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Business Combinations and Divestitures | 12 Months Ended
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Dec. 31, 2018
Business Combinations [Abstract] |
Business Combinations and Divestitures | NOTE 2 – Business combinations AND DIVESTITURES First Bancorp of Durango, Inc. and Southern Colorado Corp. Effective September 8, 2018 the Company acquired (i) First Bancorp of Durango, Inc. (“FBD”) and its community banking subsidiaries, The First National Bank of Durango and Bank of New Mexico and (ii) Southern Colorado Corp. (“SCC”) and its community banking subsidiary, Citizens Bank of Pagosa Springs, in all-cash transactions. The First National Bank of Durango serves consumers and businesses from four branches in Durango, Colorado and one branch in Bayfield, Colorado, Bank of New Mexico serves consumers and businesses from three branches in Albuquerque, Gallup and Grants, New Mexico, and Citizens Bank of Pagosa Springs serves consumers and businesses from two branches in Pagosa Springs, Colorado. The acquisitions expanded the Company’s market in Colorado and into New Mexico and further diversified the Company’s loan, customer, and deposit base. A summary of the estimate fair values of assets acquired, liabilities assumed, consideration transferred, and the resulting goodwill is as follows:
(Dollars in thousands) |  | FBD |  |  | SCC |  |  | Total |
Assets acquired: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 151,973 |  |  | $ | 14,299 |  |  | $ | 166,272 |
Securities |  |  | 237,183 |  |  |  | 33,477 |  |  |  | 270,660 |
Loans held for sale |  |  | 1,238 |  |  |  | — |  |  |  | 1,238 |
Loans |  |  | 256,384 |  |  |  | 31,454 |  |  |  | 287,838 |
FHLB stock |  |  | 786 |  |  |  | 129 |  |  |  | 915 |
Premises and equipment |  |  | 7,495 |  |  |  | 840 |  |  |  | 8,335 |
Other real estate owned |  |  | 213 |  |  |  | — |  |  |  | 213 |
Intangible assets |  |  | 11,915 |  |  |  | 2,154 |  |  |  | 14,069 |
Other assets |  |  | 2,715 |  |  |  | 403 |  |  |  | 3,118 |
|  |  | 669,902 |  |  |  | 82,756 |  |  |  | 752,658 |
Liabilities assumed: |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 601,194 |  |  |  | 73,464 |  |  |  | 674,658 |
Federal Home Loan Bank advances |  |  | 737 |  |  |  | — |  |  |  | 737 |
Other liabilities |  |  | 1,313 |  |  |  | 64 |  |  |  | 1,377 |
|  |  | 603,244 |  |  |  | 73,528 |  |  |  | 676,772 |
Fair value of net assets acquired |  |  | 66,658 |  |  |  | 9,228 |  |  |  | 75,886 |
Cash consideration transferred |  |  | 134,667 |  |  |  | 13,294 |  |  |  | 147,961 |
Goodwill |  | $ | 68,009 |  |  | $ | 4,066 |  |  | $ | 72,075 |
The Company has recognized goodwill of $72,075,000, 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 these acquisitions resulted from expected synergies and expansion in the Colorado market and into the New Mexico market. The goodwill will be deducted for tax purposes. The intangible assets recognized in the transactions will be amortized utilizing an accelerated method over their ten year estimated useful lives. The initial accounting for the acquisitions has not been completed because the fair values of the assets acquired and liabilities assumed have not yet been finalized. In connection with the acquisitions, 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 Loans |  |  | PCI Loans |  |  | Total Loans |
(Dollars in thousands) |  | FBD |  |  | SCC |  |  | Total |  |  | FBD |  |  | SCC |  |  | Total |  |  | Acquired |
Commercial real estate |  | $ | 140,955 |  |  | $ | 11,894 |  |  | $ | 152,849 |  |  | $ | 832 |  |  | $ | 200 |  |  | $ | 1,032 |  |  | $ | 153,881 |
Construction, land development, land |  |  | 13,949 |  |  |  | 5,229 |  |  |  | 19,178 |  |  |  | 3,081 |  |  |  | — |  |  |  | 3,081 |  |  |  | 22,259 |
1-4 family residential properties |  |  | 59,228 |  |  |  | 10,180 |  |  |  | 69,408 |  |  |  | 75 |  |  |  | — |  |  |  | 75 |  |  |  | 69,483 |
Farmland |  |  | 5,709 |  |  |  | 1,207 |  |  |  | 6,916 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 6,916 |
Commercial |  |  | 26,125 |  |  |  | 2,121 |  |  |  | 28,246 |  |  |  | 1,020 |  |  |  | — |  |  |  | 1,020 |  |  |  | 29,266 |
Factored receivables |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Consumer |  |  | 5,410 |  |  |  | 623 |  |  |  | 6,033 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 6,033 |
Mortgage warehouse |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
|  | $ | 251,376 |  |  | $ | 31,254 |  |  | $ | 282,630 |  |  | $ | 5,008 |  |  | $ | 200 |  |  | $ | 5,208 |  |  | $ | 287,838 |
