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Acquisition of MidCoast Community Bancorp, Inc (Tables) | 6 Months Ended
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Jun. 30, 2020
Business Acquisition [Line Items] |
Summarizes the Purchase Price of Midcoast | The following table summarizes the purchase of MidCoast as of April 17, 2020:
(In Thousands, Except Per Share Data) |  |  |  |  |  |
Purchase Price Consideration in Common Stock |  |  |  |  |  |
Citizens Financial Services, Inc. shares issued |  |  | 373,356 |  |  |  |
Value assigned to Citizens Financial Services, Inc. common share |  | $ | 51.50 |  |  |  |
Purchase price assigned to MidCoast common shares exchanged for Citizens Financial Services, Inc. |  |  |  |  |  | $ | 19,228 |
Purchase Price Consideration - Cash for Common Stock |  |  |  |  |  |  |  |
Purchase price assigned to The First National Bank of Fredericksburg common shares exchanged for cash |  |  |  |  |  |  | 7,615 |
Total Purchase Price |  |  |  |  |  |  | 26,843 |
Net Assets Acquired: |  |  |  |  |  |  |  |
MidCoast Community Bancorp, Inc shareholders’ equity |  | $ | 24,330 |  |  |  |  |
Adjustments to reflect assets acquired at fair value: |  |  |  |  |  |  |  |
Investments |  |  |  |  |  |  |  |
Loans |  |  |  |  |  |  |  |
Interest rate |  |  | 1,424 |  |  |  |  |
General credit |  |  | (4,375 | ) |  |  |  |
Specific credit - non-amortizing |  |  | (2,135 | ) |  |  |  |
Specific credit - amortizing |  |  | (966 | ) |  |  |  |
Core deposit intangible |  |  | 157 |  |  |  |  |
Owned premises |  |  | (426 | ) |  |  |  |
Other assets |  |  | 65 |  |  |  |  |
Deferred tax assets |  |  | 2,217 |  |  |  |  |
Adjustments to reflect liabilities acquired at fair value: |  |  |  |  |  |  |  |
Time deposits |  |  | (1,018 | ) |  |  |  |
Borrowings |  |  | (497 | ) |  |  |  |
Other liabilities |  |  | (13 | ) |  |  |  |
|  |  |  |  |  |  | 18,763 |
Goodwill resulting from merger |  |  |  |  |  | $ | 8,080 |
Asset Acquired and Liability Assumed | The following condensed statement reflects the amounts recognized as of the acquisition date for each major class of asset acquired and liability assumed:
(In Thousands) |  |  |  |  |  |
Total purchase price |  |  |  |  | $ | 26,843 |
Net assets acquired: |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 8,637 |  |  |  |  |
Loans |  |  | 223,235 |  |  |  |  |
Premises and equipment, net |  |  | 1,787 |  |  |  |  |
Accrued interest receivable |  |  | 586 |  |  |  |  |
Bank-owned life insurance |  |  | 3,766 |  |  |  |  |
Intangibles |  |  | 157 |  |  |  |  |
Deferred tax asset |  |  | 3,402 |  |  |  |  |
Other assets |  |  | 2,878 |  |  |  |  |
Time deposits |  |  | (123,841 | ) |  |  |  |
Deposits other than time deposits |  |  | (84,985 | ) |  |  |  |
Accrued interest payable |  |  | (164 | ) |  |  |  |
Borrowings |  |  | (15,497 | ) |  |  |  |
Other liabilities |  |  | (1,198 | ) |  |  |  |
|  |  |  |  |  |  | 18,763 |
Goodwill resulting from the MidCoast merger |  |  |  |  |  | $ | 8,080 |
Estimated Future Amortization Expense | The following table provides the current year and estimated future amortization expense for amortized intangible assets for the next five years (in thousands). We based our projections of amortization expense shown below on existing asset balances at June 30, 2020. Future amortization expense may vary from these projections:
|  | MSRs |  |  | Core deposit intangibles |  |  | Covenant not to compete |  |  | Total |
