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Dive Brief:

• Harrisburg, Pennsylvania-based Mid Penn Bancorp has agreed to acquire Bristol, Pennsylvania based William Penn Bancorp in an all-stock transaction valued at roughly $127 million, the companies announced Friday.

• The deal will create a combined entity with approximately $6.3 billion in assets, $4.9 billion in loans and $5.3 billion in deposits, according to the press release.

• The deal —  expected to close in the first half of 2025 —  has received board approvals from both companies but awaits regulatory and shareholder approvals.

Dive Insight:

The merger will strengthen Mid Penn’s footprint in the greater Philadelphia metro area and align with the lender’s strategic plan to grow in the southeastern region of the state as well as the southern region of neighboring New Jersey, Rory G. Ritrievi, Mid Penn’s chair and CEO said in a statement.

“We are excited to welcome the William Penn shareholders, customers and employees to Mid Penn,” Ritrievi said. “Together, we look forward to joining the two companies to expand our footprint and, in turn, enhance our ability to deliver for our customers, communities and shareholders.”

Shareholders of William Penn will receive 0.4260 shares of Mid Penn common stock for each share of William Penn common stock. All William Penn options will be rolled into Mid Penn equivalent options. The estimated transaction value is roughly $13.58 per William Penn share, equivalent to $127 million, based on Mid Penn’s closing stock price of $31.88 per share as of Oct. 30.

Mid Penn expects the merger to be immediately accretive to Mid Penn’s estimated earnings per share.

The same day, Mid Penn priced a public offering of nearly 2.4 million shares of its common stock at $29.50 per share, raising approximately $70 million. The company has also granted underwriters a 30-day option to purchase up to an additional 356,250 shares.

The $5 billion asset bank said the expected net proceeds of around $67 million will support Mid Penn's continued growth, including investments in the bank, potential debt redemption, future strategic transactions, and general corporate purposes. 

Following the merger completion, William Penn Bank, a subsidiary of William Penn Bancorp, will be merged with and into Mid Penn Bank, a subsidiary of Mid Penn Bancorp, with Mid Penn Bank being the surviving bank, according to a regulatory filing with the Securities and Exchange Commission. 

William Penn operates 12 branches across Pennsylvania and New Jersey and has nearly $812 million in assets, $465 million in loans, and $630 million in deposits.

“The merger enables us to accelerate our growth far more rapidly than we could as an independent company, while also creating excellent value for our shareholders, customers, and employees,” William Penn Chairman and CEO Kenneth J. Stephon said in a statement, adding that the merger will provide shareholders immediate value.

After the merger's completion, Stephon will become the director and chief corporate development officer of Mid Penn Bank and its parent company and vice chair of Mid Penn Bank, the regulatory filing said. Further, all other board members of William Penn will be given the option to serve a paid three-year term on an advisory board of Mid Penn Bank.

The merger agreement also states that if the deal falls through for any reason, William Penn might have to pay a termination fee of $4.9 million, according to the filing.

William Penn reported a net loss of $21,000 for the third quarter compared to a net income of $179,000 for the same period last year. Mid Penn reported a net income of $12.3 million or $0.74 per share in the third quarter this year — up from $9.2 million or $0.56 per share during the same period last year. 

The latest transaction will be the sixth bank acquisition by Mid Penn in the last decade. In July, the lender completed the acquisition of  Commonwealth Financial Group, an insurance business and related accounts of a full-service employee benefits firm that serves mid- to-large employers across central and eastern Pennsylvania, northern Maryland, and northern Virginia for $2 million. The acquisition resulted in contributed earnings of $69,000 in the third quarter and pre-tax expenses of $109,000. The acquirer has also estimated a total goodwill of $1.1 million because of the acquisition.