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First adds scale with Highlands
Posted on Thursday, 12 September 2019 13:27
First Community Bankshares is acquiring OTC Markets-listed Highlands Bankshares in a USD 91.00 million deal that will pave the way for a USD 2.80 billion asset banking franchise with a footprint along the I-81 corridor.
The all-scrip exchange equates to USD 8.80 apiece, which implies a price to tangible book value (TBV) of 151.6 per cent, a 24.4 multiple for earnings per share (EPS) in the last 12 months and a core deposit premium of 6.9 per cent.
Strategically, the deal improves First’s footprint and connectivity in the Highlands regional markets across southwest Virginia, northwest North Carolina and eastern Tennessee.
It should add roughly 9.0 per cent to EPS, be neutral to TBV EPS and result in the cash internal rate of return exceeding mid-teens threshold.
Furthermore, the acquisition is low-risk, as post-closing consolidated capital and liquidity ratios are expected to remain strong.
Highlands is headquartered in Abington, Virginia and is the holding company for Highlands Union Bank, which was founded in 1985 and caters to small to mid-sized private businesses, professionals, and individuals.
The group has 14 branches in total, which are located across its home state and in North Carolina and Tennessee.
As at 30th June 2019, it had total assets of USD 611.72 million, total net loans of USD 448.21 million and total deposits of USD 518.44 million.
Highlands had pre-tax profit of USD 4.58 million in H1 2019 and had a return on average assets of 0.6 per cent, return on average equity of 6.5 per cent and an efficiency ratio of 75.0 per cent at the end of June.
The group had a tier 1 ratio of 12.8 per cent, a risk-based capital ratio of 13.8 per cent and a leverage ratio of 9.1 per cent, as at 30th June 2019.
With Highlands, First will continue expanding its presence along the I-81 from the Tri-Cities in Tennessee into southwest Virginia and will be the number one player by market share in Washington County.
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