$162 million merger for local banks

May 21, 2008 2:05:36 PM PDT
Regional bank owner Harleysville National Corp. said Wednesday that it is buying smaller rival Willow Financial Bancorp. Inc. in an all-stock deal worth $162 million. Combined, the two will have 84 branches from Philadelphia to the Lehigh Valley with assets of $5.5 billion.

Harleysville, based in a city with the same name, owns Harleysville National Bank and East Penn Bank. Wayne-based Willow Financial is the parent of Willow Financial Bank, which has 29 locations in Bucks, Chester, Montgomery and Philadelphia counties.

The transaction is expected to save $15 million to $20 million in 2009, or 10 to 13 percent of combined costs. Harleysville said it expects "regular attrition" to take care of overlapping jobs.

The company doesn't expect to close branches or cut the sales force.

The deal is expected to close in the fourth quarter, pending regulatory and shareholder approvals.

The transaction calls for each share of Willow Financial to be exchanged for 0.73 shares of Harleysville. The combined company will be 73 percent owned by Harleysville shareholders and the rest by Willow's current shareholders.

Willow's chief executive, Donna Coughey, will assist with the transaction for a year as an executive vice president at Harleysville. Two Willow directors will join the Harleysville board.

In April, Willow said it was restating financial statements for the 2006 and 2007 fiscal years and adjusting results for the first quarter in fiscal 2008 due to balance sheet differences.

Since November, Willow has received three warnings of possible delisting from Nasdaq for the late filing of its first, second and third quarter 2008 earnings reports. It has made the extended deadline for the first quarter filing, plans to meet conditions for the second quarter filing and will ask for an extension for the third-quarter earnings filing.

Shares of Harleysville fell 64 cents, or 4.5 percent, to $13.44 in afternoon trading. Willow Financial shares rose by 21 percent, or $1.62, to $9.36.


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