Note 2 - Mergers and Acquisitions

6 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Business Combination Disclosure [Text Block]

NOTE 2. MERGERS AND ACQUISITIONS

Effective April 30, 2022, Eagle completed its previously announced merger with FCB. The acquisition closed after receipt of approvals from regulatory authorities, approval of FCB shareholders and the satisfaction of other closing conditions. The total consideration paid was $38,577,000 and included cash consideration of $10,226,000 and common stock issued of $28,351,000.

This transaction was accounted for under the acquisition method of accounting.

All of the assets acquired and liabilities assumed were recognized at their acquisition-date fair value, while transaction costs and restructuring costs associated with the business combinations were expensed as incurred. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. The excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill. The goodwill recorded is not deductible for federal income tax purposes.

The following table summarizes the fair values of the assets acquired and liabilities assumed, consideration paid and the resulting goodwill.

	FCB
	April 30,
	2022
	(In Thousands)
Assets acquired:
Cash and cash equivalents	$	23,623
Securities available-for-sale		126,123
Loans receivable		190,894
Premises and equipment		6,393
Cash surrender value of life insurance		8,638
Core deposit intangible		7,004
Other assets		7,687
Total assets acquired	$	370,362
Liabilities assumed:
Deposits	$	321,107
Accrued expenses and other liabilities		1,767
Other borrowings		22,853
Total liabilities assumed	$	345,727
Net assets acquired	$	24,635
Consideration paid:
Cash	$	10,226
Common stock issued (1,396,596 shares)		28,351
Total consideration paid	$	38,577
Goodwill resulting from acquisition	$	13,942

FCB investments were written down an additional $4,559,000 to fair value on the date of acquisition based on market prices obtained from an independent third party.

For acquisitions, the fair value analysis of the loan portfolios resulted in a valuation adjustment for each loan based on an amortization schedule of expected cash flow. Individual amortization schedules were used for each loan over a certain amount and those with specifically identified loss exposure. The remainder of the loans were grouped by type and risk rating into loan pools (based on loan type, fixed or variable interest rate, revolving or term payments and risk rating). Yield inputs for the amortization schedules included contractual interest rates, estimated prepayment speeds, liquidity adjustments and market yields. Credit inputs for the amortization schedules included probability of payment default, loss given default rates and individually identified loss exposure.             

The total accretable discount on FCB acquired loans was $5,416,000 as of April 30, 2022. During the three months ended June 30, 2023, accretion of the loan discount was $276,000. The remaining accretable loan discount was $3,548,000as of June 30, 2023. Three impaired loans were acquired through the FCB acquisition with insignificant balances as of April 30, 2022.

Fair value adjustments recorded for FCB related to premises and equipment were insignificant overall. The Company used independent third party appraisals in the determination of the fair value of acquired properties.

Core deposit intangible assets of $7,004,000 were recorded for FCB and are being amortized using an accelerated method over the estimated useful lives of the related deposits of 10 years from date of acquisition. For acquisitions, the core deposit intangible value is a function of the difference between the cost of the acquired core deposits and the alternative cost of funds. These cash flow streams were discounted to present value. The fair value of other deposit accounts acquired were valued by estimating future cash flows to be received or paid from individual or homogenous groups of assets and liabilities and then discounting those cash flows to a present value using rates of return that were available in financial markets for similar financial instruments on or near the acquisition date.

Direct costs related to the acquisition were expensed as incurred. The Company recorded no acquisition costs related to FCB during the six months ended June 30, 2023, and $2,296,000during the year ended December 31, 2022. Acquisition costs included professional fees and data processing expenses incurred related to the acquisition.

Operations of acquired entities have been included in the condensed consolidated financial statements since date of acquisition. The Company does not consider them as separate reporting segments and does not track the amount of revenues and net income attributable since acquisition. As such, it is impracticable to determine such amounts for the period from acquisition date through June 30, 2023.