Annual report pursuant to Section 13 and 15(d)

Business Combinations

v3.20.4
Business Combinations
12 Months Ended
Dec. 31, 2020
Business Combinations [Abstract]  
Business Combinations

NOTE 3. BUSINESS COMBINATIONS

              First Beeville Financial Corporation

On April 2, 2019, the Company completed its acquisition of First Beeville Financial Corporation and its subsidiary, The First National Bank of Beeville (together, “Beeville”). This transaction resulted in adding three additional branches and two loan production offices in the South Texas region. The Company issued 1,579,191 shares of its common stock as well as a net cash payment to Beeville shareholders of $32.4 million, for total consideration of $65.9 million, for all outstanding stock of Beeville and resulted in 100% ownership interest.    

The Company has recognized total goodwill of $25.8 million which is calculated as the excess of both the consideration exchanged and liabilities assumed compared to the fair market value of identifiable assets acquired. The fair value of the consideration exchanged related to the Company’s common stock was calculated based upon the closing market price of the Company’s common stock as of April 2, 2019. None of the goodwill recognized is expected to be deductible for income tax purposes.

The Company did not incur any expenses related to the Beeville acquisition for the year ended December 31, 2020.  The Company incurred $2.5 million expenses related to the acquisition for the year ended December 31, 2019, which are included in noninterest expense in the consolidated statements of income.

The Company did not identify any loans deemed purchased credit impaired at the acquisition date. Non-credit impaired loans had a fair value of $296.4 million at the acquisition date and contractual balance of $298.9 million. As of the acquisition date, the Company expects that an insignificant amount of the contractual balance of these loans will be uncollectible. The difference of $2.5 million will be recognized into interest income as an adjustment to yield over the life of the loans.

Estimated fair values of the assets acquired and liabilities assumed in the Beeville acquisition as of the closing date are as follows:

 

Assets of acquired bank (Dollars in thousands):

 

 

 

 

Cash and cash equivalents

 

$

60,491

 

Securities available for sale

 

 

57,206

 

Loans held for investment

 

 

296,397

 

Premises and equipment, net

 

 

5,184

 

Other real estate owned

 

 

1,359

 

Goodwill

 

 

25,848

 

Core deposit intangible

 

 

5,695

 

Other assets

 

 

12,618

 

Total assets acquired

 

$

464,798

 

Liabilities of acquired bank:

 

 

 

 

Deposits

 

$

398,427

 

Other liabilities

 

 

515

 

Total liabilities assumed

 

$

398,942

 

Common stock issued at $21.20 per share

 

$

33,479

 

Cash paid

 

$

32,377

 

Chandler Bancorp Inc.

On November 5, 2019, the Company completed its acquisition of Chandler Bancorp Inc. and its subsidiary, Citizens State Bank (together, “Citizens”). This transaction resulted in adding seven additional branches in the Northeast Texas region. The Company issued 2,100,000 shares of its common stock as well as a net cash payment to Citizens shareholders of $17.9 million, for total consideration of $62.5 million for all outstanding stock of Citizens. 

The Company has recognized total goodwill of $22.1 million which is calculated as the excess of both the consideration exchanged and liabilities assumed compared to the fair market value of identifiable assets acquired. The fair value of the consideration exchanged related to the Company’s common stock was calculated based upon the closing market price of the Company’s common stock as of November 5, 2019. None of the goodwill recognized is expected to be deductible for income tax purposes.

 

The Company incurred expenses related to the Citizens acquisition of approximately $1.6 million for the year ended December 31, 2020, which are included in noninterest expense in the consolidated statements of income.  The Company did not incur any expenses related to the acquisition for the year ended December 31, 2019.

