Business Combinations (Tables)

12 Months Ended

Sep. 30, 2022

Business Combinations

Fair Value of Assets Received and Liabilities Assumed

A final summary of the fair value of assets received and liabilities assumed are as follows:

	As Recorded		Fair Value			As Recorded
(in thousands)	by Savoy		Adjustments			by Hanover
Assets
Cash and due from banks	$	59,155	$	—		$	59,155
Investment securities available-for-sale		239		—			239
Loans held for sale		3,883		—			3,883
Loans held for investment		569,251		8,612	(a)		577,863
Premises and equipment, net		234		(22)	(b)		212
Core deposit intangible		—		490	(c)		490
Accrued interest receivable		5,171		(650)	(d)		4,521
Other assets		10,432		(2,925)	(e)		7,507
Total assets acquired	$	648,365	$	5,505			653,870
Liabilities
Deposits	$	340,215	$	2,527	(f)		342,742
Borrowings		258,247		301	(g)		258,548
Accrued interest payable		1,050		—			1,050
Other liabilities and accrued expenses		3,817		(342)	(h)		3,475
Total liabilities assumed	$	603,329	$	2,486			605,815
Net assets acquired							48,055
Total consideration							65,512
Goodwill						$	17,457

(a) Represents the fair value adjustments on net book value of loans, which includes an interest rate mark and credit mark adjustment, the write-off of deferred fees/costs and premiums and the elimination of Savoy’s allowance for loan losses.

(b) Represents the fair value adjustments to reflect the fair value of premises and equipment.

(c) Represents the fair value of core deposit intangible recorded, which is amortized on an accelerated basis over the estimated average life of the deposit base.

(d) Represents an adjustment to accrued interest receivable acquired.

(e) Represents an adjustment to other assets acquired. The largest adjustment was the net deferred tax assets resulting from the fair value adjustment related to the acquired assets, liabilities assumed and identifiable intangible assets recorded.

(f) Represents the fair value adjustments on time deposits, which is treated as a reduction of interest expense over the remaining term of the time deposits.

(g) Represents the fair value adjustments on an FHLB borrowing, which is treated as a reduction to interest expense over the life of the borrowing.

(h) Represents an adjustment to other liabilities assumed.

Consideration Paid

(in thousands, except share data)
Common stock issued (1,357,567 shares issued)	$	31,252
Rollover options		1,269
Cash payments to common shareholders		32,991
Total consideration paid	$	65,512

Loans Acquired in Savoy Acquisition

The following is a summary of the loans accounted for in accordance with ASC 310-30 that were acquired in the Savoy acquisition as of the merger date:

(in thousands)
Contractually required principal and interest at acquisition	$	14,416
Contractual cash flows not expected to be collected (non-accretable discount)		(3,467)
Expected cash flows at acquisition		10,949
Interest component of expected cash flows (accretable discount)		(540)
Fair value of acquired purchased credit impaired loans	$	10,409