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Business Combinations | 9 Months Ended
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Sep. 30, 2016
Business Combinations [Abstract] |
Business Combinations | NOTE 2 – Business combinations Southern Transportation Insurance Agency On September 1, 2016, the Company acquired Southern Transportation Insurance Agency, Ltd. in an all-cash transaction for $2,150,000. The purpose of the acquisition was to expand the Company’s product offerings for clients in the transportation industry. The Company recognized an intangible asset of $1,580,000 and goodwill of $570,000, which were allocated to the Company’s Banking segment. Goodwill resulted from expected enhanced product offerings and will be amortized for tax purposes. ColoEast Bankshares, Inc. On August 1, 2016, the Company acquired 100% of the outstanding common stock of ColoEast Bankshares, Inc. (“ColoEast”) and its community banking subsidiary, Colorado East Bank & Trust, in an all-cash transaction for $70,000,000. The Company also assumed $10,500,000 of ColoEast preferred stock issued in conjunction with the U.S. Government’s Treasury Asset Relief Program (“TARP Preferred Stock”). Colorado East Bank & Trust, which was merged into TBK Bank upon closing, offers personal checking, savings, CD, money market, HSA, IRA, NOW and business accounts, as well as commercial and consumer loans from 18 branches and one loan production office located throughout Colorado and far western Kansas. The acquisition expands the Company’s market into Colorado and Kansas and further diversifies the Company’s loan, customer, and deposit base. A summary of the estimated fair values of assets acquired, liabilities assumed, consideration transferred, and the resulting goodwill is as follows:
(Dollars in thousands) |  |  |  |
Assets acquired: |  |  |  |
Cash and cash equivalents |  | $ | 57,671 |
Securities |  |  | 161,693 |
Loans |  |  | 460,775 |
FHLB and Federal Reserve Bank stock |  |  | 550 |
Premises and equipment |  |  | 23,940 |
Other real estate owned |  |  | 3,105 |
Intangible assets |  |  | 7,238 |
Bank-owned life insurance |  |  | 6,400 |
Deferred income taxes |  |  | 4,511 |
Other assets |  |  | 10,022 |
|  |  | 735,905 |
Liabilities assumed: |  |  |  |
Deposits |  |  | 652,952 |
Junior subordinated debentures |  |  | 7,728 |
Other liabilities |  |  | 6,784 |
|  |  | 667,464 |
Fair value of net assets acquired |  |  | 68,441 |
Cash paid |  |  | 70,000 |
TARP Preferred Stock assumed |  |  | 10,500 |
Consideration transferred |  |  | 80,500 |
Goodwill |  | $ | 12,059 |
The consideration transferred was comprised of a combination of cash and the assumption of ColoEast’s TARP Preferred Stock. The Company has recognized goodwill of $12,059,000, which was calculated as the excess of both the consideration exchanged and liabilities assumed as compared to the fair value of identifiable net assets acquired and was allocated to the Company’s Banking segment. The goodwill in this acquisition resulted from expected synergies and expansion into the Colorado and Kansas markets. The goodwill will not be amortized for tax purposes. The initial accounting for the ColoEast acquisition has not been completed because the fair value of certain assets acquired and income taxes associated with the transaction have not yet been finalized. The TARP Preferred Stock assumed in the acquisition was redeemed by the Company at par on August 31, 2016. In connection with the ColoEast acquisition, the Company acquired loans both with and without evidence of credit quality deterioration since origination. The acquired loans were initially recorded at fair value with no carryover of any allowance for loan losses. Acquired loans were segregated between those considered to be purchased credit impaired (“PCI”) loans and those without credit impairment at acquisition. The following table presents details on acquired loans at the acquisition date:
|  | Loans, Excluding |  |  | PCI |  |  | Total |
(Dollars in thousands) |  | PCI Loans |  |  | Loans |  |  | Loans |
Commercial real estate |  | $ | 86,569 |  |  | $ | 10,907 |  |  | $ | 97,476 |
Construction, land development, land |  |  | 58,718 |  |  |  | 2,933 |  |  |  | 61,651 |
1-4 family residential properties |  |  | 36,412 |  |  |  | 91 |  |  |  | 36,503 |
Farmland |  |  | 100,977 |  |  |  | 233 |  |  |  | 101,210 |
Commercial |  |  | 151,605 |  |  |  | 5,129 |  |  |  | 156,734 |
Factored receivables |  |  | 694 |  |  |  | — |  |  |  | 694 |
Consumer |  |  | 6,507 |  |  |  | — |  |  |  | 6,507 |
|  | $ | 441,482 |  |  | $ | 19,293 |  |  | $ | 460,775 |
The following presents information at the acquisition date for non-purchase credit impaired loans acquired in the transaction:
(Dollars in thousands) |  |  |  |
Contractually required principal and interest payments |  | $ | 530,404 |
Contractual cash flows not expected to be collected |  | $ | 21,272 |
Fair value at acquisition |  | $ | 441,482 |
Information about the acquired loan portfolio subject to purchase credit impaired accounting guidance as of August 1, 2016 is as follows
(Dollars in thousands) |  |  |  |
Contractually required principal and interest payments |  | $ | 25,124 |
Contractual cash flows not expected to be collected (nonaccretable difference) |  |  | 1,707 |
Expected cash flows at acquisition |  |  | 23,417 |
Interest component of expected cash flows (accretable difference) |  |  | 4,124 |
Fair value of loans acquired with deterioration of credit quality |  | $ | 19,293 |
The following table presents pro forma information for the three and nine months ended September 30, 2016 and 2015 as if the ColoEast acquisition had occurred at the beginning of 2015. The pro forma information includes adjustments for interest income on loans acquired, interest expense on junior subordinated debentures assumed, depreciation expense on property acquired, amortization of intangibles arising from the transaction, and the related income tax effects. The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been completed on the assumed date.
