DNB Financial Corporation - the old Downingtown National Bank, of Chester County - has agreed to buy East River Bank of Philadelphia for $49 million in stock and cash, the companies said late Monday. East River has $282 million in loans and $234 million in deposits at its three Philadelphia offices.

The price is a rich 21x East River's 2015 profits. But DNB says it expects the deal will be profitable from the first year, with an estimated internal rate of return of 18% after cost cuts. DNB boss William J. Hieb called the merger "a powerful combination" that will accelerate DNB's growth, as it joins Beneficial, Univest, Bryn Mawr Trust, Firstrust and a handful of others with assets above $1 billion.

The combined bank will have 15 branches in the city and its western suburbs. Bank investors say it's tough to make money without at least $1 billion to $2 billion in loans and other assets, given the narrow profit margin due to competition, low Philadelphia-area business growth, and low interest rates, plus the high costs of regulatory compliance and other banking essentials.

East River customers will enjoy "greater liquidity" and larger loans, said East River CEO Christopher P. McGill, whose family previously operated the former Roxborough-Manayunk Savings Bank. He will join DNB as EVP and chief business development officer. EVP Jerry Cotlov will join as SVP and assistant chief commercial lender. John F. McGill, East River chairman, joins DNB's board as a vice chairman, and East River's Charles A. Murray and Daniel O'Donnell will also join DNB's board, which will still be headed by chairman James H. Thornton.

Shareholders and bank regulators must still approve the deal, which is scheduled to close later this year. Ambassador Financial Group and Stradley Ronon advised DNB; Griffin Financial Group LLC and Silver, Freedman Taff & Tiernan LLP advised East River. (Corrected)