Acquisition
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Mar. 31, 2013
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Acquisition [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition | Note 3. Acquisition Alliance Financial Corporation On March 8, 2013, the Company acquired Alliance Financial Corporation ("Alliance"), the parent company of Alliance Bank, N.A., for total consideration of $226 million, and thereby acquired Alliance Bank, N.A.'s 26 branch locations in the central New York counties of Onondaga, Cortland, Madison, Oneida and Oswego. The merger with Alliance enabled the Company to expand its footprint into demographically attractive and contiguous markets located in the aforementioned New York counties. The results of Alliance's operations are included in the Consolidated Statements of Income from the date of acquisition. Under the terms of the merger agreement, each outstanding share of Alliance common stock was converted into the right to receive 2.1779 shares of the Company's common stock. As a result, Alliance shareholders received 10.3 million shares of Company common stock valued at $226 million. In connection with the merger, the consideration paid and the fair value of the assets acquired and the liabilities assumed on the date of acquisition are as summarized in the following table, in thousands:
The above recognized amounts of loans, other assets and other liabilities, at fair value, are preliminary estimates and are subject to adjustment but actual amounts are not expected to differ materially from those shown. The estimated fair value of loans acquired from Alliance was determined by utilizing a methodology wherein similar loans were aggregated into pools. Cash flows for each pool were determined by estimating future credit losses and the rate of prepayments. Projected monthly cash flows were then discounted to present value based on a current market rate for similar loans. There was no carryover of Alliance's allowance for credit losses associated with the loans acquired as loans were initially recorded at fair value. Information about the acquired loan portfolio as of March 8, 2013 is as follows (in thousands):
The core deposit and trust intangible assets recognized as part of the Alliance merger are being amortized over their estimated useful lives of approximately 10 and 15 years, respectively, utilizing an accelerated method. The goodwill, which is not amortized for book purposes, is not deductible for tax purposes. The fair value of savings and transaction deposit accounts acquired from Alliance was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. Certificates of deposit were valued by projecting the expected cash flows based on the contractual terms of the certificates of deposit. These cash flows were discounted based on a current market rate for a certificate of deposit with a corresponding maturity. The fair value of borrowings, which was comprised of FHLB advances, was determined by obtaining settlement quotes from the FHLB. Direct costs related to the Alliance acquisition were expensed as incurred and amounted to $10.7 million for the three months ended March 31, 2013. The following table presents unaudited pro forma information as if the acquisition had occurred on January 1, 2012 under the "Pro forma" columns. This pro forma information gives the effect to certain adjustments, including purchase accounting fair value adjustments, amortization of core deposit and other intangibles and related income tax effects. Merger and acquisition integration costs related to the Alliance acquisitions are excluded from the periods in which they were incurred. The pro forma information does not necessarily reflect the results of operations that would have occurred had the Company merged with Alliance at the beginning of 2012. Cost savings are also not reflected in the unaudited pro forma amounts for the three months ended March 31, 2012 and 2013.
Supplemental financial information regarding the former Alliance operations included in our Consolidated Statement of Income from the date of acquisition through March 31, 2013 has not been provided as it would be impracticable to do so. The operations of Alliance have been integrated into the Bank operations and therefore financial information specific to revenues and expense associated with the Alliance operations is not accessible and thus the amounts would require estimates so significant as to render the disclosure irrelevant. |