Pa. in-state peers Citizens Financial, HV Bancorp to merge

In-state Pennsylvania peers Citizens Financial Services Inc., the holding company for First Citizens Community Bank, and HV Bancorp Inc., the holding company for Huntingdon Valley Bank, agreed to merge in a stock-and-cash deal worth about $67.4 million.

The deal will see HV Bancorp merge into Citizens Financial, with the latter as the surviving entity. Right after, Huntingdon Valley Bank will merge into First Citizens Community Bank, with the latter as the surviving bank.

Under the terms of the agreement, HV Bancorp shareholders will elect to receive either $30.50 in cash or 0.400 of a share of Citizens Financial stock for each HV Bancorp they hold. The election will be subject to proration procedures, where 80% of the shares of HV Bancorp common stock will be exchanged for Citizens Financial common stock and 20% of the shares of HV Bancorp common stock will be exchanged for cash.

The merger is expected to boost Citizens Financial's presence in Montgomery, Bucks and Philadelphia counties in Pennsylvania, New Castle County in Delaware and Burlington County in New Jersey, according to a press release.

Current HV Bancorp CEO Travis Thompson and President Robert Marino will be senior officers at First Citizens Community Bank. An HV Bancorp director will join each of the boards of directors of Citizens Financial and First Citizens Community Bank, while one HV Bancorp director will join the board of First Citizens Community Bank.

HV Bancorp had about $570.6 million in total assets, $388.3 million in net loans and $481.5 million in deposits as of June 30. The combined company is expected to have more than $2.78 billion in assets, $1.96 billion in gross loans and $2.36 billion in deposits upon completion of the transaction, based on financial metrics as of June 30.

The deal is expected to be completed in the first half of 2023.

Based on S&P Global Market Intelligence data, upon deal completion, Citizens Financial Services Inc. will enter Bucks County, Pa., with three branches to be ranked No. 26 with a 0.45% share of approximately $26.85 billion in total market deposits. It will enter Philadelphia County, Pa., with three branches to be ranked No. 26 with a 0.08% share of approximately $67.62 billion in total market deposits, and will enter Montgomery County, Pa., with two branches to be ranked No. 17 with a 0.75% share of approximately $41.19 billion in total market deposits. It will enter Burlington County, N.J., with one branch to be ranked No. 20 with a 0% share of approximately $15.86 billion in total market deposits, the data shows.

At the announcement, Market Intelligence calculates the deal value to be 155.01% of common equity, 155.01% of tangible common equity, 13.25% of deposits, 11.18% of assets and 21.76x earnings. The tangible book premium to core deposits ratio is 4.85%.

Market Intelligence valuations for bank and thrift targets in the Mid Atlantic region between Oct. 18, 2021, and Oct. 18, 2022, averaged 126.32% of book and 137.82% of tangible book and had a median of 20.24x last-12-months earnings, on an aggregate basis, and averaged 118.85% of book and 131.99% of tangible book and had a median of 19.10x LTM earnings on a per-share basis.

The agreement provides certain termination rights for both HV Bancorp and Citizens Financial and further provides that if the merger is not consummated under certain circumstances, HV Bancorp may be required to pay Citizens Financial a termination fee of about $2.7 million.

Janney Montgomery Scott LLC was financial adviser to Citizens Financial, and Hogan Lovells US LLP was its legal counsel. The Kafafian Group Inc. was financial adviser and provided a fairness opinion to HV Bancorp, and Luse Gorman PC was its legal counsel.

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