The deal is expected to close in the fourth quarter this year.
“This is a big win for our region, our customers and our shareholders,” president and CEO of Orrstown, Thomas R. Quinn Jr., said in a statement.
The deal has been in the works for roughly six months. Mercersburg was not actively looking for a partner, but thought a partnership with Orrstown made sense after the bank was approached by Orrstown, said Robert J. Fignar, president and CEO of Mercersburg. Fignar will join Orrstown as market president for Franklin and Perry counties in Pennsylvania and Washington County, Maryland.
The agreement, under which Mercersburg will merge with and into Orrstown, was unanimously approved by the boards of directors of Orrstown and Mercersburg, according to a release issued Thursday by Orrstown.
Upon completion of the transaction, the combined bank is expected to have approximately $2 billion in assets, $1.3 billion in loans and $1.6 billion in deposits.
Orrstown said the transaction is intended to qualify as a tax-free reorganization for federal income tax purposes.
Fignar doesn’t expect a lot of job loss.
“In my perspective, Orrstown is committed to offer as many Mercersburg team members as possible, opportunity in the combined organization. We will work to try to minimize job displacement,” Fignar said.
Following the closing, one of Mercersburg’s current directors, to be mutually agreed upon, will be added to the boards of directors of Orrstown and Orrstown Bank.
Under the terms of the agreement, Mercersburg shareholders will receive a combination of stock and cash currently valued at $32.4 million.
Though Fignar is excited for the future, this moment is bittersweet.
“It’s difficult because the bank has been around since 1909, so we didn’t take that lightly, but in the world we live in today, with regulations and rising costs, it’s getting difficult for small community banks,” Fignar said and added, “It’s the ending of an era, but we will be able to continue the tradition of community banking, and I think that’s important.”
Based in Shippensburg, Orrstown Financial has assets of roughly $1.6 billion and offices in Berks, Cumberland, Dauphin, Franklin, Lancaster and Perry counties, as well as in Maryland.
The bank reported earnings of $3.6 million in the first quarter of 2018, up from $2 million in the first quarter of 2017.
Orrstown’s subsidiaries include Orrstown Bank and Wheatland Advisors Inc., which it bought in 2016.
First Community Bank has approximately $180 million in assets with branches in Mercersburg, Fort Loudon, Greencastle, Chambersburg and Scotland.