Three months ended June 30, 2020 (actual) |  | $ | 49 |  |  | $ | 55 |  |  | $ | - |  |  | $ | 104 |
Six months ended June 30, 2020 (actual) |  |  | 97 |  |  |  | 105 |  |  |  | - |  |  |  | 202 |
Three months ended June 30, 2019 (actual) |  |  | 46 |  |  |  | 58 |  |  |  | 8 |  |  |  | 112 |
Six months ended June 30, 2019 (actual) |  |  | 94 |  |  |  | 116 |  |  |  | 16 |  |  |  | 226 |
Estimate for year ending December 31, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Remaining 2020 |  |  | 98 |  |  |  | 112 |  |  |  | - |  |  |  | 210 |
2021 |  |  | 165 |  |  |  | 192 |  |  |  | - |  |  |  | 357 |
2022 |  |  | 128 |  |  |  | 156 |  |  |  | - |  |  |  | 284 |
2023 |  |  | 97 |  |  |  | 121 |  |  |  | - |  |  |  | 218 |
2024 |  |  | 71 |  |  |  | 85 |  |  |  | - |  |  |  | 156 |
Thereafter |  |  | 105 |  |  |  | 91 |  |  |  | - |  |  |  | 196 |
Total |  | $ | 664 |  |  | $ | 757 |  |  | $ | - |  |  | $ | 1,421 |
Pro Forma Information | The following table presents financial information regarding the former MidCoast operations included in our Consolidated Statement of Income from the date of acquisition through June 30, 2020 under the column “Actual from Acquisition Date through June 30, 2020”. In addition, the following table presents unaudited pro forma information as if the acquisition of MidCoast had occurred on January 1, 2019 under the “Pro Forma” columns. The table below has been prepared for comparative purposes only and is not necessarily indicative of the actual results that would have been attained had the acquisition occurred as of the beginning of the periods presented, nor is it indicative of future results. Furthermore, the unaudited proforma information does not reflect management’s estimate of any revenue-enhancing opportunities nor anticipated cost savings as a result of the integration and consolidation of the acquisition. Merger and acquisition integration costs and amortization of fair value adjustments are included in the numbers below.
|  |  |  |  | Unaudited Pro Forma for |
|  | Actual from Acquisition |  |  | Three Months Ended |  |  | Six Months Ended |
|  | Date Through |  |  | June 30, |  |  | June 30, |
(In Thousands, Except Per Share Data) |  | June 30, 2020 |  |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Net interest income |  | $ | 2,261 |  |  | $ | 18,710 |  |  | $ | 14,955 |  |  | $ | 37,206 |  |  | $ | 29,514 |
Non-interest income |  |  | 33 |  |  |  | 2,326 |  |  |  | 2,091 |  |  |  | 4,241 |  |  |  | 4,177 |
Net income |  |  | 1,092 |  |  |  | 3,478 |  |  |  | 5,440 |  |  |  | 8,628 |  |  |  | 10,800 |
Pro forma earnings per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  |  |  |  | $ | 1.03 |  |  | $ | 1.38 |  |  | $ | 2.20 |  |  | $ | 2.74 |
Diluted |  |  |  |  |  | $ | 1.02 |  |  | $ | 1.38 |  |  | $ | 2.20 |  |  | $ | 2.74 |
MidCoast Community Bancorp, Inc [Member] |
Business Acquisition [Line Items] |
Estimated Future Amortization Expense | As of June 30, 2020, the current year and estimated future amortization expense for the core deposit intangibles was (in thousands):
|  | Core deposit intangibles |
Three months ended June 30, 2020 (actual) |  | $ | 5 |
Six months ended June 30, 2020 (actual) |  |  | 5 |
Estimate for year ending December 31, |  |  |  |
Remaining 2020 |  |  | 14 |
2021 |  |  | 27 |
2022 |  |  | 24 |
2023 |  |  | 21 |
2024 |  |  | 18 |
Thereafter |  |  | 48 |
Total |  | $ | 152 |

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