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BUSINESS COMBINATIONS | 3 Months Ended
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Jun. 30, 2018
Business Combinations [Abstract] |
BUSINESS COMBINATIONS |
3. | BUSINESS COMBINATIONS
On February 17, 2017, the Company acquired certain assets and assumed certain liabilities of Merchants Bancorp and its wholly-owned subsidiary, MBank. MBank provided community banking services to individuals and businesses from banking offices in the Portland, Oregon metropolitan area. As a result of the MBank transaction, the Company has increased its presence in the Portland, Oregon metropolitan area and further diversified its loan, customer and deposit base. Total consideration paid under the MBank transaction consisted of $12.1 million in cash. There were no transfers of common stock or other equity instruments in connection with the MBank transaction, and the Company did not obtain any equity interests in Merchants Bancorp or MBank. The acquired assets and assumed liabilities were recorded in the Company's consolidated balance sheets at their estimated fair values as of the February 17, 2017 transaction date, and the related results of operations have been included in the Company's consolidated statements of income since the transaction date. The excess of the consideration transferred over the fair value of the identifiable net assets acquired was recorded as goodwill. The goodwill arising from the transaction consists largely of the synergies and economies of scale expected from combining the operations of the Company and the acquired business. In most instances, determining the estimated fair values of the acquired assets and assumed liabilities required the Company to estimate cash flows expected to result from those assets and liabilities and to discount those cash flows at the appropriate rate of interest. Differences may arise between contractually required payments and the expected cash flows at the acquisition date due to items such as estimated credit losses, prepayments or early withdrawals, and other factors. The most significant of those determinations related to the valuation of acquired loans. For such loans, the excess of cash flows expected at acquisition over the estimated fair value is recognized as interest income over the remaining lives of the loans. In accordance with GAAP, there was no carry-over of MBank's previously established allowance for loan losses. Goodwill is expected to be fully deductible for income tax purposes as, under the terms of the MBank transaction, the Company purchased certain assets and assumed certain liabilities of MBank but did not acquire any equity or other ownership interests. The following table summarizes the fair value of consideration transferred, the estimated fair values of assets acquired and liabilities assumed as of the acquisition date, and the resulting goodwill relating to the transaction (in thousands):
|  | At February 17, 2017 |
|  | Book Value |  |  | Fair Value Adjustment |  |  | Estimated Fair Value |
Cash consideration transferred |  |  |  |  |  |  |  | $ | 12,080 |
Recognized amounts of identifiable assets acquired and liabilities assumed |  |  |  |  |  |  |  |  |  |
Identifiable assets acquired |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 27,196 |  |  | $ | - |  |  |  | 27,196 |
Loans receivable |  |  | 115,283 |  |  |  | (3,258 | ) |  |  | 112,025 |
CDI |  |  | - |  |  |  | 1,363 |  |  |  | 1,363 |
Premises and equipment |  |  | 1,769 |  |  |  | 399 |  |  |  | 2,168 |
BOLI |  |  | 2,113 |  |  |  | - |  |  |  | 2,113 |
Accrued interest receivable and other assets |  |  | 431 |  |  |  | 90 |  |  |  | 521 |
Total identifiable assets acquired |  |  | 146,792 |  |  |  | (1,406 | ) |  |  | 145,386 |
Liabilities assumed |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 130,572 |  |  |  | 235 |  |  |  | 130,807 |
Junior subordinated debentures |  |  | 5,155 |  |  |  | (1,468 | ) |  |  | 3,687 |
Accrued expenses and other liabilities |  |  | 293 |  |  |  | 23 |  |  |  | 316 |
Total liabilities assumed |  |  | 136,020 |  |  |  | (1,210 | ) |  |  | 134,810 |
Total identifiable net assets acquired |  | $ | 10,772 |  |  | $ | (196 | ) |  |  | 10,576 |
Goodwill recognized |  |  |  |  |  |  |  |  |  | $ | 1,504 |
The acquired loan portfolio was valued using Level 3 inputs (see Note 11) and included the use of present value techniques (including cash flow estimates) and incorporated assumptions that the Company believes marketplace participants would use in estimating fair values. Credit discounts were included in the determination of the fair value of the loans acquired; therefore, an allowance for loan losses was not recorded at the acquisition date. Acquired loans are evaluated upon acquisition and classified as either purchased credit-impaired ("PCI") or purchased non-credit-impaired. PCI loans reflect credit deterioration since origination such that it is probable at acquisition that the Company will be unable to collect all contractually required payments. The Company determined there were no PCI loans acquired in connection with the MBank transaction. For purchased non-credit-impaired loans, the difference between the fair value and unpaid principal balance of the loan at the acquisition date is amortized or accreted to interest income over the life of the loans. Any subsequent deterioration in credit quality is recognized by recording an allowance for loan losses. CDI represents the value assigned to demand, interest checking, money market and savings accounts acquired as part of an acquisition. CDI represents the future economic benefit of the potential cost savings from acquiring core deposits as part of an acquisition compared to the cost of alternative funding sources. CDI is amortized to non-interest expense using an accelerated method based on an estimated runoff of related deposits over a period of ten years. CDI is evaluated for impairment and recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable, with any changes in estimated useful life accounted for prospectively over the revised remaining life.

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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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