Note 10 - Business Combinations - Acquisition of Feather River Bancorp, Inc.

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Business Combination Disclosure [Text Block]

10. BUSINESS COMBINATIONS - ACQUISITION OF FEATHER RIVER BANCORP, INC.

On July 1, 2021, pursuant to a previously announced Agreement and Plan of Reorganization and Merger dated as of March 10, 2021 (the “Merger Agreement”) between the Company and Feather River Bancorp, Inc. (“FRB”), FRB merged with and into the Company with the Company continuing as the surviving corporation (the “Merger”). Immediately after the Merger, Bank of Feather River, the wholly owned bank subsidiary of FRB (“BFR”), merged with and into the Bank, with the Bank continuing as the surviving bank. The Merger and Bank Merger are collectively referred to as the “Transaction.”

As part of its business strategy, the Company regularly reviews its business strategies and opportunities to enhance the value of its franchise, including through acquisitions. The Transaction is consistent with the Company’s business strategy, which will (1) expand Plumas’s geographic presence into new markets in Northern California, (2) diversify and bring new expertise to Plumas’s agricultural lending business, and (3) strengthen the Company’s talent base.

Pursuant to the terms of the definitive merger agreement between the Company and FRB, each issued and outstanding share of common stock of FRB (the “Common Shares”), was converted into the right to receive, at the election of each holder of Common Shares, either (i) shares of common stock of the Company (“Plumas Common Stock”) or (ii) cash (the “Merger Consideration”). Shareholder elections were subject to proration such that aggregate Merger Consideration payable by the Company was comprised of (i) $4,738,583 in cash (the “Aggregate Cash Amount”) and (ii) 598,020 shares of Plumas Common Stock (the “Aggregate Plumas Share Amount”). Holders of Common Shares received either $19.14 in cash or 0.614 shares of Plumas Common Stock. The value of the total deal consideration was approximately $23.4 million, which is based upon the volume-weighted average trading price of Plumas common stock for the 10 trading days ending on the last trading day immediately preceding July 1, 2021, the closing date of the Merger.

Immediately after the Transaction, the newly combined company, operating as Plumas Bancorp with its banking subsidiary, Plumas Bank, had total assets of approximately $1.5 billion.

The following table reflects the estimated fair values of the assets acquired and liabilities assumed related to the FRB Acquisition as of July 1, 2021 (in thousands):

Assets:
Cash and cash equivalents	$	28,369
Loans		160,409
Core deposit intangible		1,037
Goodwill		5,502
Bank premises and equipment		2,657
Right of use asset		2,359
Other assets		4,627
Total assets acquired	$	204,960
Liabilities:
Deposits:
Non-interest bearing	$	89,479
Interest bearing
Savings accounts		9,353
Money market accounts		45,600
Time accounts		32,279
Total deposits		176,711
Lease Liabilities		2,359
Deferred tax liability		402
Other liabilities		2,093
Total liabilities assumed	$	181,565
Merger consideration (cash payments of $4.7 million and $18.7 million in stock)	$	23,395

The following table presents the net assets acquired from FRB and the estimated fair value adjustments as of July 1, 2021 (in thousands):

Book value of net assets acquired from FRB	$	16,292
Fair value adjustments:
Loans		2,453
Bank premises and equipment		(1,218	)
Right of use asset		2,359
Lease liability		(2,359	)
Core deposit intangible asset		1,037
Total purchase accounting adjustments	$	2,272
Deferred tax liabilities (tax effect of purchase accounting adjustments at 29.56%)		(671	)
Fair value of net assets acquired from FRB	$	17,893
Merger consideration		23,395
Less: fair value of net assets acquired from FRB		(17,893	)
Goodwill		5,502

As a result of the Acquisition, we recorded $5.5 million in goodwill, which represents the excess of the total purchase price paid over the fair value of the assets acquired, net of the fair values of liabilities assumed. Goodwill mainly reflects expected value created through the combined operations of Plumas Bank and Bank of Feather River. Goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations into Plumas Bank.  None of the goodwill recognized is expected to be deductible for income tax purposes