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Note 12: Business Combinations | 6 Months Ended
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Dec. 31, 2018
Notes |
Note 12: Business Combinations | Note 12: Business Combinations On November 21, 2018, the Company completed its acquisition of Gideon Bancshares Company (“Gideon”), and its wholly owned subsidiary, First Commercial Bank (“First Commercial”), in a stock and cash transaction. Upon completion of the Merger, each share of Gideon common stock was converted into the right to receive $72.48 in cash, as well as 2.04 shares of Southern Missouri common stock, with cash payable in lieu of fractional Southern Missouri shares (the “Merger Consideration”). The Company issued an aggregate of 317,225 shares of common stock for the stock portion of the Merger Consideration and paid an aggregate of approximately $11.3 million for the cash portion of the Merger Consideration. The conversion of data systems took place on December 8, 2018. The Company acquired First Commercial primarily for the purpose of conducting commercial banking activities in markets where it believes the Company’s business model will perform well, and for the long-term value of its core deposit franchise. Through December 31, 2018, the Company incurred $629,000 of third-party acquisition-related costs with $420,000 and $554,000 being included in noninterest expense in the Company's consolidated statement of income for the three- and six-month periods ended December 31, 2018, respectively, and $75,000 included in the prior fiscal year. Under the acquisition method of accounting, the total purchase price is allocated to net tangible and intangible assets based on their current estimated fair values on the date of the acquisition. Based on valuations of the fair value of tangible and intangible assets acquired and liabilities assumed, the purchase price for the Gideon acquisition is detailed in the following table.
Gideon Bancshares Company |
Fair Value of Consideration Transferred |
(dollars in thousands) |
Cash | $11,271
Common stock, at fair value | 10,757
Total consideration | $22,028
Recognized amounts of identifiable assets acquired |
and liabilities assumed |
Cash and cash equivalents | $2,894
Investment securities | 54,866
Loans | 144,286
Premises and equipment | 3,663
Identifiable intangible assets | 4,125
Miscellaneous other assets | 5,926
Deposits | (170,687)
FHLB Advances | (18,701)
Note Payable | (4,400)
Miscellaneous other liabilities | (956)
Total identifiable net assets | 21,016
Goodwill | $1,012
Of the total estimated purchase price of $22.0 million, $4.1 million has been allocated to core deposit intangible. Additionally, $1.0 million has been allocated to goodwill and none of the purchase price is deductible. Goodwill is attributable to synergies and economies of scale expected from combining the operations of the Bank and First Commercial. Total goodwill was assigned to the acquisition of First Commercial. The core deposit intangible will be amortized over seven years on a straight line basis. Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include information such as past-due and non-accrual status, our assessment of the ability of the borrower to service the debt, and recent loan-to-value percentages. Purchased credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30) and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans is not carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition using individual analysis of each purchased credit impaired loan. The Company acquired the $154.0 million loan portfolio at an estimated fair value discount of $9.7 million. The accounting for the business combination is not yet complete and therefore all required disclosures for a business combination have not been provided. When completed, the excess of expected cash flows above the fair value of the performing portion of loans will be accreted to interest income over the remaining lives of the loans in accordance with ASC 310-30. Final estimates of certain loans, those for which specific credit-related deterioration, since origination, will be recorded at fair value, reflecting the present value of the amounts expected to be collected. Income recognition of these loans will be based on reasonable expectation about the timing and amount of cash flows to be collected. The acquired business contributed revenues of $1.2 million and earnings of $405,000 for the period from November 21, 2018 through December 31, 2018. The following unaudited pro forma summaries present consolidated information of the Company as if the business combination had occurred on July 1, 2018 and 2017:
|  | Pro Forma
|  | Three months ended
|  | December 31,
|  | 2018 | 2017
Revenue |  | $ 22,879 | $ 21,237
Earnings |  | 7,629 | 5,314
|  | Pro Forma
|  | Six months ended
|  | December 31,
|  | 2018 | 2017
Revenue |  | $ 45,739 | $ 41,656
Earnings |  | 14,948 | 10,587

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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