TowneBank to Acquire Village Bank, Boost Richmond MSA Presence
TowneBank TOWN has agreed to acquire Village Bank and Trust Financial Corp. VBFC. The all-cash transaction is valued at $120 million.
Details of the Acquisition Pursued by TowneBank
Per the agreement, TowneBank will pay $80.25 per share in cash for each share of Village Bank. The merger agreement has been approved by the board of directors of both entities.
The deal is anticipated to be completed in the first half of 2025 subject to requisite regulatory approvals alongside approval of Village Bank’s shareholders. Upon the closure, VBFC will be merged with TOWN.
Village Bank, established in 1999 and based in Midlothian, VA, operates nine retail branches primarily located in Richmond MSA. As of June 30, 2024, VBFC had roughly $748 million in assets, $611 million in net loans and $620.2 million in deposits.
The combined entity is anticipated to have roughly $17.8 billion in total assets, $14.9 billion in total deposits and $12.1 billion in total loans.
TOWN’s Rationale Behind the Acquisition
The deal is anticipated to be roughly 6% accretive to TOWN’s 2025 earnings per share, assuming the execution of cost savings on a GAAP basis. Further, TOWN projects a roughly 1% improvement in common equity tier 1 capital and an 80-basis points improvement in efficiency ratio next year.
This transaction is likely to improve the deposit mix through low-cost deposits with more than 30% non-interest-bearing deposits. Also, it will enhance the bank’s yield on loans. This will keep the company well-positioned for margin expansion in a falling-rate environment.
Moreover, the deal will meaningfully deepen TowneBank’s presence in Richmond MSA. This completes the Richmond franchise distribution network, thereby, removing the requirement for future de novo investment. Additionally, it is expected to provide potential revenue synergies and higher non-interest income through Towne Financial Services Group.
G. Robert Aston, Jr., executive chairman of TowneBank, stated, “We believe our partnership can bring additional products and expanded services to the clients of Village Bank while meaningfully enhancing our Richmond presence, which is core to our franchise and future growth.”
This move aligns with the company’s inorganic growth strategy. In 2023, the company acquired Farmers Bank, while it purchased Paragon Commercial Corp. in 2018. These efforts reflect the company’s initiatives to enhance its accessibility to superior workforce and talent acquisition or to realize cost or revenue synergies in strategically important markets.
TOWN’s Zacks Rank & Price Performance
Year to date, shares of TowneBank have risen 11.9% compared with the industry’s growth of 15.2%.
Image Source: Zacks Investment Research
Currently, TOWN carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Similar Steps by Other Banks
Earlier this week, Zions Bancorporation’s ZION arm, California Bank & Trust, has agreed to acquire four branches from California-based FirstBank.
This move will expand ZION’s physical presence in Coachella Valley to six locations and add roughly 15,000 new customers, leading to a combined 7% market share in the region.
Similarly, earlier this month, Camden National Corp. CAC signed an agreement to acquire Northway Financial, Inc. in an all-stock transaction valued at roughly $86.6 million.
CAC will likely benefit from expected cost savings of 35% of Northway’s non-interest expense, 75% of which will be phased in 2025 and the rest will be realized thereafter. The entire restructuring costs will be realized upon the completion of the transaction.
The deal is anticipated to be 19.9% and 32.7% accretive to 2025 and 2026 earnings per share, respectively, assuming the phased-in cost savings. Also, tangible book value is expected to dilute by 16.2%, with a projected earn-back period of approximately 3.3 years.
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Zions Bancorporation, N.A. (ZION) : Free Stock Analysis Report
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