the acquisition method of accounting.

The fair value of savings and transaction deposit accounts acquired from OCB were assumed to approximate their carry value, as these accounts have no stated maturity and are payable on demand.

The operating results of the Company for the twelve months ending December 31, 2019, 2018 and 2017 include the operating results of OCB since their respective acquisition dates. The following table presents the net interest and other income, basic earnings per share and diluted earnings per share as if the acquisition with OCB was effective as of January 1, 2019, 2018 and 2017 for the respective year in which the acquisition was closed. 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 for 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.

Unaudited pro forma net interest income, net income and earnings per share presented below (dollars in thousands, except per share data):


	Pro Forma		Pro Forma		Pro Forma
	Year Ended		Year Ended		Year Ended
	2019		2018		2017
Net interest income	$	97,369	$	92,394	$	82,985
Net income	$	35,961	$	29,677	$	19,416
Basic earnings per share	$	2.35	$	1.94	$	1.37
Diluted earnings per share	$	2.33	$	1.92	$	1.35