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.
