NOTE 2, Acquisitions

On April 1, 2018, the Company acquired Citizens. Under the terms of the merger agreement, Citizens stockholders received 0.1041 shares of the Company's common stock and $2.19 in cash for each share of Citizens common stock, resulting in the Company issuing 149,625 shares of the Company's common stock at a fair value of $3.9 million, for a total purchase price of $7.1 million.

The transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair values on the acquisition date. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition, in accordance with ASC 350, Intangibles-Goodwill and Other. The following table provides a preliminary assessment of the consideration transferred, assets acquired, and liabilities assumed as of the date of the acquisition (dollars in thousands):

	As Recorded by Citizens		Fair Value Adjustments			As Recorded by the Company
Consideration paid:
Cash						$	3,164
Company common stock							3,947
Total purchase price						$	7,111

Identifiable assets acquired:
Cash and cash equivalents	$	2,304	$	-		$	2,304
Securities available for sale		1,959		-			1,959
Restricted securities, at cost		278		-			278
Loans, net		42,824		(34	)		42,790
Premises and equipment		1,070		450			1,520
Other real estate owned		237		(61	)		176
Core deposit intangibles		-		440			440
Other assets		1,055		(116	)		939
Total assets	$	49,727	$	679		$	50,406

Identifiable liabilities assumed:
Deposits	$	43,754	$	246		$	44,000
Other liabilities		324		-			324
Total liabilities	$	44,078	$	246		$	44,324

Net assets acquired						$	6,082
Preliminary goodwill						$	1,029

Goodwill and intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exists that indicate that a goodwill impairment test should be performed. Purchased intangible assets subject to amortization, such as the core deposit intangible asset, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.

The acquired loans were recorded at fair value at the acquisition date without carryover of Citizens' allowance for loan losses. The fair value of the loans was determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected on the loans and then applying a market-based discount rate to those cash flows. In this regard, the acquired loans were segregated into pools based on call code with other key inputs identified such as payment structure, rate type, remaining maturity, and credit risk characteristics including risk rating groups (pass rated loans and adversely classified loans), and past due status.

The acquired loans were divided into loans with evidence of credit quality deterioration which are accounted for under ASC 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality, (purchased credit-impaired) and loans that do not meet these criteria, which are accounted for under ASC 310-20, Receivables - Nonrefundable Fees and Other Costs, (purchased performing). The fair values of the purchased performing loans were $42.1 million and the fair value of the purchased credit-impaired loans were $710 thousand.

The following table presents the purchased credit-impaired loans receivable at the acquisition date (dollars in thousands):

Contractually required principal and interest payments	$	1,031
Nonaccretable difference		(211	)
Cash flows expected to be collected		820
Accretable yield		(110	)
Fair value of purchased credit-impaired loans	$	710

The amortization and accretion of premiums and discounts associated with the Company's acquisition accounting adjustments related to the Citizens acquisition had the following impact on the Consolidated Statements of Operations during the year ended December 31, 2018 (dollars in thousands). The acquisition occurred on April 1, 2018, therefore the comparative 2017 period had no impact.

Purchased performing loans	$	181
Purchased credit-impaird loans		77
Certificate of deposit valuation		116
Amortization of core deposit intangible		(33	)
Net impact to income before income taxes	$	341