On November 30, 2021, Mid Penn completed its acquisition of Riverview through the merger of Riverview with and into Mid Penn. In connection with this acquisition, Riverview Bank, Riverview’s wholly-owned bank subsidiary, merged with and into Mid Penn Bank.

Pursuant to the merger agreement, shareholders of Riverview common stock received, for each share of Riverview common stock held at the effective time of the merger, 0.4833 shares of Mid Penn common stock as merger consideration with an acquisition date fair value of $142,192,000 based on the closing stock price of Mid Penn’s common stock on November 30, 2021 of $31.46. This exchange ratio did not change as a result of changes in the Mid Penn share price. Additionally, outstanding options at the time of the merger were converted into the right to receive an amount in cash equal to the product obtained by multiplying the aggregate number of shares of Riverview common stock that were issuable upon exercise of each option outstanding, and the closing sale price of Mid Penn’s common stock on the fifth (5th) business day prior to the merger closing date multiplied by the exchange ratio, less the per share exercise price of each option outstanding, without interest. There were 172,964 options outstanding to purchase Riverview common stock and the closing price of Mid Penn common stock was at $30.76 per share on the fifth business day prior to the merger closing date. Additionally, 2,500 shares of restricted stock were paid out in cash, resulting in $776,000 of cash consideration relating to stock awards. Including $16,000 of cash paid in lieu of fractional shares, the total fair value of consideration paid was $142,984,000.

The assets and liabilities of Riverview were recorded on the consolidated balance sheets of Mid Penn at their estimated fair value as of November 30, 2021, and their results of operations have been included in the consolidated income statement of the Corporation since such date. Riverview has been fully integrated into Mid Penn; therefore, the amount of revenue and earnings of Riverview included in the consolidated income statement since the acquisition date is impracticable to provide.

Included in the purchase price was $50,995,000 of goodwill, a core deposit intangible of $4,096,000, and a customer list intangible of $2,160,000. The goodwill will not be amortized but will be measured annually for impairment or more frequently if circumstances require.

The core deposit intangible will be amortized over a ten-year period using a sum of the years’ digits basis. During the year ended December 31, 2021, core deposit intangible amortization expense related to the Riverview acquisition totaled $62,000. Core deposit intangible amortization related to the Riverview acquisition for the five years beginning 2022 through 2026 is estimated to be $738,000, $664,000, $590,000, $515,000, and $440,000 per year, respectively, and $1,087,000 in total for the years after 2025.

The customer list intangible will be amortized over a ten-year period using a sum of the years’ digits basis. During the year ended December 31, 2021, customer list intangible amortization expense related to the Riverview acquisition totaled $33,000. Customer list intangible amortization related to the Riverview acquisition for the five years beginning 2022 through 2026 is estimated to be $389,000, $350,000, $310,000, $272,000, and $232,000 per year, respectively, and $574,000 in total for the years after 2025.

(Dollars in thousands)

Assets acquired:
Cash and cash equivalents	$	316,079
Investment securities		226
Restricted stock		2,209
Loans		837,505
Goodwill		50,995
Core deposit intangible		4,096
Customer list intangible		2,160
Bank owned life insurance		32,120
Premises and equipment		11,819
Deferred income taxes		7,110
Accrued interest receivable		1,919
Other assets		6,683
Total assets acquired		1,272,921
Liabilities assumed:
Deposits:
Noninterest-bearing demand		182,291
Interest-bearing demand		371,283
Money Market		152,365
Savings		176,294
Time		199,414
Long-term debt		6,500
Subordinated debt and trust preferred securities		36,308
Accrued interest payable		439
Other liabilities		5,043
Total liabilities assumed		1,129,937

Consideration paid	$	142,984

Cash paid	$	792
Fair value of common stock issued		142,192

Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, allows for adjustments to goodwill for a period of up to one year after the merger date for information that becomes available that reflects circumstances at the merger date. The following table summarizes the final estimated fair value of the assets acquired and liabilities and equity assumed in the Riverview transaction.

(Dollars in thousands)

Total purchase price (consideration paid)	$	142,984

Net assets acquired:
Cash and cash equivalents		316,079
Investment securities		226
Restricted stock		2,209
Loans		837,505
Core deposit intangible		4,096
Customer list intangible		2,160
Bank owned life insurance		32,120
Premises and equipment		11,819
Deferred income taxes		7,110
Accrued interest receivable		1,919
Other assets		6,683
Deposits:
Noninterest-bearing demand		(182,291	)
Interest-bearing demand		(371,283	)
Money Market		(152,365	)
Savings		(176,294	)
Time		(199,414	)
Long-term debt		(6,500	)
Subordinated debt and trust preferred securities		(36,308	)
Accrued interest payable		(439	)
Other liabilities		(5,043	)
		91,989
Goodwill	$	50,995

In general, factors contributing to goodwill recognized as a result of the Riverview acquisition include expected cost savings from combined operations, opportunities to expand into several new markets, and growth and profitability potential from the repositioning of short-term investments into higher-yielding loans. The goodwill acquired as a result of the Riverview acquisition is not tax deductible.

The fair value of the financial assets acquired included loans receivable with a net amortized cost basis of $837,505,000. The table below illustrates the fair value adjustments made to the amortized cost basis in order to present a fair value of the loans acquired.

The market rate adjustment represents the movement in market interest rates, irrespective of credit adjustments, compared to the contractual rates of the acquired loans. The credit adjustment made on pools of homogeneous loans represents the changes in credit quality of the underlying borrowers from loan inception to the acquisition date. The credit adjustment on impaired loans is derived in accordance with ASC 310-30-30 and represents the portion of the loan balance that has been deemed uncollectible based on our expectations of future cash flows for each respective loan.

The information about the acquired Riverview impaired loan portfolio as of November 30, 2021 is as follows:

(Dollars in thousands)

Contractually required principal and interest at acquisition	$	5,591
Contractual cash flows not expected to be collected (nonaccretable discount)		(1,739	)
Expected cash flows at acquisition		3,852
Interest component of expected cash flows (accretable discount)		(541	)
Fair value of acquired loans	$	3,311

The following table presents pro forma information as if the merger between Mid Penn and Riverview had been completed on January 1, 2020. The pro forma information does not necessarily reflect the results of operations that would have occurred had Mid Penn merged with Riverview at the beginning of 2020. The supplemental pro forma earnings for the year ended December 31, 2020 exclude (i) $3,067,000 of merger related costs incurred by Mid Penn in 2021 related to the Riverview acquisition, and (ii) goodwill impairment of $24,754,000 recognized by Riverview in 2020. The pro forma financial information does not include the impact of possible business model changes, nor does it consider any potential impacts of current market conditions or revenues, expense efficiencies, or other factors.

(Dollars in thousands, except per share data)	For the Year Ended
	December 31,
	2021		2020
Net interest income after loan loss provision	$	147,987	$	116,989
Noninterest income		32,638		26,681
Noninterest expense		123,475		108,531
Net income		57,150		35,139
Net income per common share		3.73		2.72