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ACQUISITIONS

12 Months Ended

Dec. 31, 2023

ACQUISITIONS

NOTE B: ACQUISITIONS

Subsequent Event

On February 1, 2024, the Company, through its subsidiary BPA, completed the acquisition of certain assets of Creative Plan Designs Limited (“CPD”), a financial services company that provides employee benefit plan design, administration and consulting. Total consideration was $6.8 million in cash plus contingent consideration with an estimated fair value of $3.9 million at acquisition date. The effects of the acquired assets will be included in the consolidated financial statements from that date.

Current and Prior Period Acquisitions

During 2023, the Company, through its subsidiaries OneGroup, Wealth Partners and BPAS, completed the acquisition of certain assets of financial services companies. The acquired companies provide insurance, wealth management and benefit plan recordkeeping services and are headquartered in New York, Pennsylvania, and Florida. Total aggregate consideration for these acquisitions was $8.1 million, including $6.7 million in cash and $1.4 million in contingent consideration arrangements. The contingent consideration arrangements are based on achieving certain levels of retained revenue over a period ranging from two to five years. The fair value of these arrangements has been recorded based on the assumption that retained revenue levels will meet or exceed the required threshold for the maximum contingent consideration payments. Aggregate assets acquired were $5.1 million, including $4.9 million of customer list intangible assets, and the Company recorded goodwill of $3.0 million. The effects of the acquired assets have been included in the consolidated financial statements since the date of acquisition. Revenues and direct expenses included in the consolidated statement of income for the year ended December 31, 2023 were immaterial.

On March 1, 2023, the Company, through its subsidiary CBNA, completed the acquisition of certain assets of Axiom Realty Group, which includes Axiom Capital Corp., Axiom Realty Management, LLC and Axiom Realty Advisors, LLC (collectively referred to as “Axiom”), a commercial real estate finance and advisory firm, for $1.8 million in cash. The Company recorded a $1.2 million customer list intangible and recognized $0.6 million of goodwill in conjunction with the acquisition. The effects of the acquired assets have been included in the consolidated financial statements since that date. Revenues of approximately $0.8 million and direct expenses of approximately $1.8 million were included in the consolidated statement of income for the year ended December 31, 2023.

On May 13, 2022, the Company completed its acquisition of Elmira Savings Bank (“Elmira”), a New York State chartered savings bank headquartered in Elmira, New York, for $82.2 million in cash. The acquisition enhanced the Company’s presence in five counties in New York’s Southern Tier and Finger Lakes regions. In connection with the acquisition, the Company acquired approximately $583.6 million of identifiable assets, including $436.8 million of loans, $11.3 million of investment securities, and $8.0 million of core deposit intangibles, as well as $522.3 million of deposits. Goodwill of $42.1 million was recognized as a result of the merger. The effects of the acquired assets and liabilities have been included in the consolidated financial statements since that date. Revenues of approximately $14.9 million and $12.1 million and direct expenses of approximately$4.9 million and $3.1 million from the Elmira branch network, which may not include certain shared expenses, were included in the consolidated statements of income for the years ended December 31, 2023 and 2022, respectively. The Company incurred certain transaction-related costs in 2022 in connection with the Elmira acquisition.

During 2022, the Company, through its subsidiary OneGroup, completed acquisitions of certain assets of insurance agencies for an aggregate amount of $3.5 million in cash. The Company recorded a $2.9 million customer list intangible asset and a $0.1 million intangible asset for a noncompete agreement and recognized $0.5 million of goodwill in conjunction with the acquisitions. The effects of the acquired assets have been included in the consolidated financial statements since the date of acquisition. Revenues and direct expenses included in the consolidated statements of income for the years ended December 31, 2023 and 2022 were immaterial.

On August 2, 2021, the Company, through its subsidiary OneGroup, completed its acquisition of certain assets and liabilities of the Thomas Gregory Associates Insurance Brokers, Inc. (“TGA”), a specialty-lines insurance broker based in the Boston, Massachusetts area, for $11.6 million in cash plus contingent consideration with a fair value at acquisition date of $1.5 million. The Company recorded a $10.9 million customer list intangible asset and $2.2 million of goodwill in conjunction with the acquisition. The effects of the acquired assets and liabilities have been included in the consolidated financial statements since that date. Revenues of approximately $4.4 million, $3.1 million, and $0.6 million and direct expenses of approximately $1.9 million, $1.8 million, and $0.6 million from TGA were included in the consolidated income statements for the years ended December 31, 2023, 2022,and 2021, respectively.

