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Note 2 - Bank Acquisitions | 12 Months Ended
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Dec. 31, 2020
Notes to Financial Statements |
Business Combination Disclosure [Text Block] | Note 2. Bank Acquisitions On October 25, 2019, the Company completed the purchase of ISSB, including its’ four branches in Creston, Diagonal, Lennox and Corning, Iowa (the “ISSB Acquisition”). The ISSB Acquisition was consistent with the Bank’s strategy to strengthen and expand its Iowa market share. The ISSB’s acquired assets and liabilities were recorded at fair value at the date of acquisition. This bank was purchased for cash consideration of $22.6 million. As a result of the acquisition, the Company recorded a core deposit intangible asset of $1,891,000 and goodwill of approximately $2,680,000. The results of operations for this acquisition have been included since the transaction date of October 25, 2019. Since the acquisition date, there has been no significant credit deterioration of the acquired loans. Non-routine expenses associated with this transaction were approximately $195,000 for the year ended December 31, 2019. The following table summarizes the fair value of the total consideration transferred as a part of the ISSB Acquisition as well as the fair value of identifiable assets acquired and liabilities assumed as of the effective date of the transactions (in thousands):
|  | 2019 |
Cash consideration transferred |  | $ | 22,643 |
Recognized amounts of identifiable assets acquired and liabilities assumed: |  |  |  |
Cash and due from banks |  | $ | 3,188 |
Federal funds sold |  |  | 2,792 |
Interest-bearing deposits in financial institutions |  |  | 21,035 |
Securities available-for-sale |  |  | 33,615 |
Federal Home Loan Bank stock at cost |  |  | 365 |
Loans receivable |  |  | 137,776 |
Accrued interest receivable |  |  | 2,888 |
Bank premises and equipment |  |  | 2,452 |
Other real estate owned |  |  | 3,582 |
Bank-owned life insurance |  |  | 2,499 |
Core deposit intangible asset |  |  | 1,891 |
Other assets |  |  | 204 |
Deposits |  |  | (188,631 | )
Securities sold under repurchase agreements |  |  | (1,747 | )
Accrued interest payable and other liabilities |  |  | (1,946 | )
Total identifiable net assets |  |  | 19,963 |
Goodwill |  | $ | 2,680 |
On October 25, 2019, associated with the ISSB Acquisition, the contractual balance of loans receivable acquired was $139,703,000 and the contractual balance of the deposits assumed was $188,068,000. Loans receivable acquired include commercial real estate, 1-4 family real estate, agricultural real estate, commercial operating, agricultural operating and consumer loans. During the first quarter of 2020, an additional $310,000 of goodwill was recorded due to an adjustment to the initial purchase price. The acquired loans associated with the ISSB Acquisition at contractual values as of October 25, 2019 were determined to be risk rated as follows (in thousands):
|  | 2019 |
Pass |  | $ | 121,346 |
Watch |  |  | 12,333 |
Special Mention |  |  | - |
Substandard |  |  | 6,024 |
Total loans acquired at book value |  | $ | 139,703 |
The core deposit intangible asset associated with the ISSB Acquisition is amortized to expense on a declining basis over a period of ten years. The loan market valuation is accreted to income on a declining basis over a ten-year period. The time deposits market valuation is amortized to expense on a declining basis over a two-year period.

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