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Note 2 - Mergers/Acquisitions/Sales | 12 Months Ended
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Dec. 31, 2023
Notes to Financial Statements |
Mergers/Acquisitions/Sales | N ote 2. Mergers/Acquisitions/Sales GFED Acquisition On April 1, 2022, the Company acquired GFED and on April 2, 2022 merged GFED’s bank subsidiary with and into SFCB, the Company’s Springfield-based charter. The combined bank changed its name to “Guaranty Bank”. Stockholders of GFED received for each share of GFED common stock owned, at the election of each stockholder, subject to proration and adjustment, (1) $30.50 in cash, (2) 0.58775 shares of the Company’s common stock, or (3) mixed consideration of $6.10 in cash and 0.4702 shares of the Company’s common stock. On March 31, 2022, the last trading date before the closing date, the Company’s common stock closed at $56.59, resulting in stock consideration valued at $117.2 million and total cash consideration paid by the Company of $26.9 million. The Company funded the cash portion of the purchase price through operating cash. The acquisition of GFED supports the strategic goals of the Company. It allows for increased product and service capabilities of the combined bank and the Company anticipates it will result in strong growth in Springfield, Missouri and its surrounding communities. The Company accounted for the business combination under the acquisition method of accounting in accordance with ASC 805. The Company recognized the full fair value of the assets acquired and liabilities assumed at the acquisition date, net of applicable income tax effects. The Company considers all purchase accounting adjustments as provisional and fair values are subject to refinement for up to one year after the closing date due to timing of third party reports and management’s reviews of reports. Measurement period adjustments were recorded during the year ended December 31, 2023. See Note 7. The excess of the consideration paid over the fair value of the net assets acquired is recorded as goodwill. This goodwill is not deductible for tax purposes. ​ Note 2. Mergers/Acquisitions/Sales (continued) The fair values of the assets acquired and liabilities assumed including the consideration paid and resulting goodwill is as follows: ​
​ | ​ | ​ | ​
​ |  | As of
​ | ​ | April 1, 2022
​ | ​ | (dollars in thousands)
ASSETS |  | ​ |
Cash and due from banks | ​ | $ | 171,844
Interest-bearing deposits at financial institutions | ​ |  | 17,134
Securities | ​ |  | 143,017
Loans/leases receivable, net | ​ |  | 801,697
Bank-owned life insurance | ​ | ​ | 32,100
Premises and equipment | ​ |  | 16,257
Restricted investment securities | ​ |  | 2,220
Other real estate owned | ​ |  | 55
Intangibles | ​ |  | 10,264
Other assets | ​ |  | 23,685
Total assets acquired | ​ | $ | 1,218,273
​ | ​ |  |
LIABILITIES | ​ |  |
Deposits | ​ | $ | 1,076,573
FHLB advances | ​ |  | 16,000
Subordinated notes | ​ | ​ | 19,621
Junior subordinated debentures | ​ | ​ | 10,310
Other liabilities* | ​ |  | 15,225
Total liabilities assumed | ​ | $ | 1,137,729
Net assets acquired | ​ | $ | 80,544
​ | ​ |  |
CONSIDERATION PAID: | ​ |  |
Cash | ​ | $ | 26,871
Common stock | ​ | ​ | 117,214
Total consideration paid | ​ | $ | 144,085
Goodwill* | ​ | $ | 63,541
​ * See Note 7 regarding measurement period adjustments recorded during the year ended December 31, 2023. ​ The Company acquired $143.0 million of securities and subsequent to the closing, the Company sold $111.4 million of the acquired securities portfolio to improve the efficiency of the combined balance sheets. The Company acquired loans both with and without evidence of credit quality deterioration since origination. Acquired loans are recorded at their fair value at the time of acquisition with no carryover from the acquired institution’s previously recorded allowance for loan and lease losses. Acquired loans are accounted for under ASC 326, Financial Instruments – Credit Losses. The fair value of acquired loans recorded at the time of acquisition is based upon several factors, including the timing and payment of expected cash flows, as adjusted for estimated credit losses and prepayments, and then discounting these cash flows using comparable market rates. The resulting fair value adjustment is recorded in the form of a premium or discount to the unpaid principal balance of the respective loans. As it relates to acquired