ACQUISITIONS

Completed Acquisitions

Standard Bancshares, Inc.

On January 6, 2017, the Company completed its acquisition of Standard Bancshares, Inc. ("Standard") the holding company for Standard Bank and Trust Company. Pursuant to the terms of the merger agreement, on January 6, 2017, each outstanding share of Standard common stock was canceled and converted into the right to receive 0.4350 of a share of Company common stock. Based on the closing price of a share of Company common stock of $25.34 on that date, as reported by NASDAQ, the value of the merger consideration per share of Standard common stock was $11.02. Each outstanding Standard stock settled right was redeemed for cash, and each outstanding Standard stock option and each share of Standard phantom stock was canceled and terminated in exchange for the right to receive cash, in each case, pursuant to the terms of the merger agreement. This resulted in an overall transaction value of approximately $580.7 million, which consisted of 21,057,085 shares of Company common stock and $47.1 million in cash. Goodwill of $345.3 million associated with the acquisition was recorded by the Company. All operating systems were converted during the first quarter of 2017.

During 2017, the Company finalized the fair value adjustments associated with the Standard transaction, which required a measurement period adjustment of $6.0 million to increase goodwill. This adjustment was recognized in the current period in accordance with accounting guidance applicable to business combinations.

Premier Asset Management LLC

On February 28, 2017, the Company completed its acquisition of Premier, a registered investment advisor based in Chicago, Illinois. At the close of the acquisition, the Company acquired approximately $550.0 million of trust assets under management. The fair value adjustments, including goodwill, associated with this transaction remain preliminary and may change as the Company continues to finalize the fair value of the assets and liabilities acquired.

NI Bancshares Corporation

On March 8, 2016, the Company completed its acquisition of NI Bancshares Corporation ("NI Bancshares"), the holding company for The National Bank & Trust Company of Sycamore, which included ten banking offices in northern Illinois and over $700.0 million in trust assets under management. The merger consideration was a combination of Company common stock and cash, at a purchase price of $70.1 million. Goodwill of $22.2 million associated with the acquisition was recorded by the Company.

During 2017, the Company finalized the fair value adjustments associated with the NI Bancshares transaction, which required a measurement period adjustment of $423,000 to increase goodwill. This adjustment was recognized in the current period in accordance with accounting guidance applicable to business combinations.

The following table presents the assets acquired and liabilities assumed, net of the fair value adjustments, in the Standard and NI Bancshares transactions as of the acquisition date. The assets acquired and liabilities assumed, both intangible and tangible, were recorded at their estimated fair values as of the acquisition date and have been accounted for under the acquisition method of accounting.

Acquisition Activity

(Dollar amounts in thousands, except share and per share data)



	Standard		NI Bancshares
	January 6, 2017		March 8, 2016
Assets
Cash and due from banks and interest-bearing deposits in other banks	$	102,149	$	72,533
Securities available-for-sale	214,107		125,843
Securities held-to-maturity	—		1,864
FHLB and FRB stock	3,247		1,549
Loans	1,762,303		396,181
OREO	8,424		2,863
Investment in BOLI	55,629		8,384
Goodwill	345,334		22,174
Other intangible assets	31,072		10,408
Premises, furniture, and equipment	56,517		19,636
Accrued interest receivable and other assets	60,278		16,453
Total assets	$	2,639,060	$	677,888
Liabilities
Noninterest-bearing deposits	$	675,354	$	130,909
Interest-bearing deposits	1,348,520		464,012
Total deposits	2,023,874		594,921
Borrowed funds	—		2,416
Intangible liabilities	—		230
Accrued interest payable and other liabilities	34,471		10,239
Total liabilities	2,058,345		607,806
Consideration Paid
Common stock (2017 - 21,057,085 share issued at $25.34 per share, 2016 - 3,042,494 shares issued at $18.059 per share), net of issuance costs	533,590		54,896
Cash paid	47,125		15,186
Total consideration paid	580,715		70,082
	$	2,639,060	$	677,888

Expenses related to the acquisition and integration of completed and pending transactions totaled $20.1 million, $14.4 million and $1.4 million during the years ended December 31, 2017, 2016 and 2015, respectively, and are reported as a separate component within noninterest expense in the Consolidated Statements of Income. The acquisition of Standard was considered material to the Company's financial statements; therefore, pro forma financial data and related disclosures are included in the following tables.

The unaudited pro forma combined results of operations for the years ended December 31, 2017 and 2016 are presented as if the Standard acquisition had occurred on January 1, 2016, the first day of the Company's 2016 fiscal year. The unaudited pro forma combined results of operations are presented for illustrative purposes only and do not necessarily indicate the financial results of the combined companies had the companies actually been combined at the beginning of the period presented. The unaudited pro forma combined results of operations also does not consider any potential impacts of potential revenue enhancements, anticipated cost savings and expense efficiencies, or asset dispositions, among other factors. Acquisition and integration related expenses directly attributable to the Standard acquisition have been excluded from the following table and were $19.1 million and $8.0 million for the years ended December 31, 2017 and 2016.

Unaudited Pro Forma Combined Results of Operations

(Dollar amounts in thousands)



	Years Ended
	December 31,
	2017		2016
Total revenues ⁽¹⁾	$	636,762	$	616,922
Net income	109,195		108,770


⁽¹⁾	Includes net interest income and total noninterest income.

Acquired loans are recorded at fair value, which incorporates credit risk, at the date of acquisition. No allowance for credit losses is recorded on the acquisition date. Acquired loans are separated into (i) non-PCI and (ii) PCI loans. Non-PCI loans include loans that did not have evidence of credit deterioration since origination at the acquisition date. PCI loans include loans that had evidence of credit deterioration since origination and for which it was probable at acquisition that the Company would not collect all contractually required principal and interest payments. PCI loans are accounted for based on estimates of expected future cash flows. Accretable yield is recorded as interest income over the life of the loans if the timing and amount of the expected future cash flows can be reasonably estimated. The non-accretable yield represents the difference between contractually required payments and the expected future cash flows determined at acquisition. For additional discussion regarding significant accounting policies on acquired loans see Note 1, "Summary of Significant Accounting Policies."

The following table presents additional detail for loans acquired in the Standard transaction at the acquisition date.

Standard Acquired Loans

(Dollar amounts in thousands)



	January 6, 2017
	PCI Loans		Non-PCI Loans
Fair value	$	125,382	$	1,636,921
Contractually required principal and interest payments	218,680		1,930,311
Best estimate of contractual cash flows not expected to be collected ⁽¹⁾	65,610		100,469
Best estimate of contractual cash flows expected to be collected	153,070		1,829,842


⁽¹⁾	Includes interest payments not expected to be collected due to loan prepayments as well as principal and interest payments not expected to be collected due to customer default.