ESSA Bancorp, Inc., and Franklin Security Bancorp Announce Signing of Merger Agreement
November 18 2013 - 9:35AM
Marketwired
ESSA Bancorp, Inc., and Franklin Security Bancorp Announce Signing
of Merger Agreement
STROUDSBURG, PA and WILKES-BARRE, PA--(Marketwired - Nov 18,
2013) - ESSA Bancorp, Inc. (NASDAQ: ESSA) ("ESSA Bancorp"),
the holding company for ESSA Bank & Trust, and Franklin
Security Bancorp, Inc. ("FSB") announced today they have executed a
definitive agreement whereby ESSA Bancorp will acquire FSB and its
wholly owned subsidiary, Franklin Security Bank, through an all
cash transaction.
Under the terms of the merger agreement, stockholders of FSB
will receive $9.75 per share or an aggregate of approximately $15.7
million. Pending the satisfaction of customary closing
conditions, including the receipt of all regulatory approvals and
the approval of stockholders of FSB, the transaction is expected to
close in the second quarter of 2014. The merger is expected to
be immediately accretive to ESSA Bancorp's earnings upon
closing.
With two banking facilities serving Scranton and Wilkes-Barre,
Pennsylvania, Franklin Security Bank reported assets of $225.65
million at September 30, 2013, total loans of $148.88 million and
total deposits of $168.25 million.
ESSA Bank & Trust, with assets of $1.37 billion, provides a
full range of retail and commercial financial services, and
financial advisory and wealth management capabilities to the
Greater Pocono and Lehigh Valley areas in northeast Pennsylvania
through 26 community offices.
Gary S. Olson, President and CEO of ESSA Bank & Trust,
commented: "Partnering with Franklin Security Bank provides a
platform for ESSA Bank & Trust to expand its presence northward
to an adjacent regional market. Franklin Security Bank's strong
commercial banking and indirect auto lending businesses will
provide added diversification to ESSA Bank's balance sheet and
complement ESSA Bank & Trust's existing capabilities in retail
and commercial banking. ESSA Bank & Trust will join forces
with Franklin Security Bank's team to expand ESSA Bank &
Trust's consumer and mortgage banking operations in Franklin
Security Bank's markets. As a small business oriented
community bank, Franklin Security Bank has had particular success
in rolling out products such as remote check deposit capture, and
we look forward to leveraging their
capabilities. Additionally, we are pleased to have continued
access to the expertise of Richard F. Mebane, President and CEO of
Franklin Security Bank, who will serve as ESSA Bank & Trust's
Market President when the acquisition is concluded."
Mebane added: "We are excited to join forces with a larger
financial institution with ESSA's rich tradition of serving
northeast Pennsylvania. We are confident this merger will benefit
our customers and the communities we serve. We look forward to
expanding product and service offerings to customers in our
markets, and to leverage Franklin's commercial and auto lending
expertise to enhance ESSA's overall banking platform."
RP Financial, LC served as financial advisor to ESSA Bancorp and
Luse Gorman Pomerenk & Schick, P.C. served as legal counsel to
ESSA Bancorp. Ambassador Financial Group served as financial
advisor to FSB, Boenning & Scattergood provided a fairness
opinion to FSB and Elias, Matz, Tiernan & Herrick L.L.P. served
as legal counsel to FSB.
ESSA Bank & Trust, a wholly-owned subsidiary of ESSA
Bancorp, Inc., has total assets of over $1.3 billion and is the
leading service-oriented financial institution headquartered in
Stroudsburg, Pennsylvania. ESSA Bank & Trust maintains its
corporate headquarters in downtown Stroudsburg, Pennsylvania and
has 26 community offices throughout the Greater Pocono and Lehigh
Valley areas in Pennsylvania. In addition to being one of the
region's largest mortgage lenders, ESSA Bank & Trust offers a
full range of retail, commercial financial services, and financial
advisory and asset management capabilities. ESSA Bancorp, Inc.
stock trades on The NASDAQ Global Select Market(SM) under the
symbol "ESSA."
Forward-Looking Statements Certain statements contained herein
are "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such forward-looking statements may be
identified by reference to a future period or periods, or by the
use of forward-looking terminology, such as "may," "will,"
"believe," "expect," "estimate," "anticipate," "continue," or
similar terms or variations on those terms, or the negative of
those terms. Forward-looking statements are subject to numerous
risks and uncertainties, including, but not limited to, those
related to the economic environment, particularly in the market
areas in which the companies operate, competitive products and
pricing, fiscal and monetary policies of the U.S. Government,
changes in government regulations affecting financial institutions,
including compliance costs and capital requirements, changes in
prevailing interest rates, acquisitions and the integration of
acquired businesses, credit risk management, asset-liability
management, the financial and securities markets and the
availability of and costs associated with sources of liquidity.
Readers should not place undue reliance on any such
forward-looking statements, which speak only as of the date made.
Readers are advised that the factors listed above could affect our
financial performance and could cause our actual results for future
periods to differ materially from any opinions or statements
expressed with respect to future periods in any current statements.
We do not undertake and specifically decline any obligation to
publicly release the result of any revisions, that may be made to
any forward-looking statements to reflect events or circumstances
after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
Transaction Data
- Cash purchase price is $9.75 per share
- Deal value will be $15.7 million based on 1,610,000 Franklin
Security Bancorp shares outstanding
- All outstanding stock options will be cancelled
- The preferred stock issued to the United States Department of
the Treasury by Franklin Security Bancorp pursuant to the Small
Business Lending Fund Program is expected to be redeemed concurrent
with the closing of the transaction
- Aggregate deal value is 86.48% of tangible book value per
common share as of September 30, 2013
- Aggregate deal value is 26.1x annualized common earnings per
share for the nine months ended September 30, 2013.
- Immediately accretive to earnings, absent transaction related
expenses. Targeting earnings per share accretion of $0.03 per share
in the first clean quarter (0.13 per share on an annualized
basis).
- Improves both return on assets and return on equity
measures
- Cost savings in the range of 20% of Franklin Security Bancorp's
pre-transaction operating expenses expected to be realized within
the first year following the transaction
- Tangible book value dilution of 1.1% is estimated based on
current market conditions
- Dilution to tangible book value is projected to be recovered
through new earnings in slightly more than one year
- Pro-forma tangible capital-to-tangible assets of 9.84%
Key Rationales for the Transaction
- Provides market expansion into the Scranton and
Wilkes-Barre market which is an adjacent market to ESSA
Bancorp's current markets
- Will leverage on Franklin Security's strong commercial
banking franchise
- ESSA Bancorp expects to retain Franklin Security's seasoned
commercial lenders including Richard Mebane, Franklin Security's
CEO, who will be a Market President
- The acquired indirect auto lending platform will enhance the
ability to generate high credit quality loans with relatively short
terms to maturity
- Franklin Security has recently commenced a government banking
program which ESSA Bancorp will seek to expand
- Franklin Security's non-performing assets are low and
non-performing assets/assets equaled 1.08% as of September 30,
2013
- ESSA Bancorp will be able to offer its broader array of
products and services to Franklin Security's customers in the
Scranton Wilkes-Barre markets including:
- Consumer lending
- Single family mortgage first and second mortgage loans and home
equity loans
- Wealth management and trust services
- Insurance and other related benefit services
- Investment services
Other Transaction Considerations
- Closing anticipated in the second calendar quarter of 2014
- Break-up fee payable to ESSA Bancorp is $600,000
- Both parties have the right to terminate the transaction if it
has not closed by July 31, 2014.
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