Bank Merger: Northwest Bancshares and Penns Woods Bancorp announce $270m agreement

In a move set to reshape the regional banking landscape, Northwest Bancshares, Inc., the holding company for Northwest Bank, has announced a definitive agreement to acquire Penns Woods Bancorp, Inc., the multi-bank holding company for Jersey Shore State Bank and Luzerne Bank. The $270.4 million all-stock transaction promises to strengthen Northwest’s foothold across North Central and Northeastern Pennsylvania, expanding its branch network and total assets.

With a combined asset value projected to exceed $17 billion, this merger solidifies Northwest’s position as one of the largest community-focused banks in the United States, enhancing access to financial services for customers across Pennsylvania and neighboring states.

What Does This Mean for Customers and Shareholders?

The acquisition of Penns Woods, headquartered in Williamsport, Pennsylvania, brings with it $2.3 billion in total assets, $1.7 billion in deposits, and $1.9 billion in loans as of September 30, 2024. These numbers highlight the scale of the transaction, which will also integrate 24 branch locations in Blair, Centre, Clinton, Luzerne, Lycoming, Montour, and Union counties into Northwest’s network.

For customers, this means greater access to banking services, including retail banking, commercial lending, mortgage services, and wealth management. Northwest’s expanded footprint will now include over 150 financial centers and loan production offices, ensuring better service availability.

Shareholders of Penns Woods are poised to benefit significantly from the transaction. Under the terms of the merger, they will receive 2.385 shares of Northwest common stock for each share of Penns Woods common stock. Based on Northwest’s closing price of $14.44 on December 16, 2024, this equates to $34.44 per share, representing a 49% premium over Penns Woods’ current quarterly dividend payout.

How Will the Merger Shape Pennsylvania Banking?

The merger reflects Northwest’s commitment to expanding its footprint in key markets. By linking operations in eastern and western Pennsylvania, the deal bridges an important gap and positions the bank as a dominant force in the region.

Penns Woods’ branch network, which operates under the Jersey Shore State Bank and Luzerne Bank brands, serves as a natural complement to Northwest’s community-focused banking model. Post-merger, all Penns Woods branches will transition to the Northwest Bank name, ensuring brand consistency and operational efficiency.

Financial and Strategic Benefits

The transaction is expected to generate substantial financial benefits for Northwest. Key highlights include:

Earnings Growth: The deal is projected to boost earnings per share by 23% by 2026, excluding one-time transaction costs.

Improved Dividends: Penns Woods shareholders will receive quarterly dividends of approximately $0.48 per share, a substantial increase from their current $0.32 payout.

Efficient Integration: The tangible book value dilution of 9% at closing is expected to be earned back within three years, demonstrating the deal’s long-term financial viability.

Regulatory Strength: Northwest will maintain strong capital ratios above “well-capitalized” regulatory thresholds, ensuring financial stability throughout the integration process.

These financial advantages align with Northwest’s broader strategic goal of delivering value to shareholders while maintaining its community banking roots.

Leadership Comments on the Partnership

Northwest Bancshares President and CEO Louis J. Torchio expressed enthusiasm about the merger, calling it a pivotal step in the bank’s growth strategy. He highlighted Penns Woods’ strong reputation in the community and emphasized that the partnership would allow Northwest to expand its services while preserving its customer-centric focus.

Penns Woods CEO Richard A. Grafmyre also praised the agreement, describing it as the best path for the long-term success of Penns Woods’ customers, employees, and shareholders. He noted the cultural compatibility between the two organizations and the enhanced career opportunities the merger would create for employees.

What’s Next?

The merger, which is expected to close in the third quarter of 2025, is subject to regulatory approvals and a shareholder vote. Upon completion, Penns Woods shareholders will own approximately 12% of the combined company.

Northwest has also announced plans to appoint Richard A. Grafmyre to the boards of Northwest Bancshares and Northwest Bank, further strengthening the collaborative relationship between the two institutions.

Why Is This Merger Significant for the Banking Industry?

This deal reflects a growing trend in the financial sector, where regional banks are leveraging mergers to achieve economies of scale, enhance service offerings, and compete more effectively with larger national institutions. For Northwest, this acquisition not only adds assets and branch locations but also solidifies its position as a key player in Pennsylvania’s banking industry.

The merger is also expected to improve operational efficiency, allowing the combined company to reinvest in technology and innovation, ultimately benefiting customers with better digital banking solutions and enhanced customer support.

Timeline and Closing Details

The companies expect to finalize the merger in late 2025. Customers of Jersey Shore State Bank and Luzerne Bank can anticipate a seamless transition, with their accounts and services automatically migrating to Northwest Bank’s systems.

For shareholders and investors, this merger underscores Northwest’s focus on long-term growth, creating a stronger, more competitive institution capable of navigating an evolving banking landscape.