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Business Combinations and Divestitures | 12 Months Ended
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Dec. 31, 2017
Business Combinations [Abstract] |
Business Combinations and Divestitures | NOTE 2 – Business combinations AND DIVESTITURES Triumph Healthcare Finance On January 19, 2018, the Company entered into an agreement to sell the assets (the “Disposal Group”) of Triumph Healthcare Finance (“THF”) and exit its healthcare asset-based lending line of business. The decision to sell THF was made prior to the end of the year, and at December 31, 2017, the fair value of the Disposal Group exceeded its carrying amount. As a result of this decision, the carrying amount of the Disposal Group was transferred to assets held for sale. A summary of the carrying amount of the assets in the Disposal Group transferred to held for sale is as follows:
(Dollars in thousands) |  |  |  |
Loans |  | $ | 70,771 |
Allowance for loan and lease losses |  |  | (2,103 | )
Loans, net of allowance for loan and lease losses |  |  | 68,668 |
Premises and equipment, net |  |  | 33 |
Goodwill |  |  | 1,024 |
Intangible assets, net |  |  | 1,007 |
Other assets |  |  | 630 |
Total carrying amount |  | $ | 71,362 |
The loans in the Disposal Group transferred to assets held for sale were previously included in the commercial loan portfolio. Loans in the Disposal Group with a recorded investment of $245,000 were classified as nonaccrual and impaired without a valuation allowance, and loans in the Disposal Group with a recorded investment of $5,431,000 were classified as substandard at December 31, 2017. The Disposal Group is included in the Banking segment. Valley Bancorp, Inc. Effective December 9, 2017, the Company acquired Valley Bancorp, Inc. (“Valley”) and its community banking subsidiary, Valley Bank & Trust, in an all-cash transaction. Valley Bank & Trust serves individuals and business customers from seven locations across the northern front range including Brighton, Dacono, Denver, Hudson, Westminster and Strasburg, Colorado. Valley Bank & Trust was merged into TBK Bank upon closing. The acquisition expanding the Company’s market in Colorado and further diversified 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 |  | $ | 38,473 |
Securities |  |  | 97,687 |
Loans |  |  | 171,199 |
FHLB stock |  |  | 315 |
Premises and equipment |  |  | 6,238 |
Other real estate owned |  |  | 2,282 |
Intangible assets |  |  | 6,072 |
Bank-owned life insurance |  |  | 7,153 |
Other assets |  |  | 1,882 |
|  |  | 331,301 |
Liabilities assumed: |  |  |  |
Deposits |  |  | 293,398 |
Junior subordinated debentures |  |  | 5,470 |
Other liabilities |  |  | 2,881 |
|  |  | 301,749 |
Fair value of net assets acquired |  |  | 29,552 |
Consideration transferred |  |  | 40,075 |
Goodwill |  | $ | 10,523 |
The Company has recognized goodwill of $10,523,000, which was calculated as the excess of both the consideration exchanged and the 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 in the Colorado market. The goodwill will be deducted for tax purposes. The intangible assets recognized in the transaction will be amortized utilizing an accelerated method over their ten year estimated useful lives. The initial accounting for the acquisition has not been completed because the fair values of the assets acquired and liabilities assumed have not yet been finalized. In connection with the 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 and lease 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 of the estimated fair value of acquired loans at the acquisition date:
|  | Loans, |  |  |  |  |  |  |  |  |
|  | Excluding |  |  | PCI |  |  | Total |
(Dollars in thousands) |  | PCI Loans |  |  | Loans |  |  | Loans |
Commercial real estate |  | $ | 73,273 |  |  | $ | 254 |  |  | $ | 73,527 |
Construction, land development, land |  |  | 19,770 |  |  |  | 1,199 |  |  |  | 20,969 |
1-4 family residential properties |  |  | 26,264 |  |  |  | — |  |  |  | 26,264 |
Farmland |  |  | 16,934 |  |  |  | — |  |  |  | 16,934 |
Commercial |  |  | 31,893 |  |  |  | — |  |  |  | 31,893 |
Factored receivables |  |  | — |  |  |  | — |  |  |  | — |
Consumer |  |  | 1,612 |  |  |  | — |  |  |  | 1,612 |
Mortgage warehouse |  |  | — |  |  |  | — |  |  |  | — |
|  | $ | 169,746 |  |  | $ | 1,453 |  |  | $ | 171,199 |
The following presents information at the acquisition date for non-PCI loans acquired in the transaction:
(Dollars in thousands) |  |  |  |
Contractually required principal and interest payments |  | $ | 214,139 |
Contractual cash flows not expected to be collected |  | $ | 3,646 |
Fair value at acquisition |  | $ | 169,746 |
The following presents information at the acquisition date for PCI loans acquired in the transaction:
(Dollars in thousands) |  |  |  |
Contractually required principal and interest payments |  | $ | 2,599 |
Contractual cash flows not expected to be collected (nonaccretable difference) |  |  | 775 |
Expected cash flows at acquisition |  |  | 1,824 |
