Acquisitions

On April 12, 2019, Peoples completed the merger with First Prestonsburg Bancshares Inc. ("First Prestonsburg"). First Prestonsburg merged into Peoples and First Prestonsburg's wholly-owned subsidiary, First Commonwealth Bank of Prestonsburg, Inc. ("First Commonwealth"), which operates nine full-service branches located in eastern and central Kentucky, merged into Peoples Bank. Consideration of $32.4 million was paid by Peoples in the form of 12.512 Peoples common shares to shareholders of First Prestonsburg for each share of First Prestonsburg common stock they owned, which resulted in the issuance of 1,005,478 Peoples common shares. In addition, immediately prior to the closing of the merger, First Prestonsburg paid a special cash distribution of $140.30 per share (for an aggregate amount of $11.3 million) which was deemed part of the total consideration to its shareholders. As a result, First Prestonsburg shareholders received total consideration of $43.7 million.

The following table provides the preliminary purchase price calculation as of the date of acquisition for the First Prestonsburg acquisition, and the assets acquired and liabilities assumed at their estimated fair values.




(Dollars in thousands, except per share data)
Consideration
Common shares	80,362
Number of common shares of Peoples issued for each common share of acquired company	12.512
Price per Peoples common share, based on closing date	$	32.26
Common share consideration	$	32,437

Net Assets at Fair Value
Assets
Cash and due from banks	$	5,016
Interest-bearing deposits in other banks	2,797
Total cash and cash equivalents	7,813
Available-for-sale investment securities	136,596
Other investment securities	3,077
Total investment securities	139,673
Loans	129,365
Bank premises and equipment, net of accumulated depreciation	7,597
Other intangible assets	4,234
Other assets	2,207
Total assets	$	290,889
Liabilities
Deposits:
Non-interest-bearing	$	40,089
Interest-bearing	217,151
Total deposits	257,240
Short-term borrowings	14,400
Accrued expenses and other liabilities	2,061
Total liabilities	$	273,701
Net assets	$	17,188
Goodwill	$	15,249

The estimated fair values presented in the above table reflect additional information that was obtained during the three months ended September 30, 2019, which resulted in changes to certain fair value estimates made as of the date of acquisition. Adjustments to acquisition date estimated fair values are recorded during the period in which they occur and, as a result, previously recorded results have changed. The below table reflects the changes in the estimated fair value at September 30, 2019 from balances reported at June 30, 2019:



(Dollars in thousands)	Change in Fair Value
Net Assets
Cash and cash equivalents	$	17
Total investment securities	(1,053		)
Loans	(1,042		)
Bank premises and equipment, net of accumulated depreciation	(658		)
Other assets	(470		)
Accrued expenses and other liabilities	(4		)
Change in Goodwill	(3,202		)

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)	First Prestonsburg
Non-impaired Loans
Contractual cash flows	$	168,729
Nonaccretable difference	19,745
Expected cash flows	148,984
Accretable yield	28,269
Fair value	$	120,715
Credit Impaired Loans
Contractual cash flows	$	17,847
Nonaccretable difference	5,337
Expected cash flows	12,510
Accretable yield	3,860
Fair value	$	8,650

Peoples recorded non-interest expense related primarily to the First Prestonsburg acquisition of $199,000 and $7.2 million for the three and nine months ended September 30, 2019, respectively. For the three and nine months ended September 30, 2019, total non-interest income included gains of $10,000 and losses of $243,000, respectively, associated with the First Prestonsburg merger. For the three and nine months ended September 30, 2019, salaries and employee benefit costs included $68,000 and $2.4 million, respectively, related to change in control agreements, retention and severance bonuses, and regular payroll and taxes after conversion. Professional fees related to the acquisition included a reversal of expense of $6,000 for the three months ended September 30, 2019, and expense of $614,000 for the nine months ended September 30, 2019, and other non-interest expenses included $93,000 and $3.9 million (mainly contract termination fees) for the three and nine months ended September 30, 2019, respectively.