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Business Combinations | 12 Months Ended
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Dec. 31, 2021
Business Combinations [Abstract] |
Business Combinations | NOTE 2 – BUSINESS COMBINATIONS On November 1, 2021, the Company completed the merger with Cortland Bancorp Inc. (“Cortland”), the parent company of The Cortland Savings and Banking Company (“Cortland Bank”), pursuant to the Agreement and Plan of Merger, dated as of June 22, 2021, as amended by that certain Amendment to Agreement and Plan of Merger, dated October 12, 2021 (collectively, the “Merger Agreement”), by and among the Company, Cortland, and FMNB Merger Subsidiary IV, LLC, a wholly-owned subsidiary of the Company (“Merger Sub”). Pursuant to the terms of the Merger Agreement, on November 1, 2021, Cortland merged with and into Merger Sub (the “Merger”), with Merger Sub as the surviving entity in the Merger. Promptly following the consummation of the Merger, Merger Sub was dissolved and liquidated and Cortland Bank merged with and into the Bank (the “Bank Merger”), with the Bank as the surviving bank in the Bank Merger. The transaction received the approval of Cortland’s shareholders and all customary regulatory approvals. Pursuant to the terms of the Merger Agreement, at the effective time of the Merger, each common share, without par value, of Cortland issued and outstanding immediately prior to the effective time (except for certain Cortland common shares held directly by Cortland or the Company) was converted into the right to receive, without interest, $28.00 per share in cash or 1.75 shares of the Company’s common stock, subject to an overall limitation of 75% of the Cortland shares being exchanged for the Company’s shares and the remaining 25% being exchanged for cash. The Company issued 5.6 million shares of its common stock along with cash of $29.6 million, which represented a transaction value of approximately $128.5 million based on its closing stock price of $17.82 on October 31, 2021, the closing of the merger. In accordance with ASC 805, the Company expensed approximately $7.1 million of merger related costs during the year ended December 31, 2021. The Company recorded goodwill of $48.5 million as a result of the combination. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies, including the reduction of personnel and overlapping contracts, expected to be derived from the Company’s strategy to enhance and expand its presence in northeast Ohio. The merger offers the Company the opportunity to increase profitability by introducing existing products and services to the acquired customer base as well as add new customers in the expanded market area. The goodwill was determined not to be deductible for income tax purposes. The following table summarizes the consideration paid for Cortland and the amounts of the assets acquired and liabilities assumed on the closing date of the acquisition.
Consideration |  |  |  |
Cash |  | $ | 29,618 |
Stock |  |  | 98,921 |
Fair value of total consideration transferred |  | $ | 128,539 |
Fair value of assets acquired |  |  |  |
Cash and cash equivalents |  | $ | 113,391 |
Securities available for sale |  |  | 130,574 |
Other investments |  |  | 16,092 |
Loans |  |  | 482,168 |
Premises and equipment |  |  | 12,644 |
Bank owned life insurance |  |  | 21,547 |
Core deposit intangible |  |  | 5,886 |
Current and deferred taxes |  |  | 3,135 |
Other assets |  |  | 7,805 |
Total assets acquired |  |  | 793,242 |
Fair value of liabilities assumed |  |  |  |
Deposits |  |  | 695,274 |
Short-term borrowings |  |  | 4,246 |
Long-term borrowings |  |  | 4,262 |
Accrued interest payable and other liabilities |  |  | 9,386 |
Total liabilities |  |  | 713,168 |
Net assets acquired |  | $ | 80,074 |
Goodwill created |  |  | 48,465 |
Total net assets acquired |  | $ | 128,539 |
The following table presents unaudited pro forma information as if the Cortland acquisition that occurred on November 1, 2021 actually took place on January 1, 2020. The unaudited pro forma information for the years ended December 31, 2021 and 2020 includes adjustments of interest income on loans, amortization of core deposit intangibles arising from the transaction, interest expense on deposits and borrowings acquired. The unaudited pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effective on the assumed date.
|  | 2021 |  |  | 2020 |
Net interest income |  | $ | 130,005 |  |  | $ | 120,651 |
Provision for credit losses |  |  | 10,893 |  |  |  | 10,675 |
Noninterest income |  |  | 45,393 |  |  |  | 43,661 |
Noninterest expense |  |  | 94,236 |  |  |  | 93,045 |
Income before income taxes |  |  | 70,269 |  |  |  | 60,592 |
Income tax expense |  |  | 11,299 |  |  |  | 33,818 |
Net income |  | $ | 58,970 |  |  | $ | 50,602 |
Basic earnings per share |  | $ | 1.75 |  |  | $ | 1.50 |
Diluted earnings per share |  | $ | 1.74 |  |  | $ | 1.49 |
The above unaudited pro forma information related to 2021 excludes nonrecurring merger cost that totaled $5.7 million on an after-tax basis. On January 7, 2020, the Company completed the acquisition of Maple Leaf Financial, Inc. (“Maple Leaf”), the parent company of Geauga Savings Bank, with branches located in Cuyahoga and Geauga Counties in Ohio. The Company expects the acquisition to increase synergies and cost savings resulting from the combining of the two companies. The transaction involved both cash and 1,398,229 shares of stock totaling $43.0 million. Pursuant to the terms of the Merger Agreement, common shareholders of Maple Leaf had the right to receive $640.00 in cash or 45.5948 common shares, without par value, of the Company. Holders of outstanding and unexercised warrants to purchase Maple Leaf Common Shares received an amount in cash equal to the excess of $640.00 over $370.00, the exercise price of such warrants. Goodwill of $7.6 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 entities. The goodwill was determined not to be deductible for income tax purposes. The following table summarizes the consideration paid for Maple Leaf and the amounts of the assets acquired and liabilities assumed on the closing date of the acquisition.
Consideration |  |  |  |
Cash |  | $ | 20,423 |
Stock |  |  | 22,554 |
Fair value of total consideration transferred |  | $ | 42,977 |
Fair value of assets acquired |  |  |  |
Cash and due from financial institutions |  | $ | 18,219 |
Securities available for sale |  |  | 69,547 |
Loans |  |  | 181,280 |
Premises and equipment |  |  | 229 |
Core deposit intangible |  |  | 725 |
Other assets |  |  | 6,398 |
Total assets acquired |  |  | 276,398 |
Fair value of liabilities assumed |  |  |  |
Deposits |  |  | 183,251 |
Long-term borrowings |  |  | 54,487 |
Accrued interest payable and other liabilities |  |  | 3,257 |
Total liabilities |  |  | 240,995 |
Net assets acquired |  | $ | 35,403 |
Goodwill created |  |  | 7,574 |
Total net assets acquired |  | $ | 42,977 |

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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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