Interest component of expected cash flows (accretable yield) |  |  | 371 |
Fair value of loans acquired with deterioration of credit quality |  | $ | 1,453 |
The operations of Valley are included in the Company’s operating results beginning December 9, 2017. Expenses related to the acquisition, including professional fees and other transaction costs, totaling $1,251,000 were recorded in noninterest expense in the consolidated statements of income during the year ended December 31, 2017. Independent Bank – Colorado Branches On October 6, 2017, the Company completed its acquisition of nine branch locations in Colorado from Independent Bank Group, Inc.’s banking subsidiary Independent Bank for an aggregate deposit premium of $6,771,000 or 4.2%. The branches were merged into TBK Bank upon closing. The primary purpose of the acquisition was to improve the Company’s core deposit base and continue to build upon the diversification of the Company’s loan portfolio. 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 |  | $ | 1,611 |
Loans |  |  | 95,794 |
Premises and equipment |  |  | 7,524 |
Intangible assets |  |  | 3,255 |
Other assets |  |  | 1,644 |
|  |  | 109,828 |
Liabilities assumed: |  |  |  |
Deposits |  |  | 160,702 |
Other liabilities |  |  | 249 |
|  |  | 160,951 |
Fair value of net assets acquired |  |  | (51,123 | )
Cash received from seller, net of $6,771 deposit premium |  |  | 45,306 |
Goodwill |  | $ | 5,817 |
The Company has recognized goodwill of $5,817,000, which was calculated as the excess of both the consideration exchanged and the 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 in the Colorado market. The goodwill will be deducted for tax purposes. The intangible assets recognized in the transaction will be amortized utilizing an accelerated method over their ten year estimated useful lives. The initial accounting for the acquisition has not been completed because the fair values of the assets acquired and liabilities assumed have not yet been finalized. The loans acquired in the transaction were initially recorded at fair value with no carryover of any allowance for loan and lease losses. There were no loans acquired that were considered to be purchased credit impaired (“PCI”) loans. The following table presents details of the estimated fair value of acquired loans at the acquisition date:
(Dollars in thousands) |  |  |  |
Commercial real estate |  | $ | 13,382 |
Construction, land development, land |  |  | 537 |
1-4 family residential properties |  |  | 6,986 |
Farmland |  |  | 31,490 |
Commercial |  |  | 43,104 |
Factored receivables |  |  | — |
Consumer |  |  | 295 |
Mortgage warehouse |  |  | — |
|  | $ | 95,794 |
The following presents information at the acquisition date for non-PCI loans acquired in the transaction:
(Dollars in thousands) |  |  |  |
Contractually required principal and interest payments |  | $ | 122,498 |
Contractual cash flows not expected to be collected |  | $ | 3,415 |
Fair value at acquisition |  | $ | 95,794 |
The operations of the branches acquired are included in the Company’s operating results beginning October 6, 2017. Expenses related to the acquisition, including professional fees and other transaction costs, totaling $437,000 were recorded in noninterest expense in the consolidated statements of income during the year ended December 31, 2017. Triumph Capital Advisors, LLC On March 31, 2017, the Company sold its wholly owned asset management subsidiary, Triumph Capital Advisors, LLC, to an unrelated third party. The transaction was completed to enhance shareholder value and provide a platform for TCA to operate without the impact of regulations intended for depository institutions and their holding companies. A summary of the consideration received and the gain on sale is as follows:
(Dollars in thousands) |  |  |  |
Consideration received (fair value): |  |  |  |
Cash |  | $ | 10,554 |
Loan receivable |  |  | 10,500 |
Revenue share |  |  | 1,623 |
Total consideration received |  |  | 22,677 |
Carrying value of TCA membership interest |  |  | 1,417 |
Gain on sale of subsidiary |  |  | 21,260 |
Transaction costs |  |  | 400 |
Gain on sale of subsidiary, net of transaction costs |  | $ | 20,860 |
The Company financed a portion of the consideration received with a $10,500,000 term credit facility. Terms of the floating rate credit facility provide for quarterly principal and interest payments with an interest rate floor of 5.50%, maturing on March 31, 2023. The Company received a $25,000 origination fee associated with the term credit facility that was deferred and is being accreted over the contractual life of the loan as a yield adjustment. In addition, the Company is entitled to receive an annual earn-out payment representing 3% of TCA’s future annual gross revenue, with a total maximum earn-out amount of $2,500,000. The revenue share earn-out was considered contingent consideration which the Company recorded as an asset at its estimated fair value of $1,623,000 on the date of sale. The fair value of the revenue share asset was $1,737,000 at December 31, 2017. The Company incurred pre-tax expenses related to the transaction, including professional fees and other direct transaction costs, totaling $400,000 which were netted against the gain on sale of subsidiary in the consolidated statements of income. 