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Pennsylvania's First Commonwealth acquiring DCB Financial in Ohio for $106M

Indiana,Pa.-based First CommonwealthFinancial Corp. ($6.75 billion) will acquire Lewis Center,Ohio-based DCB FinancialCorp ($556.1 million) in a cash-and-stock deal valued atapproximately $14.50 per share, or approximately $106 million.

Pursuant tothe deal terms,DCB Financial shareholders will be entitled to receive either 1.427 shares ofFirst Commonwealth Financial common stock, or $14.50 in cash for each DCBFinancial common share. Theaggregate merger consideration is composed of 80% First Commonwealth Financialcommon stock and 20% cash.

According to SNL data, on a per-share basis, the deal valueis 176.8% of book and tangible book, 8.9x earnings, and 9.0x last-12-monthscore earnings. The price is 22.75% of deposits and 19.13% of assets. Theone-day premium is 88.48%, based on DCB Financial's closing price of $7.65 onSept. 30, and the one-month premium is 93.54%, based on DCB Financial's closingprice of $7.45 on Sept. 2.

SNL valuations for bank and thrift targets in the Midwestregion between Oct. 2, 2015, and Oct. 2, 2016, averaged 138.64% of book,146.48% of tangible book and had a median of 18.63x last-12-months earnings, ona per-share basis.

Theacquisition will provide First Commonwealth Financial with approximately $556million in total assets, $467 million in total deposits, $397 million in totalloans and nine full-service banking offices in the Columbus metropolitanstatistical area. Following the merger of the parent holding companies,Delaware County Bank and TrustCo. will merge into First Commonwealth Bank.

SNL data shows that First Commonwealth Financial will enterDelaware, Ohio, with 15 branches to be ranked third with 15.62% share of about$3.00 billion in total market deposits.

The merger— expected to qualify as a tax-free reorganization — is likely to be completedin the second quarter of 2017, subject to DCB Financial shareholders' approvaland regulatory approvals.

Excludingcertain one-time merger charges, the transaction is projected to beapproximately 4% accretive to First Commonwealth Financial's earnings in 2017,and approximately 7% accretive to earnings in 2018 once anticipated costsavings are fully phased in. Estimated tangible book value dilution at closingof less than 4% is expected to be earned back in less than five years using the"cross-over" method, including estimated one-time charges.

Onedirector from DCB Financial will join the board of First Commonwealth Financial.

FBR CapitalMarkets & Co., led by Ajay Asija, served as financial adviser to FirstCommonwealth Financial, and Squire Patton Boggs (US) LLP served as the bank'slegal counsel. Keefe Bruyette & Woods Inc. served as financial adviser toDCB Financial, and Porter Wright Morris & Arthur LLP served as its legalcounsel.

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