XML 24 R11.htm IDEA: XBRL DOCUMENT

Note 3 - Mergers and Acquisitions -

12 Months Ended

Dec. 31, 2021

Business Combination Disclosure [Text Block]

Note 3 – Mergers and Acquisitions –

On May 1, 2020, the Company consummated the merger of Pedestal Bancshares, Inc. (“Pedestal”), headquartered in Houma, Louisiana, with and into the Company, pursuant to the terms of that certain Agreement and Plan of Reorganization (the “Reorganization Agreement”), dated as of January 22, 2020, by and between the Company and Pedestal (the “Merger”). Also on May 1, 2020, Pedestal’s wholly owned banking subsidiary, Pedestal Bank, was merged with and into b1BANK. Pursuant to the terms of the Reorganization Agreement, upon consummation of the Merger, the Company issued 7,614,506 shares of its common stock to the former shareholders of Pedestal. At April 30, 2020, Pedestal reported $1.4 billion in total assets, $935.8 million in loans and $1.2 billion in deposits.

The following table reflects the consideration paid for Pedestal’s net assets and the identifiable assets purchased and liabilities assumed at their estimated fair values as of May 1, 2020.

Cost and Allocation of Purchase Price for Pedestal Bancshares, Inc. (Pedestal):
(Dollars in thousands, except per share data)

Purchase Price:
Shares Issued to Pedestal Shareholders on May 1, 2020		7,614,506
Closing Stock Price on May 1, 2020	$	12.96
Total Purchase Price	$	98,684
Net Assets Acquired:
Cash and Cash Equivalents	$	106,000
Securities Available for Sale		264,517
Loans and Leases Receivable		893,295
Premises and Equipment, Net		35,960
Cash Value of Life Insurance		11,522
Core Deposit Intangible		4,211
Other Assets		19,809
Total Assets		1,335,314

Deposits		1,177,137
Borrowings		59,399
Other Liabilities		5,189
Total Liabilities		1,241,725
Net Assets Acquired		93,589
Goodwill Resulting from Merger	$	5,095

The Company has recorded approximately $515,000 and $9.6 million of acquisition-related costs within merger and conversion-related expenses and salaries and benefits for the years ended December 31, 2021 and 2020, respectively.

The following is a description of the methods used to determine the fair values of significant assets acquired and liabilities assumed presented above.

Cash and Cash Equivalents: The carrying amount of these assets was a reasonable estimate of fair value based on the short-term nature of these assets.

Securities Available for Sale: Fair values for securities were based on quoted market prices, where available. If quoted market prices were not available, fair value estimates were based on observable inputs including quoted market prices for similar instruments, quoted market prices that were not in an active market or other inputs that were observable in the market. In the absence of observable inputs, fair value was estimated based on pricing models/estimations.

Loans and Leases Receivable: Fair values for loans were based on a discounted cash flow methodology that considered factors including, but not limited to, loan type, classification status, remaining term, prepayment speed, and current discount rates. The discount rates used for loans were based on current market rates for new originations of comparable loans and included adjustments for any liquidity concerns. The discount rate did not include an explicit factor for credit losses, as that was included within the estimated cash flows.

Core Deposit Intangible (“CDI”): The fair value for core deposit intangible assets was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, net maintenance cost of the deposit base, including interest cost, and alternative cost of funds. The CDI is being amortized over 10 years based upon the period over which estimated economic benefits are estimated to be received.

Deposits: The fair values used for the demand and savings deposits, by definition, equal the amount payable on demand at the acquisition date. Fair values for time deposits were estimated using a discounted cash flow analysis, that applied interest rates currently being offered to the contractual interest rates on such time deposits.

Borrowings: Fair values for borrowings were based on market values and market rates provided by the FHLB.

The following unaudited supplemental pro forma information is presented to reflect estimated results assuming Pedestal was acquired as of January 1, 2020. These unaudited pro forma results are not necessarily indicative of the operating results that the Company would have achieved had the acquisition been completed as of January 1, 2020 and should not be considered representative of future operating results.

	For The Year Ended December 31,
	2021		2020
	(Dollars in thousands, except per share data)
Interest Income	$	170,438	$	170,619
Interest Expense		16,554		24,286
Net Interest Income		153,884		146,333
Provision for Loan Losses		8,047		11,435
Net Interest Income after Provision for Loan Losses		145,837		134,898
Noninterest Income		35,782		26,095
Noninterest Expense		117,061		105,254
Income Before Income Taxes		64,558		55,739
Income Tax Expense		12,422		10,757
Net Income	$	52,136	$	44,982

Earnings Per Common Share
Basic	$	2.54	$	2.15
Diluted	$	2.53	$	2.14

This pro forma information combines the historical consolidated results of operations of the Company and Pedestal for the periods presented and gives effect to the following adjustments:

Fair value adjustments: Pro forma adjustment of $3.1 million for the year ended December 31, 2020 to record estimated amortization of premiums and accretion of discounts on acquired loans, borrowings, and deposits.

Pedestal’s provision for loan losses: Pro forma adjustment of $700,000 for the year ended December 31, 2020 to eliminate Pedestal’s provision for loan losses. The additional provision for loan loss on new loans was deemed immaterial and not adjusted for in the pro forma information.

Noninterest Expense: Pro forma adjustments include adjustments for the amortization of intangible assets acquired from Pedestal. Nonrecurring acquisition-related expenses of $9.6 million were removed for the year ended December 31, 2020.

Provision for Income Taxes: Pro forma adjustments for the year ended December 31, 2020 included a tax expense adjustment of 21%, as Pedestal was an S-Corp prior to its acquisition by the Company.

On April 1, 2021, the Company consummated the acquisition, through b1BANK, of SSW, headquartered in Ridgeland, Mississippi, pursuant to the terms of the definitive agreement dated as of March 22, 2021. Pursuant to the terms of the agreement, upon consummation of the acquisition, the Company paid $7.3 million in cash and issued $3.9 million in subordinated debt, which is further described in Note 11, to the former owners of SSW. At March 31, 2021, SSW reported $3.6 million in total assets and $2.3 million in total liabilities. As part of the acquisition, the Company recorded $6.5 million in goodwill and $4.3 million in customer intangibles to be amortized over a 10 year period. The fair values are provisional estimates and may be adjusted for a period of up to one year from the date of acquisition if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date.