As described in Note 1. Summary of Significant Accounting Policies, effective November 30, 2023 the Company completed its merger with Partners by acquiring 100% of the outstanding common shares of Partners.

Pursuant to the Partners Merger Agreement, Partners merged with and into LINKBANCORP with LINKBANCORP as the surviving corporation. Additionally, the Bank of Delmarva and Virginia Partners Bank each merged with and into LINKBANK, with LINKBANK as the surviving bank.

The Partners Merger constituted a business combination and was accounted for using the acquisition method of accounting, in accordance with the provisions of FASB ASC 805 Business Combinations. As such, LINKBANCORP was the accounting acquirer and Partners was the accounting acquiree and the historical financial statements of the combined company are the historical financial statements of LINKBANCORP.

Under the Partners Merger Agreement, Partners shareholders received 1.150 LINKBANCORP common shares for each share they owned, and cash in lieu of fractional shares. LINKBANCORP issued 20.7 million common shares to Partners shareholders which represented approximately 55.4% of the post-merger outstanding common shares of the Company. The fair value of the common shares issued as part of the consideration paid for Partners was determined by the closing price of the Company's common shares at the acquisition date.

The total fair value consideration was $135.8 million which consisted of $133.8 million for the fair value of common stock issued and $2.0 million for the fair value of Partners restricted stock shares.

The following condensed statement reflects the amounts acquired at the acquisition date for each major class of assets acquired and liabilities assumed.


Total Consideration in the Merger				$	135,779

Calculated Fair Value of Assets Acquired
	Cash and cash equivalents	$	34,586
	Federal Funds Sold		7,159
	Securities available for sale		123,440
	Loans, net of ACL		1,240,334
	Premises and equipment		15,504
	Right-of-use asset		6,042
	Core deposit intangibles		25,344
	Deferred taxes		14,466
	Investments in restricted bank stock		6,763
	Accrued interest receivable and other assets		29,884
Total Assets Acquired			1,503,522

Calculated Fair Value of Liabilities Assumed
	Deposits		1,299,867
	Long term borrowings		55,292
	Subordinated debt		21,078
	Operating lease liabilities		6,908
	Other liabilities		5,724
Total Liabilities Assumed			1,388,869
Net Assets Acquired					114,653
Goodwill From the Merger				$	21,126

The following table summarizes the Partners Merger as of November 30, 2023:


Consideration paid
(dollars in thousands)
Common stock consideration:
Common shares of Partners Bancorp					17,985,577
Exchange ratio					1.15
LINKBANCORP, Inc. common stock issued					20,683,158
LINKBANCORP, Inc. stock price on acquisition date				$	6.47
Purchase price assigned to Partners Bancorp common shares					133,820

Restricted stock consideration
Partners Bancorp restricted stock shares					297,726
LINKBANCORP, Inc. stock price on acquisition date				$	6.47
Total purchase price assigned to Partners Bancorp restricted shares					1,926

Cash paid in exchange for Partners Bancorp stock options and fractional shares					33
Total consideration				$	135,779

Net Assets Acquired
Partners Bancorp shareholders’ equity	$	143,817
Partners Bancorp goodwill and intangibles		(10,699	)

Fair Value Adjustments:
Securities available for sale		(921	)
Loans
Interest rate		(53,681	)
General credit		(11,607	)
Credit adjustment for loans acquired with deteriorated credit quality		(6,016	)
Remove existing deferred loan fees, net at acquisition		2,462
Remove the allowance for credit losses present at acquisition		16,124
Premises and equipment		3,045

Core deposit intangible		25,344
Other assets		4,036

Liabilities
Time deposits		3,595
Subordinated debt		1,179
Other liabilities		(2,025	)
					114,653
Goodwill From the Merger				$	21,126

Pursuant to accounting standards, the Company assigned a fair value to the assets acquired and liabilities assumed of Partners. ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”

The assets acquired and liabilities assumed in the acquisition of Partners were recorded at their estimated fair values based on management’s best estimates using information available at the date of the acquisition and are subject to adjustment for up to one year after the closing date of the acquisition. While the fair values are not expected to be materially different from the estimates, any material adjustments to the estimates will be reflected, retroactively, as of the date of the acquisition. The items most susceptible to adjustment are the fair value adjustments on loans, core deposit intangible and the deferred income tax assets resulting from the acquisition. The Company is continuing to finalize the fair values of all aspects of the acquisition.

