Note 2 – Acquisitions

On April 20, 2018, the Company acquired Greater Chicago Financial Corp. (“GCFC”) and its wholly-owned subsidiary, ABC Bank, which operated four branches in the Chicago metro area. In addition to the acquisition price of $41.1 million, the Company retired the convertible and nonconvertible debentures held by GCFC upon acquisition, which totaled $6.6 million, including interest due. The purchase and the retirement of the debentures were funded with the Company’s cash on hand, and all GCFC common stock was retired and cancelled simultaneous with the close of the transaction. The Company acquired $227.6 million of loans, net of purchase accounting adjustments, and $248.5 million of deposits, net of purchase accounting adjustments for time deposits. Purchase accounting adjustments recorded include a loan valuation mark of $11.2 million, a core deposit intangible of $3.1 million, a fixed asset valuation adjustment of $1.5 million, and goodwill of $10.2 million. In addition, a deferred tax asset of $3.5 million was recorded as of the date of acquisition based on analysis of the fair value of assets acquired, less liabilities assumed. None of the $10.2 million recorded as goodwill is expected to be deductible for tax purposes. Acquisition related costs incurred by the Company for the year ended December 31, 2018, totaled $3.5 million, pre-tax, and included $1.1 million of salaries and employee benefits related expenses, and $1.8 million of data processing, computer and ATM related conversion costs. No acquisition related costs were incurred in the nine months ended September 30, 2019.

The assets and liabilities associated with the acquisition of GCFC were recorded in the Consolidated Balance Sheets at their estimated fair values as of the acquisition date. In many cases the determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change, as noted below. The following table shows the estimated fair value of the assets acquired and liabilities assumed as of April 20, 2018. These fair value estimates were considered final as of March 31, 2019, and no further refinements to the values listed below are anticipated.

The below table summarizes the assets acquired, less the liabilities assumed, related to the GCFC/ABC Bank acquisition. All amounts are listed at their estimated fair values as of date of acquisition, and have been accounted for under the acquisition method of accounting.


GCFC/ABC Bank Acquisition Summary
As of Date of Acquisition
		April 20, 2018
Assets
Cash and due from banks	$	6,669
Interest bearing deposits with financial institutions		500
Securities available-for-sale, at fair value		72,091
Federal funds sold		4,300
FHLBC stock		1,549
Loans		227,594
Premises and equipment		5,339
Other real estate owned		401
Goodwill and core deposit intangible		13,280
Deferred tax assets, net		3,459
Other assets		1,767
Total assets	$	336,949







Liabilities
Noninterest bearing demand	$	58,005
Savings, NOW and money market		91,494
Time		98,999
Total deposits		248,498
Securities sold under repurchase agreements		5,623
Other short-term borrowings		10,875
Notes payable and other borrowings		23,367
Other liabilities		1,406
Total liabilities		289,769

Cash consideration paid		47,180
Total Liabilities Assumed and Cash Consideration Paid for Acquisition	$	336,949

Loans acquired in the GCFC acquisition were initially recorded at fair value with no separate allowance for loan losses. The Company reviewed the loans at acquisition to determine which loans should be considered purchased credit impaired (“PCI loans”), defined as impaired loans as those that were either not accruing interest or exhibited credit risk factors consistent with nonperforming loans at the acquisition date, or purchased non-credit impaired loans (“non-PCI loans”), defined as loans acquired that did not show signs of deteriorated credit quality at acquisition.

The following table represents the acquired loans as of date of acquisition and as of September 30, 2019:


	April 20, 2018				September 30, 2019
ABC Bank Acquired Loans	PCI		Non-PCI		PCI		Non-PCI
Fair Value	$	11,360	$	216,234	$	9,403	$	134,536
Contractually required principal and interest payments		19,447		220,308		15,083		135,822
Best estimate of contractual cash flows not expected to be collected		6,537		2,511		4,893		614
Best estimate of contractual cash flows expected to be collected		12,910		217,797		10,190		135,208