CASH 2018 Annual Report

126 Subject to the cash earn-out terms of the purchase agreement, MetaBank agreed to pay to SCS an amount equal to 100% of the 2017 measured business gross profit up to a maximum of $17.5 million within 20 days after the date on which each determination of the cash earn-out payment was deemed final. During the third quarter of fiscal 2017, MetaBank paid out the $17.5 million of contingent cash consideration to SCS based upon the measured business gross profit. The Company has included the financial results of SCS in its Consolidated Financial Statements subsequent to the acquisition date. The fair value of the liability for the cash contingent consideration was approximately $17.3 million and was included in other liabilities in the Company's Consolidated Statements of Financial Condition. The fair value of the equity contingent consideration was approximately $24.1 million at closing and was included in additional paid- in capital in the Company's Consolidated Statements of Financial Condition. The respective fair values of the liability and equity were estimated using an option-based income valuation method with significant inputs that were not observable in the market and thus represent a Level 3 fair value measurement as defined in the FASB's Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures . The significant inputs in the Level 3 measurement not supported by market activity included the Company's probability assessments of the expected future cash flows related to the Company's acquisition of SCS during the earn-out period. The following table represents the approximate fair value of assets acquired from and liabilities recorded of SCS on the Consolidated Statements of Financial Condition as of December 14, 2016. As of December 14, 2016 (Dollars in Thousands) Fair value of consideration paid Cash $ 7,548 Stock issued 10,789 Paid Consideration 18,337 Contingent consideration - cash 17,252 Contingent consideration - equity 24,142 Contingent consideration payable 41,394 Total consideration paid 59,731 Fair value of assets acquired Intangible assets 28,310 Other assets 2 Total assets 28,312 Fair value of net assets acquired 28,312 Goodwill resulting from acquisition $ 31,419 The SCS transaction has been accounted for under the acquisition method of accounting. The assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the transaction date. The Company made significant estimates and exercised judgment in estimating fair values and accounting for such acquired assets and liabilities. Upon receipt of final fair value estimates on certain assets, liabilities, and contingent considerations, which must be within one year of the acquisition date, the Company made final adjustments to the purchase price allocation and retrospectively adjusted the recorded goodwill. The Company recognized goodwill of $31.4 million as of December 14, 2016, which was calculated as the excess of both the adjusted consideration exchanged and the liabilities recorded as compared to the fair value of identifiable assets acquired. Goodwill resulted from expected operational synergies and expanded product lines and is expected to be deductible for tax purposes. See Note 20 to the Consolidated Financial Statements for further information on goodwill.