Branch Acquisitions

9 Months Ended

Sep. 30, 2011

Branch Acquisition [Abstract]

Business Combination Disclosure [Text Block]

Branch Acquisitions

On May 27,2011, the Company's wholly-owned subsidiary, Union Bank ("Union") acquired three New Hampshire branch offices of Northway Bank ("Northway"). In the transaction, Union assumed deposit relationships, and acquired performing loans, branch cash, two banking facilities, and other assets as illustrated below, including one leased branch location. Union paid a 6% premium on assumed deposits, loans were acquired at par, and the banking facilities were purchased at the most recent tax assessed value. The acquisition allows Union to expand its New Hampshire community banking franchise into western Coos County and to expand its presence in northern Grafton County. The transaction was accounted for as a business combination under current regulatory guidelines.

The May 27, 2011 acquisition-date estimated fair values of assets acquired and liabilities assumed were as follows:

Assets:	(Dollars in thousands)
Cash	$	29,607
Loans	32,910
Bank premises and equipment	517
Accrued interest receivable	197
Identified intangible asset	1,708
Goodwill	2,223
Liabilities:
Deposits	(67,015		)
Accrued interest and other liabilities	(147		)

The purchase premium of $4.2 million was allocated to assets acquired and liabilities assumed based on estimates of fair value at the date of acquisition. The fair value of the deposit accounts assumed was compared to the carrying amounts received and the difference of $1.7 million was recorded as core deposit intangible. The excess of the purchase premium over the fair value of the assets acquired, liabilities assumed, and the amount allocated for core deposit intangible was recorded as goodwill.

The loans acquired were recorded at fair value at the time of acquisition. The fair value of the loans acquired resulted in a loan premium of $545 thousand which is included in the loan balances above, less a non-accretable credit risk component of $318 thousand. The loan premium will be amortized as an adjustment to the related loan yield over the estimated average life of the loans.

Acquisition expenses incurred by the Company were approximately $62 thousandfor the three months ended September 30, 2011 and $407 thousandfor the nine months ended September 30, 2011. These expenses are included on the consolidated statements of income under the caption "Branch acquisition expenses." Management believes that substantially all of the acquisition expenses have been incurred and any additional expenses will not be material to the Company's results of operations.

The Company recorded goodwill of $2.2 million. The goodwill is not amortizable but is deductible for tax purposes. As discussed in the last paragraph of Note 4, management assesses qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the company is less than its carrying amount. Management is not aware of any such events or circumstances that would cause it to conclude that the fair value of the company is less than its carrying amount.

The acquired identified intangible asset in the table above is the core deposit intangible which is subject to amortization over the estimated 10 year average life of the core deposit base. The amortization expense is included in other noninterest expense on the consolidated statement of income and is deductible for tax purposes.

Amortization expense for the core deposit intangible was $43 thousand for the three months ended September 30, 2011 and $57 thousand from the acquisition date to September 30, 2011. As of September 30, 2011, the remaining amortization expense related to the core deposit intangible, absent any future impairment, is expected to be as follows:

	(Dollars in thousands)
2011	$	43
2012	171
2013	171
2014	171
2015	171
Thereafter	924
Total	$	1,651

Management will evaluate the core deposit intangible for impairment if conditions warrant.

The amounts of revenue and expenses related to the acquired branches since the May 27, 2011 acquisition date are included in the unaudited interim consolidated statement of income of the Company for the three and nine month periods ended September 30, 2011 as follows:

	For The Three Months Ended September 30, 2011			For The Nine Months Ended September 30, 2011
	(Dollars in thousands)
Interest and fees on loans	$	428		$	596
Interest on deposits and borrowed funds	146			199
Net interest income	282			397
Provision for loan losses	—			—
Net interest income after provision for loan losses	282			397
Noninterest income	35			52
Noninterest expenses	348			757
Lossbefore income tax benefit	(31		)	(308		)
Income tax benefit	(11		)	(105		)
Net loss	$	(20	)	$	(203	)

Disclosure of the proforma revenue and earnings of the combined entity for the current and prior reporting periods as though the acquisition had occurred at the beginning of the prior annual reporting period is not considered practicable. Retrospective application to January 1, 2011 and January 1, 2010 requires assumptions about management's intent in prior periods that cannot be independently substantiated. It is impossible to objectively distinguish information about significant estimates of amounts that provide evidence of circumstances that existed on the dates at which those amounts would be recognized, measured, or disclosed under retrospective application and would have been available when the financial statements for that prior period were issued. The Company is unable to obtain certain information from the seller regarding transfer of deposits among branches and deposit activity since January 1, 2010. It is impracticable to estimate historical information.