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Business Combinations | 9 Months Ended
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Sep. 30, 2014
Business Combinations [Abstract] |
Business Combinations | Business Combinations The Company applies the acquisition method of accounting for business combinations under ASC 805 - Business Combinations. Under the acquisition method, the acquiring entity in a business combination recognizes 100 percent of the assets acquired and liabilities assumed at their acquisition date fair values. Management utilizes valuation techniques appropriate for the asset or liability being measured in determining these fair values. Any excess of the purchase price over amounts allocated to assets acquired, including identifiable intangible assets, and liabilities assumed is recorded as goodwill. Where amounts allocated to assets acquired and liabilities assumed is greater than the purchase price, a bargain purchase gain is recognized. Acquisition-related costs are expensed as incurred as merger and integration expense. Acquisition of Foster Bankshares, Inc. On August 13, 2013, the Company completed the acquisition of Foster Bankshares, Inc. ("Foster"), the holding company of Foster Bank. The Company acquired Foster in order to expand its market in Illinois and into Virginia. Foster's primary subsidiary, Foster Bank, operated eight branches in Illinois and one branch in Virginia. Under the terms of the acquisition agreement, Foster shareholders can elect to receive a cash price of $34.6703 per share or, for shareholders who qualified as accredited investors, 2.62771 shares of Company common stock for each share of Foster common stock. As of September 30, 2014, the Company had issued 183,269 shares of Company common stock in exchange for 69,749 shares of Foster common stock and paid $2.0 million for 58,906 shares of Foster common stock. As of September 30, 2014, there were 3,345 shares of Foster common stock that had not been redeemed, and the accrued liability for the unredeemed shares of Foster common stock was $116 thousand. The consideration paid, the assets acquired, and the liabilities assumed are summarized in the following table:
| (In thousands) |
Consideration paid: |
BBCN common stock issued in exchange for Foster common stock | $ | 2,609 |
Cash paid for the redemption of Foster common stock | 2,042 |
Liability for unredeemed Foster common stock | 116 |
Total consideration paid | $ | 4,767 |
Assets Acquired: |
Cash and cash equivalents | $ | 42,883 |
Investment securities available for sale | 4,844 |
Loans receivable | 255,297 |
FRB and FHLB stock | 1,714 |
OREO | 14,251 |
Premises and equipment | 4,733 |
Core deposit intangibles | 2,763 |
Deferred tax assets, net | 21,211 |
Other assets | 2,353 |
Liabilities Assumed: |
Deposits | (321,596 | )
Borrowings | (18,045 | )
Subordinated debentures | (15,309 | )
Other liabilities | (5,857 | )
Total identifiable net assets | $ | (10,758 | )
Excess of consideration paid over fair value of net assets acquired (goodwill) | $ | 15,525 |
The $15.5 million of goodwill recognized in the Foster acquisition represents the future economic benefit arising from the acquisition including the creation of a platform that can support future operations and strengthening the Company's existing presence in the Chicago metropolitan area and expansion into the Washington, D.C. market. Goodwill is not amortized for book purposes and is not deductible for tax purposes. Acquisition of Pacific International Bancorp, Inc. On February 15, 2013, the Company completed the acquisition of Pacific International Bancorp, Inc. ("PIB"), a Seattle based company, pursuant to an Agreement and Plan of Merger, dated October 22, 2012. The Company acquired PIB in order to increase its presence in the Seattle market. PIB's primary subsidiary, Pacific International Bank, a Washington state-chartered bank, operated four bank branches in the Seattle metropolitan area. In connection with the acquisition, the consideration paid, the assets acquired, and the liabilities assumed are summarized in the following table:
| (In thousands) |
Consideration paid:
BBCN common stock issued | $ | 8,437 |
Cash in lieu of fractional shares paid to PIB stockholders | 1 |
Redemption of Preferred Stock | 7,475 |
Total consideration paid | $ | 15,913 |
Assets Acquired:
Cash and cash equivalents | $ | 25,968 |
Investment securities available for sale | 7,810 |
Loans receivable | 131,589 |
FRB and FHLB stock | 1,829 |
OREO | 3,418 |
Deferred tax assets, net | 9,886 |
Core deposit intangibles | 604 |
Other assets | 2,514 |
Liabilities Assumed:
Deposits | (143,665 | )
Borrowings | (14,698 | )
Subordinated debentures | (4,108 | )
Other liabilities | (5,116 | )
Total identifiable net assets | $ | 16,031 |
Bargain purchase gain | $ | 118 |
