Business Combination and Goodwill (Tables)

9 Months Ended

Sep. 30, 2018

Assets acquired and liabilities assumed recognized at the acquisition date

The following table summarizes the consideration paid by the Company in the merger with County First and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date:


(dollars in thousands)	As Recorded by County First	Fair Value and Other Merger Related Adjustments	As Recorded by the Company

Consideration Paid
Cash			$ 2,122
Common shares issued			35,620
Fair Value of Total Consideration Transferred			$ 37,742

Recognized amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalents	$ 34,409	$ -	$ 34,409
Securities	38,861	(619)	38,242
Loans, net of allowance	142,404	(1,654)	140,750
Premises and equipment	2,980	181	3,161
Core deposit intangibles	-	3,590	3,590
Interest receivable	513	(12)	501
Bank owned life insurance	6,275	-	6,275
Deferred tax asset	639	(339)	300
Other assets	586	-	586
Total assets acquired	$ 226,667	$ 1,147	$ 227,814

Deposits	$ 199,210	$ 18	$ 199,228
Other liabilities	1,449	103	1,552
Total liabilities assumed	$ 200,659	$ 121	$ 200,780
Net identifiable assets acquired	$ 26,008	$ 1,026	$ 27,034

Goodwill resulting from acquisition			$ 10,708

Proforma Results

The following table presents certain pro forma information as if County First had been acquired on January 1, 2017. These results combine the historical results of County First in the Company’s consolidated statement of income and, while certain adjustments were made for the estimated impact of certain fair value adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition taken place on January 1, 2017. Merger and acquisition costs of $741,000 and $3.6 million (pre-tax) are included in the Company’s consolidated statements of income for the three and nine months ended September 30, 2018. The Company has not segregated County First earnings after the acquisition date as the bank’s operations have been merged into Community Bank of the Chesapeake and it would be impractical to do so. There are no assumptions about what merger related costs would have been in the proforma information below, only actual expenses are included in net income. Furthermore, additional expenses related to systems conversions and other costs of integration are expected to be recorded during 2018. Additionally, the Company expects to achieve further operating cost savings and other business synergies as a result of the acquisition which are not reflected in the pro forma amounts below:


Proforma Results for the Nine Months Ended September 30, 2017
(dollars in thousands, except per share amounts)	The Community Financial Corporation Actual	County First Actual	Proforma September 30, 2017	Actual Results Nine Months Ended September 30, 2018

Total revenues (net interest income plus noninterest income)	$ 35,698	$ 6,561	$ 42,259	$ 41,056
Net income	7,667	1,009	8,676	7,414
Basic earnings per common share	$ 1.66	$ 1.10	$ 1.56	$ 1.34