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ACQUISITION OF CBANK

6 Months Ended

Jun. 30, 2023

ACQUISITION OF CBANK

ACQUISITION OF CBANK

2. ACQUISITION OF CBANK

OVERVIEW

On March 15, 2023, the Company completed its acquisition of CBank (“CBank”), and its wholly owned bank subsidiary Commercial Industrial Finance (“CIF”), for approximately $51 million in cash. The primary reason for the acquisition of CBank was to expand the Company’s footprint in the Cincinnati, Ohio metropolitan statistical area.

ACQUISITION SUMMARY

The following table provides a summary of the assets acquired and liabilities assumed as recorded by CBank, the previously reported preliminary fair value adjustments necessary to adjust those acquired assets and assumed liabilities to fair value, recast adjustments to those previously reported preliminary fair values, and the expected fair values of those assets and liabilities as recorded by the Company. As provided for under GAAP, management has up to 12 months following the date of acquisition to finalize the fair values of the acquired assets and assumed liabilities. The preliminary fair value adjustments and the preliminary resultant fair values shown in the following table continue to be evaluated by management and may be subject to further recast adjustments.


		March 15, 2023
		As Previously Reported							As Recasted

		As Recorded			Fair Value				Recast				As Recorded
(in thousands)		by CBank			Adjustments (1)				Adjustments (1)				by Republic

Assets acquired:

Cash and cash equivalents		$	10,030		$	—			$	—			$	10,030
Investment securities			16,463			(4)	a			(65)	a			16,394
Loans			221,707			(4,219)	b			(150)	b			217,338
Allowance for loan and lease losses			(2,953)			1,353	c			1,391	c, j			(209)
Loans, net			218,754			(2,866)				1,241				217,129
Goodwill			954			(954)	d			—				—
Core deposit intangible			—			2,844	e			—				2,844
Premises and equipment, net			162			35	f			(24)	f			173
Other assets and accrued interest receivable			7,067			(320)	g			—				6,747

Total assets acquired		$	253,430		$	(1,265)			$	1,152			$	253,317

Liabilities assumed:

Deposits:
Noninterest-bearing		$	42,160		$	—			$	—			$	42,160
Interest-bearing			179,487			31	h			—				179,518
Total deposits			221,647			31				—				221,678

Other liabilities and accrued interest payable			4,709			96	i			50	i			4,855

Total liabilities assumed			226,356			127				50				226,533

Net assets acquired		$	27,074		$	(1,392)			$	1,102				26,784

Cash consideration paid														(51,000)

Goodwill													$	24,216

(1)

The Company’s acquisition of CBank closed on March 15, 2023. The fair value adjustments reported are preliminary estimates based on information obtained subsequent to March 15, 2023 and through June 30, 2023. Management is continuing to evaluate each of its estimates and may provide additional recast adjustments in future periods based on this continuing evaluation. To the extent that additional recast adjustments are posted in future periods, the resultant fair values and the amount of goodwill recorded by the Company will change.

Explanation of fair value and recast adjustments:

a.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the investment securities.

b.

Adjustments to loans to reflect estimated fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.

c.

Adjustments to the Allowance reflect the fair value adjustment to eliminate the acquiree’s recorded allowance for loan losses and other fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.

d.

Adjustment reflects the fair value adjustment to eliminate the recorded goodwill.

e.

Adjustment reflects the fair value adjustment for the core deposit intangible asset recorded as a result of the acquisition.

f.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the premises and equipment, net.

g.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the other assets and accrued interest receivable.

h.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the assumed time deposits.

i.

Adjustment reflects the fair value adjustment based on the Company’s evaluation of the other liabilities and accrued interest payable.

j.

Adjustment reflects a change in estimated fair value based upon further evaluation of PCD loans, including cash payments received subsequent to the date of acquisition.

Goodwill of approximately $24 million, which is the excess of the merger consideration over the fair value of net assets acquired, was recorded in the CBank acquisition and is the result of expected operational synergies and other factors. This goodwill is all attributable to the Company’s Traditional Banking segment and is expected to be deductible for tax purposes.