Recent Events, Including Mergers and Acquisitions

9 Months Ended

Sep. 30, 2022

Recent Events, Including Mergers and Acquisitions [Abstract]

Recent Events, Including Mergers and Acquisitions

Note 2: Recent Events, Including Mergers and Acquisitions

Business Combinations

On December 9, 2021, the Company acquired 100% of the outstanding equity of Watonga Bancshares, Inc. (“Watonga”), the bank holding company for Cornerstone Bank, for $29.3 million in cash. Immediately following the acquisition, Watonga was dissolved and Cornerstone Bank merged with and into Bank7.

An updated preliminary summary of the fair value of assets acquired and liabilities assumed from Watonga are as follows:

	Estimated Fair Value
(in thousands)
Assets Acquired
Cash and cash equivalents	$	41,747
Available-for-sale debt securities		86,166
Federal funds sold		7,941
Loans		117,335
Premises and equipment		8,669
Core deposit intangible		1,254
Prepaid expenses and other assets		4,512
Total assets acquiried	$	267,624
Liabilities Assumed
Deposits	$	243,487
Accounts payable and accrued expenses		1,696
Total liabilities assumed	$	245,183
Net assets acquired	$	22,441
Consideration transferred		29,498
Goodwill	$	7,057

Goodwill decreased $649,000 and decreased $411,000 for the three months and nine months ended September 30, 2022, respectively, related to the resolution of contractual obligations, assessment of the fair value of premises and equipment, and tax provision adjustments.

As of the acquisition date, the Company evaluated $117.3 million of net loans ($118.5 million gross loans less $1.2 million discount) purchased in conjunction with the acquisition of Watonga Bancshares, Inc. in accordance with the provisions of FASB ASC Topic 310-20, Nonrefundable Fees and Other Costs. As of September 30, 2022, the net loan balance of the ASC Topic 310-20 purchased loans is $68.8 million ($69.7 million gross loans less $818,000 discount). The fair value discount is being accreted into interest income over the weighted average life of the loans using a constant yield method.

The fair values of assets acquired and liabilities assumed are preliminary and based on valuation estimates and assumptions. The accounting for business combinations require estimates and judgments regarding expectations of future cash flows of the acquired business, and the allocations of those cash flows to identifiable tangible and intangible assets. The estimates and assumptions underlying the preliminary valuations are subject to collection of information necessary to complete the valuations (specifically related to projected financial information) within the measurement periods, which are up to one year from the acquisition date. Although the Company does not currently expect material changes to the initial value of net assets acquired, the Company continues to evaluate assumptions related to the valuation of the assets acquired and liabilities assumed. Any adjustments to our estimates of purchase price allocation will be made in the periods in which the adjustments are determined, and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date.