Note 13: Business Combinations

3 Months Ended

Mar. 31, 2014

Notes

Note 13: Business Combinations

Note 13: Business Combinations 

On October 4, 2013, the Company acquired 100% of the outstanding stock of Ozarks Legacy Community Financial, Inc. (OLCF), and its subsidiary, the Bank of Thayer, headquartered in Thayer, Missouri. The Bank of Thayer was merged into the Company’s existing bank subsidiary, Southern Bank, on that date. The Company acquired OLCF primarily for the purpose of conducting commercial banking activities in markets where it believes the Company’s business model will perform well, and for the long-term value of its core deposit franchise. Through March 31, 2014, the Company incurred $688,000 of third-party acquisition-related costs. The expenses are included in noninterest expense in the Company’s consolidated statement of income for the period ended March 31, 2014. The goodwill of $1,474,000 arising from the acquisition consists largely of synergies and economies of scale expected from combining the operations of the Company and OLCF. Total goodwill was assigned to the acquisition of the bank holding company.

The following table summarizes the consideration paid for OLCF and its subsidiary, the Bank of Thayer and the amounts of assets acquired and liabilities assumed recognized at the acquisition date:

Fair Value of Consideration Transferred
Cash	$6,279,694
Contingent consideration	-
Total consideration	$6,279,694
Recognized amounts of identifiable assets acquired
and liabilities assumed
Cash and Cash equivalents	$2,234,980
Investment Securities	34,271,743
Loans	39,368,508
Premises and equipment	1,155,297
Identifiable intangible assets	1,432,645
Miscellaneous other assets	1,285,870
Deposits	(68,234,600)
Securities sold under agreements to repurchase	(1,099,675)
Advances from FHLB	(1,095,928)
Subordinated debt	(2,490,890)
Miscellaneous other liabilities	(2,022,076)
Total identifiable net assets	4,805,874
Goodwill	$1,473,820

On February 21, 2014, the Company completed its acquisition of Citizens State Bankshares of Bald Knob, Inc., and its subsidiary, the Citizens State Bank, Bald Knob, Arkansas (herein collectively, “Citizens State Bank”).  Citizens State Bank was merged into the Company’s existing bank subsidiary, Southern Bank, on that date. The Company completed the conversion of data systems for the Citizens State Bank operations in April, 2014. Through March 31, 2014, the Company incurred $313,000 of third-party acquisition-related costs. The expenses are included in noninterest expense in the Company’s consolidated statement of income for the period ended March 31, 2014.   There was no goodwill arising from the acquisition.

The following table summarizes the consideration paid for Citizens State Bankshares of Bald Knob, Inc. and its subsidiary, Citizens State Bank and the amounts of assets acquired and liabilities assumed recognized at the acquisition date:

Fair Value of Consideration Transferred
Cash	$5,708,211
Contingent consideration	-
Total consideration	$5,708,211
Recognized amounts of identifiable assets acquired
and liabilities assumed
Cash and Cash equivalents	$4,167,979
Investment Securities	50,539,865
Loans	11,984,135
Premises and equipment	612,540
Identifiable intangible assets	624,440
Miscellaneous other assets	4,075,288
Deposits	(64,154,307)
Advances from FHLB	(1,499,904)
Miscellaneous other liabilities	(641,825)
Total identifiable net assets	5,708,211
Goodwill	$-

On February 25, 2014, the Company announced the signing of a definitive merger agreement whereby Peoples Service Company (PSC) will be acquired by the Company in a stock and cash transaction. PSC is the 80% owner of Peoples Banking Company (PBC), the 100% owner of Peoples Bank of the Ozarks.  In connection with the acquisition, the minority shareholders of PBC will be given the opportunity to exchange their shares of PBC for shares of PSC and to receive the merger consideration payable under the terms of the merger agreement. The transaction is expected to close in the third calendar quarter of 2014, subject to satisfaction of customary closing conditions, including regulatory and shareholder approvals, and consummation of the exchange transaction involving the minority shareholders of PBC. The acquired financial institution is expected to be merged with and into Southern Bank in the fourth quarter of calendar year 2014 or the first quarter of calendar year 2015.  Through March 31, 2014, the Company incurred $100,000 of third-party acquisition-related costs. The expenses are included in noninterest expense in the Company’s consolidated statement of income for the period ended March 31, 2014.