Orrstown Financial Services, Inc. (NASDAQ: ORRF) and Hamilton Bancorp, Inc. (NASDAQ: HBK) today announced the signing of a definitive agreement under which Hamilton will merge with and into Orrstown. Hamilton shareholders will receive a combination of stock and cash currently valued at $58.5 million.
Under the terms of the agreement, Hamilton shareholders will receive 0.54 shares of Orrstown common stock and $4.10 per share in cash for each share of Hamilton common stock owned by them. The cash consideration is subject to reduction based on potential losses, write-downs, or reserves related to certain identified loans. 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 Hamilton shareholders. Including the impact of merger-related benefits and charges, the transaction is projected to result in earnings per share accretion of approximately 8% in 2020, with an internal rate of return of approximately 18.6% and a tangible book value earn back period of approximately 1.3 years.
Upon completion of the transaction, the combined company is expected to have approximately $2.5 billion in assets, $1.7 billion in loans and $2.1 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 second quarter of 2019. Following the closing, one of Hamilton’s current directors, to be mutually agreed upon, will be added to the boards of directors of Orrstown and Orrstown Bank. In addition, Ellen R. Fish, Executive Vice President of Hamilton, will join Orrstown as Executive Vice President and Senior Lender for the Greater Baltimore region.
“We are thrilled to welcome Hamilton Bank to the Orrstown family,” said Thomas R. Quinn, Jr., President and CEO of Orrstown. “By joining Hamilton and Orrstown together, our institutions, shareholders, and customers will benefit greatly from our expanded footprint, enhanced products and services, and robust technology offerings. As Orrstown marks its 100th anniversary in 2019, we will continue to remain true to our community banking roots in all of the markets we serve. This merger affords us an immediate presence in one of the most populous regions in the country, and in a market that is strategically situated for Orrstown’s future growth. I would like to personally thank Bob DeAlmeida and his team for their leadership throughout this process and for their continued support during the upcoming transition.”
Bob DeAlmeida, President and CEO of Hamilton, added, “I am proud of the Hamilton team and the many years of service to our customers. We built and grew a great bank. Today, I am excited to announce the partnership with Orrstown that will allow us to better serve our customers through expanded products and services. This merger will result in a stronger competitive bank in the Baltimore area which is focused on providing a great customer experience. Our goal, through the combination of Hamilton and Orrstown, is to build an incredibly strong community bank which has the size and resources to meet the needs of our customers today and well into the future.”
The definitive agreement has been unanimously approved by the boards of directors of Orrstown and Hamilton. The completion of the transaction is subject to Hamilton’s stockholder approval and customary regulatory approvals. All Hamilton directors, who own shares of Hamilton’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. Keefe, Bruyette & Woods, Inc. served as financial advisor and Luse Gorman, P.C. served as legal counsel to Hamilton.
About Orrstown
With approximately $1.9 billion in assets following the acquisition of Mercersburg Financial Corporation on October 1, 2018, 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 Hamilton
Founded in 1915, Hamilton Bank is a community bank with $525.3 million in assets and $54.9 million in shareholders’ equity. The bank has 72 full-time equivalent employees and operates seven branch locations across Greater Baltimore, serving the communities of Cockeysville, Pasadena, Rosedale, Towson, Ellicott City, and Baltimore in Maryland. Whether online or on the corner, Hamilton Bank is a community bank that cares about its customers. For more information about Hamilton, visit www.Hamilton-Bank.com.
