DEFA14A: TowneBank to Acquire Old Point Financial Corporation in $203 Million Deal

TowneBank and Old Point Financial Corporation announced a definitive agreement for TowneBank to acquire Old Point, enhancing TowneBank's presence in the Hampton Roads MSA.

Summary

• TowneBank and Old Point Financial Corporation have entered into a definitive agreement for TowneBank to acquire Old Point.
• The transaction is valued at approximately $203 million.
• Old Point shareholders can elect to receive $41.00 in cash or 1.1400 shares of TowneBank common stock for each Old Point share, with stock consideration capped between 50% and 60% of the total.
• The combined company, pro forma for TowneBank's acquisition of Village Bank and Trust Financial Corp., would have total assets of $19.5 billion, loans of $13.1 billion, and deposits of $16.3 billion as of December 31, 2024.
• TowneBank anticipates the acquisition will be approximately 10% accretive to earnings per share with fully phased-in cost savings on a GAAP basis.
• The deal is expected to close in the second half of 2025, pending regulatory and shareholder approvals.

Sentiment

Score: 7

Explanation: The sentiment is positive due to the strategic benefits of the merger, expected EPS accretion, and management's optimistic comments. However, risks associated with integration and regulatory approvals temper the overall sentiment.

Positives

• The acquisition will enhance TowneBank's position in the Hampton Roads MSA.
• The combined company will have a strong core deposit base and outstanding credit quality.
• Substantial synergies are expected to generate top-tier financial performance.
• The acquisition is expected to be approximately 10% accretive to TowneBank's earnings per share.
• The transaction will bring expanded relationships and services to the communities served.

Negatives

• Integration of Old Point into TowneBank may take longer or be more difficult than expected.
• Expected growth opportunities or cost savings may not be fully realized or may take longer to realize.
• Deposit attrition, operating costs, customer losses, and business disruption may be greater than expected.
• The transaction may not close when expected or at all due to regulatory, shareholder, or other approval issues.

Risks

• Failure to successfully integrate Old Point into TowneBank.
• Failure to realize expected growth opportunities or cost savings.
• Higher than expected deposit attrition, operating costs, customer losses, or business disruption.
• Failure to obtain required regulatory, shareholder, or other approvals.
• Potential legal proceedings against TowneBank or Old Point.
• Reputational risk and adverse reactions from customers, employees, or business partners.
• Dilution caused by TowneBank's issuance of additional shares.
• Diversion of management's attention from ongoing business operations.
• Economic, legislative, or regulatory changes.
• Competitive pressures in the banking industry.
• Changes in the interest rate environment.
• Unforeseen outflow of cash or deposits.
• Changes in the creditworthiness of customers.
• Adverse developments in the financial industry.
• General economic conditions that may be less favorable than expected.
• Unusual and infrequently occurring events, such as weather-related disasters or public health events.
• Cybersecurity threats or attacks.
• Implementation of new technologies.
• Changes in business conditions or the securities market.
• Changes in the local economies.

Future Outlook

The transaction is expected to close in the second half of 2025, subject to regulatory and shareholder approvals, and is anticipated to enhance TowneBank's position in the Hampton Roads MSA and generate top-tier financial performance.

Management Comments

• G. Robert Aston, Jr., Executive Chairman of TowneBank, stated that they are excited to partner with Old Point and welcome its talented team.
• Robert F. Shuford, Jr., Chairman, President and Chief Executive Officer of Old Point Financial Corporation, added that TowneBank has raised the bar high and that together they will bring expanded relationships and services to their communities.

Industry Context

This announcement reflects the ongoing consolidation trend in the banking industry, where larger institutions are acquiring smaller ones to expand their market presence, achieve economies of scale, and enhance profitability.

Comparison to Industry Standards

• The deal price per share is 180% of tangible book value per share.
• The price to forward earnings plus cost savings is 6.5x.
• The average of Virginia M&A transactions since January 1, 2014, with deal value greater than $50 million, excluding merger of equals, is 182% of price/TBVPS and 8.3x of price to forward earnings plus cost savings.

Stakeholder Impact

• Shareholders of Old Point will receive cash or TowneBank stock.
• Employees of Old Point may have enhanced opportunities within the larger TowneBank organization.
• Customers of Old Point will have access to a broader range of services.
• The combined company aims to help communities grow and prosper.

Next Steps

• Old Point will file a preliminary proxy statement with the SEC.
• Old Point will deliver a definitive proxy statement/offering circular to its shareholders seeking approval of the transaction.
• The transaction is subject to regulatory approval and approval by Old Point's shareholders.
• The companies will work towards closing the transaction in the second half of 2025.

Key Dates

Keywords

TowneBank, Old Point Financial Corporation, Merger, Acquisition, Banking, Financial Services, Hampton Roads, Shareholders, Regulatory Approval, Integration