Under the merger agreement, each share of 1st Colonial common stock was convertible, at the holder's election and subject to proration, into either 0.6945 of a share of Mid Penn common stock or $18.50 in cash, with the consideration mix fixed at 60% stock and 40% cash in the aggregate. At announcement this implied a value of $20.03 per 1st Colonial share and an aggregate transaction value of approximately $101 million, equal to 1.16 times 1st Colonial's tangible book value and 11.6 times its last-twelve-months earnings per share, based on Mid Penn's September 23, 2025 closing stock price. Because the stock portion of consideration floats with Mid Penn's share price, the value disclosed at closing had risen to approximately $106.1 million. All outstanding 1st Colonial stock options were cashed out at closing, and outstanding restricted stock units vested and settled in 1st Colonial shares shortly before closing. Upon completion, former 1st Colonial shareholders owned approximately 8% of Mid Penn's outstanding common stock, with Mid Penn shareholders owning the remaining approximately 92%.
Mid Penn disclosed fully phased-in cost savings equal to 40% of 1st Colonial's noninterest expense base, with 80% of those savings phased in during 2026. The company also disclosed one-time merger and integration charges of approximately $12 million pretax (approximately $9.6 million after-tax), fully reflected in pro forma tangible book value at close. Mid Penn estimated the transaction would be accretive to earnings per share by approximately 10% in 2026 and approximately 14% in 2027 (full-year estimate), with tangible book value per share dilution of approximately 6% at closing and an earnback period of approximately 3.4 years on a crossover-method basis. Mid Penn projected an internal rate of return of approximately 24%, assuming a 10.0 times terminal price/earnings multiple and an 8.5% minimum tangible common equity to tangible assets ratio, and pro forma regulatory ratios of approximately 11.7% CET1, 9.4% TCE ratio and 13.0% total capital ratio.
Mid Penn Chair, President and CEO Rory G. Ritrievi said the deal was "a strategic move to further expand our footprint into the greater Philadelphia metropolitan area, particularly southern New Jersey," adding that "the combined bank will continue the positive impact Mid Penn has made in the greater Philadelphia metropolitan area market, creating a more powerful, resilient, and dynamic financial institution." 1st Colonial President and CEO Robert B. White said the transaction would allow for "an expansion of our product and service offering, as well as bring greater financial capacity for continued investment in our company and our communities." As of June 30, 2025, 1st Colonial, founded in 2000, operated three full-service branches and one loan production office, with approximately $877 million in total assets, $743 million in total deposits and approximately $640 million in total loans. The combined company had pro forma total assets of more than $7.2 billion at announcement, and press materials at closing cited consolidated assets of approximately $7 billion.
The registration statement on Form S-4 (declared effective ahead of a 1st Colonial special shareholder meeting) discloses that 1st Colonial ran a competitive sale process beginning in early 2025, soliciting and receiving non-binding indications from Mid Penn and two other unnamed parties referred to as "Financial Institution A" and "Financial Institution B." 1st Colonial initially signed an exclusive term sheet with Financial Institution A in June 2025, but its board terminated that process in mid-July 2025 after reverse due diligence revealed credit-quality and credit-philosophy concerns, and it rejected a revised offer from Financial Institution A on July 21, 2025 before re-engaging Mid Penn on July 25, 2025. The merger agreement was signed September 24, 2025 following unanimous approval by both companies' boards. As part of the transaction, 1st Colonial CEO Robert B. White became Senior Executive Vice President, Greater Philadelphia Metro Area Market President and Senior Risk Advisor of Mid Penn Bank, and one former 1st Colonial director, Thomas R. Brugger, was appointed to the Mid Penn and Mid Penn Bank boards.
Keefe, Bruyette & Woods, A Stifel Company, served as exclusive financial advisor to Mid Penn, and Holland & Knight LLP served as Mid Penn's legal advisor. Stephens Inc. served as exclusive financial advisor to 1st Colonial and rendered a fairness opinion to 1st Colonial's board, and Stradley Ronon Stevens & Young, LLP served as 1st Colonial's legal advisor.
The merger agreement provided for a termination fee of $4,040,000 payable by 1st Colonial under specified circumstances, and an outside termination date of September 30, 2026. Closing conditions included 1st Colonial shareholder approval, Nasdaq listing approval for the new Mid Penn shares, and regulatory approvals from the Federal Reserve, FDIC, Pennsylvania Department of Banking and Securities, and New Jersey Department of Banking and Insurance; the companies' initial regulatory applications were filed November 24, 2025. The transaction was intended to qualify as a tax-free reorganization for shareholders receiving Mid Penn stock. All of these conditions were satisfied and the transaction closed on February 27, 2026, well ahead of the September 30, 2026 outside date.