Northwest Bancshares, the bank holding company for Northwest Bank, and Penns Woods Bancorp, the multi-bank holding company of Jersey Shore State Bank and Luzerne Bank, entered into a definitive agreement and plan of merger whereby Northwest will acquire Penns Woods in an all-stock transaction valued at approximately $270.4 million.

When the transaction is completed, Northwest will have more than 150 financial centers, as well as loan production offices, across four states.

Under the terms of the agreement, which has been unanimously approved by the board of directors of both companies, Northwest will exchange shares of its common stock for all of the outstanding shares of Penns Woods common stock, in an all-stock transaction. Penns Woods shareholders will be entitled to receive 2.385 shares of Northwest common stock for each share of Penns Woods common stock they own upon the effective time of the merger. Any unexercised stock options of Penns Woods will be canceled in exchange for a cash payment at the spread value over the exercise price.

Based on Northwest’s closing stock price of $14.44 as of Dec. 16, 2024, the transaction consideration is valued at $34.44 for each share of Penns Woods which equates to a 139.0% multiple of tangible book value, a 12.8x multiple on LTM core earnings and a core deposit premium of 5.2% as of Sept. 30, 2024. Including the consideration paid to option holders, the aggregate consideration is approximately $270.4 million. The merger is expected to qualify as a tax-free reorganization. Following completion of the transaction, Penns Woods shareholders would be expected to receive, on a per share equivalent basis, a dividend equal to approximately $0.48 per share based on Northwest’s current quarterly dividend of $0.20 per share. This dividend is approximately 49% higher than Penns Woods’ current quarterly dividend of $0.32 per share.

“We are very excited to announce this partnership with the Penns Woods team as this transaction marks another milestone in our long-term growth strategy and executes on our strategic plan,” Louis J. Torchio, president and CEO of Northwest, said. “Jersey Shore State Bank and Luzerne Bank have outstanding reputations throughout their respective markets, and we look forward to welcoming our new colleagues and their customers to the Northwest family. We will be strongly positioned to continue to serve communities that are familiar to Northwest, expand our presence into new markets and deliver exceptional banking services across our entire footprint. Through this acquisition, we look forward to building on Northwest’s rich history of community-focused banking and delivering even greater value to our customers, employees, communities and shareholders.”

“As Lou mentioned, we are very excited to announce this partnership and are looking forward to bringing together two like-minded institutions,” Richard A. Grafmyre, CEO of Penns Woods, said. “This combination will provide the best path for the long-term success of our organization, employees, customers and shareholders. We believe that the combination of our highly compatible organizations will create a catalyst for growth and benefit all of the communities we serve. The merger will provide increased scale and additional capabilities for our customers, and it will provide greater opportunities for our employees to advance their careers as a part of a larger organization.”

Upon completion of the merger, the shares issued to Penns Woods shareholders are expected to comprise approximately 12% of the outstanding shares of the combined company. The agreement also provides that Northwest will appoint Grafmyre to the boards of Northwest and Northwest Bank after closing.

Excluding one-time transaction costs, Northwest expects the transaction to be approximately 23% accretive to 2026 fully diluted earnings per share. Tangible book value dilution is expected to be approximately 9% at closing, with an expected tangible book value earn-back period of under three years using the “cross-over” method. The “pay-to-trade” multiple is 0.91x. Northwest and Northwest Bank capital ratios are expected to be significantly above “well-capitalized” regulatory thresholds upon closing.

The companies expect to complete the transaction in Q3/25, subject to the satisfaction of customary closing conditions, including regulatory approvals and approval by Penns Woods shareholders. At closing, Jersey Shore State Bank and Luzerne Bank branches will become branches of Northwest Bank.

Janney Montgomery Scott is acting as financial advisor to Northwest, and Dinsmore & Shohl is acting as its legal advisor in the transaction. Stephens is acting as financial advisor to Penns Woods, and Stevens & Lee is acting as its legal advisor in the transaction.