Mergers and Acquisitions

3 Months Ended

Mar. 31, 2024

On January 31, 2024, the Company acquired 100% percent of the outstanding common stock of Community Financial Group, Inc. (“CFGW”) and its wholly-owned subsidiary, Wheatland Bank (“Wheatland”), a community bank based in Spokane, Washington. Wheatland provides banking services to individuals and businesses in Washington with locations in Chelan, Wenatchee, Ellensburg, Yakima, Quincy, Moses Lake, Pasco, Odessa, Davenport, Ritzville, Spokane, and Spokane Valley. Wheatland merged into the Bank and became a new bank division headquartered in Spokane and the Bank’s existing Washington-based division, North Cascades Bank, combined with the new Wheatland division. The preliminary value of the Wheatland acquisition was $93,156,000 and as part of the transaction, the Company issued 2,389,684 shares of its common stock and paid $771,000 in cash in exchange for all of Wheatland’s outstanding shares of common stock. The fair value of the Company shares issued was determined on the basis of the closing market price of the Company’s common stock on the January 31, 2024 acquisition date. The excess of the preliminary fair value of consideration transferred over total identifiable net assets was recorded as goodwill. The goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Bank and Wheatland. None of the goodwill is deductible for income tax purposes as the acquisition was accounted for as a tax-free exchange.

The assets and liabilities of Wheatland were recorded on the Company’s consolidated statements of financial condition at their preliminary estimated fair values as of the acquisition date and the results of operations have been included in the Company’s consolidated statements of operations since that date. The following table discloses the preliminary fair value estimates of the consideration transferred, the total identifiable net assets acquired and the resulting goodwill arising from the Wheatland acquisition. The Company is continuing to obtain information to determine the fair values of assets acquired and liabilities assumed.


(Dollars in thousands)	Wheatland January 31, 2024
Fair value of consideration transferred
Fair value of Company shares issued	$	92,385
Cash consideration	771

Total fair value of consideration transferred	93,156
Recognized amounts of identifiable assets acquired and liabilities assumed
Identifiable assets acquired
Cash and cash equivalents	31,674
Debt securities	187,183
Loans receivable, net of ACL	452,737
Core deposit intangible 1	16,936
Accrued income and other assets	50,760
Total identifiable assets acquired	739,290
Liabilities assumed
Deposits	616,955
Borrowings	58,500
Accrued expenses and other liabilities	9,048
Total liabilities assumed	684,503
Total identifiable net assets	54,787
Goodwill recognized	$	38,369

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1 The core deposit intangible for the acquisition was determined to have an estimated life of 10 years.

The preliminary fair values of the Wheatland assets acquired include loans with preliminary fair values of $452,740,000. The gross principal and contractual interest due under the Wheatland contracts was $468,882,000. The Company evaluated the loans at the acquisition date and determined there were PCD loans of $1,655,000 with an ACL of $3,000.

The Company incurred $5,575,000 of expenses in connection with the Wheatland acquisition during the three months ended March 31, 2024. Mergers and acquisition expenses are included in other expense in the Company's consolidated statements of operations and consist of third-party costs and employee severance expenses.

Total income consisting of net interest income and non-interest income of the acquired operations of Wheatland was approximately $5,841,000 and net loss was approximately $7,650,000 from January 31, 2024 to March 31, 2024. The following unaudited pro forma summary presents consolidated information of the Company as if the Wheatland acquisition had occurred on January 1, 2023:


	Three Months ended
(Dollars in thousands)	March 31, 2024		March 31, 2023
Net interest income and non-interest income	$	198,925	220,927
Net income	30,602		62,358