Bluefield, Va.-based First Community Bankshares Inc. agreed to acquire Abingdon, Va.-based Highlands Bankshares Inc. and unit Highlands Union Bank in an all-stock deal valued at around $91.0 million.
Each Highlands Bankshares common and preferred stock prior to the merger will be converted into the right to receive 0.2703 of a First Community Bankshares common stock. Highlands Union Bank will merge into First Community Bank and a Highlands Bankshares director will join First Community Bank's board under the terms of the deal.
The fixed exchange ratio may be increased if there are savings related to termination costs to be paid by Highlands Bankshares to its core data processing provider. Based on current savings estimates, no adjustment is contemplated at this time, according to a filing.
The deal is expected to close in the fourth quarter. First Community Bankshares expects the transaction to be neutral to tangible book value per share and to have upper-single-digit accretion to earnings in the first year after deal closing.
S&P Global Market Intelligence calculates the deal is 155.18% of common equity and 155.18% of tangible common equity and 25.24x earnings, on aggregate basis. The deal value is 15.23% of assets, 17.97% of deposits and the tangible book premium to core deposits ratio is 7.33%.
The deal has a one-day premium of 22.54% and a one-month premium of 21.71%.
S&P Global Market Intelligence valuations for bank and thrift targets in the Southeast region between Sept. 11, 2018, and Sept. 11, 2019, averaged 158.59% of book and 170.17% of tangible book and had a median of 17.71x last-12-months earnings, on an aggregate basis.
First Community Bankshares will expand in Virginia by seven branches to be ranked No. 21 with a 0.36% share of approximately $323.05 billion in total market deposits. The deal will also enable the company to expand in Tennessee by five branches to be ranked No. 137 with a 0.06% share of approximately $154.8 billion in total market deposits.
It will also expand in North Carolina by two branches to be ranked no. 47 with a 0.06% share of approximately $366.36 billion in total market deposits.
Highlands Bankshares will pay a termination fee of $4 million to First Community Bankshares under certain conditions if the deal falls through.
First Community Bankshares reported consolidated assets of $2.21 billion as of June 30, according to a news release. Based on S&P Global Market Intelligence data, Highlands Bankshares had total assets of $611.7 million as of June 30. The combined company will have consolidated assets of more than $2.8 billion.
Banks Street Partners served as financial adviser to First Community Bankshares and First Community Bank. The company and the bank were represented by Pitman Law Firm LLC, Fox Rothschild LLP and Bowles Rice LLP.
Stephens Inc. was financial adviser to Highlands Bankshares. Highlands Bankshares and Highlands Union Bank were represented by Nelson Mullins Riley & Scarborough LLP.
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