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ACQUISITIONS | 12 Months Ended
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Dec. 31, 2015
ACQUISITIONS [Abstract] |
ACQUISITIONS | NOTE B: ACQUISITIONS On December 4, 2015, the Company completed its acquisition of Oneida Financial Corp. (“Oneida”), parent company of Oneida Savings Bank, headquartered in Oneida, New York for approximately $158 million in Company stock and cash, comprised of $56.3 million of cash and the issuance of 2.78 million common shares. Upon the completion of the merger, the Bank added 12 branch locations in Oneida and Madison counties and approximately $769 million of assets, including approximately $399 million of loans and $226 million of investment securities, along with $699 million of deposits. Through the acquisition of Oneida, the Company acquired OneGroup and OWM as wholly-owned subsidiaries primarily engaged in offering insurance and investment advisory services. These subsidiaries complement the Company’s other non-banking financial services businesses. The effects of the acquired assets and liabilities have been included in the consolidated financial statements since that date. On January 1, 2014, the Company, through its subsidiary, BPAS-APS (formerly known as Harbridge Consulting Group, LLC), completed its acquisition of a professional services practice from EBS-RMSCO, Inc., a subsidiary of The Lifetime Healthcare Companies (“EBS-RMSCO”). This professional services practice, which provides actuarial valuation and consulting services to clients who sponsor pension and post-retirement medical and welfare plans, enhanced the Company’s participation in the Western New York marketplace. The effects of the acquired assets and liabilities have been included in the consolidated financial statements since that date. On December 13, 2013, the Bank completed its acquisition of eight retail branch-banking locations across its Northeast Pennsylvania markets from Bank of America, N.A. (“B of A”), acquiring approximately $1.1 million in loans and $303 million of deposits. The assumed deposits consisted of $220 million of checking, savings and money market accounts (“core deposits”) and $83 million of time deposits. Under the terms of the purchase agreement, the Bank paid B of A a blended deposit premium of 2.4%, or approximately $7.3 million. The effects of the acquired assets and liabilities have been included in the consolidated financial statements since that date. The assets and liabilities assumed in the acquisitions were recorded at their estimated fair values based on management's best estimates using information available at the dates of the acquisition, and are subject to adjustment based on updated information not available at the time of acquisition. The above referenced acquisitions expanded the Company’s geographical presence in New York and Pennsylvania and management expects that the Company will benefit from greater geographic diversity and the advantages of other synergistic business development opportunities. The following table summarizes the estimated fair value of the assets acquired and liabilities assumed.
(000s omitted) |  | 2015 |  |  | 2014 |  |  | 2013 |
Consideration paid (received): |  |  |  |  |  |  |  |  |
Cash |  | $ | 56,266 |  |  | $ | 924 |  |  | $ | (291,980 | )
Community Bank System, Inc. common stock |  |  | 102,202 |  |  |  | 0 |  |  |  | 0 |
Total net consideration paid (received) |  |  | 158,468 |  |  |  | 924 |  |  |  | (291,980 | )
Recognized amounts of identifiable assets acquired and liabilities assumed: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | 81,772 |  |  |  | 0 |  |  |  | 0 |
Investment securities |  |  | 225,729 |  |  |  | 0 |  |  |  | 0 |
Loans |  |  | 399,422 |  |  |  | 0 |  |  |  | 1,106 |
Premises and equipment |  |  | 22,212 |  |  |  | 0 |  |  |  | 2,549 |
Accrued interest receivable |  |  | 1,133 |  |  |  | 0 |  |  |  | 5 |
Other assets |  |  | 27,452 |  |  |  | 163 |  |  |  | (18 | )
Core deposit intangibles |  |  | 2,570 |  |  |  | 0 |  |  |  | 2,537 |
Other intangibles |  |  | 9,994 |  |  |  | 578 |  |  |  | 9 |
Deposits |  |  | (699,241 | ) |  |  | 0 |  |  |  | (303,456 | )
Other liabilities |  |  | (653 | ) |  |  | 0 |  |  |  | 0 |
Total identifiable assets (liabilities), net |  |  | 70,390 |  |  |  | 741 |  |  |  | (297,268 | )
