ACQUISITIONS (Tables)

9 Months Ended

Sep. 30, 2020

ACQUISITIONS

Schedule of estimated fair value of the assets acquired and liabilities

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed after considering the measurement period adjustments described above:

	2020		2019
(000s omitted)	Steuben		Kinderhook		Other (1)		Total
Consideration paid :
Cash	$	21,613	$	93,384	$	1,650	$	95,034
Community Bank System, Inc. common stock		76,942		0		0		0
Total net consideration paid		98,555		93,384		1,650		95,034
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents		55,973		90,381		0		90,381
Investment securities		180,497		39,770		0		39,770
Loans, net of allowance for credit losses on PCD loans (2)		339,017		479,877		0		479,877
Premises and equipment, net		7,764		13,970		0		13,970
Accrued interest and fees receivable		2,712		1,130		0		1,130
Other assets		17,633		14,109		0		14,109
Core deposit intangibles		2,928		3,573		0		3,573
Other intangibles		1,196		0		1,650		1,650
Deposits		(516,274)		(568,161)		0		(568,161)
Other liabilities		(5,105)		(2,922)		0		(2,922)
Other Federal Home Loan Bank borrowings		(6,000)		(2,420)		0		(2,420)
Subordinated notes payable		0		(13,831)		0		(13,831)
Subordinated debt held by unconsolidated subsidiary trusts		(2,062)		(2,062)		0		(2,062)
Total identifiable assets, net		78,279		53,414		1,650		55,064
Goodwill	$	20,276	$	39,970	$	0	$	39,970

(1) Includes amounts related to both acquisitions completed by CISI in 2019.

(2) Acquisition-related allowance for credit losses on purchased credit deteriorated (“PCD”) loans applicable beginning in 2020.

Schedule of of the loans acquired

The Company has acquired loans from Steuben for which there was evidence of a more-than-insignificant deterioration in credit quality since origination. There were no investment securities acquired from Steuben 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	$	24,415
Allowance for credit losses at acquisition		(524)
Non-credit discount at acquisition		(115)
Fair value of PCD loans at acquisition	$	23,776

The following is a summary of the remaining loans acquired from Steuben for which there was no evidence of a more-than-insignificant deterioration in credit quality since origination at the date of acquisition:

(000s omitted)	Non-PCD Loans
Contractually required principal and interest at acquisition	$	416,230
Contractual cash flows not expected to be collected		(3,131)
Expected cash flows at acquisition		413,099
Interest component of expected cash flows		(97,858)
Fair value of non-PCD loans at acquisition	$	315,241

The following is a summary of the loans acquired from Kinderhook at the date of acquisition:

	Acquired		Acquired		Total
	Impaired		Non-impaired		Acquired
(000s omitted)	Loans		Loans		Loans
Contractually required principal and interest at acquisition	$	13,350	$	636,384	$	649,734
Contractual cash flows not expected to be collected		(4,176)		(5,472)		(9,648)
Expected cash flows at acquisition		9,174		630,912		640,086
Interest component of expected cash flows		(551)		(159,658)		(160,209)
Fair value of acquired loans	$	8,623	$	471,254	$	479,877

Schedule of pro forma information

The pro forma information set forth below reflects the historical results of Steuben combined with the Company’s consolidated statements of income with adjustments related to (a) certain purchase accounting fair value adjustments and (b) amortization of customer lists and core deposit intangibles. Acquisition-related expenses totaling $0.8 million and $4.4 million for the three and nine months ended September 30, 2020, respectively, related to Steuben were included in the pro forma information as if they were incurred in the first quarter of 2019.

	Pro Forma (Unaudited)				Pro Forma (Unaudited)
	Three Months Ended				Nine Months Ended
(000’s omitted)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Total revenue, net of interest expense	$	152,634	$	154,221	$	456,740	$	457,399
Net income		43,472		40,695		124,338		126,874