A pair of longstanding local banks are coming together in a merger valued at $207 million.
Under the all-stock deal, dubbed a merger of equals, the York County-based parent of PeoplesBank is merging into Shippensburg-based Orrstown Financial.
The combined bank — which will take the Orrstown name — would have assets of roughly $5.2 billion and a network of 51 branches in Central and eastern Pennsylvania and the Baltimore region.
It would also boast a nearly 7% market share for customer deposits in Adams, Cumberland, Dauphin, Franklin, Lancaster, Lebanon and York counties, making it the fifth-largest in the region, according to data as of June 30 from the Federal Deposit Insurance Corp.
The deal is expected to close in the third quarter of 2024.
Why is this happening: Leaders of the two banks say the merger will give them greater scale, enhance profits and create more opportunities for employees, clients and community involvement.
For example, the combined bank will be able to make larger loans and offer more products Thomas Quinn Jr., president and CEO of Orrstown, said in a statement.
“Together, we are poised to create a stronger, more resilient institution that will harness the synergies of our combined expertise and resources,” added Craig Kauffman, president and CEO of PeoplesBank parent Codorus Valley Bancorp,
Who’s in charge: The combined bank would be led initially by Quinn.
Kauffman would become executive vice president and COO.
Quinn is expected to retire in June 2025, at which point Kauffman would become president and CEO.
Neil Kalani, Orrstown’s CFO, would be CFO of the combined bank.
Orrstown chair Joel Zullinger would helm the combined bank’s board, which would have seven directors from Orrstown and six from Codorus Valley.
Codorus Valley chair J. Rodney Messick would be vice chair.
What about the HQ: The combined bank will have its administrative headquarters in the Harrisburg area and its operations center in the York area.
Codorus Valley is based in York Township.
In a news release, the banks did not address plans for Orrstown’s headquarters in Shippensburg, nor did they project any cost savings, a typical outcome from most mergers.
However, the banks plan to review their combined branch network in the weeks ahead, according to Codorus Valley spokesperson John Moss.
“As with any merger of companies within similar geographical footprints, there is always the possibility that branches could be consolidated due to overlap,” he said.
What’s the ownership: Under the agreement approved by both bank’s boards, Orrstown shareholders will own 56% of the combined company, with Codorus Valley shareholders owning 44%.
The parent company will be Orrstown Financial, with Orrstown Bank as the chief subsidiary.
The legal backdrop: Both Orrstown and Codorus Valley recently moved on from high-profile legal entanglements.
Orrstown settled a decade-old shareholder lawsuit brought by the Southeastern Pennsylvania Transportation Authority, or SEPTA.
Codorus Valley recently terminated its deal with an activist shareholder who had been critical of the bank’s performance. They parted on good terms.
The financials: Despite the headwinds facing banks, both Orrstown and Codorus Valley have seen profits rise.
Orrstown’s net income for the first nine months of 2023 was $28 million, up from $12.4 million for the same period in 2022.
Codorus Valley posted net income of $19.5 million for the first nine months of this year, up from $12.2 million for the year-ago period.
The legacies: Both banks have been around for more than a century.
PeoplesBank was founded in 1864.
Orrstown dates back to 1919.