Goodwill represents consideration transferred in excess of the fair value of the net assets acquired. The goodwill resulting from the acquisition represents the value expected from the expansion of the Company's market and enhancement of operations and efficiencies. Goodwill acquired in the acquisition is not deductible for tax purposes.

The estimated fair values of the investment securities available for sale, primarily comprised of U.S. Government agency mortgage-backed securities, obligations of states and political subdivisions, and obligations of U.S. Government agencies and corporations were determined using Level 1 and Level 2 inputs in the fair value hierarchy. A fair value discount of $921 was recorded and will be amortized over the estimated life of the investments using the interest rate method.

Acquired loans are classified into two categories: PCD loans and non-PCD loans. PCD loans are defined as a loan or group of loans that have experienced more than insignificant credit deterioration since origination. Non-PCD loans will have an allowance established on acquisition date, which is recognized as an expense through provision for credit losses. The allowance for credit losses on non-PCD loans of $9.7 million was recorded through the provision for credit losses within the Consolidated Statements of Operations.

For PCD loans, an allowance is recognized at acquisition by adding it to the fair value of the loan, which is the “Day 1 amortized cost”. There is no provision for credit loss expense recognized on PCD loans because the initial allowance is established by grossing-up the amortized cost of the PCD loan. At the date of acquisition, of the $1.3 billion of loans acquired from Partners, $431.6 million, or 33%, of Partners’ loan portfolio, was accounted for as PCD loans. The fair value of PCD loans was $408.6 million at the date of acquisition. The gross contractual amounts receivable related to the PCD loans was $431.6 million. The Company estimates, on the date of acquisition, that $158 of the contractual cash flows specific to the PCD loans will not be collected.

The Company assumed leases on 11 facilities of Partners. The Company believes that the current lease costs were at market terms therefore no fair value adjustment is needed.

The Company acquired 13 locations previously owned by Partners as branches and administration offices. A fair value adjustment of $5.9 million was recorded at acquisition date.

The fair value of the core deposit intangible was determined based on a discounted cash flow analysis using a discount rate commensurate with market participants. To calculate cash flows, deposit account servicing costs (net of deposit fee income) and interest expense on deposits were compared to the higher cost of alternative funding sources available through national brokered CD offering rates and FHLB advance rates. The projected cash flows were developed using expected deposit attrition. The core deposit intangible will be amortized over ten years using the sum-of-years digits method.

The fair value adjustment for time deposits was based on a discounted cash flow methodology of the contract rates and contractual repayments of fixed maturity deposits using prevailing market interest rates for similar-term time deposits. The time deposit fair value adjustment will be amortized into income on a level yield amortization method over the contractual life of the deposits.

The Company reviewed the cost of the borrowings to market interest rates for similar instruments and believed that the rates were comparable and that no fair value adjustment was recorded.

The fair value of the subordinated debt was determined using a discounted cash flow method using a market participant discount rate for similar instruments. The subordinated debt fair value adjustment will be amortized into income on a level yield amortization method based upon the assumed market rate and the term of the subordinated debt.

The following pro forma financial information presents the consolidated results of operations of Partners and LINKBANCORP as if the Partners Merger occurred as of January 1, 2022 with pro forma adjustments. The pro forma adjustments give effect to any change in interest income due to the accretion of discounts (premiums) associated with the fair value adjustments of acquired loans, any change in interest expense due to estimated premium amortization/discount accretion associated with the fair value adjustments to acquired time deposits and other debt, and the amortization of the core deposit intangible that would have resulted had the deposits been acquired as of January 1, 2022. Merger related expenses incurred by the Company during the year ended December 31, 2023 are not reflected in the pro forma amounts. The pro forma information does not necessarily reflect the results of operations that would have occurred had Partners merged with LINKBANCORP, Inc. at the beginning of 2023. The pro forma amounts for the three months ended March 31, 2023 do not reflect the anticipated cost savings that had not yet been realized.