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Business Combinations
 3 Months Ended
Mar. 31, 2017
Business Combinations [Abstract]  
Business Combinations

Business Combinations:

 

On March 13, 2017, the Company announced the agreement and plan of merger with Monitor Bancorp, Inc. (“Monitor”), the holding company for Monitor Bank.  Pursuant to the agreement, the actual consideration to be paid will be calculated based on Monitor’s consolidated tangible book value per share as of March 31, 2017, plus the after-tax proceeds of the anticipated sale of Monitor’s interest in the Monitor Wealth Group (in aggregate, “March 31 TBV”).  Each shareholder of Monitor will be entitled to elect to receive consideration in cash or in Farmers’ common shares, subject to an overall limitation of 85% of the shares being exchanged for Farmers’ shares and 15% for cash.  Based on a current estimate of March 31 TBV, the transaction would be valued at approximately $7.8 million with $1.4 million of goodwill recorded.  The merger is expected to qualify as a tax-free reorganization for those shareholders electing to receive Farmers’ shares.  The transaction is subject to receipt of Monitor shareholder approval and customary regulatory approvals.  The Company expects the transaction to close late in the second quarter or early in the third quarter of 2017.

On June 1, 2016, the Bank completed the acquisition of the Bowers Insurance Agency, Inc., and merged all activity of Bowers with Insurance, the Bank’s wholly-owned insurance agency subsidiary.  The Bowers group is engage in selling insurance including commercial, farm, home, and auto property/casualty insurance and will help to meet the needs of all the Company’s customers.  The transaction involved both cash and 123,280 shares of stock totaling $3.2 million, including up to $1.2 million of future payments, contingent upon Bowers meeting performance targets, with an estimated fair value at the acquisition date of $880 thousand.  The acquisition is part of the Company’s plan to increase the levels of noninterest income and to complement the existing insurance services currently being offered.

Goodwill of $1.8 million, which is recorded on the balance sheet, arising from the acquisition consisted largely of synergies and the cost savings resulting from the combining of the companies.  The goodwill was determined not to be deductible for income tax purposes.  The fair value of other intangible assets of $1.6 million is related to client relationships, company name and noncompetition agreements.

 

The following table summarizes the consideration paid for Bowers and the amounts of the assets acquired and liabilities assumed on the closing date of the acquisition.

 

(In Thousands of Dollars)

 

 

 

Consideration

 

 

 

Cash

$

1,137

 

Stock

 

1,138

 

Contingent consideration

 

880

 

Fair value of total consideration transferred

$

3,155

 

Fair value of assets acquired

 

 

 

Cash

$

64

 

Premises and equipment

 

290

 

Other assets

 

34

 

Total assets acquired

 

388

 

Fair value of liabilities assumed

 

124

 

Net assets acquired

$

264

 

 

 

 

 

Assets and liabilities arising from acquisition

 

 

 

Identified intangible assets

 

1,630

 

Deferred tax liability

 

(588

)

Goodwill created

 

1,849

 

Total net assets acquired

$

3,155

 

The following table presents pro forma information as if the above acquisition that occurred during June 2016 actually took place at the beginning of 2016.  The pro forma information includes adjustments for merger related costs, amortization of intangibles arising from the transaction and the related income tax effects.  The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transactions been effective on the assumed date.

 

 

For Three Months Ended March 31,

 

(In thousands of dollars except per share results)

2016

 

Net interest income

$

16,747

 

Net income

$

4,810

 

Basic and diluted earnings per share

$

0.18