Acquisition of MidCoast Community Bancorp, Inc (Tables)

9 Months Ended

Sep. 30, 2020

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.				$	19,227
Purchase Price Consideration - Cash for Common Stock
Purchase price assigned to The First National Bank of Fredericksburg common shares exchanged for cash					7,616
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 September 30, 2020. Future amortization expense may vary from these projections:

	MSRs		Core deposit intangibles		Covenant not to compete		Total
Three months ended September 30, 2020 (actual)	$	46	$	57	$	-	$	103
Nine months ended September 30, 2020 (actual)		144		162		-		306
Three months ended September 30, 2019 (actual)		44		58		8		110
Nine months ended September 30, 2019 (actual)		138		174		24		336
Estimate for year ending December 31,
Remaining 2020		60		55		-		115
2021		213		192		-		405
2022		168		156		-		324
2023		130		121		-		251
2024		98		85		-		183
Thereafter		169		91		-		260
Total	$	838	$	700	$	-	$	1,538

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 September 30, 2020 under the column “Actual from Acquisition Date through September 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.

			Pro Forma for
	Actual from Acquisition		Three Months Ended				Nine Months Ended
	Date Through		September 30,				September 30,
(In Thousands, Except Per Share Data)	September 30, 2020		2020		2019		2020		2019
Net interest income	$	5,387	$	16,052	$	15,404	$	47,642	$	44,918
Non-interest income		107		3,538		2,239		7,779		6,416
Net income		3,035		7,678		5,849		16,306		16,649
Pro forma earnings per share:
Basic			$	1.96	$	1.49	$	4.16	$	4.23
Diluted			$	1.96	$	1.49	$	4.16	$	4.23

MidCoast Community Bancorp, Inc [Member]

Business Acquisition [Line Items]

Estimated Future Amortization Expense

As of September 30, 2020, the current year and estimated future amortization expense for the core deposit intangibles was (in thousands):

	Core deposit intangibles
Three months ended September 30, 2020 (actual)	$	7
Nine months ended September 30, 2020 (actual)		12
Estimate for year ending December 31,
Remaining 2020		7
2021		27
2022		24
2023		21
2024		18
Thereafter		48
Total	$	145