ACQUISITIONS

3 Months Ended

Mar. 31, 2024

ACQUISITIONS

ACQUISITIONS

NOTE B: ACQUISITIONS

Subsequent Period Acquisition

On April 1, 2024, the Company, through its subsidiary OneGroup NY, Inc. (“OneGroup”), completed the acquisition of a New York based insurance agency for $4.2 million in cash plus contingent consideration with an estimated fair value of $1.0 million at acquisition date. The effects of the acquisition will be included in the consolidated financial statements from that date.

Current and Prior Period Acquisitions

On February 1, 2024, the Company, through its subsidiary Benefit Plans Administrative Services, LLC (“BPA”), completed the acquisition of certain assets of Creative Plan Designs Limited (“CPD”), a financial services company that provides employee benefit plan design, administration and consulting services. Total consideration was $5.9 million in cash plus contingent consideration with an estimated fair value of $3.0 million at acquisition date. The effects of the acquired assets are included in the consolidated financial statements from that date. Revenues and direct expenses included in the consolidated statement of income for the three months ended March 31, 2024 were immaterial.

The acquisition of CPD includes contingent consideration arrangements that require additional consideration to be paid by the Company based on the future revenue levels of CPD over approximately three years and a contract holdback payment. The contract holdback will be paid upon satisfaction of certain customer retention requirements, and will be prorated based on actual results. The contract holdback amount was estimated at the maximum level of $1.5 million at the acquisition date. The revenue-based contingent consideration is payable in four installments, based on future revenue levels of CPD in 2024, 2025, 2026 and the first quarter of 2027. The range of undiscounted amounts the Company could pay under the contingent consideration agreement is between zero and $2.0 million for the first three payments in total and a variable amount for the fourth payment, which is between zero and a percentage of annualized revenue above a threshold for a particular revenue stream in the first quarter of 2027. The fair value of the contingent consideration recognized on the acquisition date of $3.0 million was estimated by applying the income approach, a measure that is based on significant Level 3 inputs not readily observable in the market. Key assumptions at the date of acquisition include (1) a discount rate range of 15.1% to 19.1% to present value the payments and (2) probability of achievement of future revenue levels of 82%.

During 2023, the Company, through its subsidiaries OneGroup, OneGroup Wealth Partners, Inc. (“Wealth Partners”) and Benefit Plans Administrative Services, Inc. (“BPAS”), completed the acquisition of certain assets of financial services companies. The acquired companies provide insurance, wealth management and benefit plan recordkeeping services and are headquartered in New York, Pennsylvania, and Florida. Total aggregate consideration for these acquisitions was $8.1 million, including $6.7 million in cash and $1.4 million in contingent consideration arrangements. The contingent consideration arrangements are based on achieving certain levels of retained revenue over a period ranging from two to five years. The fair value of these arrangements has been recorded based on the assumption that retained revenue levels will meet or exceed the required threshold for the maximum contingent consideration payments. Aggregate assets acquired were $5.1 million, including $4.9 million of customer list intangible assets, and the Company recorded goodwill of $3.0 million. The effects of the acquired assets have been included in the consolidated financial statements since the date of acquisition. The operations of these acquisitions have been integrated into the Company and discrete reporting of revenues and direct expenses for the three months ended March 31, 2024 and 2023 is not practicable.

On March 1, 2023, the Company, through its subsidiary Community Bank, N.A. (“CBNA”), completed the acquisition of certain assets of Axiom Realty Group, which includes Axiom Capital Corp., Axiom Realty Management, LLC and Axiom Realty Advisors, LLC (collectively referred to as “Axiom”), a commercial real estate finance and advisory firm, for $1.8 million in cash. The Company recorded a $1.2 million customer list intangible and recognized $0.6 million of goodwill in conjunction with the acquisition. The effects of the acquired assets have been included in the consolidated financial statements since that date. Revenues of approximately $0.6 million and $0.1 million and direct expenses of approximately $0.7 million and $0.2 million were included in the consolidated statements of income for the three months ended March 31, 2024 and 2023, respectively.

The assets and liabilities assumed in the acquisitions were recorded at their estimated fair values based on management’s best estimates using information available at the dates of the acquisitions, and are subject to adjustment based on updated information not available at the time of the acquisitions. During the first quarter of 2024, an additional cash consideration payment of $0.1 million was made associated with a 2023 acquisition based upon the receipt of new information resulting in a $0.1 million increase to the carrying value of other intangibles and had no impact on the carrying value of goodwill.

The Axiom acquisition generally expanded the Company’s lending presence nationwide. The OneGroup and Wealth Partners acquisitions generally expanded the Company’s insurance and wealth management presence in New York, Florida and Pennsylvania. The BPAS and BPA acquisitions generally expanded the Company’s employee benefit services presence in New York. Management expects that the Company will benefit from greater geographic diversity and the advantages of other synergistic business development opportunities.

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

	2024		2023
(000s omitted)	CPD		Axiom		Other(1)		Total
Consideration:
Cash	$	5,861	$	1,819	$	6,832	$	8,651
Contingent consideration		3,066		0		1,450		1,450
Total net consideration		8,927		1,819		8,282		10,101
Recognized amounts of identifiable assets acquired and liabilities assumed:
Premises and equipment, net		6		25		41		66
Other assets		26		2		175		177
Other intangibles		5,500		1,176		5,064		6,240
Other liabilities		(999)		(9)		(9)		(18)
Total identifiable assets, net		4,533		1,194		5,271		6,465
Goodwill	$	4,394	$	625	$	3,011	$	3,636

(1) Includes amounts for all OneGroup, Wealth Partners and BPAS acquisitions completed in 2023.

The other intangibles related to the CPD acquisition are being amortized using an accelerated method over an estimated useful life of twelve years. The other intangibles related to the OneGroup, Wealth Partners and BPAS acquisitions completed in 2023 and the Axiom acquisition are being amortized using an accelerated method over an estimated useful life of eight years. The goodwill, which is not amortized for book purposes, was assigned to the Employee Benefit Services segment for the CPD acquisition and the BPAS acquisition completed in 2023, the Insurance segment for the OneGroup acquisitions completed in 2023, the Wealth Management segment for the Wealth Partners acquisition completed in 2023, and the Banking and Corporate segment for the Axiom acquisition. Goodwill arising from all of the acquisitions completed in the first quarter of 2024 and 2023 is deductible for tax purposes.

Direct costs related to the acquisitions were expensed as incurred. Merger and acquisition integration-related expenses were immaterial during both the three months ended March 31, 2024 and 2023 and have been separately stated in the consolidated statements of income.