Business Combinations

9 Months Ended

Sep. 30, 2020

Business Combinations [Abstract]

Business Combination Disclosure

Acquisition

Santander Branch Acquisition

On September 6, 2019, the Company's banking subsidiary, First Commonwealth Bank, completed its acquisition of 14 full service branches from Santander Bank N.A. ("Santander") receiving $329.5 million in cash. This acquisition further expands the Company's market into State College, Lock Haven, Williamsport and Lewisburg, Pennsylvania and included the purchase of $101.2 million in loans and $471.4 million in deposits.

The table below summarizes the final purchase price allocation and the net assets acquired (at fair value) and consideration transferred in connection with the Santander acquisition (dollars in thousands):

Consideration received
Cash received	$	329,533
Total consideration received			$	329,533
Fair Value of Assets Acquired
Cash and cash equivalents	2,935
Loans	99,956
Premises and other equipment	3,637
Core deposit intangible	5,615
Other assets	770
Total assets acquired	112,913
Fair Value of Liabilities Assumed
Deposits	471,386
Other Liabilities	186
Total liabilities assumed	471,572
Total Fair Value of Identifiable Net Assets			(358,659)
Goodwill			$	29,126

The Company determined that this acquisition constitutes a business combination as defined in FASB ASC Topic 805, “Business Combinations.” Accordingly, as of the date of the acquisition, the Company recorded the assets acquired and liabilities assumed at fair value. The Company determined fair values in accordance with the guidance provided in FASB ASC Topic 820, “Fair Value Measurements and Disclosures.” Acquired loans were recorded at fair value with no carryover of the related allowance for loan losses. At the date of acquisition, none of the loans were accounted for under the guidance of ASC Topic 310-30, “Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality.” The fair value of acquired loans and certificate of deposits is established by discounting the expected future cash flows with a market discount rate for like maturities and risk instruments. The $100.0 million fair value of acquired loans is the result of $101.2 million in loans acquired from Santander and the recognition of a net combined yield and credit mark adjustment of $1.2 million. The $471.4 million fair value of acquired deposits is the result of $471.0 million in deposits acquired and the recognition of a yield mark adjustment of $0.4 million on the certificate of deposits. A $5.6 million core deposit intangible was recognized for core deposits acquired.

The goodwill of $29.1 million arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company with the branches acquired from Santander. The goodwill for this transaction is expected to be deducted over a 15-year period for income tax purposes.

Costs related to the acquisition totaled $3.7 million. These amounts were expensed as incurred and are recorded as a merger and acquisition related expense in the Consolidated Statements of Income.