ACQUISITIONS |
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| ACQUISITIONS | 3.ACQUISITIONS Targeted Lending Co., LLC On April 24, 2026, the Bank completed the acquisition of 100% of the membership interests of Targeted Lending, an independent equipment financing company, in an all-cash transaction. Targeted Lending, as a subsidiary of the Bank, will operate as the newly formed Specialty Financing division, expanding the Bank’s commercial lending capabilities and extending the Bank’s reach into nationwide equipment finance markets. Total consideration for the transaction was $144.1 million, comprised of $98.7 million to settle certain debt of Targeted Lending, cash of $43.8 million, and potential performance-based cash consideration (“Contingent Consideration”), which was determined to have a fair value of $1.6 million as of April 24, 2026. This Contingent Consideration can be earned over a three-year period commencing with the date of acquisition, and the potential payment of which ranges from zero to $3.0 million. This Contingent Consideration is included in Other liabilities in the Consolidated Statements of Condition. The acquisition of Targeted Lending was accounted for as a business combination using the purchase method of accounting in accordance with FASB Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date, including the identifiable intangible assets acquired. Goodwill has been recorded representing the excess of the purchase price over the fair value of the net assets acquired and is not expected to be tax-deductible. The goodwill recognized is the result of expected synergies and operational efficiencies, among other factors. The Company’s accounting for the acquisition has not been finalized as the Company continues to evaluate the post-closing adjustment amount, which is expected to have an insignificant effect on the value of the goodwill recognized as of April 24, 2026. The allocation will be updated, if necessary, through the measurement period, which ends no later than one year from the acquisition date. The following table presents the estimated fair value of the assets acquired and liabilities assumed (dollars in thousands):
The fair value estimates used in valuing certain acquired assets and liabilities are based, in part, on inputs that are unobservable. Loans Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, interest rate, term, amortization term and current discount rates. Loans were grouped together according to similar characteristics when applying various valuation techniques. The discount rates used for loans was a risk-adjusted discount rate based on a weighted average cost of capital considering the cost of equity and cost of debt. The discount rate does not include a factor for credit losses as that has been included as a reduction to the estimated cash flows. Purchased loans that reflect a more-than-insignificant deterioration of credit from origination are considered PCD loans. The remaining loans were classified as PSLs. For PCD loans, the initial estimate of expected credit losses is recognized in the allowance for credit losses on loans on the date of acquisition using the same methodology as other loans receivables. The Company adopted ASU 2025-08 "Financial Instruments - Credit Losses (Topic 326): Purchased Loans" during the three months ended June 30, 2026. Accordingly, the initial estimate of expected credit losses recognized in the allowance for credit losses on loans included both PCD loans and PSL. A non-credit discount/premium is allocated to the loans. The following table includes the fair value and unpaid principal balance of the acquired loans as of April 24, 2026 (dollars in thousands):
The following valuation approaches were utilized to estimate the acquisition-date fair value for the intangible assets acquired: Customer Relationships: Represents the fair value of the originator network acquired. Fair value was estimated with an income approach using a multi-period excess earnings method which discounts expected future cash flows, taking into account historic customer attrition rates and contributory asset charges, among other factors. The intangible asset is being amortized over an estimated useful life of 15 years. Developed technologies: Fair value was estimated with income approach using a relief from royalty method, taking into account attributable revenue and obsolescence patterns, among other factors. The intangible asset is being amortized over an estimated useful life of 3 years. Targeted Lending contributed revenues of $3.2 million and earnings of $1.2 million to the Company’s consolidated results for the period from April 24, 2026 to June 30, 2026. The following table shows the Company and Targeted Lending proforma combined net interest income, non-interest income and net income. The proforma financial information presented in the table below was computed by combining the historical financial information of the Company and Targeted Lending along with the effects of the acquisition method of accounting for business combinations as though the Company acquired Targeted Lending on January 1, 2025. Also included in the proforma financial information are certain adjustments, including $1.2 million of acquisition-related costs, as well as adjustments related to amortization expense of the intangible assets acquired in the Targeted Lending acquisition. The proforma information does not reflect the potential benefits of cost and funding synergies, opportunities to earn additional revenues or other factors and therefore does not represent what the actual net revenues and net income would have been had the Company actually acquired Targeted Lending as of this date.
Other Acquisitions On April 20, 2026, the Company, through its subsidiary Pioneer Insurance Agency, Inc., completed the acquisitions of certain assets of Reiser Consulting Group, Inc. of Albany, NY (“Reiser Consulting Group”) and Wyndham Benefits, LLC (“Wyndham Benefits”) of Ballston Spa, NY. The Company paid an aggregate of $1.2 million in cash and recorded $645,000 in contingent consideration payable to acquire the assets. The Company recorded a $745,000 customer list intangible asset and goodwill in the amount of $1.1 million in conjunction with the acquisitions. The goodwill from the acquisitions are expected to be deductible for tax purposes. The acquisitions of Reiser Consulting Group and Wyndham Benefits were made to expand the Company’s employee benefit products and services. |
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