Note 13: Acquisitions

3 Months Ended

Sep. 30, 2014

Notes

Note 13: Acquisitions

Note 13: Acquisitions

On August 5, 2014, the Company completed its acquisition of Peoples Service Company and its subsidiary, the Peoples Bank of the Ozarks, Nixa, Missouri (herein collectively, “Peoples Bank”).  Peoples Bank will be merged into the Company’s existing bank subsidiary, Southern Bank, late in the fourth quarter of calendar 2014.  The conversion of data systems for the Peoples Bank operations is expected to take place at that time. The Company acquired Peoples Bank primarily for the purpose of conducting commercial banking activities in markets where it believes the Company’s business model will perform well, and for the long-term value of its core deposit franchise. Through September 30, 2014, the Company incurred $277,000 in third-party acquisition-related costs. Expenses totaling $127,000 are included in noninterest expense in the Company’s consolidated statement of income for the three months ended September 30, 2014, compared to $0 at September 30, 2013.   Notes payable of $2.9 million were contractually required to be repaid on the date of acquisition.  The goodwill of $3.0 million arising from the acquisition consists largely of synergies and economies of scale expected from combining the operations of the Company and Peoples Bank. Total goodwill was assigned to the acquisition of the bank holding company.

The following table summarizes the consideration paid for Peoples Service Company and its subsidiary, Peoples Bank of the Ozarks and the amounts of assets acquired and liabilities assumed recognized at the acquisition date:

Fair Value of Consideration Transferred
(dollars in thousands)
Cash	$12,094
Common stock, at fair value	12,331
Total consideration	$24,425
Recognized amounts of identifiable assets acquired
and liabilities assumed
Cash and Cash equivalents	$18,236
Interest bearing time deposits	9,950
Investment Securities	31,257
Loans	190,445
Premises and equipment	11,785
Identifiable intangible assets	3,000
Miscellaneous other assets	4,067
Deposits	(221,887)
Advances from FHLB	(16,038)
Subordinated debt	(4,844)
Miscellaneous other liabilities	(1,558)
Notes Payable	(2,921)
Total identifiable net assets	21,492
Goodwill	$2,933

The following unaudited pro forma condensed financial information presents the results of operations of the company, including the effects of the purchase accounting adjustments and acquisition expenses, had the acquisition taken place at the beginning of each period:

	Three months ended
	September 30,
	2014	2013
Interest income	$14,394	$12,285
Interest expense	2,190	2,180
Net interest income	12,205	10,105
Provision for loan losses	827	500
Noninterest income	1,978	1,655
Noninterest expense	9,388	6,824
Income before income taxes	3,968	4,437
Income taxes	1,301	1,339
Net income	2,667	3,097
Dividends on preferred shares	50	50
Net income available to common stockholders	$2,617	$3,047
Earnings per share
Basic	$0.71	$0.84
Diluted	$0.69	$0.82
Basic weighted average shares outstanding	3,688,526	3,640,936
Diluted weighted average shares outstanding	3,785,561	3,734,997

The unaudited pro forma condensed combined financial statements do not reflect any anticipated cost savings and revenue enhancements. Accordingly, the pro forma results of operations of the company as of and after the business combination may not be indicative of the results that actually would have occurred if the combination had been in effect during the periods presented or of the results that may be attained in the future.