Orrstown Financial Services, Inc. to Acquire Mercersburg Financial Corporation
SHIPPENSBURG, PA–May 31, 2018 (GLOBE NEWSWIRE) — Orrstown Financial Services, Inc. (NASDAQ: ORRF) (“Orrstown”) and Mercersburg Financial Corporation (OTC Pink: MCBG) (“Mercersburg”) today announced the signing of a definitive agreement under which Mercersburg will merge with and into Orrstown. Mercersburg shareholders will receive a combination of stock and cash currently valued at $32.4 million.
Under the terms of the agreement, Mercersburg shareholders may elect to receive either 1.5291 Orrstown shares or $40.00 in cash for each Mercersburg share, subject to proration to ensure that, in the aggregate, 85% of Mercersburg’s shares will be converted into Orrstown common stock and 15% of Mercersburg’s shares will be exchanged for cash. The transaction is intended to qualify as a tax-free reorganization for federal income tax purposes.
The combination is expected to create significant value for both Orrstown and Mercersburg shareholders. Including the impact of merger-related benefits and charges, the transaction is projected to result in GAAP earnings per share accretion of approximately 8.7% in 2019, with an internal rate of return of approximately 18% and a tangible book value earn back period of approximately three years. In addition, Orrstown anticipates improvements in both its return on assets and return on tangible common equity – increases of approximately 10 basis points and 100 basis points, respectively – as the transaction leverages the company’s previous investments in personnel, infrastructure and technology.
Upon completion of the transaction, the combined bank is expected to have approximately $2 billion in assets, $1.3 billion in loans and $1.6 billion in deposits. With its combined lending teams, business development officers and branch network in south central Pennsylvania and Maryland, the combined organization will be better positioned to serve the businesses and consumers in its marketplaces.
The transaction is expected to close in the fourth quarter of 2018. Following the closing, one of Mercersburg’s current directors, to be mutually agreed upon, will be added to the boards of directors of Orrstown and Orrstown Bank. In addition, Robert (“Bob”) J. Fignar, President and CEO of Mercersburg, will join Orrstown as Market President for Franklin and Perry counties in Pennsylvania and Washington County, Maryland.
Mr. Fignar commented, “This combination of two community banks with similar cultures will enable us to better meet the needs of our customers through enhanced products and services, including an outstanding mobile banking platform, and increased lending capacity. I am enthusiastic about what the combined organization can bring to the region and look forward joining the Orrstown team.”
Thomas R. Quinn, Jr., President and CEO of Orrstown, added, “Bob Fignar and his team are committed to the communities they serve. As Market President, Bob will have the autonomy and oversight for all aspects of financial services in Franklin, Perry, and Washington counties, including commercial banking, retail banking, wealth management and brokerage, and mortgage lending. Bob’s leadership and vision, combined with our increased market share, will serve as a great benefit to our customers. This is a big win for our region, our customers and our shareholders.”
William E. Sanders, Jr., Mercersburg’s Chairman, stated, “Mercersburg is excited to partner with a strong, well-managed company like Orrstown. The merger provides our shareholders with greater value for their investment, greater advancement opportunities for the staff, and increased service opportunities for our customers.”
Joel R. Zullinger, Orrstown’s Chairman, added, “Mercersburg and Orrstown share many similarities–from their founding in the first two decades of the 20th century through expansion beginning in the 1970s and 1980s woven together through personalized service and a community-first mentality. The customers and shareholders of both organizations can look forward to a continuation and expansion of the community banking model.”
The definitive agreement has been unanimously approved by the boards of directors of Orrstown and Mercersburg. The completion of the transaction is subject to Mercersburg’s stockholder approval and customary regulatory approvals. All Mercersburg directors, who own shares of Mercersburg’s outstanding common stock, have entered into voting agreements to vote their shares in favor of the transaction. Hovde Group, LLC served as financial advisor and Goodwin Procter LLP served as legal counsel to Orrstown. Ambassador Financial Group served as financial advisor and Stevens & Lee served as legal counsel to Mercersburg.
About Orrstown-With over $1.6 billion in assets, Orrstown Financial Services, Inc. and its wholly-owned subsidiaries, Orrstown Bank and Wheatland Advisors, Inc., provide a wide range of consumer and business financial services through banking and financial advisory offices in Berks, Cumberland, Dauphin, Franklin, Lancaster, Perry, and York Counties, Pennsylvania and Washington County, Maryland. Orrstown Bank is an Equal Housing Lender and its deposits are insured up to the legal maximum by the FDIC. Orrstown Financial Services, Inc.’s common stock is traded on Nasdaq (ORRF). For more information about Orrstown Financial Services, Inc. and Orrstown Bank, visit www.orrstown.com. For more information about Wheatland Advisors, Inc., visit www.wheatlandadvisors.com.
About Mercersburg– Mercersburg Financial Corporation is the holding company for First Community Bank of Mercersburg (FCB), an independent community bank founded in 1909. Since its inception, FCB has grown to become approximately a $180 million bank with six convenient locations in the communities of Mercersburg, Fort Loudon, Greencastle, Chambersburg and Scotland. FCB is dedicated to offering services and products that meet the needs of its customers while providing a fair shareholder return and a strong commitment to the local communities in which it serves. For more information about FCB, visit www.fcbmbg.com. Special Note Concerning Forward-Looking Statements