WARREN, Pa. and MARIETTA, Pa., June 12,
2018 /PRNewswire/ -- Northwest Bancshares, Inc.
("Northwest") (NASDAQ: NWBI) and Donegal Financial Services
Corporation ("DFSC") (privately-owned) announced today the signing
of a definitive agreement pursuant to which Northwest will acquire
DFSC in a cash and stock transaction for total consideration valued
at $85 million. In addition to
the $85 million deal consideration,
given DFSC's substantial capital position, DFSC will pay a dividend
of approximately $30 million to its
two shareholders, Donegal Group Inc. and Donegal Mutual Insurance
Company, immediately prior to the closing of the merger. DFSC is
based in Marietta, Lancaster County, Pennsylvania and is the
parent company of Union Community Bank. As of March 31, 2018, DFSC had total assets of
$577 million, net loans of
$430 million, deposits of
$490 million, tangible equity of
$79 million, and operates 14 branches
in Lancaster County, which is one
of Pennsylvania's fastest-growing
counties.
![Northwest Bank (PRNewsfoto/Northwest Bank) Northwest Bank (PRNewsfoto/Northwest Bank)](https://mma.prnewswire.com/media/346742/Northwest_Bank_Logo.jpg)
Northwest's presence in Lancaster
County will increase from six to 16 offices, while deposits
will increase to $640 million from
$150 million, elevating Northwest to
the sixth highest market share in the county. It is
anticipated that four of the branches of the combined entity will
be consolidated with nearby offices. It is also expected that
this acquisition, combined with Northwest's anticipated organic
growth in 2018, will result in the company crossing the
$10 billion asset threshold in
2019. When the transaction is consummated, the combination of
the two banking companies will create an institution that provides
banking services through 182 branch locations and 297 ATMs in three
states.
William J. Wagner, Chairman and
CEO of Northwest, stated, "We welcome the employees and customers
of Union Community Bank to the Northwest family, where we believe
they will embrace our community bank culture, superior product and
service offering, and tradition of exceptional customer
service. We are extremely excited to be acquiring a community
bank of exceptional quality in one of the more rapidly-growing
counties in our geographic footprint. In
addition to providing meaningful accretion in earnings per share
and return on equity, this merger will provide bottom-line earnings
that exceed the loss of transaction income we will incur as
mandated by the Dodd-Frank Act when we cross the $10 billion asset threshold. We believe we
would have exceeded this asset threshold in 2019 due to normal
internal growth."
Under the terms of the agreement, payment will be 50% cash and
50% stock, with the stock portion consisting of a fixed exchange of
137.84 Northwest shares for each of DFSC's 17,864 outstanding
shares. The exchange ratio was based upon the average per
share closing price of Northwest's stock for the ten trading days
ended June 4, 2018, which was
$17.26. The agreement provides
that the exchange ratio will switch to a floating basis if the
value of Northwest's shares during a period ending the fifth
trading day prior to closing is less than $15.53 or greater than $18.99, in an effort to provide protection to
both parties such that the total purchase price shall not be less
than $80.75 million or more than
$89.25 million. Northwest also
has the right to alter the mix of cash and stock to be received if
the value of Northwest's shares during the calculation period is
less than $15.53. The transaction is
expected to close in the first quarter of 2019.
The transaction is expected to be immediately accretive to
Northwest's earnings, excluding one-time costs. Upon
achieving anticipated annual cost savings of approximately 40% of
DFSC's expenses, annual earnings are projected to increase
approximately $0.05 per share
beginning in 2019, excluding merger-related expenses. Using
those cost savings assumptions, the purchase price represents
approximately 10.6 times the earnings contributed by the
acquisition. Based on DFSC's actual earnings (annualized) for
the quarter ending March 31, 2018,
the purchase price equates to 16.2 times earnings.
Taking into consideration the aforementioned dividend payment,
the purchase price represents 172% of DFSC's tangible book value as
of March 31, 2018. The tangible
book value per share dilution is estimated to be less than 3% with
an estimated earn back period of less than 4 years. The
acquisition is expected to increase Northwest's return on average
common equity from approximately 8.4% to approximately 8.7% in the
first year of combined operations.
Gregory E. Diehl, President and
CEO of Union Community Bank stated, "We are very excited about
joining the Northwest team. We strongly believe that
Northwest shares our core values and is dedicated to its clients,
employees, and the communities it serves. We believe
Northwest's outstanding record of enhancing shareholder value and
success as a community bank revolves around its connection to its
customers as evidenced by being named by J.D. Power in six of the
last nine years as the bank with the 'Highest Level of Customer
Satisfaction in the mid-Atlantic region.'"
Ronald J. Seiffert, President and
Chief Operating Officer of Northwest, added, "We believe this
merger greatly enhances Northwest's franchise value and delivers an
extremely attractive combination of market appeal, office
locations, deposit mix and growth opportunities."
Completion of the transaction is subject to customary closing
conditions, including regulatory approvals.