The acquisition of TGA includes a contingent consideration arrangement that requires additional consideration to be paid by the Company based on the future retained revenue of TGA over a three-year period. Amounts are payable in two payments, the first of which is two years after the acquisition date, and the second is three years after the acquisition date. The range of the undiscounted amounts the Company could pay under the contingent consideration agreement is between zero and $3.4 million. The fair value of the contingent consideration recognized on the acquisition date of $1.5 million was estimated by applying the income approach, a measure that is based on significant Level 3 inputs not readily observable in the market. Key assumptions at the date of acquisition include (1) a discount rate range of 0.82% to 1.09% to present value the payments and (2) probability of achievement of retained revenue of 45.0%. The first of the required payments was made during 2023, further detail is provided in Note Q: Fair Value.

On July 1, 2021, the Company, through its subsidiary BPA, completed its acquisition of FBD for $15.4 million in cash plus contingent consideration with a fair value at acquisition date of $1.4 million. The Company recorded a $14.0 million customer list intangible asset and $2.1 million of goodwill in conjunction with the acquisition. The effects of the acquired assets have been included in the consolidated financial statements since that date. The operations of FBD have been integrated into the Company and therefore discrete reporting of revenues and direct expenses for the year ended December 31, 2023 is not practicable. Revenues of approximately $3.5 million and $2.8 million and direct expenses of approximately $4.1 million and $2.5 million from FBD were included in the consolidated income statements for the years ended December 31, 2022 and 2021 respectively.

The acquisition of FBD includes a contingent consideration arrangement that requires additional consideration to be paid by the Company based on the future retained revenue of FBD over a two-year period. Amounts are payable 30 months after the acquisition date. The range of the undiscounted amounts the Company could pay under the contingent consideration agreement is between zero and $2.7 million. The fair value of the contingent consideration recognized on the acquisition date of $1.4 million was estimated by applying the income approach, a measure that is based on significant Level 3 inputs not readily observable in the market. Key assumptions at the date of acquisition include (1) a discount rate of 1.05% to present value the payment and (2) probability of achievement of retained revenue of 50%.

On June 1, 2021, the Company, through its subsidiary OneGroup, completed its acquisition of certain assets and liabilities of NuVantage Insurance Corp. (“NuVantage”), an insurance agency headquartered in Melbourne, Florida. The Company paid $2.9 million in cash and recorded a $1.4 million customer list intangible asset and $1.4 million of goodwill in conjunction with the acquisition. The effects of the acquired assets and liabilities have been included in the consolidated financial statements since that date. Revenues of approximately $1.3 million, $1.3 million, and $0.7 million and direct expenses of approximately $2.0 million, $1.3 million, and $0.6 million from NuVantage were included in the consolidated income statements for the years ended December 31, 2023, 2022, and 2021, respectively.

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 acquisitions. During 2023, the carrying amount of loans, accrued interest and fees receivable, other assets and other liabilities associated with the Elmira acquisition was adjusted upon receipt of new information. The adjustments resulted in a net decrease to goodwill of $0.1 million.

The Elmira and Axiom acquisitions generally expanded the Company’s banking presence in New York. The OneGroup and Wealth Partners acquisitions generally expanded the Company’s insurance and wealth management presence in New York, Massachusetts, Florida and Pennsylvania. The BPAS and BPA acquisitions generally expanded the Company’s employee benefit services presence in New York and Minnesota. 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 after considering the measurement period adjustments described above:


		2023									2022									2021
(000s omitted)		Axiom			Other ⁽¹⁾			Total			Elmira			Other ⁽²⁾				Total		Total ⁽³⁾
Consideration:
Cash		$	1,819		$	6,698		$	8,517		$	82,179		$	3,477		$	85,656		$	29,870
Contingent consideration			0			1,450			1,450			0			0			0			2,900
Total net consideration			1,819			8,148			9,967			82,179			3,477			85,656			32,770
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents			0			0			0			84,988			0			84,988			541
Investment securities			0			0			0			11,305			0			11,305			0
Loans, net of allowance for credit losses on PCD loans			0			0			0			436,796			0			436,796			0
Premises and equipment, net			25			41			66			11,303			14			11,317			760
Accrued interest and fees receivable			0			0			0			882			0			882			0
Other assets			2			175			177			30,337			0			30,337			579
Core deposit intangibles			0			0			0			7,970			0			7,970			0
Other intangibles			1,176			4,930			6,106			0			3,014			3,014			26,337
Deposits			0			0			0			(522,295)			0			(522,295)			0
Other liabilities			(9)			(9)			(18)			(3,596)			(34)			(3,630)			(1,164)
Other Federal Home Loan Bank borrowings			0			0			0			(17,616)			0			(17,616)			0
Total identifiable assets, net			1,194			5,137			6,331			40,074			2,994			43,068			27,053
Goodwill		$	625		$	3,011		$	3,636		$	42,105		$	483		$	42,588		$	5,717

(1)	Includes amounts for OneGroup, Wealth Partners and BPAS acquisitions completed in 2023.

