Acquisitions (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of Recognized Identifiable Assets Acquired and Liabilities Assumed



	As Recorded			Fair Value				As Recorded
As of May 30, 2017	by Cascade			Adjustments				by the Company

Assets acquired:
Cash and cash equivalents	$	246.8		$	—			$	246.8
Investment securities	476.7			4.9			(1)	481.6
Loans held for investment	2,111.0			(31.7		)	(2)	2,079.3
Mortgage loans held for sale	10.3			—				10.3
Allowance for loan losses	(24.0		)	24.0			(3)	—
Premises and equipment	46.6			0.1			(4)	46.7
Other real estate owned (“OREO”)	1.2			—				1.2
Core deposit intangible assets	—			48.0			(5)	48.0
Deferred tax assets, net	47.6			(20.9		)	(6)	26.7
Other assets	98.6			2.1			(7)	100.7
Total assets acquired	3,014.8			26.5				3,041.3

Liabilities assumed:
Deposits	2,669.9			(0.9		)	(8)	2,669.0
Accounts payable and accrued expense	62.2			1.9			(9)	64.1
Total liabilities assumed	2,732.1			1.0				2,733.1

Net assets acquired	$	282.7		$	25.5			$	308.2

Consideration paid:
Cash								$	155.0
Class A common stock								386.0
Total consideration paid								$	541.0

Goodwill								$	232.8



Explanation of fair value adjustments:
(1)	Write up of the book value of investments to their estimated fair values on the date of acquisition based upon quotes obtained from an independent third party pricing service.
(2)	Write down of the book value of loans to their estimated fair values. Shared National Credits (SNC) were recorded at quoted sales prices where available. The fair value of the remaining loans was estimated using cash flow projections based on the remaining maturity and repricing terms, adjusted for estimated future credit losses and prepayments and discounted to present value using a risk-adjusted market rate for similar loans. The fair value of collateral dependent loans acquired with deteriorated credit quality was estimated based on the Company’s analysis of the fair value of each loan’s underlying collateral, discounted using market-derived rates of return with consideration given to the period of time and costs associated with foreclosure and disposition of the collateral.
(3)	Adjustment to remove the Cascade allowance for loan losses at acquisition date, as the credit risk is included in the fair value adjustment for loans receivable described in (2) above.
(4)	Write up of the book value of premises and equipment to their estimated fair values on the date of acquisition based upon appraisals obtained from an independent third party appraiser or broker’s opinion of value.
(5)	Adjustment represents the value of the core deposit base assumed in the acquisition based upon valuation from an independent accounting and advisory firm.
(6)	Adjustment consists of the write-off of pre-existing deferred tax assets and purchase accounting adjustments as a result of the acquisition.
(7)	Adjustment consists of various other assets recorded as a result of the acquisition, including mortgage servicing rights, SBA servicing rights, and favorable leases offset by reductions to the fair value of other items.
(8)	Decrease in book value of time deposits to their estimated fair values based upon interest rates of similar time deposits with similar terms on the date of acquisition based upon valuation from an independent accounting and advisory firm.



(9)	Increase in fair value due to credit card incentive program, unfavorable leases, write-off of balance sheet reserve, and swap liability offset.

The following table summarizes the consideration paid, fair values of the Northwest assets acquired and liabilities assumed, and the resulting goodwill. Due to the recent closing of the transaction, all amounts reported are provisional pending the review of valuations obtained from third parties.



	As Recorded			Fair Value				As Recorded
As of August 16, 2018	by Northwest			Adjustments				by the Company

Assets acquired:
Cash and cash equivalents	$	31.2		$	—			$	31.2
Investment securities	3.1			—				3.1
Loans held for investment	727.9			(14.8		)	(1)	713.1
Allowance for loan loss	(8.0		)	8.0			(2)	—
Premises and equipment	14.5			(0.5		)	(3)	14.0
Other real estate owned (“OREO”)	0.3			0.3				0.6
Core deposit intangible assets	2.4			13.3			(4)	15.7
Other assets	29.3			(10.0		)	(5)	19.3
Total assets acquired	800.7			(3.7		)		797.0

Liabilities assumed:
Deposits	696.1			0.2			(6)	696.3
Accounts payable and accrued expense	8.1			(0.4		)	(7)	7.7
Long term debt	13.0			0.1				13.1
Trust preferred securities	5.2			(0.8		)	(8)	4.4
Deferred tax liability, net	(1.2		)	1.5			(9)	0.3
Total liabilities assumed	721.2			0.6				721.8

