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Acquisition

3 Months Ended

Mar. 31, 2022

Note 2 – Acquisition

On December 1, 2021, the Company completed its acquisition of West Suburban Bancorp, Inc. (“West Suburban”), a bank holding company, and its wholly owned subsidiary, West Suburban Bank, based in Lombard, Illinois, with operations throughout our existing market footprint. This acquisition brought increased scale and new markets to the Company, and provided new product offerings and line of business opportunities. At closing, the Company acquired $2.94 billion of assets, $1.50 billion of loans, $1.07 billion of securities, and $2.69 billion of deposits, net of fair value adjustments. Under the terms of the merger agreement, each outstanding share of West Suburban common stock was exchanged for 42.413 shares of Company common stock, plus $271.15 of cash. This resulted in merger consideration of $295.2 million, based on the closing price of the Company’s common stock on the date of acquisition, which consisted of 15.7 million shares of the Company’s common stock and $100.7 million of cash. Goodwill of $67.7 million associated with the acquisition was recorded by the Company, which was the result of expected synergies, operational efficiencies and other factors.

The acquisition of West Suburban was accounted for as a business combination. We recorded the estimate of fair value based on initial valuations available at December 1, 2021. The determination of estimated fair value required management to make assumptions related to discount rates, expected future cash flows, market conditions and other future events that are often subjective in nature and may require adjustments. Accordingly, these estimated fair values are considered preliminary as of March 31, 2022, and are subject to adjustment for up to one year after December 1, 2021. These adjustments may include: (i) changes in deferred tax assets or liabilities related to fair value estimates and changes in the expected realization of items considered to be net operating loss carryforwards due to tax calculations still

in process, and (ii) changes in goodwill as a result of the net effect of any adjustments. No adjustments were identified during the quarter ended March 31, 2022. None of the $67.7 million of goodwill recorded is expected to be deductible for income tax purposes.

The following table provides the preliminary purchase price allocation as of the December 1, 2021 closing date of the merger for the estimated fair value of the assets acquired and liabilities assumed, as recorded by the Company.


West Suburban Acquisition Summary
As of Date of Acquisition

	December 1, 2021
Assets
Cash and due from banks	$	16,794
Interest bearing deposits with financial institutions		232,880
Securities available-for-sale and held-to maturity, at fair value		1,066,373
FHLBC stock		3,340
Loans, net of allowance for credit losses Day One PCD loan adjustment		1,502,118
Premises and equipment		47,456
Other real estate owned		5,552
Core deposit intangible		14,772
Deferred tax assets		2,093
Other assets		52,710
Total assets	$	2,944,088

Liabilities
Noninterest bearing demand	$	409,141
Savings, NOW and money market		2,069,890
Time		215,205
Total deposits		2,694,236
Reserve for unfunded commitments		1,787
Other liabilities		20,629
Total liabilities		2,716,652

Cash consideration paid		100,679
Stock issued for acquisition		194,484
Total Liabilities Assumed and Cash and Stock Consideration Paid for Acquisition	$	3,011,815
Goodwill	$	67,727

Expenses related to the West Suburban acquisition totaled $5.6 million for the quarter ended March 31, 2022, and $13.2 million during the year ended December 31, 2021, and are reported within noninterest expense based on the line items impacted, which are primarily salaries and employee benefits, occupancy, furniture and equipment, computer and data processing, legal fees, and other expense in the Consolidated Statements of Income.

Purchased loans and leases that reflect a more-than-insignificant deterioration of credit from origination are considered purchased credit deteriorated (“PCD”) loans. For PCD loans, the initial estimate of expected credit losses was recognized in the allowance for credit losses (“ACL”) on the date of acquisition using the same methodology as other loans and leases held-for-investment. The following table provides a summary of loans purchased as part of the West Suburban acquisition which were individually evaluated and determined to be PCD loans at acquisition.


	As of
West Suburban Acquired PCD Loans	December 1, 2021
Par value of acquired loans	$	108,241
Allowance for credit losses		(12,075)
Non-credit discount		(1,723)
Purchase price of PCD loans at acquisition	$	94,443

The following table presents the carrying amount of all acquired loans as of March 31, 2022 and December 21, 2021, including loans that, as of the acquisition date, had not experienced a more-than-insignificant deterioration in credit quality since origination (“non-PCD loans”):


Acquired Loan Detail	As of March 31, 2022						As of December 31, 2021
	PCD		Non-PCD		Total		PCD		Non-PCD		Total
West Suburban acquired loans	$	88,601	$	1,354,305	$	1,442,906	$	102,409	$	1,418,752	$	1,521,161
ABC Bank acquired loans		4,534		57,904		62,438		4,547		64,236		68,783
Talmer Bank acquired loans		-		44,836		44,836		-		45,858		45,858
Total acquired loans net book value	$	93,135	$	1,457,045	$	1,550,180	$	106,956	$	1,528,846	$	1,635,802
Accretion recorded on acquired loans year to date	$	400	$	2,016	$	2,416	$	401	$	565	$	966