MERGERS AND ACQUISITIONS (Tables)

6 Months Ended

Jun. 30, 2019

Summary of consideration Paid and Estimated Fair Values of Assets Acquired and Liabilities Assumed

The following table summarizes the consideration paid for Hamilton and the estimated fair values of the assets acquired and liabilities assumed recognized at the acquisition date:


(Dollars in thousands)
Fair value of consideration transferred:
Cash	$	14,197
Common stock issued	36,622
Total consideration transferred	$	50,819

Estimated fair values of assets acquired and (liabilities) assumed:
Cash and cash equivalents	$	43,140
Securities available for sale	60,882
Restricted investments in bank stocks	2,658
Loans	347,667
Premises and equipment	3,749
Core deposit intangible	4,550
Goodwill	7,030
Cash surrender value of life insurance	17,948
Deferred tax asset, net	5,838
ROU lease asset	2,746
Other assets	4,016
Total assets acquired	500,224

Deposits	(388,246)
Borrowings	(51,393)
Other liabilities	(9,766)
Total liabilities assumed	(449,405)
	$	50,819

Schedule of Performing and PCI Loans Acquired, By Loan Class

The following table presents performing and PCI loans acquired, by loan class, at May 1, 2019.

Upon completion of the acquisition, the Company sold the acquired investment portfolio and paid off acquired borrowings at the indicated fair value amounts in conjunction with its asset/liability management strategies.


(in thousands)	Performing		PCI		Total
Commercial real estate:
Owner-occupied	$	42,148	$	6,324	$	48,472
Non-owner occupied	45,401		770		46,171
Multi-family	10,773		0		10,773

Acquisition and development:
1-4 family residential construction	7,450		0		7,450
Commercial and land development	4,528		0		4,528
Commercial and industrial	32,316		1,702		34,018

Residential mortgage:
First lien	152,657		10,800		163,457
Home-equity - term	4,478		1		4,479
Home equity - lines of credit	13,657		0		13,657
Installment and other loans	14,467		195		14,662
Total loans acquired	$	327,875	$	19,792	$	347,667

Schedule Of Fair Value Adjustments Made To Amortized Costs Basis Of Loans Acquired

The following table presents the fair value adjustments made to the amortized cost basis of loans acquired at May 1, 2019.


(in thousands)
Gross amortized cost basis at acquisition	$	362,125
Market rate adjustment	(5,309)
Credit fair value adjustment on non-credit impaired loans	(3,947)
Credit fair value adjustment on impaired loans	(5,202)
Estimated fair value of acquired loans	$	347,667

Schedule Of Information About Acquired PCI Loans

The following table provides information about acquired PCI loans at May 1, 2019.


(in thousands)
Contractually required principal and interest at acquisition	$	31,599
Nonaccretable difference	(8,310)
Expected cash flows at acquisition	23,289
Accretable yield	(3,497)
Estimated fair value of acquired PCI loans	$	19,792

Unaudited pro forma net income for the three and six months ended June 30, 2018, would have totaled $3,557,000 and $2,516,000, and revenues would have totaled $34,878,000 and $58,695,000 for the same period had the Mercersburg and Hamilton acquisitions occurred January 1, 2018. Unaudited pro forma net income for the three and six months ended June 30, 2019, would have totaled $6,152,000 and $9,710,000, and revenues would have totaled $27,607,000 and $50,923,000 for the same period had the Hamilton acquisition occurred January 1, 2019.

In connection with the Mercersburg and Hamilton acquisitions, we incurred merger related expenses totaling $6,860,000 and $7,505,000 for the three and six months ending June 30, 2019, which are included in noninterest expenses. The expenses consisted primarily of $1,649,000 and $1,967,000 of investment banking, legal and consulting fees; $3,492,000 and $3,619,000 of information systems expense, including canceling of contracts; and $1,719,000 and $1,919,000 of other expenses, including payout of employee termination contracts.