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Acquisition
 12 Months Ended
Dec. 31, 2023
Business Combination and Asset Acquisition [Abstract]  
Acquisition

(3) Acquisition

 

On October 1, 2022, the Company acquired 100% of the outstanding common shares of Freedom Bancshares, Inc., in exchange for $33.4 million of cash. Freedom Bancshares, Inc. was the holding company of Freedom Bank. Freedom Bank was founded in 2006 and operated out of a single location in Overland Park, Kansas. The acquisition was effected through the merger of Freedom Bancshares, Inc. with and into the Bank. The purchase price was financed with $10.0 million of debt issued by Company and through cash received from a dividend from the Bank.

 

The transaction was accounted for using the acquisition method of accounting, and as such, assets acquired and liabilities assumed were recorded at their estimated fair value on the acquisition date. Acquired loans were recorded at fair value at the acquisition date and no separate valuation allowance was established. No purchased credit impaired loans were acquired. Market value adjustments are accreted or amortized on a level yield basis over the expected term of the asset or liability. Additionally, the Company recorded a core deposit intangible of $4.2 million. The core deposit intangible is amortized on an accelerated basis over the estimated useful life of the deposits. Goodwill of $14.7 million from the acquisition consisted largely of synergies and the cost savings resulting from the combining of the operations of the banks. The goodwill is not deductible for income tax purposes. During 2023, goodwill was increased by $178,000 due to adjustments related to filing final tax returns for Freedom Bancshares, Inc and Freedom Bank, which are reflected in the table below. The Company incurred $3.4 million of acquisition related costs relating to the acquisition during 2022, of which $3.1 million was deductible for income tax purposes.

 

Results of the operations of the acquired business are included in the income statement from the effective date of the acquisition.

 

 

The following table summarizes the consideration paid for Freedom Bancshares, Inc. and the amounts of the assets acquired and liabilities assumed at the acquisition date:

 

   As of 
(Dollars in thousands)  October 1, 2022 
     
Cash paid in acquisition  $33,350 
      
Assets acquired:     
Cash and cash equivalents   32,778 
Investment securities   33,126 
Bank stocks   699 
Loans   113,910 
Bank owned life insurance   4,374 
Premises and equipment   3,782 
Core deposit intangibles   4,170 
Other   7,016 
Total assets acquired   199,855 
      
Liabilities assumed:     
Deposits   150,410 
FHLB advances   7,000 
Other borrowings   22,198 
Other liabilities   1,742 
Total liabilities assumed   181,350 
      
Net assets acquired   18,505 
      
Goodwill  $14,845 

 

The fair value of net assets acquired includes fair value adjustments to certain receivables that were not considered impaired as of the acquisition date. The fair value adjustments were determined using discounted contractual cash flows. However, the Company believes that all contractual cash flows related to these financial instruments will be collected. As such, these receivables, which have shown evidence of credit deterioration since origination were not considered impaired at the acquisition date and were not subject to the guidance relating to purchased credit impaired loans. Receivables acquired that were not subject to these requirements include non-impaired loans with a fair value and gross contractual amounts receivable of $113.9 million and $118.1 million on the date of acquisition.

 

Unaudited pro forma consolidated operating results for the years ended December 31, 2022 and December 31, 2021, as if the acquisition was consummated on January 1 of that year are as follows:

 

         
(Dollars in thousands, except per share amounts)  Years ended December 31, 
   2022   2021 
         
Net interest income  $44,750   $45,942 
Net earnings   9,098    19,922 
Earnings per share (1):          
Basic (1)   1.66    3.62 
Diluted (1)   1.65    3.61 

 

(1)All per share amounts have been adjusted to give effect to the 5% stock dividends paid during December 2022 and 2021.