Citizens & Northern Corporation, headquarted in Wellsboro, Tioga County, is acquiring Covenant Financial, Inc. of Doylestown.
C&N Corp. and Covenant announced Dec. 18, that the boards of directors of both companies unanimously approved an agreement and plan of merger pursuant to which Covenant will merge with and into C&N Corp. in a transaction valued at approximately $77 million.
Covenant’s bank subsidiary, Covenant Bank, will be merged into C&N Corp.’s bank subsidiary, Citizens & Northern Bank (“C&N”).
C&N Corp. is the bank holding company for C&N, which operates 27 banking offices in Bradford, Bucks, Cameron, Lycoming, McKean, Potter, Sullivan and Tioga counties in Pennsylvania and Steuben County in New York, as well as loan production offices in Elmira, N.Y., and Warminster and York, York County. As of Sept. 30, C&N Corp. had consolidated assets of $1.643 billion.
Covenant is the holding company of Covenant Bank, which oper-operates two community bank offices located in Bucks and Chester counties. Covenant had assets of $512 million as of Sept. 30.
After the transaction is complete, the combined organization is projected to have approximately $2.3 billion in assets.
A joint announcement of the transaction was made by J. Bradley Scovill, president and CEO of C&N Corp. and John C. Spier, CEO of Covenant.
“The addition of Covenant expands C&N’s presence in attractive southeastern Pennsylvania markets and builds on our recent acquisition of Monument Bank,” Scovill said. “We are excited about the opportunities created by the combined customer base and expanded C&N Team serving the market. Covenant has deep roots in the region and its relationship-based, community focused culture aligns with C&N’s mission and values.
“This strategic investment provides scale, effectively leverages our strong capital base and is expected to produce substantial earnings accretion beginning in 2020. We are pleased to welcome the Covenant Team and customers to C&N and view our partnership as a significant step in positioning C&N to enhance long-term shareholder value.”
In the transaction, Covenant shareholders will elect to receive either 0.6212 shares of C&N Corp. common stock or $16.50 in cash for each share of Covenant common stock owned, subject to proration to ensure that, overall, 25% of the Covenant shares will be converted into cash and 75% of the Covenant shares will be converted into C&N Corp. stock.
Holders of Covenant common stock prior to the consummation of the merger will own approximately 13% of C&N Corp.’s common stock outstanding immediately following the consummation of the merger. The parties have also agreed that two members of the Covenant board will join the C&N Corp. board of directors.
“This partnership provides our shareholders with an attractive return on their investment in Covenant and an opportunity to realize greater value in the future,” Spier said. “We have built a strong bank and believe that partnering with this high-performing franchise positions us to realize that value. Our common vision will propel us forward as an even stronger community bank in the years ahead.”
Covenant Bank’s President and COO Blair T. Rush will join the market leadership team as EVP and Region President. Chief Lending Officer Kelley A. Cwiklinski will continue as SVP and Regional Commercial Lending Executive. They will join C&N’s team of Chris Nardo, Michelle Pedersen and Ben Crowley in leading C&N’s growth strategy in the southeastern Pennsylvania region.
The merger is subject to satisfaction of customary closing conditions, including receipt of customary regulatory approvals and approval by Covenant’s shareholders. It is expected that the transaction will close in the third quarter of 2020. More information about the transaction and the Agreement will be filed with a Current Report on Form 8-K by C&N Corp. shortly.
Boenning & Scattergood, Inc. served as financial advisor to C&N Corp. and Stevens & Lee, P.C. served as C&N Corp.’s legal counsel. Sandler O’Neill + Partners, L.P. served as financial advisor to Covenant and Windels Marx Lane & Mittendorf, LLP served as Covenant’s legal counsel.