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ACQUISITIONS | 12 Months Ended
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Dec. 31, 2016
Business Acquisition [Line Items] |
ACQUISITIONS | ACQUISITIONS New England Bancorp, Inc. On November 10, 2016, the Company completed its acquisition of New England Bancorp, Inc. ("NEB"), the parent of Bank of Cape Cod. The transaction qualified as a tax-free reorganization for federal income tax purposes and NEB shareholders received, for each share of NEB common stock, the right to receive 0.25 shares of the Company's stock (valued at $15.14 per share, based upon the highest trading value of the Company's stock on November 10, 2016 of $60.55). The deal consideration was $41.7 million in the aggregate, inclusive of cash paid in lieu of fractional shares and resulted in an increase to the Company's outstanding shares of 672,665 shares. The Company accounted for the NEB acquisition using the acquisition method pursuant to the Business Combinations Topic of the FASB ASC. Accordingly, the Company recorded merger and acquisition expenses of $5.0 million, during the year ended December 31, 2016, related to the NEB transaction. Additionally, the acquisition method requires the acquirer to recognize the assets acquired and the liabilities assumed at their fair values as of the acquisition date. The following table summarizes the estimated fair value of the assets acquired and liabilities assumed as of the date of the acquisition:
| Net Assets Acquired at Fair Value
| (Dollars in thousands)
Assets |
Cash | $ | 9,679 |
Loans | 225,731 |
Premises and equipment | 201 |
Goodwill | 20,443 |
Core deposit and other intangibles | 670 |
Other assets | 19,197 |
Total assets acquired | 275,921 |
Liabilities |
Deposits | 175,686 |
Borrowings | 51,150 |
Other liabilities | 7,344 |
Total liabilities assumed | 234,180 |
Purchase price | $ | 41,741 |
Fair value adjustments to assets acquired and liabilities assumed are generally amortized using either an effective yield or straight-line basis over periods consistent with the average life, useful life and/or contractual term of the related assets and liabilities. Fair values of the major categories of assets acquired and liabilities assumed were determined as follows: Cash and Cash Equivalents The fair values of cash and cash equivalents approximate the respective carrying amounts because the instruments are payable on demand or have short-term maturities. Loans The loans acquired were recorded at fair value without a carryover of the allowance for loan losses. Fair value of the loans is determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected, as adjusted for an estimate of future credit losses and prepayments, and then applying a market-based discount rate to those cash flows. The overall discount on the loans acquired in this transaction was due to estimated credit risk, as well as considerations for liquidity and market interest rates. In addition, the acquired loans were reviewed to determine if the the loan had evidence of deterioration of credit quality at the purchase date and also reviewed to determine if it was probable that all contractually required payments will not be collected. Based on the review of the loan portfolio at the time of the acquisition it was deemed that there was no evidence to show that any of the acquired loans were purchased credit impaired. Core Deposit Intangible The fair value of the core deposit intangible is derived by comparing the interest rate and servicing costs that the financial institution pays on the core deposit liability versus the current market rate for alternative sources of financing, while factoring in estimates over the remaining life and attrition rate of the deposit accounts. The intangible asset represents the stable and relatively low cost source of funds that the deposits and accompanying relationships provide the Company, when compared to alternative funding sources. Deposits The fair value of acquired savings and transaction deposit accounts was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. The fair value of time deposits were determined based on the present value of the contractual cash flows over the remaining period to maturity using a market interest rate. Borrowings The fair values of Federal Home Loan Bank ("FHLB") advances were derived based upon the present value of the principal and interest payments using a current market discount rate. Subsequent to the acquisition, the Company paid off all acquired borrowings at their recognized fair value amounts, resulting in no gain or loss on extinguishment. Selected Pro Forma Results The following summarizes the unaudited pro forma results of operations as if the Company acquired NEB on January 1, 2016 (2015 amounts represent combined results for the Company and NEB). The selected pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the financial results of the combined companies had the acquisition actually been completed at the beginning of the periods presented, nor does it indicate future results for any other interim or full-year period.
