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Farmers National (FMNB) to Buy Emclaire Financial for $105M

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Farmers National Banc Corp. (FMNB - Free Report) , along with Emclaire Financial Corp., has announced entering an agreement and plan of merger.

Per the deal, each shareholder of Emclaire may choose to receive either $40 per share in cash or 2.15 shares of FMNB common stock, conditional on an overall limitation of 70% of shares being exchanged for Farmers National’s shares and 30% for cash.

Based on Farmers National’s closing share price of $17.02 on Mar 23, 2022 (the day before the transaction was announced), the transaction is valued at around $105 million or $37.62 per share. The transaction is subject to the receipt of approval from Emclaire shareholders and customary regulatory approvals, and is expected to close in the second half of 2022.

Moreover, upon transaction closing, Emlenton Bank will be merged with and into Farmers Bank, with Farmers Bank as the surviving bank, and Emlenton Bank’s branches will become part of Farmers Bank.

The buyout marks FMNB’s largest one to date. It will facilitate the bank’s expansion in strategic markets like significant extension into the Pennsylvania markets and debut in the attractive Pittsburgh market. Moreover, it will enable the company to introduce and integrate its robust wealth management and mortgage services into the Emlenton footprint. This will provide a significant fee income growth opportunity.

Also, the buyout is expected to increase assets by 26% to $5.2 billion. The company will have 66 locations across Ohio and western Pennsylvania. Markedly, as of Dec 31, 2021, Emclaire had $1.1 billion in total assets, $918.5 million in total deposits, $72.4 million in tangible common equity and $790.9 million in gross loans.

The deal is financially attractive, with anticipated double-digit earnings per share accretion and around 10% when fully phased in. FMNB expects tangible book value earn-back of 3 years and an internal rate of return of more than 20%.

Emclaire management noted, “We are thrilled to be joining such a premier regional banking franchise. We are excited about the new products and services that will be available to our customers and the communities we serve. I believe that this partnership will provide great value for the entire Emclaire family.”

FMNB has a track record of strengthening its franchise value through mergers. Last November, the company closed the acquisition of Cortland Bancorp in a $129.3-million cash-and-stock deal. The deal enhanced its market share in Trumbull and Mahoning Counties, and expanded its presence in the attractive Cleveland suburban area.

Currently, Farmers National carries a Zacks Rank #3 (Hold). The stock has gained 11.6% over the past six months, outperforming the industry’s rally of 4%.

 

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Other Banking Consolidations

Following the regulatory approvals from the board of governors of the Federal Reserve System and the Office of the Comptroller of the Currency, Citizens Financial Group, Inc. (CFG - Free Report) expects to close the acquisition of Investors Bancorp, Inc.  by mid-April of 2022. The acquisition was announced in July 2021.

Post-closing, information relating to the anticipated conversion of Investors’ customer accounts to Citizens Financial will be communicated throughout the year, with conversion targeted to be completed in first-quarter 2023.


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