Acquisitions

During 2014, Peoples completed several acquisitions, which were accounted for as business combinations under the acquisition method of accounting under US GAAP. The assets purchased, liabilities assumed, and related identifiable intangible assets were recorded at their acquisition date fair values, and are detailed in the table below. The goodwill recognized will not be deductible for income tax purposes. The balances and operations related to these acquisitions are included in Peoples' consolidated financial statements from the date of acquisition.

On May 30, 2014, Peoples completed its acquisition of Midwest Bancshares, Inc. ("Midwest") for total consideration of $12.6 million, which was settled 50% in cash and 50% in Peoples' common shares. Midwest merged into Peoples, and Midwest's wholly-owned subsidiary, First National Bank of Wellston, which operated two full-service branches in Wellston and Jackson, Ohio, merged into Peoples Bank.

On August 22, 2014, Peoples completed its acquisition of Ohio Heritage Bancorp, Inc. ("Ohio Heritage") for total consideration of $37.7 million, which was settled 15% in cash and 85% in Peoples' common shares. Ohio Heritage merged into Peoples, and Ohio Heritage's wholly-owned subsidiary, Ohio Heritage Bank, which operated six full-service branches in Coshocton, Newark, Heath, Mount Vernon and New Philadelphia, Ohio, merged into Peoples Bank.

On August 25, 2014, Peoples Insurance acquired an insurance agency and related customer accounts in the Pikeville, Kentucky area for total cash consideration of $0.3 million, and recorded $0.2 million of customer relationship intangibles and $0.1 million of goodwill.

On October 24, 2014, Peoples completed its acquisition of North Akron Savings Bank ("North Akron") for total consideration of $20.1 million, which was settled 20% in cash and 80% in Peoples' common shares. North Akron, which operated four full-service branches in Akron, Cuyahoga Falls, Munroe Falls and Norton, Ohio, merged into Peoples Bank.

The following table provides the purchase price calculation as of the dates of acquisition for the three bank acquisitions, and the assets acquired and liabilities assumed at their estimated fair values.



(Dollars in thousands, except per share data)	Midwest		Ohio Heritage		North Akron
Purchase Price
Common shares outstanding at merger announcement	192,500		342,458		2,630
Cash purchase price per share	$	32.75	$	16.50	$	1,531.00
Cash consideration	6,304		5,650		4,027
Number of common shares of Peoples issued for each common share of acquired company	1.33		3.99		253.06
Price per Peoples common share, based on merger agreement	$	24.60	$	23.46	$	24.20
Common share consideration	6,305		32,020		16,106
Total purchase price	$	12,609	$	37,670	$	20,133

Net Assets at Fair Value
Assets
Cash and cash equivalents	$	3,562	$	18,231	$	11,028
Investment securities	23,198		28,865		17,597
Loans, including loans held for sale, net of deferred fees and costs	58,716		175,800		111,525
Bank premises and equipment, net	1,446		4,943		1,815
Other intangible assets	976		2,421		1,389
Other assets	1,089		9,330		1,090
Total assets	88,987		239,590		144,444
Liabilities
Deposits	77,945		174,881		108,102
Borrowings	—		42,440		24,209
Accrued expenses and other liabilities	109		2,646		212
Total liabilities	78,054		219,967		132,523
Net assets	$	10,933	$	19,623	$	11,921
Goodwill	$	1,676	$	18,047	$	8,212

Please refer to Note 6 for details of the changes in goodwill and intangible assets arising from the acquisitions. Adjustments to the acquisition date fair values are recorded in the period in which they occur, and have changed amounts previously disclosed. As a result of revised fair values, goodwill recorded in the Midwest and Ohio Heritage acquisitions increased $652,000 and $95,000, respectively from amounts previously reported as of September 30, 2014.

Acquired loans are reported net of the unamortized fair value adjustment. The following table details the fair value adjustment for acquired loans as of the acquisition date:



(Dollars in thousands, except per share data)	Midwest		Ohio Heritage		North Akron
Nonimpaired Loans
Contractual cash flows	$	81,931	$	241,575	$	154,933
Nonaccretable difference	15,786		23,227		19,162
Expected cash flows	66,145		218,348		135,771
Accretable yield	12,969		49,730		30,471
Fair value	$	53,176	$	168,618	$	105,300

Purchase Credit Impaired Loans
Contractual cash flows	$	10,782	$	13,550	$	11,477
Nonaccretable difference	4,491		4,884		4,439
Expected cash flows	6,291		8,666		7,038
Accretable yield	751		1,484		813
Fair value	$	5,540	$	7,182	$	6,225

Peoples recorded non-interest expenses related to acquisitions of $4.8 million and net losses on asset disposals of $0.3 million in the Consolidated Statement of Income during 2014.

On August 4, 2014, Peoples entered into an Agreement and Plan of Merger (the "NB&T Agreement") with NB&T. The NB&T Agreement calls for NB&T to merge into Peoples and fNB&T's wholly-owned subsidiary, The National Bank and Trust Company, which operates 22 full-service branches in southwest Ohio, to merge into Peoples Bank. This transaction is expected to close during the first quarter of 2015.