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Business Combinations | 6 Months Ended
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Jun. 30, 2022
Business Combination and Asset Acquisition [Abstract] |
Business Combinations | Business Combinations On January 1, 2022, the Company acquired Citizens Union Bancorp of Shelbyville, Inc. (“CUB”) through the merger of CUB with and into the Company. This was immediately followed by the merger of Citizens Union Bank of Shelbyville, Inc., a wholly-owned subsidiary of CUB, into the Company’s subsidiary bank, German American Bank. CUB, headquartered in Shelbyville, Kentucky, operated 15 retail banking offices located in Shelby, Jefferson, Spencer, Bullitt, Oldham, Owen, Gallatin and Hardin counties in Kentucky through Citizens Union Bank of Shelbyville, Inc. As of the closing of the transaction, CUB had total assets of approximately $1,108,546 (unaudited), total loans of approximately $683,807 (unaudited), and total deposits of approximately $930,533 (unaudited). The Company accounted for the transaction under the acquisition method of accounting which means these financial assets and liabilities were recorded at fair value at the day of acquisition. The fair value of the common shares issued as part of the consideration paid for CUB was based upon the closing price of the Company's common shares on the acquisition date. The fair value estimates included in these financial statements are based on preliminary valuations; certain loan, deferred tax, and premises and equipment measurements have not been finalized and are subject to change. The Company does not expect material variances from these estimates and expects that final valuation estimates will be completed prior to December 31, 2022. In accordance with ASC 805, the Company has expensed approximately $12,132 of direct acquisition costs and recorded $58,548 of goodwill and $7,572 of intangible assets. The goodwill of $58,548 arising from the acquisition consisted largely of synergies and the cost savings resulting from the combining of the operations of the companies. This goodwill will be evaluated annually for impairment and is non-deductible for tax purposes. The intangible assets are related to core deposits and are being amortized over 8 years. The following table summarizes the fair value of the total consideration transferred as a part of the CUB acquisition as well as the fair value of identifiable assets acquired and liabilities assumed as of the effective date of the transaction.
Consideration |  |
Cash for Stock Options and Fractional Shares |  | $ | 942 |
Cash Consideration |  | 49,863 |
Equity Instruments |  | 111,914 |
Fair Value of Total Consideration Transferred |  | $ | 162,719 |
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed: |  |
Cash |  | $ | 20,244 |
Federal Funds Sold and Other Short-term Investments |  | 238,325 |
Interest-bearing Time Deposits with Banks |  | 250 |
Securities |  | 102,233 |
Loans |  | 678,167 |
Stock in FHLB and Other Restricted Stock, at Cost |  | 10,078 |
Premises, Furniture & Equipment |  | 20,064 |
Other Real Estate |  | 40 |
Intangible Assets |  | 7,572 |
Company Owned Life Insurance |  | 12,881 |
Accrued Interest Receivable and Other Assets |  | 17,908 |
Deposits - Non-interest Bearing |  | (237,472) |
Deposits - Interest Bearing |  | (696,750) |
FHLB Advances and Other Borrowings |  | (60,837) |
Accrued Interest Payable and Other Liabilities |  | (8,532) |
Total Identifiable Net Assets |  | 104,171 |
Goodwill |  | $ | 58,548 |
Under the terms of the merger agreement, each CUB common shareholder of record at the effective time of the merger became entitled to receive a cash payment of $13.44 and a 0.7739 share of common stock of the Company for each of their former shares of CUB common stock. As a result, in connection with the closing of the merger on January 1, 2022, the Company issued 2,870,975 shares of its common stock to the former shareholders of CUB and paid cash consideration in the aggregate amount of $50.8 million. This acquisition is consistent with the Company’s strategy to build a regional presence in Kentucky. The acquisition offers the Company the opportunity to increase profitability by introducing existing products and services to the acquired customer base as well as add new customers in the expanded region. The fair value of purchased financial assets with credit deterioration was $29,868 on the date of acquisition. The gross contractual amounts receivable relating to the purchased financial assets with credit deterioration was $34,453. The Company estimates, on the date of acquisition, that $3,117 of the contractual cash flows specific to the purchased financial assets with credit deterioration will not be collected. The following table presents unaudited pro forma information as if the acquisition had occurred on January 1, 2021 after giving effect to certain adjustments. The unaudited pro forma information for the three and six months ended June 30, 2022 and 2021 includes adjustments for interest income on loans and securities acquired, amortization of intangibles arising from the transaction, interest expense on deposits and borrowings acquired, and the related income tax effects. The unaudited pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed date.
|  | Unaudited Pro Forma |  | Unaudited Pro Forma
|  | Quarter Ended 6/30/2022 |  | Quarter Ended 6/30/2021
Net Interest Income |  | $ | 49,597 |  |  | $ | 48,453 |
Non-interest Income |  | 15,180 |  |  | 15,253 |
Total Revenue |  | 64,777 |  |  | 63,706 |
Provision for Loan Losses Expense |  | 300 |  |  | (5,454) |
Non-interest Expense |  | 35,274 |  |  | 33,677 |
Income Before Income Taxes |  | 29,203 |  |  | 35,483 |
Income Tax Expense |  | 5,029 |  |  | 7,300 |
Net Income |  | $ | 24,174 |  |  | $ | 28,183 |
Earnings Per Share and Diluted Earnings Per Share |  | $ | 0.82 |  |  | $ | 0.96 |
|  | Unaudited Pro Forma |  | Unaudited Pro Forma
|  | Six Months Ended 6/30/2022 |  | Six Months Ended 6/30/2021
Net Interest Income |  | $ | 96,505 |  |  | $ | 96,184 |
Non-interest Income |  | 31,368 |  |  | 31,779 |
Total Revenue |  | 127,873 |  |  | 127,963 |
Provision for Loan Losses Expense |  | (800) |  |  | (8,311) |
Non-interest Expense |  | 71,729 |  |  | 71,121 |
Income Before Income Taxes |  | 56,944 |  |  | 65,153 |
Income Tax Expense |  | 10,051 |  |  | 13,248 |
Net Income |  | $ | 46,893 |  |  | $ | 51,905 |
Earnings Per Share and Diluted Earnings Per Share |  | $ | 1.59 |  |  | $ | 1.77 |
For the three months ended June 30, 2022, the above pro forma financial information excludes non-recurring merger costs that totaled $427 on a pre-tax basis. For the six months ended June 30, 2022, the above pro forma financial information excludes non-recurring merger costs that totaled $12,132 on a pre-tax basis and Day 1 provision for credit losses under the CECL model of $6,300 on a pre-tax basis

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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 https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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