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Business Combinations
 12 Months Ended
Dec. 31, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]  
Business Combinations Business Combinations
Merger Related Expenses
The Company incurred merger related expenses of $1.8 million, $22,000, and $2.7 million for the years ended December 31, 2024, 2023, and 2022, respectively. The following table summarizes the merger related expenses for the years ended December 31, 2024, 2023 and 2022:
For the Year Ended December 31,
202420232022
(in thousands)
Data processing fees$— $10 $790 
Professional fees1,506 12 1,936 
Other/miscellaneous fees273 — 9 
Merger related expenses$1,779 $22 $2,735 
Merger related expenses for 2024 primarily include expenses related to the acquisition of Spring Garden, which was completed on October 1, 2024. Merger related expenses for 2022 included expenses related to the terminated merger agreement with Partners Bancorp.
Spring Garden Acquisition
On October 1, 2024, the Company completed its acquisition of Spring Garden. The acquisition is complimentary to the Company’s existing products and will expand the Company’s specialty finance offerings. Total consideration paid was $162.7 million and goodwill from the transaction amounted to $17.2 million.
The acquisition was accounted for under the acquisition method of accounting. Under this method of accounting, the purchase price has been allocated to the respective assets acquired and liabilities assumed based upon their estimated fair values. The excess of consideration paid over the estimated fair value of the net assets acquired has been recorded as goodwill.
The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed by the Company at the date of the acquisition for Spring Garden, net of total consideration paid (in thousands):
At October 1, 2024
Estimated
Fair Value
Total consideration paid (1)
$162,704 
Assets acquired:
Cash and cash equivalents$68 
Loans140,062 
Other real estate owned1,666 
Premises and equipment157 
Other assets1,122 
Customer relationship intangible6,500 
Total assets acquired149,575 
Liabilities assumed:
Other liabilities4,033 
Total liabilities assumed4,033 
Net assets acquired$145,542 
Goodwill recorded$17,162 
(1)Cash consideration paid was $68 million. The difference between the cash and total consideration paid includes adjustments for the settlement of pre-existing relationships.
The calculation of goodwill is subject to change for up to one year after the date of acquisition as additional information relative to the closing date estimates and uncertainties become available. While the calculation of goodwill is subject to change, the Company finalized its review of the acquired assets and liabilities and will not be recording any further adjustments to the carrying value.
Fair Value Measurement of Assets Acquired and Liabilities Assumed
The methods used to determine the fair value of the assets acquired and liabilities assumed in the Spring Garden acquisition were as follows. Refer to Note 15 Fair Value Measurements, for a discussion of the fair value hierarchy.
Loans
The acquired loan portfolio was valued utilizing Level 3 inputs and included the use of present value techniques employing cash flow estimates and incorporated assumptions that marketplace participants would use in estimating fair values. In instances where reliable market information was not available, the Company used its own assumptions in an effort to determine reasonable fair value. Specifically, the Company utilized three separate fair value analyses which a market participant would employ in estimating the total fair value adjustment. The three separate fair valuation methodologies used were: (1) interest rate loan fair value analysis; (2) general credit fair value adjustment; and (3) specific credit fair value adjustment.
To prepare the interest rate fair value analysis, market rates for similar loans were obtained from various external data sources and reviewed by the Company’s management for reasonableness. The weighted average of these rates was used as the fair value interest rate a market participant would utilize. A present value approach was utilized to calculate the interest rate fair value adjustment.
The general credit fair value adjustment was calculated using expected lifetime losses and estimated fair value adjustments for qualitative factors. The expected lifetime losses were calculated using an average of historical losses of the loan portfolio amongst peer groups were deemed appropriate. The adjustment related to qualitative factors, if any, was impacted by general economic conditions.
To calculate the specific credit fair value adjustment, the Company identified loans that experienced more-than-insignificant deterioration in credit quality since origination. Loans meeting this criteria were reviewed by comparing the contractual cash flows to expected collectible cash flows. The aggregate expected cash flows less the acquisition date fair value resulted in an accretable yield amount which will be recognized over the life of the loans.
Customer Relationship Intangible
The customer relationship intangible asset represents the value associated with the commercial construction business that was acquired, which was valued using the multi-period excess earnings method under the income approach. The customer relationship intangible totaled $6.5 million, and is being amortized over its estimated useful life of approximately 7 years.
Intangibles
The estimated future amortization expense for core deposit intangible and customer relationship intangible over the next five years and thereafter are as follows (in thousands):
For the Year Ending December 31,Amortization Expense
2025$3,634 
20263,269 
20272,616 
20281,600 
2029918 
Thereafter643 
Total$12,680