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Acquisitions and Joint Ventures
 12 Months Ended
Dec. 31, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]  
Acquisitions and Joint Ventures Acquisitions and Joint Ventures
Ametros Acquisition
On January 24, 2024, the Bank acquired all of the equity interest in Ametros from Long Ridge Capital Management (the “Seller”). Ametros is a custodian and administrator of medical funds from insurance claim settlements that helps individuals manage their ongoing medical care through its CareGuard service and proprietary technology platform. The acquisition provided the Bank with a fast-growing source of low-cost and long-duration deposits, new sources of non-interest income, and will enhance its employee benefit and healthcare financial services expertise.
The acquisition was accounted for as a business combination. Accordingly, the total purchase price, which included cash paid of $359.7 million, the forgiveness of $12.9 million in long-term debt, and the assumption of a $5.8 million liability for the Seller’s transaction expenses, has been allocated to the identifiable assets acquired and liabilities assumed based on their acquisition-date fair values, as summarized in the following table:
(In thousands)Fair Value
Purchase price consideration$378,424 
Assets:
Cash and due from banks310 
Premises and equipment1,078 
Other intangible assets188,900 
Deferred tax assets, net(35,889)
Other assets:
Funds held in escrow288,167 
Accounts receivable2,435 
Prepaid expenses1,166 
Total other assets291,768 
Total assets acquired$446,167 
Liabilities:
Interest-bearing deposits (1)
(20,622)
Other liabilities:
Accounts payable684 
Accrued expenses4,270 
Deferred revenue20,391 
Members’ funds
288,167 
Operating lease liabilities$838 
Total other liabilities$314,350 
Total liabilities assumed$293,728 
Net assets acquired152,439 
Pre-existing equity interest (2)
2,200 
Goodwill$228,185 
(1)The $20.6 million reflects the amount held in Ametros’ operating cash account at the Bank on January 24, 2024. Upon acquisition, such cash and the Bank’s corresponding deposit liability owed to Ametros were eliminated in consolidation, which resulted in a decrease to interest-bearing deposits for the Bank and the Bank’s legal title to the funds being held in such operating cash account.
(2)Prior to the acquisition date, the Company had a 0.6% equity interest in Ametros. The consideration transferred reflects the purchase price for the remaining 99.4% of the business. Upon acquisition, the Company recognized a $1.5 million gain in Other income on the accompanying Consolidated Statement of Income, which represents the difference between the cost basis and estimated acquisition-date fair value of the Company’s pre-existing equity interest in Ametros.
The Company’s valuations of the assets acquired and liabilities assumed in the Ametros acquisition were considered final as of December 31, 2024. There were no adjustments to fair value estimates recognized during the measurement period. The $228.2 million of goodwill represents future economic benefits arising from acquiring Ametros, primarily due to its strong market position and its assembled workforce, and is not deductible for tax purposes. Information regarding the allocation of goodwill to the Company’s reportable segments can be found within Note 21: Segment Reporting.
The Company incurred $3.1 million of professional and outside services expenses related to the acquisition of Ametros during the first quarter of 2024. The revenue and earnings related to the Ametros business since the acquisition date are included in the Company’s Consolidated Statements of Income for the year ended December 31, 2024, and were not material.
The following is a description of the valuation methodologies used to estimate the fair values of the significant assets acquired and liabilities assumed:
Other intangible assets. The Company identified and recognized a $182.8 million core deposit intangible asset and a
$6.1 million trade name intangible asset. A core deposit intangible asset represents the value of relationships with deposit customers. The fair value of the core deposit intangible asset was estimated using a net cost savings method, a form of discounted cash flow methodology, which gave appropriate consideration to expected client attrition rates and other applicable adjustments to the projected deposit balance, the interest cost and net maintenance cost associated with the client deposit base, an alternative cost of funds, and a discount rate that was used to discount the future economic benefits of the core deposit intangible asset to present value. The core deposit intangible asset is being amortized on an accelerated basis over an estimated useful life of 25 years, which is the period over which the estimated economic benefits are estimated to be received. The fair value of the trade name intangible asset for the Ametros brand was estimated using a relief-from-royalty methodology, which models the cost savings from owning the brand rather than licensing it from a third party. The trade name intangible asset is being amortized on a straight-line basis over an estimated useful life of 5 years.
