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BUSINESS COMBINATIONS | 12 Months Ended
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Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract] |
BUSINESS COMBINATIONS | BUSINESS COMBINATIONS On October 18, 2021, we completed the PMB Acquisition, pursuant to which PMB merged with and into the Company, with the Company as the surviving corporation. PMB was the bank holding company of the wholly-owned Pacific Mercantile Bank, a California state chartered commercial bank headquartered in Costa Mesa, California, and operated seven banking offices, including three full service branches, located throughout Southern California. PMB's size, business focus, and deposit profile aligned with our operations and is expected to accelerate our growth and operating scale in key markets. Under the terms and conditions of the merger, each outstanding share of PMB common stock, aggregating 23,713,437 shares, was converted into the right to receive 0.5 (the “Exchange Ratio”) of a share of the Company's common stock. In addition, at the effective time of the merger, the Company paid $3.2 million in cash for all outstanding PMB share-based awards, including outstanding shares subject to unvested restricted stock awards. In the merger, the Company issued 11,856,713 shares of common stock with an estimated fair value of $222.2 million based upon the $18.74 closing price of the Company's common stock on October 18, 2021. Together with the $3.2 million of cash consideration, this result in an aggregate purchase price of $225.4 million. Goodwill in the amount of $57.2 million was recognized and represents the synergies and economies of scale expected from combining the operations of PMB with ours. Goodwill is not expected to be deductible for tax purposes. The following table represents a preliminary allocation of merger consideration to the assets and liabilities of PMB as of October 18, 2021 and the preliminary fair value amounts at acquisition date:
($ in thousands) |  |  |  |  |  | Fair Value(1)
Assets acquired: |  |  |  |  |  |
Cash and due from banks |  |  |  |  |  | $ | 3,196 |
Interest-earning deposits in financial institutions |  |  |  |  |  | 475,554 |
Loans receivable |  |  |  |  |  | 962,856 |
Allowance for credit losses |  |  |  |  |  | (13,622) |
Premises and equipment, net |  |  |  |  |  | 314 |
Operating lease right-of-use assets |  |  |  |  |  | 9,212 |
Other intangible assets, net |  |  |  |  |  | 5,054 |
Income tax receivable |  |  |  |  |  | 2,035 |
Deferred income tax, net |  |  |  |  |  | 10,660 |
Bank owned life insurance investment |  |  |  |  |  | 9,043 |
Other assets |  |  |  |  |  | 20,302 |
Total assets acquired |  |  |  |  |  | $ | 1,484,604 |
Liabilities assumed: |  |  |  |  |  |
Deposits |  |  |  |  |  | $ | 1,284,714 |
Long term debt, net |  |  |  |  |  | 17,527 |
Lease liability |  |  |  |  |  | 9,441 |
Accrued expenses and other liabilities |  |  |  |  |  | 4,695 |
Total liabilities assumed |  |  |  |  |  | 1,316,377 |
Excess of assets acquired over liabilities assumed |  |  |  |  |  | 168,227 |
Consideration paid |  |  |  |  |  | 225,384 |
Goodwill |  |  |  |  |  | $ | 57,157 |
(1)Estimated fair values are preliminary and subject to adjustment for a period of up to one year after the acquisition date as additional information related to fair value may become available. The preliminary fair value of the acquired identifiable intangible assets, representing core deposit intangibles, is $5.1 million. Core deposit intangible assets were valued using a net cost savings method and 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 on an accelerated basis over its estimated useful life of 10 years. During the year ended December 31, 2021, we incurred $15.9 million of costs to effect and integrate the Merger, which were expensed in accordance with ASC 805 and are included in merger-related costs in our consolidated statements of operations. These costs included investment banking fees, personnel costs, professional fees, facilities-related charges, systems conversion costs and other costs. The following table presents the total amounts of revenue and earnings of PMB since the acquisition included in our results of operations:
|  | Year Ended December 31,
($ in thousands) |  | 2021 |  |
Net interest income |  | $ | 7,430 |  |  |
Noninterest income |  | 528 |  |  |
Total revenue |  | $ | 7,958 |  |  |
Net loss |  | $ | (18,649) |  |  |
The following table presents unaudited pro forma total revenue and earnings as if the Acquisition occurred on January 1, 2020. This information is presented for informational purposes only. This information includes various estimates and may not necessarily be indicative of the financial condition or results of operations that would have occurred if the Acquisition had been completed at the beginning of the periods indicated or which may be obtained in the future. The pro forma information, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the opportunities to earn additional revenue and does not include assumptions as to cost savings and, accordingly, does not attempt to predict or suggest future results. There were no material, nonrecurring adjustments to the unaudited pro forma total revenue and net income presented below.
|  | Year Ended December 31,
($ in thousands) |  | 2021 |  | 2020
Supplemental unaudited pro forma financial information: |  |  |  |
Net interest income |  | $ | 287,755 |  |  | $ | 279,617 |
Noninterest income |  | 24,468 |  |  | 24,855 |
Total revenue |  | 312,223 |  |  | 304,472 |
Net income |  | $ | 85,517 |  |  | $ | 16,586 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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