Note 19 Acquisition Activities

On January 1, 2018, the Company completed its acquisition of Peoples, Inc., the bank holding company of Colorado-based Peoples National Bank and Kansas-based Peoples Bank. Immediately following the completion of the acquisition, Peoples National Bank and Peoples Bank merged into NBH Bank. Pursuant to the merger agreement executed in June 2017, the Company paid $36.2 million of cash consideration and 3,398,477 shares of the Company’s Class A common stock in exchange for all of the outstanding common stock of Peoples. Included in the cash consideration is $10.0 million of restricted cash placed in escrow for certain potential liabilities the Company is indemnified for pursuant to the merger agreement. The restricted cash is included in other assets in the Company’s consolidated statements of financial condition at March 31, 2019. The transaction was valued at $146.4 million in the aggregate, based on the Company’s closing price of $32.43 on the acquisition date. Acquisition related costs of $7.6 million on a pre-tax basis were included in the Company’s consolidated statements of operations for the three months ended March 31, 2018. The results of Peoples are included in the results of the Company subsequent to the acquisition date.

The Company determined that this acquisition constitutes a business combination as defined in ASC Topic 805, Business Combinations. Accordingly, as of the date of the acquisition, the Company recorded the assets acquired and liabilities assumed at fair value. The Company determined fair values in accordance with the guidance provided in ASC Topic 820, Fair Value Measurements and Disclosures. Fair value is established by discounting the expected future cash flows with a market discount rate for like maturities and risk instruments. The estimation of expected future cash flows, market conditions and other future events and actual results could differ materially. The determination of the fair values of fixed assets, loans, OREO, core deposit intangible, mortgage servicing rights and mortgage repurchase reserve involves a high degree of judgment and complexity.

The table below summarizes the net assets acquired (at fair value) and consideration transferred in connection with the Peoples acquisition:


Assets:
Cash and due from banks	$	105,173
Investment securities available-for-sale		118,512
Non-marketable securities		4,796
Loans		542,707
Loans held for sale		54,260
Other real estate owned		1,253
Premises and equipment		18,584
Core deposit intangible asset		10,477
Mortgage servicing rights		4,301
Other assets		15,361
Total assets acquired	$	875,424

Liabilities:
Total deposits		729,911
FHLB borrowings		33,825
Other liabilities		20,683
Total liabilities assumed	$	784,419

Identifiable net assets acquired	$	91,005

Consideration:
NBHC common stock paid at January 1, 2018, closing price of $32.43	$	110,213
Cash		36,189
Total	$	146,402

Goodwill	$	55,397

In connection with the Peoples acquisition, the Company recorded $55.4 million of goodwill, a $10.5 million core deposit intangible asset, a $4.3 million mortgage servicing rights intangible asset and a $4.0 million mortgage repurchase reserve, included in other liabilities. The core deposit intangible is being amortized straight-line over ten years and the mortgage servicing rights intangible is amortized in proportion to and over the period of the estimated net servicing income. The Federal Home Loan Bank (“FHLB”) borrowings of $33.8 million were paid off during the first quarter of 2018. The goodwill associated with this transaction is not tax deductible.

At the date of acquisition, the gross contractual amounts receivable, inclusive of all principal and interest, was $713.6 million. The Company’s best estimate of the contractual principal cash flows for loans not expected to be collected was $2.1 million.