Ambassador Financial Group, Inc. served as financial advisor and
Luse Gorman, PC served as legal
counsel to Northwest in this transaction.
Keefe, Bruyette, & Woods, Inc., a Stifel Company, served as
financial adviser to Donegal Mutual Insurance Company, who is the
majority shareholder of DFSC and Duane Morris LLP served as legal
counsel to Donegal Group Inc. and Donegal Mutual Insurance Company,
who are DFSC's two shareholders.
Investor Conference Call
Executives from Northwest will host a conference call with
investors and the financial community at 10:00 AM Eastern Time on Tuesday, June 12, 2018
to discuss this transaction. Those wishing to participate in the
call may dial toll-free @ 1-877-870-4263. Participants should
ask to be joined into the Northwest Bancshares, Inc. call. The
slide presentation can be viewed at
https://www.webcaster4.com/Webcast/Page/1049/26179 or by
clicking on the link "Northwest Bancshares, Inc. investor
presentation" on Northwest's website www.Northwest.com. A replay of
the call will be available until June 19,
2018 by dialing toll-free @ 1-877-344-7529, with replay
access code 10121138. The investor presentation on this transaction
is also available at the Investor Relations section of Northwest's
website www.Northwest.com.
About Northwest Bancshares, Inc.
Headquartered in Warren,
Pennsylvania, Northwest Bancshares, Inc. is the holding
company of Northwest Bank. Founded in 1896, Northwest Bank is
a full-service financial institution offering a complete line of
business and personal banking products and wealth management
services, as well as the fulfillment of business and personal
insurance needs. Northwest operates 172 community banking offices
in Pennsylvania, New York and Ohio. Northwest Bancshares,
Inc.'s common stock is listed on the NASDAQ Global Select Market
("NWBI"). Additional information regarding Northwest Bancshares,
Inc. and Northwest Bank can be accessed on-line at
www.Northwest.com.
About Donegal Financial Services Corporation
Donegal
Financial Services Corporation. is the holding company of Union
Community Bank with assets of approximately $577 million, as of March
31, 2018.
About Donegal Group Inc.
Donegal Group Inc. is an insurance holding company whose insurance
subsidiaries offer personal and commercial property and casualty
lines of insurance in 22 Mid-Atlantic, Midwestern, New England and
Southern states. Donegal Mutual Insurance Company and the
insurance subsidiaries of Donegal Group Inc. conduct business
together as the Donegal Insurance Group. The Donegal
Insurance Group has an A.M. Best rating of A (Excellent).
Donegal Group Inc.'s Class A common stock and Class B common stock
trade on NASDAQ under the symbols DGICA and DGICB, respectively. As
an effective acquirer of small to medium-sized "main street"
property and casualty insurers, Donegal Group Inc. has grown
profitably over the last three decades. The Company continues to
seek opportunities for growth while striving to achieve its
longstanding goal of outperforming the property and casualty
insurance industry in terms of service, profitability and book
value growth.
Forward-Looking Statements
This release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of
1995. These forward-looking statements include, but are
not limited to, statements about (1) the benefits of the merger
between Northwest and DFSC, including anticipated future results,
cost savings and accretion to reported earnings that may be
realized from the merger; (2) Northwest's and DFSC's plans,
objectives, expectations and intentions and other statements
contained in this presentation that are not historical facts; and
(3) other statements identified by words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates"
or words of similar meaning.
Forward-looking statements involve risks and uncertainties that
may cause actual results to differ materially from those in such
statements. The following factors, among others, could cause actual
results to differ materially from the anticipated results expressed
in the forward-looking statements: the businesses of Northwest and
DFSC may not be combined successfully, or such combination may take
longer than expected; the cost savings from the merger may not be
fully realized or may take longer than expected; operating costs,
customer loss and business disruption following the merger may be
greater than expected; governmental approvals of the merger may not
be obtained, or adverse regulatory conditions may be imposed in
connection with governmental approvals of the merger or otherwise;
the stockholders of DFSC may revise their approval of the merger;
credit and interest rate risks associated with Northwest's and
DFSC's respective businesses; and difficulties associated with
achieving expected future financial results. Additional factors
that could cause actual results to differ materially from those
expressed in the forward-looking statements are discussed in
Northwest's reports (such as the Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K)
filed with the Securities and Exchange Commission (the "SEC") and
available at the SEC's Internet website (www.sec.gov). All
subsequent written and oral forward-looking statements concerning
the proposed transaction or other matters attributable to Northwest
or DFSC or any person acting on their behalf are expressly
qualified in their entirety by the cautionary statements above.
Except as required by law, Northwest and DFSC do not undertake any
obligation to update any forward-looking statement to reflect
circumstances or events that occur after the date the
forward-looking statement is made.
Annualized, pro forma, projected and estimated numbers are used
for illustrative purpose only, are not forecasts and may not
reflect actual results.
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SOURCE Northwest Bancshares, Inc.