Acquisition

On April 3, 2017, the Company completed its acquisition of DCB Financial Corporation ("DCB") and its banking subsidiary, The Delaware County Bank and Trust Company, for consideration of $21.2 million in cash and 8.4 million shares of the Company's common stock. Through the acquisition, the Company obtained nine full-service banking offices and four limited service locations which are operating under the First Commonwealth name. This acquisition expands the Company's presence in the central Ohio market and added $383.1 million in loans and $484.4 million in deposits to the Company's balance sheet.

The table below summarizes the net assets acquired (at fair value) and consideration transferred in connection with the DCB Financial acquisition (dollars in thousands):



Consideration Paid
Cash paid to shareholders	$	21,232
Shares issued to shareholders (8,356,882 shares)	$	110,812
Total consideration paid			$	132,044

Fair Value of Assets Acquired
Cash and cash equivalents	24,420
Investment Securities	88,986
FHLB Stock	3,250
Loans	383,083
Premises and other equipment	12,113
Core deposit intangible	5,998
Other real estate	68
Bank owned life insurance	20,522
Other assets	16,450
Total assets acquired	554,890

Fair Value of Liabilities Assumed
Deposits	484,366
Capital lease obligation	7,851
Other Liabilities	1,182
Total liabilities assumed	493,399

Total Fair Value of Identifiable Net Assets			61,491

Goodwill			$	70,553

The goodwill of $70.6 million arising from the acquisition represents the value of synergies and economies of scale expected from combining the operations of the Company with DCB Financial Corporation.

The Company determined that this acquisition constitutes a business combination as defined in FASB ASC Topic 805, “Business Combinations.” Accordingly, as of the date of the acquisition, the Company recorded the assets acquired and liabilities assumed at fair value. The Company determined fair values in accordance with the guidance provided in FASB ASC Topic 820, “Fair Value Measurements and Disclosures.” Acquired loans were recorded at fair value with no carryover of the related allowance for loan losses. Fair value is established by discounting the expected future cash flows with a market discount rate for like maturities and risk instruments. At the date of acquisition, none of the loans were accounted for under the guidance of ASC Topic 310-30, “Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality.” We acquired $390.8 million in total loans and recognized a net combined yield and credit market adjustment of $7.7 million.

The fair value of the 8,356,882 common shares issued was determined based on the market price of the Company's common shares on the acquisition date.

Costs related to the acquisition totaled $10.2 million. These amounts were expensed as incurred and are recorded as a merger and acquisition related expense in the Consolidated Statements of Income.

As a result of the full integration of the operations of DCB, it is not practicable to determine revenue or net income included in the Company's operating results relating to DCB since the date of acquisition as DCB’s results cannot be separately identified.

On December 2, 2016, the Company completed the acquisition of 13 branches from FirstMerit Bank, NA receiving $476.6 million in cash. This acquisition further expands the Company's market into northern Ohio and included the purchase of $105.6 million in loans and $619.7 million in deposits.

The table below summarizes the net assets acquired (at fair value) and consideration transferred in connection with the FirstMerit Bank, NA acquisition (dollars in thousands):



Consideration Received
Cash received	$	(476,555	)
Total consideration received				$	(476,555	)

Fair Value of Assets Acquired
Cash and cash equivalents	2,914
Loans	102,097
Premises and other equipment	6,072
Core deposit intangible	11,330
Other assets	353
Total assets acquired	122,766

Fair Value of Liabilities Assumed
Deposits	619,729
Other Liabilities	70
Total liabilities assumed	619,799

Total Fair Value of Identifiable Net Assets				(497,033		)

Goodwill				$	20,478

The goodwill of $20.5 million arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company with the branches acquired from FirstMerit Bank, NA. The goodwill for this transaction is expected to be deducted over a 15 year period for income tax purposes.

We acquired $105.6 million in total loans and recognized a net combined yield and credit market adjustment of $3.5 million.

Costs related to the acquisition totaled $3.2 million. These amounts were expensed as incurred and are recorded as a merger and acquisition related expense in the Consolidated Statements of Income.

The Company determined this acquisition constitutes a business combination as defined in FASB ASC Topic 805, “Business Combinations.” Accordingly, as of the date of the acquisition, assets acquired and liabilities assumed were recorded at fair value. Fair values were determined in accordance with the guidance provided in FASB ASC Topic 820, “Fair Value Measurements and Disclosures.” Acquired loans were recorded at fair value with no carryover of the related allowance for loan losses. Fair value is established by discounting the expected future cash flows with a market discount rate for like maturities and risk instruments. At the date of acquisition, none of the loans were accounted for under the guidance of ASC Topic 310-30, “Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality.”