BUSINESS COMBINATIONS AND ASSET SALES TRANSACTIONS

The Company completed the following acquisitions between January 1, 2014 and September 30, 2015 and used the acquisition method of accounting. Accordingly, the operating results of the acquired entities have been included in the consolidated financial statements from their respective dates of acquisition.

The following table presents a summary of acquired assets and assumed liabilities along with a summary of the acquisition consideration as of the dates of acquisition:



	Acquisition and Date Acquired
	Banco Popular Branches		Renovation Ready
	November 8, 2014		January 31, 2014
	(In thousands)
Assets acquired:
Cash and due from banks	$	5,532	$	—
Loans and leases receivable	1,065,088		—
Premises, equipment, and capital leases	9,002		—
Goodwill	7,653		2,239
Other intangible assets	15,777		761
Other assets	2,301		—
Total assets acquired	$	1,105,353	$	3,000
Liabilities assumed:
Deposits	$	1,076,906	$	—
Other liabilities	506		1,000
Total liabilities assumed	1,077,412		1,000
Total consideration paid	$	27,941	$	2,000
Summary of consideration
Cash paid	$	27,941	$	1,000
Common stock issued	—		1,000
Earn-out liabilities	—		1,000

Banco Popular’s California Branch Network Acquisition

Effective November 8, 2014, the Bank acquired 20 full-service branches from Banco Popular North America (BPNA) in the Southern California banking market (the BPNA Branch Acquisition). The purchase price, net of deposit premiums received of $3.9 million, was $24.0 million. At the time of its completion, the transaction added $1.07 billion in loans and $1.08 billion in deposits to the Bank.

The following table summarizes the total consideration transferred as part of the BPNA Branch Acquisition as well as the fair value adjustments to the net assets acquired as of the acquisition date:



	November 8, 2014
	(In thousands)
Total Consideration				$	27,941
Net assets pre-acquisition				24,027
Fair value adjustments
Loans receivable	$	(19,526	)
Core deposit intangibles	15,777
Certificates of deposit purchase premium	(1,208		)
Premises and equipment	1,218
Total fair value adjustments				(3,739		)
Fair value of net assets acquired				20,288
Consideration paid in excess of fair value of net assets acquired (goodwill)				$	7,653

The Company recorded core deposit intangible assets of $15.8 million as part of the BPNA Branch Acquisition. Core deposit intangible assets were valued using a net cost savings method and was calculated as the present value of the estimated net cost savings attributable to the core deposit base over the expected remaining life of the deposits. The cost savings derived from the core deposit balance were calculated as the difference between the prevailing alternative cost of funds and the estimated cost of the core deposits. The core deposit intangible is being amortized over its estimated useful life of 10 years using the sum of years-digits amortization methodology.

The fair value of loans acquired from BPNA was estimated by utilizing a methodology wherein similar loans were aggregated into pools. Cash flows for each pool were determined by estimating future credit losses and the rate of prepayments. Projected monthly cash flows were then discounted to present value based on a market rate for similar loans. There was no carryover of BPNA's allowance for loan losses associated with the acquired loans as the loans were initially recorded at fair value.

The fair value of savings and transaction deposit accounts acquired from BPNA was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. Certificates of deposit were valued by projecting the expected cash flows based on the remaining contractual terms of the certificates of deposit. These cash flows were discounted based on market rates for certificates of deposit with corresponding remaining maturities.

Direct costs related to the BPNA Branch Acquisition were expensed as incurred and amounted to $4.3 million for the year ended December 31, 2014.

During the three months ended September 30, 2015, the Company finalized its purchase accounting for the BPNA Branch Acquisition and recorded the measurement period adjustments. The measurement period adjustments included recording Goodwill of $7.7 million, an additional discount of $7.4 million to Loans and Leases Receivable, and an additional premium of $292 thousand to Deposits. Recorded in the Consolidated Statements of Operations, the cumulative life to date measurement period adjustments related to the loan discount and deposit premium amortization were a $33 thousand decrease in Interest and Dividend Income on Loans and a $110 thousand decrease in Interest Expense on Deposits, respectively.

RenovationReady® Acquisition

Effective January 31, 2014, the Company acquired certain assets, including service contracts and intellectual property, of RenovationReady, a provider of specialized loan services to financial institutions and mortgage bankers that originate agency eligible residential renovation and construction loan products.

The RenovationReady acquisition was accounted for under GAAP guidance for business combinations. The purchased identifiable intangible assets and assumed liabilities were recorded at their estimated fair values as of January 31, 2014. The Company recorded $2.2 million of goodwill and $761 thousand of other intangible assets. The other intangible assets are related to a customer relationship intangible.

Pro Forma Information

While the BPNA Branch Acquisition is considered a purchase of a business for accounting purposes, pro forma income statement information is not presented because the BPNA Branch Acquisition does not represent the acquisition of a business which has continuity both before and after the acquisition. Pro formation income statement information for RenovationReady is not presented because it is immaterial.

Building Sale

During the nine months ended September 30, 2015, the Company sold a certain improved real property office complex located at 1588 South Coast Drive, Costa Mesa, California (the Property) at a sale price of approximately $52.3 million with a gain on sale of $9.9 million. The Property had a book value of $42.3 million at the sale date. Additionally, the Company incurred selling costs of $2.3 million for this transaction, which were reported in Professional Fees and All Other Expenses in the Consolidated Statements of Operations.

Branch Sale

On September 25, 2015, the Bank completed a branch sale transaction to Americas United Bank, a California banking corporation (AUB). In the transaction, the Bank sold two branches and certain related assets and deposit liabilities to AUB as well as certain loans. The transaction included a transfer of $46.9 million of deposits to AUB. Additionally, as part of the transaction, the leases related to both locations were assumed by AUB. The Company recognized a gain of $163 thousand from this transaction, which is included in Other Income in the Consolidated Statements of Operations.

The Bank also sold certain loans of $40.2 million to AUB as part of the transaction. The Company recognized a gain of $644 thousand from the sale of these loans, which is included in Net Gain on Sale of Loans in the Consolidated Statements of Operations.