(2)	Includes amounts for OneGroup acquisitions completed in 2022.

(3)	Includes amounts for TGA, FBD, and NuVantage acquisitions completed in 2021.

The Company acquired certain loans from Elmira for which there was not evidence of a more-than-insignificant deterioration in credit quality since origination (non-PCD loans) with an unpaid principal balance of $455.7 million at the acquisition date. Total fair value adjustments for non-PCD loans resulted in a net discount of $20.8 million.

The Company acquired loans from Elmira for which there was evidence of a more-than-insignificant deterioration in credit quality since origination (PCD loans as described in Note A: Summary of Significant Accounting Policies). There were no investment securities acquired from Elmira for which there was evidence of a more-than-insignificant deterioration in credit quality since origination. The carrying amount of those loans is as follows at the date of acquisition:


(000s omitted)		PCD Loans
Par value of PCD loans at acquisition		$	2,184
Allowance for credit losses at acquisition			(71)
Non-credit discount at acquisition			(81)
Fair value of PCD loans at acquisition		$	2,032

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.

Borrowings assumed with the Elmira acquisition included FHLB borrowings with a fair value of $17.6 million, with maturity dates ranging from January 2023 through March 2027 and a weighted average interest rate of 2.48%.

The core deposit intangibles related to the Elmira acquisition and other intangibles related to the NuVantage acquisition, three of the OneGroup acquisitions completed in 2022, the OneGroup, Wealth Partners, and BPAS acquisitions completed in 2023, and the Axiom acquisition are being amortized using an accelerated method over an estimated useful life of eight years. The other intangibles associated with the fourth remaining OneGroup acquisition completed in 2022 are being amortized using an accelerated method over their estimated useful life of ten years. The other intangibles related to the TGA and FBD acquisitions are being amortized using an accelerated method over their estimated useful life of 13 years and 15 years, respectively. The goodwill, which is not amortized for book purposes, was assigned to the Banking segment for the Elmira and Axiom acquisitions; the All Other segment for the OneGroup and Wealth Partners acquisitions completed in 2023 and 2022 and the NuVantage and TGA acquisitions; and the Employee Benefit Services segment for the BPAS acquisition completed in 2023 and the FBD acquisition. Goodwill arising from the Elmira and FBD acquisitions is not deductible for tax purposes. Goodwill arising from the Axiom acquisition and the OneGroup, Wealth Partners and BPAS acquisitions completed in 2023 and 2022 and the NuVantage and TGA acquisitions is deductible for tax purposes.

Direct costs related to the acquisitions were expensed as incurred. Merger and acquisition integration-related expenses amount to $0.1 million, $5.0 million and $0.7 million during 2023, 2022 and 2021, respectively, and have been separately stated in the consolidated statements of income.

Supplemental Pro Forma Financial Information (Unaudited)

The following unaudited condensed pro forma information assumes the Elmira acquisition had been completed as of January 1, 2021 for the years ended December 31, 2022 and 2021. The pro forma information does not include amounts related to the Axiom acquisition, the OneGroup, Wealth Partners and BPAS acquisitions completed in 2023 and 2022, or the NuVantage, FBD, and TGA acquisitions completed in 2021, as the amounts were immaterial. 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 year 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 that may have occurred as a result of the integration and consolidation of the acquisitions.

The pro forma information set forth below reflects the historical results of Elmira combined with the Company’s consolidated statements of income with adjustments related to (a) certain purchase accounting fair value adjustments and (b) amortization of core deposit intangibles. Acquisition expenses related to the Elmira transaction totaling $5.0 million for the year ended December 31, 2022 were included in the pro forma information as if they were incurred in 2021.


		Pro Forma (Unaudited)
		Year Ended December 31,
(000s omitted)		2022			2021
Total revenue, net of interest expense		$	687,976		$	646,375
Net income			193,417			191,450