Net assets acquired	$	79.5		$	(4.3	)		$	75.2

Consideration paid:
Cash								$	3.0
Class A common stock								173.3
Total consideration paid								176.3

Goodwill								$	101.1



Explanation of fair value adjustments and the removal of previously recorded fair value marks recorded by Northwest. Note adjustments to the marks for deferred tax assets, other assets, and long term debt were made since the prior quarter, none of which were material. The adjustments had no impact on 2018 earnings and a net increase to goodwill of $0.3 million from the third quarter reported balances.
(1)	Write down of the book value of loans to their estimated fair values. The fair value of the loans was estimated using cash flow projections based on the remaining maturity and repricing terms, adjusted for estimated future credit losses and prepayments and discounted to present value using a risk-adjusted market rate for similar loans. The fair value of collateral dependent loans acquired with deteriorated credit quality was estimated based on the Company’s analysis of the fair value of each loan’s underlying collateral, discounted using market-derived rates of return with consideration given to the period of time and costs associated with foreclosure and disposition of the collateral.
(2)	Adjustment to remove the Northwest allowance for loan losses at acquisition date, as the credit risk is included in the fair value adjustment for loans receivable described in (1) above.
(3)	Write down of the book value of premises and equipment to their estimated fair values on the date of acquisition based upon broker’s opinion of value.
(4)	Adjustment represents the value of the core deposit base assumed in the acquisition based upon valuation from an independent accounting and advisory firm.
(5)	Adjustment consists of reductions to the fair value of other items, including the removal of Northwest previously recorded goodwill.
(6)	Increase in book value of time deposits to their estimated fair values based upon interest rates of similar time deposits with similar terms on the date of acquisition based upon valuation from an independent accounting and advisory firm.



(7)	Decrease due to the write-off of off balance sheet reserves.
(8)	Write down of the book value of debt to the estimated fair values on the date of acquisition based upon favorable interest rates in the market.
(9)	Adjustment consists of the write-off of pre-existing deferred tax assets and purchase accounting adjustments as a result of the acquisition.

Acquisition Related Expenses

These costs are incorporated in non-interest expense in the Company’s consolidated statements of income and are summarized below.



	Dec 31, 2018		Dec 31, 2017		Dec 31, 2016
Legal and professional fees	$	4.0	$	9.6	$	2.1
Employee expenses	1.1		5.1		0.2
Technology conversion and contract termination	6.6		10.2		0.2
Other	0.7		2.3		0.3
Total acquisition related expenses	$	12.4	$	27.2	$	2.8

Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period

Information regarding Northwest loans acquired deemed credit-impaired as of the August 16, 2018 acquisition date are as follows:



Contractually required principal and interest payments	$	27.5
Contractual cash flows not expected to be collected (“non-accretable discount”)	4.4
Cash flows expected to be collected	23.1
Interest component of cash flows expected to be collected (“accretable discount”)	3.2
Fair value of acquired credit-impaired loans	$	19.9

Information regarding Northwest acquired loans not deemed credit-impaired at the August 16, 2018 acquisition date are as follows:



Contractually required principal and interest payments	$	894.8
Contractual cash flows not expected to be collected	26.1
Fair value at acquisition	$	693.2

Information regarding Cascade loans acquired deemed credit-impaired as of the May 30, 2017 acquisition date is as follows:



Contractually required principal and interest payments	$	49.7
Contractual cash flows not expected to be collected (“non-accretable discount”)	24.7
Cash flows expected to be collected	25.0
Interest component of cash flows expected to be collected (“accretable discount”)	1.9
Fair value of acquired credit-impaired loans	$	23.1

Schedule of Acquired Loans not Deemed to Have Credit Impairment

Information regarding Cascade acquired loans not deemed credit-impaired at the May 30, 2017 acquisition date is as follows:



Contractually required principal and interest payments	$	2,098.1
Contractual cash flows not expected to be collected	23.3
Fair value at acquisition	$	2,066.5

Business Acquisition, Pro Forma Information

The following table presents unaudited pro forma consolidated revenues and net income as if the Cascade acquisition had occurred as of January 1, 2016.



Year ended December 31, (unaudited)	2018		2017
Interest income	$	473.4	$	420.8
Non-interest income	143.3		153.3
Total revenues	$	616.7	$	574.1

Net income	$	162.5	$	126.4

EPS - basic	$	2.81	$	2.03
EPS - diluted	2.79		2.01