The bargain purchase gain of $118 thousand from the PIB acquisition was recorded in other income in the Consolidated Statements of Income. Acquired Loans The Company estimated the fair value for most loans acquired by utilizing a methodology wherein loans with comparable characteristics were aggregated by type of collateral, remaining maturity and repricing terms. Cash flows for each pool were determined by estimating future credit losses and prepayment rates. Projected monthly cash flows were then discounted using a risk-adjusted market rate for similar loans to determine the fair value of each pool. To estimate the fair value of the remaining loans, management analyzed the value of the underlying collateral of the loans, assuming the fair values of the loans were derived from the eventual sale of the collateral. The value of the collateral was based on recently completed appraisals adjusted to the valuation date based on recognized industry indices. The Company discounted those values using market derived rates of return, with consideration given to the period of time and costs associated with the foreclosure and disposition of the collateral. There was no carryover of the allowance for loan losses associated with the loans the Company acquired as the loans were initially recorded at fair value. The following table presents loans acquired with deteriorated credit quality as of the date of acquisition:
| Foster |  | PIB
| (In thousands)
Contractually required principal and interest at acquisition | $ | 150,430 |  |  | $ | 54,462 |
Contractual cash flows not expected to be collected (nonaccretable discount) | 37,447 |  |  | 9,687 |
Expected cash flows at acquisition | 112,983 |  |  | 44,775 |
Interest component of expected cash flows (accretable discount) | 14,928 |  |  | 4,945 |
Fair value of acquired impaired loans | $ | 98,055 |  |  | $ | 39,830 |
The outstanding principal balances and the related carrying amounts of the acquired loans included in the statement of financial condition are $197.6 million and $167.2 million, respectively, for Foster and $78.3 million and $71.0 million, respectively, for PIB, as of September 30, 2014. Pro Forma Information The operating results of Foster and PIB from the dates of acquisitions through September 30, 2014 are included in the Condensed Consolidated Statement of Income for 2014 and 2013. The following unaudited combined pro forma information presents the operating results for the three and nine months ended September 30, 2014 and 2013, as if the Foster and PIB acquisitions had occurred on January 1, 2013:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2014 |  | 2013 |  | 2014 |  | 2013
| (In thousands, except share data)
Net interest income | $ | 67,907 |  |  | $ | 66,353 |  |  | $ | 200,363 |  |  | $ | 196,861 |
Net income | $ | 21,420 |  |  | $ | 22,960 |  |  | $ | 65,928 |  |  | $ | 60,084 |
Pro forma earnings per share: |  |  |  |  |  |  |
Basic | $ | 0.27 |  |  | $ | 0.29 |  |  | $ | 0.83 |  |  | $ | 0.76 |
Diluted | $ | 0.27 |  |  | $ | 0.29 |  |  | $ | 0.83 |  |  | $ | 0.75 |
The above pro forma results are presented for illustrative purposes only and are not intended to represent or be indicative of the actual results of operations of the merged companies that would have been achieved had the acquisitions occurred at January 1, 2013, nor are they intended to represent or be indicative of future results of operations. The pro forma results do not include expected operating cost savings as a result of the acquisitions. These pro forma results require significant estimates and judgments particularly as it relates to the valuation and accretion of income associated with acquired loans. Acquisition-Related Expenses The following table presents acquisition-related expenses associated with the Foster and PIB acquisitions which were reflected in the Condensed Consolidated Statements of Income in merger and integration expense. These expenses are comprised primarily of salaries and benefits, occupancy expenses, professional services and other noninterest expense.
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2014 |  | 2013 |  | 2014 |  | 2013
| (Dollars in thousands)
PIB | $ | — |  |  | $ | (275 | ) |  | $ | 31 |  |  | $ | 1,057 |
Foster | $ | 66 |  |  | $ | 1,206 |  |  | $ | 259 |  |  | $ | 1,564 |
Total | $ | 66 |  |  | $ | 931 |  |  | $ | 290 |  |  | $ | 2,621 |

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1383-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7488404&loc=d3e6996-128479 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4922-128472 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4934-128472 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4926-128472 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7488404&loc=d3e7000-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1392-128463 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1486-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7488404&loc=d3e6927-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1497-128463 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1490-128463 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7488404&loc=d3e7008-128479 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4845-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1500-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1524-128463 + Details
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