Note 8 - Acquisition of Guaranty Bank and Trust Company

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

Business Combination Disclosure [Text Block]

NOTE

8

– ACQUISITION OF GUARANTY BANK AND TRUST COMPANY

On

June 8, 2017,

the Company announced the signing of a definitive agreement to acquire Guaranty Bank and Trust Company (Guaranty Bank) , headquartered in Cedar Rapids, Iowa, from Guaranty Bankshares, Ltd. (Guaranty). Guaranty Bank

is an Iowa-chartered bank that operates

five

banking locations throughout the Cedar Rapids metropolitan area. As of

June 30, 2017,

Guaranty Bank had

$264

million in assets and

$212

million in deposits.

The Company filed

a registration statement on Form S-

4

with the SEC on

July 27, 2017

for

881,631

shares of common stock in connection with its proposed acquisition of Guaranty Bank.

The purchase and assumption agreement provides for the sale by Guaranty of substantially all of its assets, including all of the capital stock of Guaranty Bank, and the assumption by the Company of certain of Guaranty

’s assets and liabilities. The sale is anticipated to be completed late in the

third

quarter or early

fourth

quarter of

2017.

At a date following the completion of the sale, the Company intends to merge Guaranty Bank with and into CRBT, with CRBT as the surviving bank. At such time, Guaranty Bank’s banking offices will become banking offices of CRBT. Until the banks are merged, the Company will own and operate Guaranty Bank as a separate bank subsidiary.

The total consideration to be paid to Guaranty by the Company at the closing of the sale pursuant to the purchase and assumption agreement, subject to adjustment, is equal to: (

1

)

 Guaranty’s adjusted tangible equity as of the end of the month immediately preceding the closing date up to an amount equal to

$24,286,985

multiplied by

1.53;

plus (

2

) Guaranty’s adjusted tangible equity as of the end of the month immediately preceding the closing date in excess of the core capital.

 Guaranty intends to pay a special dividend to its shareholders in an amount equal to the excess capital immediately prior to the closing of the sale. Therefore, the total consideration to be paid to Guaranty at the closing of the sale is expected to be an amount equal to

1.53

multiplied by the core capital, or approximately

$37.2

million. The cash portion of the sale consideration is expected to be approximately

$7.8

million. Based on a closing price of the Company's common stock of

$46.05

as of the end of day

August 3, 2017,

the stock portion of the sale consideration would equal approximately

638,400

shares of the Company's common stock with an aggregate market value of approximately

$29.4

million. The cash and stock portions of

the sale consideration will be paid directly to Guaranty, and

not

to Guaranty’s shareholders.

No

fractional shares of the Company's common stock will be issued in the sale.

In

June 2017,

the Company executed a

$7.0

million term note commitment with a

four

-year term with interest calculated at the effective LIBOR rate plus

3.00%

per annum (

4.16%

at

June 30, 2017).

This

$7.0

million term note commitment

may

be drawn upon at closing of the acquisition of Guaranty Bank to help fund the cash portion of the purchase price. 

Any additional cash consideration paid to Guaranty beyond this

$7.0

million would come from operating cash.