SBM Acquisition |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SBM Acquisition | SBM Acquisition On October 16, 2015, the Company completed its acquisition of 100% of SBM's, the parent company of The Bank of Maine, common stock. The Merger qualified as a tax-free reorganization for federal income tax purposes and, pursuant to the terms and Merger Agreement, each share of SBM common stock outstanding at the effective time of the acquisition was converted into the right to receive, at the election of the stockholder and subject to the allocation and proration procedures described in the Merger Agreement, either: (1)$206.00 in cash, without interest or (2) 5.421 shares of common stock of the Company; provided that 80% of the SBM shares outstanding immediately prior to the effective time of the acquisition were converted into the right to receive common stock of the Company and the remaining SBM shares were converted into the right to receive cash. The total consideration paid by the Company was $136.7 million, consisting of (i) $26.1 million in cash; (ii) 2,749,762 shares of Camden common stock valued at $108.6 million, based on the October 16, 2015 closing price of the Company's common stock of $39.48 per share; and (iii) the fair value of 92,688 non-qualified stock options issued under the 2012 Plan of $2.0 million. Pursuant to the Merger Agreement, all unexercised non-qualified stock options held by SBM option holders immediately vested upon completion of the acquisition and were to roll into the Company's non-qualified stock options using the 5.421 share conversion ratio (rounded down to the nearest whole share). The non-qualified stock options issued under the Company's 2012 Plan maintained the same terms and conditions as previously held under SBM's equity plan. The fair value of the non-qualified stock options approximated the intrinsic value of the non-qualified stock options at acquisition date. The Merger complimented the Company's existing footprint within Maine, while expanding its presence in the higher growth Southern Maine market and into Massachusetts. After completion of the Merger, the Company now has 64 banking centers and three specialized lending offices spread across Maine, New Hampshire and Massachusetts. In addition to providing incremental market share and increasing its presence within Southern Maine, the acquisition improved the Company's interest rate risk exposure in a rising rate environment through a larger mix of variable rate loans as percentage of total loans and additional core deposits (non-interest checking, interest checking, savings and money market accounts) totaling $497.4 million. The Company accounted for the Merger using the acquisition method. The acquisition method requires the acquirer to recognize the assets acquired and the liabilities assumed at their fair values as of the acquisition date (with limited exceptions). Additionally, the acquisition method does not provide for acquisition expenses to be capitalized as part of the transaction. The Company incurred $10.4 million of acquisition-related costs during the year ended December 31, 2015. Refer to Note 3 for additional details. The following table summarizes the estimated fair value of the assets acquired and liabilities assumed as of the date of the acquisition:
The Company generated $50.9 million of goodwill in connection with the SBM acquisition and has been allocated to the Company's banking reporting unit. The goodwill generated represents the synergies expected from combining operations of the two organizations, including, but not limited to, systems conversion, consolidation of bank locations and operation centers, and reduced headcount across operation teams. The goodwill generated from the transaction is not deductible for tax purposes. Fair value adjustments to assets acquired and liabilities assumed are generally amortized using an effective yield, straight-line basis, or other reasonable method consistent with the expected benefit over periods consistent with the estimated useful life or contractual term of the related assets and liabilities. Fair values of the major categories of assets acquired and liabilities assumed were determined as follows: Loans and loans held for sale — The loans acquired were recorded at fair value without a carryover of the allowance for loan losses or net deferred origination costs. Fair value of the loans was determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected, as adjusted for an estimate of future credit losses and prepayments, and then applying a market-based discount rate to those cash flows. The overall discount on the loans acquired in this transaction was due primarily to anticipated future credit losses. For the year ended December 31, 2015, the Company recorded $531,000 of loan interest accretion attributable to the fair value discount on the acquired loans since the acquisition date. Cash and due from banks — The fair values of cash and due from banks approximate the respective carrying amounts as the instruments are payable on demand or have short-term maturities. Investments — The Company acquired both bond investments and equity securities as part of the SBM acquisition. The fair value of the acquired bond investments at acquisition date was estimated using quoted broker pricing for identical securities and an independent third-party pricing service. The fair value of the acquired equity securities was based on publicly available trading prices of the securities. As the acquired equity securities are thinly-traded, the Company considered the closing share prices of the securities for a period of time prior and subsequent to the acquisition date to estimate fair value. Additionally, the Company considered the overall marketability and illiquidity of the acquired equity securities and applied an additional discount using available market data where available. Deferred tax assets — The Company acquired deferred tax assets and assumed deferred tax liabilities as part of the SBM acquisition. Deferred tax assets and liabilities are not recorded at fair value in accordance with GAAP. The SBM acquisition qualified as stock transaction for tax purposes, and, thus, the acquired tax basis of the assets acquired and liabilities assumed was not adjusted for the various fair value adjustments creating temporary timing differences for the various fair value adjustments. Premises and equipment — The fair value of acquired bank premises and equipment was determined utilizing independent third party appraisals and other methods. OREO — Buildings and properties owned by the Company were not recorded at fair value at acquisition date, but, instead, were recorded at their estimated net realizable value (which is fair value less estimated costs to sell). The Company utilized independent third party appraisals to estimate the fair value of the acquired buildings and properties and adjusted for estimated costs to sell the locations. Core deposit intangible assets — The fair value of core deposit intangible assets was derived by comparing the interest rate and servicing costs that the financial institution pays on the core deposit liability versus the current market rate for alternative sources of financing. The intangible asset represents the stable and relatively low cost source of funds that the deposits and accompanying relationships provide the Company, when compared to alternative funding sources. Deposits and borrowings — The fair value of acquired checking, savings, and money market accounts was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. Additionally, the fair value of acquired retail repurchase agreements was assumed to approximate its carrying value. The fair value of CDs was determined based on the present value of the contractual cash flows over the remaining period to maturity using a market interest rate. The following table presents selected unaudited pro forma financial information reflecting the acquisition of SBM assuming it was completed as of January 1, 2014. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the combined financial results of the Company and SBM had the transaction actually been completed at the beginning of the periods presented, nor does it indicate future results for any other interim or full-year period. The unaudited pro forma information is based on the actual financial statements of SBM for the year ended December 31, 2014, and on its calculated results for the period January 1, 2015 to October 16, 2015 (the date of acquisition), at which time SBM's operations were combined into the Company's reported financial results. The unaudited pro forma information, for the years ended December 31, 2015 and 2014, set forth below reflect adjustments related to: the amortization or accretion of purchase accounting fair value adjustments; and an estimated tax rate of 35.0%. Acquisition-related expenses incurred by the Company and SBM were reversed for the purposes of this unaudited pro forma information. Furthermore, the unaudited pro forma information does not reflect management’s estimate of any revenue-enhancing opportunities or anticipated cost-savings.
Revenues and earnings of the acquired company since the acquisition date have not been disclosed as it is not practicable as SBM was merged and fully integrated into the Company and separate financial information is not readily available. At December 31, 2015, the Company's accounting for the acquired loans and deferred tax assets was not yet complete and the balances disclosed and presented within the accompanying consolidated financial statements are provisional amounts. The Company did not acquire any companies or assets qualifying for acquisition accounting for the year ended December 31, 2014. |