|  | Three Months Ended |  |  | Nine Months Ended |
(Dollars in thousands) |  | September 30, 2016 |  |  | September 30, 2015 |  |  | September 30, 2016 |  |  | September 30, 2015 |
Net interest income |  | $ | 32,792 |  |  | $ | 29,941 |  |  | $ | 94,778 |  |  | $ | 87,443 |
Noninterest income |  | $ | 6,131 |  |  | $ | 7,098 |  |  | $ | 16,463 |  |  | $ | 28,507 |
Net income |  | $ | 4,677 |  |  | $ | 6,809 |  |  | $ | 14,959 |  |  | $ | 25,740 |
Basic earnings per common share |  | $ | 0.25 |  |  | $ | 0.37 |  |  | $ | 0.80 |  |  | $ | 1.42 |
Diluted earnings per common share |  | $ | 0.24 |  |  | $ | 0.37 |  |  | $ | 0.79 |  |  | $ | 1.39 |
The operations of ColoEast are included in the Company’s operating results beginning August 1, 2016. Expenses related to the acquisition, including professional fees and integration costs, totaling $1,618,000 were recorded in noninterest expense in the consolidated statements of income during the three and nine months ended September 30, 2016. Doral Money Acquisition On February 27, 2015, the Company entered into a Purchase and Sale Agreement with the Federal Deposit Insurance Corporation (“FDIC”), in its capacity as receiver of Doral Bank, to acquire 100% of the equity of Doral Money, Inc. (“Doral Money”), a subsidiary of Doral Bank, and the management contracts associated with two active collateralized loan obligations (“CLOs”) with approximately $700,000,000 in assets under management. The consideration transferred in the acquisition consisted of cash paid of $135,864,000. The primary purpose of the acquisition was to expand the CLO assets under management at TCA. On February 26, 2015, the Company entered into a $99,975,000 secured term loan credit facility payable to a third party, with an interest rate equal to LIBOR plus 3.5%, and a maturity date of March 31, 2015. The proceeds from the loan were used by the Company to partially fund the Doral Money acquisition. The acquisition was completed on March 3, 2015, at which time the Company also repaid the $99,975,000 third party secured term loan credit facility in full by delivering the securities issued by the CLOs that were acquired from Doral Money with an acquisition date fair value of $98,316,000 and cash representing payments received on the CLO securities in the amount of $1,659,000. A summary of the fair values of assets acquired, liabilities assumed, net consideration transferred, and the resulting bargain purchase gain is as follows:
|  | Initial Values |  |  | Measurement |  |  |  |  |
|  | Recorded at |  |  | Period |  |  | Adjusted |
(Dollars in thousands) |  | Acquisition Date |  |  | Adjustments |  |  | Values |
Assets acquired: |  |  |  |  |  |  |  |  |  |  |  |
Cash |  | $ | 8,273 |  |  | $ | — |  |  | $ | 8,273 |
CLO Securities |  |  | 98,316 |  |  |  | — |  |  |  | 98,316 |
Intangible asset - CLO management contracts |  |  | 1,918 |  |  |  | — |  |  |  | 1,918 |
Loans |  |  | 36,765 |  |  |  | 900 |  |  |  | 37,665 |
Prepaid corporate income tax |  |  | 3,014 |  |  |  | 1,688 |  |  |  | 4,702 |
Other assets |  |  | 772 |  |  |  | — |  |  |  | 772 |
|  |  | 149,058 |  |  |  | 2,588 |  |  |  | 151,646 |
Liabilities assumed: |  |  |  |  |  |  |  |  |  |  |  |
Deferred tax liability |  |  | 663 |  |  |  | — |  |  |  | 663 |
Other liabilities |  |  | 22 |  |  |  | (20 | ) |  |  | 2 |
|  |  | 685 |  |  |  | (20 | ) |  |  | 665 |
Fair value of net assets acquired |  |  | 148,373 |  |  |  | 2,608 |  |  |  | 150,981 |
Net consideration transferred |  |  | 135,864 |  |  |  | — |  |  |  | 135,864 |
Bargain purchase gain |  | $ | (12,509 | ) |  | $ | (2,608 | ) |  | $ | (15,117 | )
The Company completed the acquisition via an FDIC bid process for Doral Money as part of the Doral Bank failure and the resulting nontaxable bargain purchase gain represents the excess of the fair value of the net assets acquired over the fair value of the net consideration transferred. The Company subsequently recorded measurement period adjustments related to the finalization of income taxes associated with the transaction and the valuation of loans acquired in the transaction, which increased the bargain purchase gain by $1,708,000 and $900,000 during the three months ended September 30, 2015 and the three months ended December 31, 2015, respectively.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References No definition available. + Details
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