 

The Company reviewed the Citizens loan portfolio for potential impairment and identified loans with a contractual balance of $3.2 million that were deemed purchased credit impaired. Non-credit impaired loans had a preliminary fair value of $248.8 million at the acquisition date and contractual balance of $253.1 million. As of the acquisition date, the Company expects that an insignificant amount of the contractual balance of these loans will be uncollectible. The difference of $1.1 million will be recognized into interest income as an adjustment to yield over the life of the loans.

 

Estimated fair values of the assets acquired and liabilities assumed in the Citizens acquisition as of the closing date are as follows:

 

Assets of acquired bank (Dollars in thousands):

 

 

 

 

Cash and cash equivalents

 

$

84,240

 

Loans held for investment

 

 

252,037

 

Premises and equipment, net

 

 

10,849

 

Goodwill

 

 

22,124

 

Core deposit intangible

 

 

850

 

Other assets

 

 

3,247

 

Total assets acquired

 

$

373,347

 

Liabilities of acquired bank:

 

 

 

 

Deposits

 

$

271,742

 

FHLB Borrowings

 

$

38,242

 

Other liabilities

 

 

857

 

Total liabilities assumed

 

$

310,841

 

Common stock issued at $21.20 per share

 

$

44,604

 

Cash paid

 

$

17,902

 

 

As of September 30, 2020, management completed evaluating the fair values of all assets and liabilities assumed in the Citizens acquisition.  Measurement period adjustments recoded during the year ended December 31, 2020 include a $1.7 million adjustment to the loan discount, $262 thousand adjustment to premises and equipment, $296 thousand adjustment to other assets, and $499 thousand adjustment to other liabilities.  

 

Revenues and earnings of Citizens since the acquisition date have not been disclosed as these branches were merged into the Company during the third quarter 2020.

 

Simmons Branch Acquisition

 

On February 28, 2020, the Company completed its acquisition of certain assets and assumption of certain liabilities associated with five branch offices of Simmons Bank (the “Simmons branch acquisition”).  The offices are located in Austin, San Antonio and Tilden, Texas. The Company paid total cash for the purchase of $131.6 million. The Simmons branch acquisition was accounted for as a business combination in accordance with ASC 805 “Business Combinations”.

The Company has recognized total goodwill of $11.5 million which is calculated as the excess of both the consideration exchanged and liabilities assumed compared to the fair market value of identifiable assets acquired. Goodwill recognized is expected to be deductible for income tax purposes and will be amortized over 15 years.

 

 The Company incurred expenses related to the Simmons branch acquisition of approximately $441 thousand for the year ended December 31, 2020, which are included in noninterest expense in the consolidated statements of income.  The Company did not incur any expenses related to the acquisition for the year ended December 31, 2019.

 

The Company did not identify any loans deemed purchased credit impaired at the acquisition date. Non-credit impaired loans had a preliminary fair value of $255.5 million at the acquisition date and contractual balance of $260.3 million. As of the acquisition date, the Company expects that an insignificant amount of the contractual balance of these loans will be uncollectible. The difference of $4.8 million will be recognized into interest income as an adjustment to yield over the life of the loans.

 

Estimated fair values of the assets acquired and the liabilities assumed in the Simmons branch acquisition as of the closing date are as follows:

 

Assets of acquired bank (Dollars in thousands):

 

 

 

 

Cash and cash equivalents

 

$

418

 

Loans held for investment

 

 

255,455

 

Premises and equipment

 

 

2,195

 

Goodwill

 

 

11,456

 

Core deposit intangible

 

 

10

 

Other assets

 

 

1,756

 

Total assets acquired

 

$

271,290

 

Liabilities of acquired bank:

 

 

 

 

Deposits

 

$

139,672

 

Other liabilities

 

 

47

 

Total liabilities assumed

 

$

139,719

 

Cash paid

 

$

131,571

 

As of June 30, 2020, management completed evaluating the fair values of all assets acquired and liabilities assumed in the Simmons branch acquisition

 

Revenues and earnings of Simmons branches since the acquisition date have not been disclosed as these branches were merged into the Company during 2020.