Funds held in escrow and Members’ funds. Funds held in escrow represent amounts held in interest-bearing checking accounts at insured depository institutions other than the Bank for the purpose of providing post-settlement medical administration services on a respective member’s behalf. Members’ funds is the corresponding liability to the Funds held in escrow. Given that these amounts can be withdrawn and/or directed for use on demand, as long as in accordance with the terms of the settlement agreement, their carrying amount is a reasonable estimate of fair value.
Joint Venture with Marathon Asset Management
On July 19, 2024, the Company, through its subsidiary MW Advisor Holding, LLC, entered into an agreement, with Marathon Asset Management and formed MW Advisors, LLC, a private credit joint venture, which will deliver direct lending solutions for sponsor-backed middle market companies across the country. The Company and Marathon Asset Management each own 50 percent of MW Advisors, LLC. Other than its formation, there was no activity related to MW Advisors, LLC, during the year ended December 31, 2024.
interLINK Acquisition
On January 11, 2023, the Bank acquired 100% ownership of interLINK from StoneCastle Partners LLC. InterLINK is a technology-enabled deposit management platform that administers over $9 billion of deposits from FDIC-insured cash sweep programs between banks and broker/dealers and clearing firms. The acquisition provided the Bank with access to a unique source of core deposit funding and scalable liquidity and added another technology-enabled channel to its already differentiated, omnichannel deposit gathering capabilities.
The total purchase price of the acquisition was $174.6 million, which included cash paid of $158.6 million and $16.0 million of contingent consideration measured at fair value. The contingent consideration is payable in cash upon the achievement of discrete customer and deposit growth events within three years of the acquisition date. Additional information regarding the determination of fair value for contingent consideration liabilities can be found within Note 18: Fair Value Measurements.
The transaction was accounted for as a business combination, and resulted in the addition of $31.4 million in net assets measured at fair value, which primarily comprised $36.0 million of broker dealer relationship intangible assets, $6.0 million of developed technology, a $4.0 million non-competition agreement intangible asset, and $15.9 million of royalty liabilities. The $143.2 million of goodwill recognized is deductible for tax purposes.
Merger with Sterling
On January 31, 2022, the Company completed its merger with Sterling. The Company’s operating results for the years ended December 31, 2024, 2023, and 2022, include the operating results of acquired assets and assumed liabilities of Sterling subsequent to the merger on January 31, 2022. Due to the various conversions of Sterling systems, as well as other streamlining and integration of operating activities into those of the Company, historical reporting for the former Sterling operations after the merger effective date, is impracticable, and thus disclosures of Sterling’s revenue and earnings since the merger effective date that are included in the accompanying Consolidated Statements of Income for the reporting period is impracticable.
Supplemental Pro Forma Financial Information (Unaudited)
The following table summarizes supplemental pro forma financial information giving effect to the merger with Sterling as if it had been completed on January 1, 2021:
(In thousands)Year ended December 31, 2022
Net interest income$1,961,005 
Non-interest income440,783 
Net income869,639 
The supplemental pro forma financial information is presented for informational purposes only and does not necessarily reflect the results of operations that would have occurred had the Company merged with Sterling on January 1, 2021. The supplemental pro forma financial information includes the impact of (i) accreting and amortizing the discounts and premiums associated with the estimated fair value adjustments to acquired loans and leases, investment securities, deposits, and long-term debt, (ii) the amortization of recognized intangible assets, (iii) the elimination of Sterling’s historical accretion and amortization of discounts and premiums and deferred origination fees and costs on loans and leases, (iv) the elimination of Sterling’s historical accretion and amortization of discounts and premiums on investment securities, and (v) the related estimated income tax effects. Cost savings and other business synergies related to the merger are not included in the supplemental pro forma financial information.
In addition, the supplemental pro forma financial information was adjusted for merger-related expenses, as follows:
(In thousands)Year ended December 31, 2022
Compensation and benefits (1)
$79,001 
Occupancy (2)
36,586 
Technology and equipment (3)
24,688 
Marketing416 
Professional and outside services (4)
73,070 
Other expense (5)
32,700 
Total merger-related expenses$246,461 
(1)Comprised primarily of employee severance and retention costs, and executive restricted stock awards.
(2)Comprised primarily of charges associated with the Company’s 2022 corporate real estate consolidation plan.
(3)Comprised primarily of technology contract termination costs.
(4)Comprised primarily of advisory, legal, accounting, and other professional fees.
(5)Comprised primarily of disposals on property and equipment, contract termination costs, and other miscellaneous expenses.