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Acquisitions and Preliminary Purchase Price Allocation | 9 Months Ended
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Sep. 30, 2019
Business Combinations [Abstract] |
Acquisitions and Preliminary Purchase Price Allocation | Acquisitions and Preliminary Purchase Price Allocation On December 7, 2018, the Company acquired 100% of the outstanding common stock of Poage Bankshares, Inc., the parent company of Town Square Bank (collectively, "Poage"). The acquisition of Poage was structured as a stock transaction in which the Company issued approximately 1.1 million shares, valued at approximately $82.6 million, or $24.22 per share of Poage common stock. On December 7, 2018, the Company also acquired 100% of the outstanding common stock of Farmers Deposit Bancorp, Inc., the parent company of Farmers Deposit Bank (collectively, "Farmers Deposit"). The acquisition of Farmers Deposit was structured as a cash transaction valued at $24.9 million, or $1,174.14 per share of Farmers Deposit common stock. The Company accounted for both acquisitions using the acquisition method pursuant to "Topic 805 Business Combinations" of the FASB Accounting Standards Codification. 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 acquisition (in thousands):
| Farmers |  |
| Deposit | Poage | Total
Consideration | $ | 24,900 |  | $ | 83,936 |  | $ | 108,836 |
Identifiable assets: |  |  |
Cash and cash equivalents | 4,173 |  | 34,325 |  | 38,498 |
Investment securities | 46,235 |  | 72,321 |  | 118,556 |
Loans | 58,485 |  | 304,359 |  | 362,844 |
Bank owned life insurance | — |  | 7,439 |  | 7,439 |
Premises and equipment | 568 |  | 4,547 |  | 5,115 |
Deferred tax assets, net | 137 |  | 2,222 |  | 2,359 |
Other assets | 2,302 |  | 8,770 |  | 11,072 |
Total identifiable assets | 111,900 |  | 433,983 |  | 545,883 |
Identifiable liabilities: |  |  |
Deposits | 92,241 |  | 379,285 |  | 471,526 |
Short-term borrowings | 2,025 |  | — |  | 2,025 |
Long-term debt | — |  | 4,053 |  | 4,053 |
Other liabilities | 651 |  | 3,032 |  | 3,683 |
Total identifiable liabilities | 94,917 |  | 386,370 |  | 481,287 |
Net identifiable assets | 16,983 |  | 47,613 |  | 64,596 |
Goodwill | 4,583 |  | 28,269 |  | 32,852 |
Core deposit intangible | 3,334 |  | 8,054 |  | 11,388 |
| $ | 24,900 |  | $ | 83,936 |  | $ | 108,836 |
Acquired Loans The following table presents information regarding the purchased credit-impaired and noncredit-impaired loans acquired in conjunction with both acquisitions as of the date of acquisition (in thousands):
Acquired Credit-Impaired |
Contractually required principal and interest | $ | 25,315 |
Contractual cash flows not expected to be collected (non-accretable difference) | (13,593 | )
Expected cash flows | 11,722 |
Interest component of expected cash flows (accretable difference) | (2,375 | )
Carrying value of purchased credit-impaired loans acquired | $ | 9,347 |
Acquired Noncredit-Impaired |
Outstanding balance | $ | 354,343 |
Less: fair value adjustment | (846 | )
Carrying value of acquired noncredit-impaired loans | $ | 353,497 |
Acquired Deposits The fair values of non-time deposits approximated their carrying value at the acquisition date. For time deposits, the fair values were estimated based on discounted cash flows, using interest rates that are currently being offered compared to the contractual interest rates. Based on this analysis, management recorded a premium on time deposits acquired of $0.1 million and $1.7 million for the Farmers Deposit and Poage acquisitions, respectively, each of which is being amortized over 5 years. Core Deposit Intangible The Company believes that the customer relationships with the deposits acquired have an intangible value. In connection with the acquisitions, the Company recorded a core deposit intangible asset of $3.3 million and $8.1 million for Farmers Deposit and Poage, respectively. Each of the core deposit intangible assets represent the value that the acquiree had with their deposit customers. The fair value was estimated based on a discounted cash flow methodology that considered the type of deposit, deposit retention and the cost of the deposit base. The core deposit intangibles are being amortized over 10 years. Goodwill Under GAAP, management has up to twelve months following the date of the acquisition to finalize the fair value of acquired assets and liabilities. The measurement period ends as soon as the Company receives information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. Any subsequent adjustments to the fair value of the acquired assets and liabilities, intangible assets or other purchase accounting adjustments will result in adjustments to the goodwill recorded. Among the items that are still preliminary at September 30, 2019, is the finalization of the final tax return for Poage, which management anticipates completing during the fourth quarter of 2019. Given the form of the respective transactions, the goodwill preliminarily recorded in conjunction with the Farmers Deposit acquisition is expected to be deductible for tax purposes, while the goodwill preliminarily recorded in conjunction with the Poage acquisition is not expected to be deductible for tax purposes. The following table summarizes adjustments to goodwill subsequent to December 31, 2018 (in thousands):
| Goodwill
Balance at December 31, 2018 | $ | 109,567 |
Adjustment to goodwill acquired in conjunction with the acquisition of Poage | (365 | )
Adjustment to goodwill acquired in conjunction with the acquisition of Farmers Deposit | (154 | )
Balance at September 30, 2019 | $ | 109,048 |

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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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