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Business Combination

12 Months Ended

Dec. 31, 2024

Business Combination

Business Combination

Note 2: Business Combination

On December 13, 2024, the Bank completed its acquisition of FMCB in an all-cash transaction with total consideration of $33.1 million. The primary reasons for the acquisition were for continued growth and to increase the Company's presence in the Twin Cities market. Immediately following the completion of the acquisition, FMCB was merged with and into the Bank, with the Bank as the surviving entity. Net interest income and net income for FMCB were $408,000 and $373,000, respectively, since the date of acquisition through December 31, 2024 and were included in the Company's Consolidated Statements of Income. Merger-related expenses of $712,000 are reflected in noninterest expense on the Consolidated Statements of Income for the year ended December 31, 2024. The pro forma information has not been included as it is impracticable due to the lack of available historical U.S. GAAP financial data and the proximity between closing on the transaction to the end of the year.

Goodwill of $9.4 million was recorded in the acquisition, which reflects expected synergies from combining the operations of the companies and is fully deductible for tax purposes over fifteen years.

The following table presents a summary of the fair values of assets acquired and liabilities assumed as of the acquisition date:

​	​	​	​
(dollars in thousands)		December 13, 2024
Assets	​	​	​
Cash and Cash Equivalents	​	$	50,380
Bank-Owned Certificates of Deposits	​	​	4,375
Securities Available for Sale	​	​	89,345
Loans, Net of PCD Allowance	​	​	119,308
FHLB Stock	​	​	252
Premises and Equipment	​	​	3,674
Accrued Interest	​	​	847
Core Deposit Intangible	​	​	7,740
Bank-Owned Life Insurance	​	​	6,065
Other Assets	​	​	243
Total Assets Acquired	​	$	282,229
​	​	​	​
Liabilities	​	​	​
Deposits	​	$	257,569
Accrued Interest Payable	​	​	865
Other Liabilities	​	​	55
Total Liabilities Assumed	​	​	258,489
Net Assets Acquired	​	$	23,740
Consideration Paid	​	​	​
Cash Paid	​	​	33,096
Total Consideration Paid	​	​	33,096
Goodwill	​	$	9,356

​

The Company acquired loans both with and without evidence of credit quality deterioration since origination. Acquired loans are recorded at their fair value at the time of acquisition with no carryover from the acquired institution’s previously recorded allowance for loan and lease losses. Acquired loans are accounted for under ASC 326 - Measurement of Credit Losses on Financial Instruments.

​

The fair value of acquired loans recorded at the time of acquisition is based upon several factors, including the timing and payment of expected cash flows, as adjusted for estimated credit losses and prepayments, and then discounting these cash flows using comparable market rates. The resulting fair value adjustment is recorded in the form of a premium or discount to the unpaid principal balance of the respective loans. As it relates to PCD loans, the net premium or net discount is adjusted to reflect the Company’s allowance for credit losses recorded for PCD loans at the time of acquisition, and the remaining fair value adjustment is accreted or amortized into interest income over the remaining life of the respective loans. As it relates to non-PCD loans, the credit loss and yield components of their fair value adjustment are aggregated, and the resulting net premium or net discount is accreted or amortized into interest income over the remaining life of the respective loans.

​

The following table presents a summary of PCD loans at acquisition:

​	​	​	​
(dollars in thousands)		December 13, 2024
Purchase Price of PCD Loans at Acquisition	​	$	2,987
Allowance for Credit Losses on PCD Loans at Acquisition	​	​	114
Non-credit Discount at Acquisition	​	​	75
Par Value of PCD Loans at Acquisition	​	$	3,176

​

X

- 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://www.xbrl.org/2003/role/disclosureRef
-Topic 805
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 5
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479907/805-20-50-5

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Topic 805
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org/805/tableOfContent

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- References

No definition available.

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