In conducting valuations, we rely on and apply the standards and methodologies as prescribed by the following statements and standards:
- ASC 820 – Fair Value Measurements
- ASC 805 – Business Combinations ASC 310-30 – Accounting for Certain Loans or Debt Securities Acquired in a Transfer (SOP 03-3) FDIC Assisted Transactions require valuation of all the tangible and intangible assets and liabilities including the following typical assets:
Tangible Assets and Liabilities
- Fixed assets – We anticipate relying on the price paid for the fixed assets. We will review this information and conduct site visits to ensure the appraised value represents fair value.
- Loans – We determine the fair value of the loan portfolios acquired on a per loan basis. We conduct site visits to discuss the larger loans individually with Management.
- Accretable yield – We estimate the timing and amount of all future cash inflows from the loans using assumptions that are used in determining fair value. The excess of those future cash flows over the initial investment is the accretable yield to be recognized as interest income over the life of the investment using the effective yield method.
- Loss-share receivable – We determine the fair value of the FDIC loss-share receivable based on the loan valuation model.
- Other real estate owned – We may rely on real estate values provided by Management for the other real estate owned.
- Deposits – We determine the fair value of the acquired deposit liabilities.
- Claw back liability – We estimate the potential claw back liability associated with the purchase agreement terms.
- Trademarks and/or trade names – We determine the fair value of any acquired trademarks or trade names.
- Core deposit intangibles – We determine the fair value of core deposit intangibles that typically represent the premium paid to acquire core deposits.
- Other intangible assets – We consider any other intangible assets identified during the analysis.
- All assets and liabilities will reconcile to the purchase price balanced by Goodwill or Gain on Bargain Purchase.