Acquisitions

9 Months Ended

Sep. 30, 2019

Huntington Wisconsin Branch Acquisition

On February 15, 2019, the Corporation received regulatory approval for the acquisition of the Wisconsin branches of Huntington. This all cash transaction closed on June 14, 2019. The conversion of the branches happened simultaneously with the close of the transaction and the acquisition expanded the Bank's presence into 13 new Wisconsin communities. As a result of the acquisition and other consolidations, a net of 14 branch locations were added.

The Huntington branch acquisition constituted a business combination. The acquisition has been accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair value on the acquisition date. The determination of estimated fair values required management to make certain estimates that are subjective in nature and may require adjustments upon the availability of new information regarding facts and circumstances which existed at the date of acquisition (i.e., appraisals) for up to a year following the acquisition. The Corporation continues to review information relating to events or circumstances existing at the acquisition date. Management anticipates that this review could result in adjustments to the acquisition date valuation amounts presented herein but does not anticipate that these adjustments will be material.

The Corporation recorded approximately $7 million in goodwill related to the Huntington branch acquisition during the second quarter of 2019 and approximately $210,000 during the third quarter of 2019. Upon review of information relating to events and circumstances existing at the acquisition date, and in accordance with applicable accounting guidance, the Corporation remeasured select previously reported fair value amounts. The adjustment to goodwill was driven by an update that decreased the fair value of furniture acquired. Goodwill created by the acquisition is tax deductible. See Note 8 for additional information on goodwill, as well as the carrying amount and amortization of core deposit intangible assets related to the Huntington branch acquisition.

The following table presents the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date related to Huntington branch acquisition:



($ in Thousands)	Purchase Accounting Adjustments			June 14, 2019
Assets
Cash and cash equivalents	$	—		$	551,250
Loans	(1,552		)	116,346
Premises and equipment, net	4,800			22,430
Goodwill				7,286
Core deposit intangibles (included in other intangible assets, net on the face of the consolidated balance sheets)	22,630			22,630
OREO (included in other assets on the face of the consolidated balance sheets)	(2,561		)	5,263
Other assets	—			559
Total assets				$	725,764
Liabilities
Deposits	$	156		$	725,173
Other liabilities	70			590
Total liabilities				$	725,764

The following is a description of the methods used to determine the fair value of significant assets and liabilities presented on the balance sheet above.

Loans: Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, amortization status and current discount rates. Loans were grouped together according to similar characteristics when applying various valuation techniques.

Core deposit intangible: This intangible asset represents the value of the relationships with deposit customers. The fair value 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, alternative cost of funds, and the interest costs associated with customer deposits. The CDI will be amortized on a straight-line basis over 10 years.

Other Acquisitions

On July 25, 2019, the Corporation entered into an agreement to acquire Illinois-based First Staunton for cash consideration of approximately $76 million. Upon completion of the transaction, the Bank expects to acquire approximately $350 million in loans, approximately $440 million in deposits, and 9 branches. Regulatory approval for the transaction was received from the OCC on October 10, 2019. The transaction is subject to customary closing conditions, and is expected to close in first quarter of 2020.