v3.25.2
Note 2 - Business Combination
 6 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Business Combination Disclosure [Text Block]

Note 2: Business Combination

 

On June 1, 2024 (the “Acquisition Date”), the Company completed its acquisition of Frontier Community Bank ("FCB"), a Virginia chartered commercial bank headquartered in Waynesboro, Virginia, in accordance with the definitive merger agreement entered on January 23, 2024, by and among the Company, the Bank and FCB. Upon completion of the merger, FCB merged with and into the Bank. Each share of FCB common stock was converted into either $14.48 in cash or 0.4250 shares of the Company’s common stock, with FCB shareholders having the ability to elect the merger consideration to be received, subject to the allocation and proration procedures set forth in the FCB Merger Agreement. The Company issued 464,855 shares of common stock and paid cash consideration of $2,050 to former FCB shareholders in the acquisition. As a result of the transaction, the Bank expanded its operations into the Waynesboro, Staunton and Lynchburg, Virginia markets.

The acquisition of FCB was accounted for as a business combination using the acquisition method of accounting. Assets acquired, liabilities assumed, and consideration paid were recorded at estimated fair value on the Acquisition Date. The excess of the purchase price over the fair value of the net assets was recorded as provisional goodwill and represents the benefit from the transaction that is not otherwise quantifiable, including expected management and operational synergies and intangible assets that do not qualify for separate recognition. The Company does not expect that any portion of goodwill will be deductible. Please refer to the Company’s 2024 Form 10-K, Note 22: Business Combination for additional information of the acquisition of FCB.

The following table presents the calculation of the purchase price and the fair value of the identifiable assets and liabilities as of the Acquisition Date.

 

June 1, 2024

 

As Recorded by FCB

 

 

Estimated Fair Value Adjustments

 

 

Estimated Fair Values as Recorded by NBI

 

Purchase Price Consideration:

 

 

 

 

 

 

 

 

 

Stock consideration(1)

 

 

 

 

 

 

 

$

14,299

 

Cash consideration (2)

 

 

 

 

 

 

 

 

2,050

 

Total purchase price consideration

 

 

 

 

 

 

 

$

16,349

 

 

 

 

 

 

 

 

 

 

 

Identifiable assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,993

 

 

$

(59

)

 

$

8,934

 

Securities

 

 

9,325

 

 

 

(5

)

 

 

9,320

 

Loans, gross, purchased performing

 

 

115,589

 

 

 

(7,720

)

 

 

107,869

 

Loans, gross, purchased credit deteriorated

 

 

11,157

 

 

 

(822

)

 

 

10,335

 

Loans in process

 

 

539

 

 

 

–

 

 

 

539

 

Deferred fees and costs on loans

 

 

34

 

 

 

(34

)

 

 

–

 

Allowance for credit losses on loans

 

 

(881

)

 

 

881

 

 

 

–

 

Premises and equipment

 

 

3,003

 

 

 

449

 

 

 

3,452

 

Core deposit intangible

 

 

–

 

 

 

2,100

 

 

 

2,100

 

Other assets

 

 

4,998

 

 

 

966

 

 

 

5,964

 

Total identifiable assets acquired

 

$

152,757

 

 

$

(4,244

)

 

$

148,513

 

 

 

 

 

 

 

 

 

 

 

Identifiable Liabilities

 

 

 

 

 

 

 

 

 

Deposits

 

$

130,323

 

 

$

(606

)

 

$

129,717

 

Borrowings

 

 

5,250

 

 

 

(20

)

 

 

5,230

 

Other liabilities

 

 

1,960

 

 

 

131

 

 

 

2,091

 

Total identifiable liabilities assumed

 

$

137,533

 

 

$

(495

)

 

$

137,038

 

 

 

 

 

 

 

 

 

 

 

Fair value of net assets acquired

 

 

 

 

 

 

 

$

11,475

 

 

 

 

 

 

 

 

 

 

 

Goodwill(3)

 

 

 

 

 

 

 

$

4,874

 

 

(1)
The Company issued 464,855 shares of its common stock valued at $30.76 per share, which was the closing price of the Company’s common stock on May 31, 2024, the last day of trading prior to the consummation of the acquisition.
(2)
Cash consideration was paid for shareholder elections, fractional shares and to settle outstanding vested stock options. The merger agreement provided for up to 10% of consideration to be paid in cash of $14.48 per FCB common share, at the shareholders’ election. Payments for shareholder elections and fractional shares totaled $1,769. Outstanding and vested options were settled at the difference between $14.48 and the strike price and totaled $281.
(3)
The Company kept the measurement of goodwill open until December 31, 2024 in order to reflect any adjustments to the fair value of assets acquired and liabilities assumed that arose during the Company’s final review procedures. The Company recorded a small measurement period adjustment to goodwill between the acquisition date and December 31, 2024. For more information, please refer to the Company’s 2024 Form 10-K, Note 17: Goodwill and Other Intangibles.