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BUSINESS COMBINATIONS | 6 Months Ended
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Mar. 31, 2022
BUSINESS COMBINATIONS |
BUSINESS COMBINATIONS | 2. BUSINESS COMBINATIONS On May 26, 2021, the Company completed its previously announced acquisition of Savoy Bank (“Savoy”) pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), dated as of August 27, 2020, as amended, between the Company, the Bank and Savoy. Pursuant to the Merger Agreement, Savoy was merged with and into the Bank, with the Bank surviving, in a two-step transaction (collectively, the “Merger”). The purchase price in the transaction was based upon the tangible book values of each of the Company and Savoy as of April 30, 2021 and calculated in accordance with the terms of the Merger Agreement. At the effective time of the Merger, each share of Savoy common stock, $1.00 par value was converted into the right to receive (i) $3.246 in cash and (ii) 0.141 shares of the Company’s common stock. The final aggregate purchase price was $65.5 million, or $6.49 per Savoy share. A preliminary summary of the fair value of assets received and liabilities assumed are as follows:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | As Recorded |  | Fair Value |  | As Recorded
(in thousands) | ​ | by Savoy | ​ | Adjustments | ​ | by Hanover
Assets | ​ |  | ​ | ​ |  | ​ |  |  | ​
Cash and due from banks | ​ | $ | 59,155 | ​ | $ | — |  | $ | 59,155
Investment securities available-for-sale | ​ |  | 239 | ​ |  | — |  |  | 239
Loans held for sale | ​ |  | 3,883 | ​ |  | — |  |  | 3,883
Loans held for investment | ​ |  | 569,251 | ​ |  | 8,612 | (a) |  | 577,863
Premises and equipment, net | ​ |  | 234 | ​ |  | (22) | (b) |  | 212
Core deposit intangible | ​ |  | — | ​ |  | 490 | (c) |  | 490
Accrued interest receivable | ​ |  | 5,171 | ​ |  | (650) | (d) |  | 4,521
Other assets | ​ |  | 10,432 | ​ |  | (2,925) | (e) |  | 7,507
Total assets acquired | ​ | $ | 648,365 | ​ | $ | 5,505 | ​ |  | 653,870
Liabilities | ​ |  |  | ​ |  |  |  |  |
Deposits | ​ | $ | 340,215 | ​ | $ | 2,527 | (f) | ​ | 342,742
Borrowings | ​ |  | 258,247 | ​ |  | 301 | (g) |  | 258,548
Accrued interest payable | ​ |  | 1,050 | ​ |  | — |  |  | 1,050
Other liabilities and accrued expenses | ​ |  | 3,817 | ​ |  | (342) | (h) |  | 3,475
Total liabilities assumed | ​ | $ | 603,329 | ​ | $ | 2,486 |  |  | 605,815
Net assets acquired | ​ |  |  | ​ |  |  |  |  | 48,055
Total consideration | ​ |  |  | ​ |  |  |  |  | 65,512
Goodwill | ​ |  |  | ​ |  |  |  | $ | 17,457
(a) | Represents the fair value adjustments on net book value of loans, which includes an interest rate mark and credit mark adjustment, the write-off of deferred fees/costs and premiums and the elimination of Savoy’s allowance for loan losses.
(b) | Represents the fair value adjustments to reflect the fair value of premises and equipment.
(c) | Represents the fair value of core deposit intangible recorded, which will be amortized on an accelerated basis over the estimated average life of the deposit base.
(d) | Represents an adjustment to accrued interest receivable acquired.
(e) | Represents an adjustment to other assets acquired. The largest adjustment was the net deferred tax assets resulting from the fair value adjustment related to the acquired assets, liabilities assumed, and identifiable intangible assets recorded.
(f) | Represents the fair value adjustments on time deposits, which will be treated as a reduction of interest expense over the remaining term of the time deposits.
(g) | Represents the fair value adjustments on an FHLB borrowing, which will be treated as a reduction to interest expense over the life of the borrowing.
(h) | Represents an adjustment to other liabilities assumed.
A summary of total consideration paid is as follows:
​ | ​ | ​ | ​
(in thousands, except share data) |  |  | ​
Common stock issued (1,357,567 shares issued) | ​ | $ | 32,521
Cash payments to common shareholders | ​ |  | 32,991
Total consideration paid | ​ | $ | 65,512
​ With the Savoy acquisition, the Company significantly expanded its commercial banking and Small Business Administration (“SBA”) lending capabilities. None of the goodwill associated with this acquisition is deductible for income tax purposes. All goodwill related to this acquisition was allocated to the Company’s only reporting unit, which is the Company as a whole. The estimated fair values are subject to refinement for up to one year after the closing date of the acquisition as additional information regarding closing date fair value becomes available. During this one-year period, the causes of any changes in cash flow estimates are considered to determine whether the change results from circumstances that existed at the acquisition date or if the change results from an event that occurred after the acquisition date. The Company has determined the above noted acquisition constitutes a business combination as defined by ASC Topic 805, which establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired and the liabilities assumed. The Company has recorded the assets purchased and liabilities assumed at their estimated fair value in accordance with ASC Topic 805. The following is a summary of the loans accounted for in accordance with ASC 310-30 that were acquired in the Savoy acquisition as of the merger date:
​ | ​ | ​ | ​
(in thousands) |  | ​ | ​
Contractually required principal and interest at acquisition | ​ | $ | 14,416
Contractual cash flows not expected to be collected (non-accretable discount) |  | ​ | (3,467)
Expected cash flows at acquisition |  | ​ | 10,949
Interest component of expected cash flows (accretable discount) |  | ​ | (540)
Fair value of acquired purchased credit impaired loans | ​ | $ | 10,409
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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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