Branch Acquisition

9 Months Ended

Sep. 30, 2024

Note 16: Branch Acquisition

Pathfinder Bank completed the purchase of the East Syracuse branch from Berkshire Bank on July 19, 2024, assuming $186.0 million in associated deposits and acquiring $30.6 million in assets including $29.9 million in loans. Acquired assets include a core deposit intangible (“CDI”) valued at $6.3 million, and the valuation of acquired loans resulted in an estimated discount of $1.8 million.

The addition of the East Syracuse branch significantly increased the Bank's customer base, which grew non-brokered deposits by 21.5%.

At acquisition, the average cost of deposits assumed with the branch acquisition was 1.99% (excluding the CDI) and as of September 30, 2024, the Bank retained approximately 97% of deposit balances. No loans were purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected and considered to be credit impaired. The Company utilized a portion of the low-cost liquidity provided from the transaction to pay down $74.4 million in borrowings and $106.0 million in high-cost brokered deposits during the third quarter of 2024.

Acquisition-related expenses of $1.6 million for the three months ended September 30, 2024 were recorded in the consolidated statements of income and were expensed as incurred. The following table sets forth assets acquired and liabilities assumed in the acquisition of the East Syracuse branch, at their estimated fair values as of the closing date of the transaction:



Data is actual, not in thousands
	Amount Recorded		Fair Value Adjustment				Fair Value Recorded
Consideration:

Cash received							$	149,843,537

Fair value of assets acquired and liabilities assumed:

Assets acquired:
Cash and cash equivalents	$	251,040	$	-			$	251,040
Negative deposits (classified as loans)		28,080		-				28,080
Loans, net		29,908,345		(1,843,429	)	(a)		28,064,916
Accrued interest receivable on loans		162,388		-				162,388
Premises and equipment, net		223,676		-				223,676
Core deposit intangible		-		6,271,000		(b)		6,271,000
Right-of-use asset		12,481,680		493,000		(c)		12,974,680
Total assets acquired	$	43,055,209	$	4,920,571			$	47,975,780

Liabilities assumed:
Deposits	$	185,860,409	$	543,226		(d)	$	186,403,635
Accrued interest payable on deposits		149,948		-				149,948
Lease liability		12,481,680		-				12,481,680
Total liabilities assumed	$	198,492,037	$	543,226			$	199,035,263

Net assets acquired and liabilities assumed							$	(151,059,483	)

Goodwill							$	1,215,946		(e)

The amount of revenue of the acquired business since the acquisition date, and the proforma results of operations, are not material to the financial statements.

(a) Adjustments to loans will be recognized as an adjustment of yield over their remaining term.
(b) Recording of new intangible asset for the fair value of core deposits, to be amortized on an accelerated basis over a ten year period. The weighted average amortization period is 6.4 years.
(c) The right-of-use asset was initially measured at an amount equal to the lease liability and includes an adjustment for favorable lease terms when compared with market terms.
(d) Adjustments to deposits will be recognized as an adjustment of yield over their remaining term.

(e) Total amount of goodwill that is expected to be deductible for tax purposes.

The estimated fair values of the assets and liabilities, including identifiable intangible assets, are subject to refinement. Subsequent adjustments to the estimated fair values of assets acquired and liabilities assumed, and the resulting goodwill, is allowed for a period of up to one year after the acquisition date for new information that becomes available after the acquisition date.