Waynesboro Branch Acquisition

9 Months Ended

Sep. 30, 2021

Waynesboro Branch Acquisition

Note 16. Waynesboro Branch Acquisition

Note 16. Waynesboro Branch Acquisition

On April 26, 2021, the Bank acquired a branch from Carter Bankshares Inc. located in Waynesboro, VA. Pursuant to the transaction, the Bank acquired $14,229 thousand in deposits. In connection with its purchase of the branches, the Bank received a cash payment from Carter Bankshares Inc. of $13,758 thousand, which was net of a premium paid on deposits of $135 thousand. This acquisition provides the Bank with the opportunity to enhance its footprint in Augusta County market.

The Company has accounted for the branch purchases under the acquisition method of accounting in accordance with FASB ASC topic 805, “Business Combinations,” whereby the acquired assets and liabilities were recorded by the Bank at their estimated fair values as of their acquisition date. The acquired assets and assumed liabilities of the Waynesboro branch was measured at estimated fair value. Management made significant estimates and exercised significant judgement in accounting for the acquisition of the Waynesboro branch. Deposits were valued based upon interest rates, original and remaining terms and maturities, as well as current rates for similar funds in the same markets. Equipment was acquired based on the remaining book value from Carter Bankshares, Inc., which approximated fair value.

The statement of net assets acquired and the resulting goodwill recorded is presented in the following tables (dollars in thousands). As explained in the notes that accompany the following table, the purchased assets, assumed liabilities and identifiable assets were recorded at the acquisition date fair value.

	Acquired Balances as Recorded by Carter Bankshares Inc.			Fair Value Adjustments			Acquired Balances as Recorded by Farmers & Merchants Bank
Cash and due from banks	$	188		$	-		$	188
Premises and equipment, net		11			-			11
Right-of-use asset		50			-			50
Core deposit intangible		-			73			73
Total assets	$	249		$	73		$	322
Deposits:
Noninterest-bearing	$	1,693		$	-		$	1,693
Interest-bearing		12,401			135			12,536
Total deposits		14,094			135			14,229
Lease Liability		50			-			50
Total liabilities	$	14,144		$	135		$	14,279
Net assets acquired	$	(13,895	)	$	(62	)	$	(13,957	)

The following table summarizes the acquired assets and assumed liabilities in the purchase as of the acquisition date, and the resulting goodwill of $199 thousand resulting from the transaction (in thousands):

Assets acquired at fair value:
Cash and cash equivalents	$	188
Premises and equipment, net		11
Right-of-use asset		50
Core deposit intangible		73
Total fair value of assets acquired	$	322
Liabilities assumed at fair value:
Deposits	$	14,229
Lease liability		50
Total fair value of liabilities assumed	$	14,279
Net assets acquired at fair value	$	(13,957	)
Transaction consideration paid to Carter Bankshares Inc.	$	(13,758	)
Amount of goodwill resulting from acquisition	$	199

The total amount of goodwill arising from this transaction of $199 thousand is expected to be deductible for tax purposes, pursuant to section 197 of the Internal Revenue Code.