loans that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination (“PCD”), the net premium or net discount is adjusted to reflect the Company’s allowance for credit losses recorded for PCD loans at the time of acquisition, and the remaining fair value adjustment is accreted or amortized into interest income over the remaining life of the respective loans. As it relates to loans not classified as PCD (“non-PCD”) loans, the credit loss and yield components of their fair value adjustment are aggregated, and the resulting net premium or net discount is accreted or amortized into interest income over the remaining life of the respective loans. The Company recorded an accretable discount of $12.0 million on the non-PCD loans. The Company also recorded an ACL for non-PCD loans at the time of acquisition through provision expense of $11.0 million (pre-tax). ​ Note 2. Mergers/Acquisitions/Sales (continued) The carrying amount of loans acquired and classified as PCD is as follows: ​
​ | ​ | ​ | ​
​ |  | Guaranty Bank
​ | ​ | April 1, 2022
​ | ​ | (dollars in thousands)
​ | ​ | ​ | ​
Principal balance of PCD loans at acquisition | ​ | $ | 38,711
Allowance for credit losses at acquisition | ​ |  | (5,902)
Non-credit discount at acquisition | ​ |  | (1,366)
Fair value of PCD loans at acquisition | ​ | $ | 31,443
​ | ​ | ​ | ​
​ Premises and equipment acquired with a fair value of $16.3 million includes sixteen branch locations. The fair value was determined with the assistance of a third-party appraiser. The assets and related fair value adjustments will be recognized as an increase in depreciation expense over 39 years. The Company recorded a core deposit intangible totaling $10.3 million, which is the portion of the acquisition purchase price that represents the value assigned to the existing deposit base. The core deposit intangible has a finite life and is amortized using an accelerated method over the estimated useful life of the deposits (estimated to be ten years). The following table presents the assumed borrowings as of the acquisition date: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
​ | ​ | Amount | Rate | Terms | Maturity Date | Collateral
​ | ​ | (dollars in thousands)
FHLB advance | ​ | 6,500 | 0.59% | monthly interest payments; principal due at maturity | 5/15/2023 | commercial and residential real estate loans
FHLB advance | ​ | 6,500 | 0.82% | monthly interest payments; principal due at maturity | 5/15/2025 | commercial and residential real estate loans
FHLB advance | ​ | 3,000 | 1.12% | monthly interest payments; principal due at maturity | 5/17/2027 | commercial and residential real estate loans
Subordinated notes | ​ | 19,621 | 5.25% | monthly interest payments; principal due at maturity | 9/30/2030 | unsecured
Junior subordinated debentures | ​ | 10,310 | 4.09% | monthly interest payments; principal due at maturity | 2/23/2036 | unsecured
Fair value of borrowings assumed | ​ | $ 45,931 | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ The Company prepaid the $16.0 million of FHLB advances in full shortly after closing. During 2022, the Company incurred $3.7 million of expenses related to the acquisition, comprised primarily of legal, accounting, investment banking costs and personnel costs, and $5.5 million of post-acquisition, compensation, transition and integration costs, comprised primarily of personnel costs, IT integration and data conversion costs related to the acquisition. GB results are included in the consolidated statements of income effective on the acquisition date. Unaudited pro forma combined operating results for the years ended December 31, 2022 and 2021, giving effect to the GFED acquisition as if it had occurred as of January 1, 2021, are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ |  | For the Year Ended December 31,
​ |  |  | 2022 | 2021
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net interest income | ​ | ​ | $ | 242,161 | ​ | $ | 222,839
Noninterest income | ​ | ​ | $ | 82,966 | ​ | $ | 114,095
Net income | ​ | ​ | $ | 119,899 | ​ | $ | 99,606
​ | ​ | ​ |  |  | ​ | ​ | ​
Earnings per common share: | ​ | ​ |  |  | ​ | ​ |
Basic | ​ | ​ | $ | 6.97 | ​ | $ | 5.60
Diluted | ​ | ​ | $ | 6.89 | ​ | $ | 5.53
​ ​

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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://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent + Details
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