Business Combination

9 Months Ended

Sep. 30, 2016

Business Combinations [Abstract]

Business Combination

2. BUSINESS COMBINATION

On July 15, 2016, the Corporation completed its previously announced acquisition of Lake National Bank (“LNB”) of Mentor, Ohio for $22.50 per share in cash, resulting in consideration paid to LNB shareholders of $24.75 million. Following completion of the merger, the two branches of LNB in Mentor, Ohio are operating as part of the ERIEBANK division of CNB Bank.

As disclosed in the accompanying consolidated statements of income, the Corporation incurred merger costs of $266 thousand and $481 thousand for the three and nine months ended September 30, 2016. All merger costs have been expensed as incurred.

The following table summarizes the consideration paid for LNB and the amounts of the assets acquired and liabilities assumed that were recognized at the acquisition date:

Consideration paid:
Cash	$	24,750
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents		21,884
Securities available for sale		450
Loans		122,036
FHLB and other equity interests		637
Premises and equipment		3,242
Bank owned life insurance		2,152
Mortgage servicing rights		109
Core deposit intangible		1,583
Accrued interest receivable and other assets		3,301
Total assets acquired		155,394
Demand deposits		81,472
Time deposits		58,311
Accrued interest payable and other liabilities		2,634
Total liabilities assumed		142,417
Total identifiable net assets		12,977
Goodwill	$	11,773

Valuation of some assets acquired or created including, but not limited to, goodwill are preliminary and could be subject to change.

Included in accrued interest receivable and other assets is a deferred tax asset of $249 which represents the tax effect of temporary differences between the tax basis and fair values assigned to the assets and liabilities.

Acquired loans were recorded at fair value with no carryover of the related allowance for loan losses. Determining the fair value of loans involved estimating the amount and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest. The Corporation acquired $126,134 of gross loans and recognized a net combined yield and credit mark of $4,098.

Goodwill of $11,773 arising from the acquisition consisted largely of synergies and the cost savings resulting from the combining of the operations of the Corporation and Lake National Bank. None of the goodwill is expected to be deductible for income tax purposes.