Peoples announces merger
BY DAVE FALCHEK
The largest community bank in Northeast Pennsylvania will be formed from the combination of Peoples Neighborhood Bank of Hallstead and Scranton-based Penn Security Bank & Trust.
Peoples Financial Services Corp. plans to close on an acquisition of Penseco Financial Services Corp. in the fourth quarter, said Alan Dakey, Peoples’ chief executive.
“This merger of two strong, well-respected banks will create the largest community bank in the region while retaining a community bank culture,” Dakey said, touting how neatly the banks’ service areas complement each other.
The resulting institution will be known as Peoples Security Bank & Trust, with 23 branches and more than 380 employees stretching from Broome County, N.Y., to Monroe County.
The headquarters will be in downtown Scranton. Significant operations, including information technology and loan support, will consolidate in Hallstead.
To make the purchase, Peoples will issue new common shares and exchange 1.36 People’s shares for each Penseco share. Based on Friday closing value of People’s stock of $34.90 and the 3.3 million Penseco common shares reported outstanding as Feb. 12, 2013, the value of the transaction will be approximately $155 million.
The exact value will change with the respective values of the companies between now and the closing.
The new board will include eight members from Penseco, including chairman William Aubrey, and six members from People’s board. Penseco chief executive Craig Best will lead the new institution.
The new combined bank will be more profitable than either independent bank on its own, Best said.
The bank will save money in regulatory compliance, a growing burden on smaller institutions. The new bank will have access to new revenue streams, such as wealth management and merchant services.
“We are very excited about the transaction for both companies and groups of shareholders,” Best said.
Dakey said the new company should be able to gain listing on the Nasdaq exchange, which will add liquidity to the shares that the companies currently lack.
John Martines, a former local bank president, was somewhat surprised by the combo. While the merger makes sense on paper, he said the two organization have somewhat different cultures. Penseco represents a hyper-conservative culture, albeit one that has loosened up lately, he said.
Peoples has shown a progressive, even aggressive, position in the local banking community as it has grown with development of the natural gas industry.
Penn Security, Martines said, has a great lending staff and Peoples, with its exposure in the Marcellus Shale region, has money to lend.
The merger is also unique, he said.
While Peoples appears to be the surviving entity, Penn Security, with its board comprising a majority of the new board, and its chief executive in charge, appears to be in control of the resulting bank.
“This looks as close to a merger of equals as you can get,” he said.
The new bank will become the leader in the Scranton/Wilkes-Barre Metro market with $838.4 million.
Penn Security has $646 million in the metro market and People’s has $192 million in the metro market.
People’s also has $391 million in deposits as of March 31 in Wyoming and Susquehanna counties of Pennsylvania and Broome County, N.Y.
Dakey noted Tuesday that “People’s remains committed to the customers we serve, and nothing really changes for them as we move forward.”