The following presents information at the acquisition date for non-PCI loans acquired in the transactions:
(Dollars in thousands) |  | FBD |  |  | SCC |  |  | Total |
Contractually required principal and interest payments |  | $ | 318,674 |  |  | $ | 38,590 |  |  | $ | 357,264 |
Contractual cash flows not expected to be collected |  | $ | 4,255 |  |  | $ | 550 |  |  | $ | 4,805 |
Fair value at acquisition |  | $ | 251,376 |  |  | $ | 31,254 |  |  | $ | 282,630 |
The following presents information at the acquisition date for PCI loans acquired in the transactions:
(Dollars in thousands) |  | FBD |  |  | SCC |  |  | Total |
Contractually required principal and interest payments |  | $ | 10,511 |  |  | $ | 269 |  |  | $ | 10,780 |
Contractual cash flows not expected to be collected (nonaccretable difference) |  |  | 2,570 |  |  |  | 5 |  |  |  | 2,575 |
Expected cash flows at acquisition |  |  | 7,941 |  |  |  | 264 |  |  |  | 8,205 |
Interest component of expected cash flows (accretable yield) |  |  | 2,933 |  |  |  | 64 |  |  |  | 2,997 |
Fair value of loans acquired with deterioration of credit quality |  | $ | 5,008 |  |  | $ | 200 |  |  | $ | 5,208 |
The following table presents unaudited supplemental pro forma information for the years ended December 31, 2018 and 2017 as if the FBD and SCC acquisitions had occurred at the beginning of 2017. The supplemental pro forma information includes adjustments for interest income on loans acquired, depreciation expense on property acquired, amortization of intangibles arising from the transactions, and the related income tax effects. Additionally, because FBD and SCC were Subchapter S corporations before the acquisitions and did not incur any federal income tax liabilities, adjustments have been included to estimate the impact of federal income taxes on FBD and SCC’s net income for the periods presented. The supplemental pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transactions been completed on the assumed date.
|  | Year Ended December 31, 2018 |
(Dollars in thousands) |  | FBD |  |  | SCC |  |  | Total |
Net interest income |  | $ | 241,322 |  |  | $ | 228,797 |  |  | $ | 243,069 |
Noninterest income |  | $ | 26,473 |  |  | $ | 23,412 |  |  | $ | 26,915 |
Net income |  | $ | 52,269 |  |  | $ | 51,541 |  |  | $ | 52,102 |
Basic earnings per common share |  | $ | 2.00 |  |  | $ | 2.05 |  |  | $ | 1.99 |
Diluted earnings per common share |  | $ | 1.97 |  |  | $ | 2.01 |  |  | $ | 1.96 |
|  | Year Ended December 31, 2017 |
(Dollars in thousands) |  | FBD |  |  | SCC |  |  | Total |
Net interest income |  | $ | 176,154 |  |  | $ | 158,166 |  |  | $ | 178,636 |
Noninterest income |  | $ | 45,570 |  |  | $ | 41,166 |  |  | $ | 46,080 |
Net income |  | $ | 39,211 |  |  | $ | 36,475 |  |  | $ | 39,466 |
Basic earnings per common share |  | $ | 1.68 |  |  | $ | 1.83 |  |  | $ | 1.66 |
Diluted earnings per common share |  | $ | 1.65 |  |  | $ | 1.79 |  |  | $ | 1.63 |
Revenue and earnings of FBD and SCC since the acquisition date have not been disclosed as the acquired companies were merged into the Company and separate financial information is not readily available. Expenses related to the acquisitions, including professional fees and other transaction costs, totaling $5,871,000 were recorded in noninterest expense in the consolidated statements of income during the year ended December 31, 2018. Interstate Capital Corporation On June 2, 2018, the Company acquired substantially all of the operating assets of, and assumed certain liabilities associated with, Interstate Capital Corporation’s (“ICC”) accounts receivable factoring business and other related financial services. ICC operates out of offices located in El Paso, Texas and Santa Teresa, New Mexico and provides invoice factoring to small and medium-sized businesses. 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 |  | $ | 75 |
Factored receivables |  |  | 131,017 |
Premises and equipment |  |  | 279 |
Intangible assets |  |  | 13,920 |
Other assets |  |  | 144 |
|  |  | 145,435 |
Liabilities assumed: |  |  |  |
Deposits |  |  | 7,389 |
Other liabilities |  |  | 763 |
|  |  | 8,152 |
Fair value of net assets acquired |  |  | 137,283 |
Consideration: |  |  |  |
Cash paid |  |  | 160,258 |
Contingent consideration |  |  | 20,000 |
Total consideration |  |  | 180,258 |
Goodwill |  | $ | 42,975 |
