Shreveport, La.-based Home Federal Bancorp Inc. of Louisiana, the holding company of Home Federal Bank, agreed to acquire Benton, La.-based Northwest Bancshares Corp., the holding company of First National Bank of Benton, in an all-cash transaction.
The deal is expected to close in the first quarter of 2023, subject to customary closing conditions, including regulatory approvals and the approval of Northwest Bancshares shareholders.
At announcement, S&P Global Market Intelligence calculates the deal value to be 179.36% of common equity and tangible common equity, 16.02% of deposits, 14.22% of assets and 13.03x earnings. The tangible book premium-to-core deposits ratio is 7.37%.
Market Intelligence valuations for bank and thrift targets in the Southwest region between Oct. 4, 2021, and Oct. 4, 2022, averaged 154.99% of book and 164.39% of tangible book and had a median of 16.58x LTM earnings, on an aggregate basis.
Under the merger agreement, Northwest Bancshares shareholders will receive their pro rata portion of the aggregate merger consideration equal to $4.25 million, plus the sum of 8.0% of the total assets of Northwest Bancshares as of the month-end immediately before the closing of the merger after giving effect to a special distribution to be paid, less any amount that Northwest Bancshares' total unaccrued and unpaid transaction expenses exceed $125,000. Based on financial data as of Aug. 31, the parties currently estimate that the aggregate merger consideration will be about $10.1 million, according to a news release.
Additionally, before the completion of the merger, Northwest Bancshares will pay the special distribution in cash to its shareholders in an aggregate amount that will reduce the ratio of the company's total shareholders' equity to total consolidated assets to 8.0%. Based on financial data at Aug. 31, the companies currently estimate that the amount of special distribution will be about $8.4 million.
As of Aug. 31, Northwest Bancshares had $81.7 million in total consolidated assets, $52.1 million in total loans, $65.0 million in total deposits and $14.2 million in shareholders' equity, according to the news release.
With the completion of the deal, Home Federal Bancorp will expand in Bossier Parish, La., by one branch to be ranked sixth with a 4.74% share of approximately $3.54 billion in total market deposits.
First National Bank of Benton will be merged with and into Home Federal Bank promptly following the completion of the holding company merger. First National Bank of Benton operates out of one banking location in Benton, La., while Home Federal Bank conducts business from its nine full-service banking offices and home office in northwest Louisiana.
Home Federal Bancorp expects that the transaction will be over 20% accretive to EPS after cost savings are fully realized and accretive to tangible book value per share in about three years of closing. Following the merger, Home Federal Bank is expected to have leverage and total risk-based capital ratios of approximately 8.2% and 14.2%, respectively.
Raymond James & Associates Inc. was financial adviser to Home Federal Bancorp, and Silver Freedman Taff & Tiernan LLP was the company's legal adviser in the transaction. Hillworth Bank Partners rendered a fairness opinion to Home Federal Bancorp.
SEACAP Financial LLC was financial adviser to Northwest Bancshares, and Butler Snow LLP was the company's legal adviser in the transaction.
To use S&P Capital IQ Pro's branch analytics tools to compare market overlap, click here. To create custom maps, click here.