Goodwill |  | $ | 88,078 |  |  | $ | 183 |  |  | $ | 5,288 |
Acquired loans that have evidence of deterioration in credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all contractually required payments were aggregated by comparable characteristics and recorded at fair value without a carryover of the related allowance for loan losses. Cash flows for each loan were determined using an estimate of credit losses and an estimated rate of prepayments. Projected monthly cash flows were then discounted to present value using a market-based discount rate. The excess of the undiscounted expected cash flows over the estimated fair value is referred to as the “accretable yield” and is recognized into interest income over the remaining lives of the acquired loans. The following is a summary of the loans acquired from Oneida at the date of acquisition:
(000’s omitted) |  | Acquired Impaired Loans |  |  | Acquired Non-Impaired Loans |  |  | Total Acquired Loans |
Contractually required principal and interest at acquisition |  | $ | 5,138 |  |  | $ | 484,937 |  |  | $ | 490,075 |
Contractual cash flows not expected to be collected |  |  | (1,977 | ) |  |  | (4,833 | ) |  |  | (6,810 | )
Expected cash flows at acquisition |  |  | 3,161 |  |  |  | 480,104 |  |  |  | 483,265 |
Interest component of expected cash flows |  |  | (341 | ) |  |  | (83,502 | ) |  |  | (83,843 | )
Fair value of acquired loans |  | $ | 2,820 |  |  | $ | 396,602 |  |  | $ | 399,422 |
The fair value of checking, savings and money market deposit accounts acquired were assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. Certificate of deposit accounts were valued at the present value of the certificates’ expected contractual payments discounted at market rates for similar certificates. The core deposit intangibles and other intangibles related to the B of A, EBS-RMSCO, and Oneida acquisitions are being amortized using an accelerated method over their estimated useful life of approximately eight to ten years. The goodwill, which is not amortized for book purposes, was assigned to the Banking segment for the B of A acquisition, the Banking and All Other segments for the Oneida acquisition, and to the Employee Benefit Services segment for the EBS-RMSCO acquisition. The goodwill arising from the B of A and EBS-RMSCO deals is deductible for tax purposes. Goodwill arising from the Oneida acquisition is not deductible for tax purposes. Direct costs related to the acquisitions were expensed as incurred. Merger and acquisition integration-related expenses amount to $7.0 million, $0.1 million and $2.2 million during 2015, 2014 and 2013, respectively, and have been separately stated in the Consolidated Statements of Income. Supplemental Pro Forma Financial Information The following unaudited condensed pro forma information assumes the Oneida acquisition had been completed as of January 1, 2014 for the year ended December 31, 2015 and December 31, 2014. The table below has been prepared for comparative purposes only and is not necessarily indicative of the actual results that would have been attained had the acquisition occurred as of the beginning of the years presented, nor is it indicative of the Company’s future results. Furthermore, the unaudited pro forma information does not reflect management’s estimate of any revenue-enhancing opportunities nor anticipated cost savings or the impact of conforming certain acquiree accounting policies to the Company’s policies that may have occurred as a result of the integration and consolidation of the acquisitions. The pro forma information set forth below reflects adjustments related to (a) certain purchase accounting fair value adjustments; and (b) amortization of customer lists and core deposit intangibles. Expenses totaling $14.0 million related to conversion of systems and other costs of integration, as well as certain one-time costs, are excluded from the pro forma year ended December 31, 2015 and were included in the pro forma year ended December 31, 2014.
|  | Actual since Acquisition Through |  |  | Pro Forma (Unaudited) Year Ended December 31, |
(000’s omitted) |  | December 31, 2015 |  |  | 2015 |  |  | 2014 |
Total revenue, net of interest expense |  | $ | 3,667 |  |  | $ | 426,541 |  |  | $ | 416,713 |
Net income (loss) |  |  | (3,905 | ) |  |  | 96,894 |  |  |  | 85,665 |

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