ICC’s net assets acquired were allocated to the Company’s Factoring segment whose factoring operations were significantly expanded as a result of the transaction. The Company has recognized goodwill of $42,975,000, which was calculated as the excess of both the fair value of cash consideration exchanged and the fair value of the contingent liability assumed as compared to the fair value of identifiable net assets acquired and was allocated to the Company’s Factoring segment. The goodwill in this acquisition resulted from expected synergies and expansion in the factoring market. The goodwill will be deducted for tax purposes. The intangible assets recognized include a customer relationship intangible asset with an acquisition date fair value of $13,500,000 which will be amortized utilizing an accelerated method over its eight year estimated useful life and a trade name intangible asset with an acquisition date fair value of $420,000 which will be amortized on a straight-line basis over its three year estimated useful life. Consideration paid included contingent consideration with an acquisition date fair value of $20,000,000. The contingent consideration is based on a proprietary index designed to approximate the rise and fall of transportation invoice prices subsequent to acquisition and is correlated to monthly movements in average invoice prices historically experienced by ICC. At the end of a 30 month earnout period, a final average index price will be calculated and the contingent consideration will be settled in cash based on the final average index price. Final contingent consideration payout will range from $0 to $22,000,000, and the fair value of the associated liability will be remeasured each reporting period with changes in fair value recorded in noninterest income in the consolidated statements of income. The fair value of the contingent consideration was $20,745,000 at December 31, 2018. Revenue and earnings of ICC since the acquisition date have not been disclosed as the acquired company was merged into the Company and separate financial information is not readily available. 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. Expenses related to the acquisition, including professional fees and other transaction costs, totaling $1,094,000 were recorded in noninterest expense in the consolidated statements of income during the year ended December 31, 2018. 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. At December 31, 2017, the carrying amount of the Disposal Group was transferred to assets held for sale. The sale closed on March 16, 2018. A summary of the carrying amount of the assets in the Disposal Group and the gain on sale is as follows:
(Dollars in thousands) |  |  |  |
Carrying amount of assets in the disposal group: |  |  |  |
Loans |  | $ | 70,147 |
Premises and equipment, net |  |  | 19 |
Goodwill |  |  | 1,457 |
Intangible assets, net |  |  | 958 |
Other assets |  |  | 197 |
Total carrying amount |  |  | 72,778 |
Total consideration received |  |  | 74,017 |
Gain on sale of division |  |  | 1,239 |
Transaction costs |  |  | 168 |
Gain on sale of division, net of transaction costs |  | $ | 1,071 |
The Disposal Group was included in the Banking segment, and the loans in the Disposal Group were previously included in the commercial loan portfolio. 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 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 accounting for the acquisition has 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 |
Revenue and earnings of Valley since the acquisition date have not been disclosed as the acquired company was merged into the Company and separate financial information is not readily available. 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 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 accounting for the acquisition has 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 |
Revenue and earnings of the acquired branches since the acquisition date have not been disclosed as the branches were merged into the Company and separate financial information is not readily available. 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. 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 $1,774,000 at December 31, 2018. The Company received the first cash proceeds of $174,000 from the revenue share during the year ended December 31, 2018. 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 during the year ended December 31, 2017. 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 |
Revenue and earnings of ColoEast since the acquisition date have not been disclosed as the acquired company was merged into the Company and separate financial information is not readily available. 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.

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