trending Market Intelligence /marketintelligence/en/news-insights/trending/5ozhlpd9rupelnwfl3s3la2 content esgSubNav
In This List

Northwest Bancshares to buy Donegal Financial Services for $85M

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


Northwest Bancshares to buy Donegal Financial Services for $85M

Northwest Bancshares Inc. is set to acquire Donegal Financial Services Corp. and Union Community Bank in a deal valued at about $85 million.

Northwest's 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 Donegal Financial's 17,864 outstanding shares.

On an aggregate basis, SNL calculates that the deal value is 15.54% of assets and 17.35% of deposits.

SNL valuations for bank and thrift targets in the mid-Atlantic region between June 11, 2017, and June 11, 2018, averaged 147.68% of book, 145.89% of tangible book and had a median of 35.68x last-12-months earnings, on an aggregate basis.

The transaction is expected to be immediately accretive to Northwest's earnings, excluding one-time costs. Annual earnings are anticipated to rise approximately 5 cents per share beginning in 2019, excluding merger-related expenses, once the company realizes anticipated annual cost savings of approximately 40% of Donegal Financial's expenses.

Donegal Group expects to realize an after-tax gain, net of transaction-related expenses, within a range of $8.9 million to $12.5 million upon deal closing.

Donegal Financial had total assets of $577 million, net loans of $430 million, deposits of $490 million and tangible equity of $79 million, as of March 31. The company operates 14 branches in Lancaster County in Pennsylvania. With the deal, Northwest will expand its presence in the county to 16 offices from six, while deposits will increase to $640 million from $150 million.

SNL data shows that Northwest Bancshares will expand in Lancaster County by 14 branches to be ranked sixth with a 5.47% share of about $11.07 billion in total market deposits.

The acquisition, along with the buyer's expected organic growth in 2018, will result in Northwest crossing the $10 billion asset threshold in 2019. As of March 31, Northwest had total assets of $9.52 billion, according to S&P Global Market Intelligence.

Donegal Financial will pay a dividend of approximately $30 million to its two shareholders, Donegal Group Inc. and Donegal Mutual Insurance Co., immediately prior to the closing of the merger. The transaction is expected to close during the first quarter of 2019, subject to regulatory approvals.

Ambassador Financial Group Inc. served as financial adviser and Luse Gorman PC served as legal counsel to Northwest. Keefe Bruyette & Woods Inc. served as financial adviser to Donegal Mutual and Duane Morris LLP served as legal counsel to Donegal Group and Donegal Mutual Insurance.

To use S&P Global Market Intelligence's branch analytics tools to compare market overlap, click here. To create custom maps, click here.

SNL Image