|  | Years Ended December 31
|  | 2016 |  | 2015
|  | (Dollars in thousands)
Net interest income after provision for loan losses |  | $ | 228,927 |  |  | $ | 221,252 |
Net income |  | $ | 80,411 |  |  | $ | 65,623 |
Excluded from the pro forma results of operations for the year ended December 31, 2016 are merger-related costs of $6.3 million recognized by both the Company and NEB in the aggregate and the corresponding tax benefit. These costs were primarily made up of contract terminations arising due to the change in control, the acceleration of certain compensation and benefit costs, and other merger expenses. Peoples Federal Bancshares, Inc. On February 20, 2015, the Company completed its acquisition of Peoples Federal Bancshares, Inc. ("Peoples"), the parent of Peoples Federal Saving Bank. The transaction qualified as a tax-free reorganization for federal income tax purposes and Peoples shareholders received, for each share of Peoples common stock, the right to receive either $21.00 in cash per share or 0.5523 shares of the Company's stock (valued at $23.26 per share, based upon the highest trading value of the Company's stock on February 20, 2015 of $42.11). The total deal consideration was $141.8 million and was comprised of 40% cash and 60% stock consideration. The cash consideration was $55.4 million in the aggregate, inclusive of cash paid in lieu of fractional shares. The total stock consideration was $86.4 million and resulted in an increase to the Company's outstanding shares of 2,052,137 shares. The Company accounted for the Peoples acquisition using the acquisition method pursuant to the Business Combinations Topic of the FASB ASC. Accordingly, the Company recorded merger and acquisition expenses of $10.5 million during the year ended December 31, 2015. Additionally, the acquisition method requires the acquirer to recognize the assets acquired and the liabilities assumed at their fair values as of the acquisition date. The following table summarizes the estimated fair value of the assets acquired and liabilities assumed as of the date of the Peoples acquisition:
| Net Assets Acquired at Fair Value
| (Dollars in thousands)
Assets |
Cash | $ | 41,957 |
Investments | 43,585 |
Loans | 463,927 |
Premises and equipment | 9,346 |
Goodwill | 30,662 |
Core deposit and other intangibles | 3,936 |
Other assets | 46,920 |
Total assets acquired | 640,333 |
Liabilities |
Deposits | 432,250 |
Borrowings | 51,209 |
Other liabilities | 15,054 |
Total liabilities assumed | 498,513 |
Purchase price | $ | 141,820 |
Fair value adjustments to assets acquired and liabilities assumed are generally amortized using either an effective yield or straight-line basis over periods consistent with the average life, useful life and/or contractual term of the related assets and liabilities. Fair values of the major categories of assets acquired and liabilities assumed were determined as follows: Cash and Cash Equivalents The fair values of cash and cash equivalents approximate the respective carrying amounts because the instruments are payable on demand or have short-term maturities. Investments The fair values of securities were based on quoted market prices for identical securities received from an independent, nationally-recognized, third-party pricing service. Prices provided by the independent pricing service were based on recent trading activity and other observable information including, but not limited to, market interest rate curves, referenced credit spreads and estimated prepayment rates where applicable. Loans The loans acquired were recorded at fair value without a carryover of the allowance for loan losses. Fair value of the loans is determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected, as adjusted for an estimate of future credit losses and prepayments, and then applying a market-based discount rate to those cash flows. The overall discount on the loans acquired in this transaction was due to estimated credit loss, as well as considerations for liquidity and market interest rates. A portion of the loans acquired showed evidence of deterioration of credit quality at the purchase date and it was deemed unlikely that the Company would be able to collect all contractually required payments. As such, these loans were deemed to be purchased credit impaired ("PCI") and the carrying value and prospective income recognition are predicated upon future cash flows expected to be collected. The following is a summary of these PCI loans associated with the acquisition as of the date acquired:
|  | As of February 20, 2015
|  | (Dollars in thousands)
Contractually required principal and interest at acquisition |  | $ | 4,358 |
Contractual cash flows not expected to be collected |  | (1,596 | )
Expected cash flows at acquisition |  | 2,762 |
Interest component of expected cash flows |  | (319 | )
Basis in PCI loans at acquisition - estimated fair value |  | $ | 2,443 |
Premises and Equipment The fair value of the premises, including land, buildings and improvements, was determined based upon appraisals by licensed real estate appraisers or pending agreed upon sale prices. The appraisals were based upon the best and highest use of the property with final values determined based upon an analysis of the cost, sales comparison and income capitalization approaches for each property appraised. Core Deposit Intangible The fair value of the core deposit intangible is derived by comparing the interest rate and servicing costs that the financial institution pays on the core deposit liability versus the current market rate for alternative sources of financing, while factoring in estimates over the remaining life and attrition rate of the deposit accounts. The intangible asset represents the stable and relatively low cost source of funds that the deposits and accompanying relationships provide the Company, when compared to alternative funding sources. Deposits The fair value of acquired savings and transaction deposit accounts was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. The fair value of time deposits were determined based on the present value of the contractual cash flows over the remaining period to maturity using a market interest rate. Borrowings The fair values of FHLB advances were derived based upon the present value of the principal and interest payments using a current market discount rate. Selected Pro Forma Results The following summarizes the unaudited pro forma results of operations as if the Company acquired Peoples on January 1, 2015 (2014 amounts represent combined results for the Company and Peoples). The selected pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the financial results of the combined companies had the acquisition actually been completed at the beginning of the periods presented, nor does it indicate future results for any other interim or full-year period.
|  | Years Ended December 31
|  | 2015 |  | 2014
|  | (Dollars in thousands)
Net interest income after provision for loan losses |  | $ | 216,086 |  |  | $ | 203,296 |
Net income |  | $ | 69,816 |  |  | $ | 60,896 |
Excluded from the pro forma results of operations for the year ended December 31, 2015 are merger-related costs of $16.7 million, pre-tax, recognized by both the Company and Peoples in the aggregate. These costs were primarily made up of contract terminations arising due to the change in control, the acceleration of certain compensation and benefit costs, and other merger expenses.

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