NEW INDEPENDENT BANCSHARES, INC. AND SUBSIDIARY Notes to the Consolidated Financial Statements
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES( Continued)
u. Use of Estimates The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
v. Adoption of New Accounting Standard In November 2025, the FASB issued ASU 2025-08, " Financial Instruments- Credit Losses( Topic 326): Purchased Loans " to simplify accounting for acquired loans by introducing a " gross-up " approach for Purchased Seasoned Loans( PSLs) and eliminating the Day-1 credit loss expense for most acquisitions. The guidance is effective beginning after December 15, 2026 and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company elected to early adopt this standard for the acquisition in 2025.
NOTE 2.
BUSINESS COMBINATIONS
On November 18, 2025, the Company acquired 100 % of the outstanding common shares of State Bank of Medora( Medora), an Indiana state charted bank, in exchange for $ 19,250,025. Medora operated one full-service office in Medora, Indiana. The merger opened a new market in Southern Indiana for the Company. Under the terms of the agreement, the Medora common stock owners, except shares held in a fiduciary capacity or in satisfaction of a debt previously contracted, if any, received $ 2,566.67 for each share of Medora common stock owned. Medora ' s results of operations were included in the Company ' s results beginning November 18, 2025.
Acquisition related costs of $ 1,587,069 are included in noninterest expense on the company ' s consolidated statement of income for the year ended December 31, 2025.
The fair value of net assets acquired includes fair value adjustments to certain receivables that were not considered impaired as of acquisition date. The fair value adjustments were determined using discounted contractual cash flows. However, the Company believes that all contractual cash flows related to these financial instruments will be collected. As such, these receivables were not considered impaired at the acquisition date and were not subject to the guidance relating to purchased credit impaired loans, which have shown evidence of credit deterioration since origination. Receivables acquired that were not subject to these requirements include non-impaired loans with a fair value net of allowance for credit losses and gross contractual amounts receivables of $ 45,102,608 and $ 46,199,724 on the date of acquisition.
The fair value, net of related allowance for credit losses, of purchased financial assets with credit deterioration was $ 363,033 on the date of acquisition. The gross contractual amounts receivable relating to the purchased financial assets with credit deterioration was $ 1,404,179. The Company estimates, on the date of acquisition, that $ 1,007,939 of the contractual cash flows specific to the purchased financial assets with credit deterioration will not be collected.
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