Business Combinations

12 Months Ended

Dec. 31, 2023

Business Combinations

Business Combinations

NOTE 3 Business Combinations

On July 1, 2022, the Company acquired MPB BHC, Inc., the bank holding company for Metro Phoenix Bank located in Phoenix, Arizona, for a total purchase price of $64.0 million in a stock-for-stock transaction. The primary reasons for the acquisition were to expand the Company’s operations in the Phoenix MSA and grow the size of the Company’s business. As part of the transaction, $7.6 million was allocated to a customer deposit intangible and $15.1 million to goodwill, which is not deductible for income tax purposes. Goodwill resulting from the acquisition was allocated to the Company’s Banking segment. The purchase consisted of $270.4 million in loans and $353.7 million in deposits. The purchased assets and assumed liabilities were recorded at their respective acquisition date estimate fair values indicated in the following table:

	As recorded by		Preliminary Fair Value		As recorded by
(dollars in thousands)	Metro Phoenix Bank		Adjustments		the Company
Assets
Cash and cash equivalents	$	101,819	$	(123)	$	101,696
Fed funds sold		18,936		—		18,936
Core deposit intangible		—		7,592		7,592
Loans		273,843		(3,440)		270,403
Accrued interest receivable		1,091		—		1,091
Other assets		3,342		188		3,530
Total assets		399,031		4,217		403,248
Liabilities
Deposits		354,529		(844)		353,685
Other liabilities		673		—		673
Total liabilities		355,202		(844)		354,358
Excess assets over liabilities	$	43,829	$	5,061		48,890
Stock issued for MPB						64,019
Total goodwill recorded					$	15,129

The following table presents pro forma information for the years ended December 31, 2022 and 2021, as if the acquisition had occurred on January 1, 2022. This table has been prepared for comparative purposes only and is not indicative of the actual results that would have been attained had the acquisition occurred as of the beginning of the periods presented, nor is it indicative of future results. Furthermore, the unaudited pro forma information does not reflect management’s estimate of any revenue-enhancing opportunities nor anticipated cost savings as a result of the integration and consolidation of the acquisition. Pro forma results for the periods presented are:

	Pro Formas (unaudited)
	for the years ended December 31,
(dollars in thousands)	2022		2021
Net interest income after provision for credit losses	$	107,172	$	104,087
Noninterest income		112,755		151,499
Noninterest expense		166,476		178,337
Net income (after tax)		40,784		58,585
Basic earnings per common share	$	2.17	$	3.36
Diluted earnings per common share	$	2.14	$	3.30

The Company recorded acquisition related costs of $2.5 million for the year ended December 31, 2022. These costs were included in professional fees and assessments expenses in the Company’s consolidated statements of income.

As part of the acquisition of Metro Phoenix Bank, the Company acquired loans that displayed evidence of deterioration of credit quality since origination and the Company believed it to be probable that all contractually required payments would not be collected. The carrying amounts and contractually required payments of these loans, which are included in the loan balances in Note 6 (Loans and Allowance for Credit Losses) of the consolidated financial statements, as of December 31, 2022, were as follows:

	December 31,
(dollars in thousands)	2022
Real estate construction	$	175
Outstanding balance		175
Carrying amount		151
Allowance for credit losses on loans		—
Carrying amount, net of allowance for loan losses	$	151

Accretable yield, or income expected to be collected, is shown in the table below:

	For the year ended
	December 31,
(dollars in thousands)	2022
Beginning balance	$	177
New loans purchased		—
Accretion of income		—
Ending balance	$	177