Two of central Maryland's oldest community banks have agreed to merge and reorganize under a new name.

The merger of Middletown Valley Bank and Woodsboro Bank, announced Friday, would create a $445 million-asset institution with more than a dozen branches in Frederick and Washington counties. The combined company would be called First Heritage Community Bank.

The banks described the transaction as a tax-free reorganization and a tax-free exchange of shares of common stock. First Heritage will issue 2.5 million shares of common stock, with Woodsboro shareholders receiving roughly 2.8 shares for each share owned and Middletown shareholders receiving about 1.06 shares for each share they own.

The exchange is subject to adjustments to reduction in common equity, based on certain conditions. The deal is expected to close in the second quarter.

Middletown's stock contribution is valued at $25.1 million, equal to 54.8% of First Heritage, and Woodsboro's contribution is valued at $20.8 million, or 45.2% of the new company.

Both banks are more than a century old — Woodsboro was founded in 1899 and Middletown was founded in 1908 — and neither has ever made an acquisition, according to the Federal Deposit Insurance Corp.

Under terms of the merger agreement, Richard Miller, the chief executive of the $230 million-asset Woodsboro, would be CEO of the newly created First Heritage for two years and then hand the reins to B.J. Goetz, the CEO of the $215 million-asset Middletown.

James Pierne, a Middletown director, would become chairman of First Heritage. Natalie McSherry, a Woodsboro director, would become vice chairman.

The banks said they don't expect to close branches and aren't anticipating "substantial" job cuts.

Griffin Financial Group advised Middletown and Silver, Freedman, Taft & Tiernan was legal counsel. Ambassador Financial Group advised Woodsboro and Gordon Feinblatt was legal counsel. Ober Kaler was consolidation counsel to both Middletown and Woodsboro.

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