Note 2 - Sales-Mergers-Acquisitions

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Sales/Mergers/Acquisitions

Note 2. Sales/Mergers/Acquisitions

Sale of the Bates Companies

On August 12, 2020, the Company sold all of the issued and outstanding capital stock of the Bates Companies.  The aggregate consideration paid to the Company was a $500 thousand note receivable, less imputed interest of $52 thousand, plus cancellation of all future amounts otherwise to become payable to the purchaser by the Company under an earn-out agreement entered into between the same parties in 2018 with a non-discounted value of approximately $880 thousand at the sale date.

Assets and liabilities of the Bates Companies sold are summarized as follows as of the date of closing:

	As of
	August 12, 2020
	(dollars in thousands)
ASSETS
Cash and due from banks	$	349
Premises and equipment, net		19
Other assets		2,259
Total assets sold	$	2,627
LIABILITIES
Other liabilities	$	946
Total liabilities sold	$	946
Net assets sold	$	1,681
Cash consideration	$	195
Forgiveness of earn-out consideration		880
Note receivable consideration		448
Loss on sale of subsidiary	$	158

Disposition costs in 2020 related to the sale totaled $227 thousand and were comprised primarily of legal, accounting and personnel costs.

Sale of Assets and Liabilities of Rockford Bank & Trust Company

On November 30, 2019, the Company sold substantially all of the assets and transferred substantially all of the deposits and certain other liabilities of the Company’s wholly-owned subsidiary, RB&T, to IB&T, a wholly-owned subsidiary of Heartland Financial USA, Inc., for a cash payment.  The cash payment amount was determined substantially by the following formula: (1) the “Purchase Price Premium”, plus (2) the aggregate net book value of the acquired assets, minus (3) the aggregate book value of the assumed liabilities.  The Purchase Price Premium was equal to: (A) 8% of RB&T’s tangible assets, multiplied by (B) 0.345.  The Purchase Price Premium totaled $12.5 million and the total payment by IB&T to the Company at closing was $46.6 million.

Assets and liabilities of RB&T sold are summarized as follows as of the date of closing:

	As of
	11/30/2019
	(dollars in thousands)
ASSETS
Cash and due from banks	$	3,973
Interest-bearing deposits at financial institutions		55,291
Securities held to maturity, at amortized cost		3,243
Securities available for sale, at fair value		21,874
Loans/leases receivable held for investment, net		357,931
Premises and equipment, net		5,612
Restricted investment securities		675
Other real estate owned, net		2,134
Other assets		3,228
Total assets acquired	$	453,961
LIABILITIES
Noninterest-bearing deposits	$	69,802
Interest-bearing deposits		331,486
Short-term borrowings		1,158
FHLB advances		15,000
Other liabilities		2,241
Total liabilities assumed	$	419,687
Net assets sold	$	34,274
Cash consideration received	$	46,560
Gain on sale of assets and liabilities	$	12,286

Note 2. Sales/Mergers/Acquisitions (continued)

The Company retained certain assets, mainly comprised of BOLI, and certain liabilities, mainly comprised of deferred compensation and income tax accruals. These assets and liabilities totaling $12.0 million and $5.0 million, respectively, as of December 31, 2019, were liquidated in 2020.

Disposition costs in 2019 related to the sale totaled $3.3 million and were comprised primarily of legal and accounting costs, costs in connection with the disposal of fixed assets and prepaids, personnel costs and IT deconversion costs related to the sale of RB&T.