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 deducted for tax purposes. The intangible assets recognized in the transaction will be amortized utilizing a straight line method over their eight year estimated useful lives. 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 expanded the Company’s market into Colorado and Kansas and further diversified the Company’s loan, customer, and deposit base. A summary of the fair values of assets acquired, liabilities assumed, consideration transferred, and the resulting goodwill is as follows:
|  | Initial Values |  |  | Measurement |  |  |  |  |
|  | Recorded at |  |  | Period |  |  | Adjusted |
(Dollars in thousands) |  | Acquisition Date |  |  | Adjustments |  |  | Values |
Assets acquired: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 57,671 |  |  | $ | — |  |  | $ | 57,671 |
Securities |  |  | 161,693 |  |  |  | — |  |  |  | 161,693 |
Loans |  |  | 460,775 |  |  |  | — |  |  |  | 460,775 |
FHLB and Federal Reserve Bank stock |  |  | 550 |  |  |  | — |  |  |  | 550 |
Premises and equipment |  |  | 23,940 |  |  |  | — |  |  |  | 23,940 |
Other real estate owned |  |  | 3,105 |  |  |  | (143 | ) |  |  | 2,962 |
Intangible assets |  |  | 7,238 |  |  |  | — |  |  |  | 7,238 |
Bank-owned life insurance |  |  | 6,400 |  |  |  | — |  |  |  | 6,400 |
Deferred income taxes |  |  | 4,511 |  |  |  | (70 | ) |  |  | 4,441 |
Other assets |  |  | 10,022 |  |  |  | — |  |  |  | 10,022 |
|  |  | 735,905 |  |  |  | (213 | ) |  |  | 735,692 |
Liabilities assumed: |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 652,952 |  |  |  | — |  |  |  | 652,952 |
Junior subordinated debentures |  |  | 7,728 |  |  |  | — |  |  |  | 7,728 |
Other liabilities |  |  | 6,784 |  |  |  | — |  |  |  | 6,784 |
|  |  | 667,464 |  |  |  | — |  |  |  | 667,464 |
Fair value of net assets acquired |  |  | 68,441 |  |  |  | (213 | ) |  |  | 68,228 |
Cash paid |  |  | 70,000 |  |  |  | — |  |  |  | 70,000 |
TARP Preferred Stock assumed |  |  | 10,500 |  |  |  | — |  |  |  | 10,500 |
Consideration transferred |  |  | 80,500 |  |  |  | — |  |  |  | 80,500 |
Goodwill |  | $ | 12,059 |  |  | $ | 213 |  |  | $ | 12,272 |
The consideration was comprised of a combination of cash and the assumption of ColoEast’s TARP Preferred Stock. The Company recognized goodwill of $12,272,000, which included measurement period adjustments related to the final valuation of other real estate owned acquired in the transaction and the finalization of income taxes associated with the transaction. Goodwill 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 deducted for tax purposes. The intangible assets recognized in the transaction will be amortized utilizing an accelerated method over their ten year estimated useful lives. 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 and lease 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-PCI 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 PCI 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 yield) |  |  | 4,124 |
Fair value of loans acquired with deterioration of credit quality |  | $ | 19,293 |
The following table presents pro forma information for the years ended December 31, 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.
(Dollars in thousands) |  | December 31, 2016 |  |  | December 31, 2015 |
Net interest income |  | $ | 128,322 |  |  | $ | 117,051 |
Noninterest income |  | $ | 22,671 |  |  | $ | 36,539 |
Net income |  | $ | 21,220 |  |  | $ | 31,624 |
Basic earnings per common share |  | $ | 1.14 |  |  | $ | 1.73 |
Diluted earnings per common share |  | $ | 1.13 |  |  | $ | 1.70 |
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 other transaction costs, totaling $1,618,000 were recorded in noninterest expense in the consolidated statements of income during the year ended December 31, 2016. Doral Money Acquisition On March 3, 2015, the Company acquired 100% of the equity of Doral Money, Inc. (“DMI”), a subsidiary of Doral Bank, and the management contracts associated with two active CLOs with approximately $700,000,000 of managed assets. The consideration transferred in the acquisition consisted of cash paid of $135,864,000. The primary purpose of the acquisition was to expand the managed CLO assets at Triumph Capital Advisors, LLC. 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 DMI 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 incurred pre-tax expenses related to the acquisition of approximately $243,000 which are included in professional fees in the consolidated statements of income in the period incurred.

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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 Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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