Business Combinations

12 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

Note 20 - Business Combinations

On December 31, 2021, the Company acquired the remaining 62% equity interest in the Lincoln Agency for $5.3 million in cash and $5.3 million in Company common stock. The Company previously acquired a 38% minority interest in Lincoln Agency that was accounted for as an equity method investment, which had an immaterial carrying value at the acquisition date. The acquisition of the remaining equity interest was considered a step acquisition, whereby the Company re-measured the previously held equity method investment to its fair value of $5.2 million, resulting in the recognition of a gain of $5.2 million, which is recorded as a component of noninterest income in the accompanying consolidated statements of income. The acquisition date fair value of the previously held equity method investment was calculated using multiple factors, including the total consideration for the acquired ownership interest of Lincoln Agency and an analysis of control premiums paid for similar transactions.

The purchase agreement for Lincoln Agency includes potential earnout payments of up to $250,000 based on net product line revenue for fiscal year 2023 and up to an additional $750,000 based on compound annual revenue growth for fiscal year 2024. The Company included the $795,000 fair value of this contingent liability as a component of other liabilities on the accompanying consolidated balance sheet.

Additionally, the Company acquired 100% of the book of business, and certain assets, and assumed certain liabilities of Pulley-White on December 31, 2021, for $2.2 million in cash and $2.2 million in Company common stock. The purchase agreement for Pulley-White also includes potential earnout payments of up to an additional $250,000 provided the revenue attributable to the legacy operations of Pulley-White for the two years ended December 31, 2023, achieve certain compounded annual growth rate metrics and payments of up to $500,000 provided the revenue attributable to the legacy operations of Pulley-White for the three years ended December 31, 2024, achieve certain compounded annual growth rate metrics. The Company included the $574,000 fair value of this contingent liability as a component of other liabilities on the accompanying consolidated balance sheet.

A preliminary summary of the fair value of assets acquired and liabilities assumed from the acquisitions is as follows:


(Dollars in thousands)	Estimated Fair Value
Assets Acquired:
Definite-lived intangibles	$	14,067
Operating lease right of use assets	1,488
Prepaid expense and other assets	47
Total assets acquired	15,602

Liabilities Assumed:
Operating lease liability	1,488
Accounts payable and accrued expenses	244
Total liabilities assumed	1,732
Net assets acquired	13,870
Total consideration	21,497
Goodwill	$	7,627

With these acquisitions, the Company continues to expand the scope of product offerings to its banking customers. $4.6 million of goodwill associated with these acquisitions is deductible for income tax purposes.

A summary of total consideration is as follows:


(Dollars in thousands)	December 31, 2021
Cash paid	$	7,457
Common stock issued (177,348 shares)	7,458
Contingent consideration	1,369
Fair value of previously held interest in Lincoln Agency	5,213
Total consideration	$	21,497

The Company has determined the above noted acquisitions constitute a business combination as defined by ASC Topic 805, which establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired and the liabilities assumed. The Company has recorded the assets purchased and liabilities assumed at their estimated fair value in accordance with ASC Topic 805.

The fair value of assets acquired and liabilities assumed are preliminary and based on valuation estimates and assumptions. The accounting for business combinations require estimates and judgments regarding expectations of future cash flows of the acquired business, and the allocations of those cash flows to identifiable tangible and intangible assets. The estimates and assumptions underlying the preliminary valuations are subject to collection of information necessary to complete the valuations (specifically related to projected financial information) within the measurement periods, which are up to one year from the acquisition date. Although the Company does not currently expect material changes to the initial value of net assets acquired, the Company continues to evaluate assumptions related to the valuation of the assets acquired and liabilities assumed. Any adjustments to our estimates of purchase price allocation will be made in the periods in which the adjustments are determined, and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date.

Pro forma results of operations for these acquisitions in the aggregate are not presented because these acquisitions are not material to the Company's consolidated results of operations.

Acquisition costs, which primarily consists of professional services, are expensed as incurred as a component of noninterest expense. The Company incurred total acquisition costs of approximately $214,000 during the year ended December 31, 2021.