Magazine article American Banker

ONBANCorp to Buy Thrift in Pa. for $136 Million

Magazine article American Banker

ONBANCorp to Buy Thrift in Pa. for $136 Million

Article excerpt

Onbancorp, a fast-growing savings bank in Syracuse, N.Y., said Tuesday that it has agreed to buy a profitable thirft in northeastern Pennsylvania for $136 million in stock.

The acquisition of Franklin First Financial Corp., which has $1.1 billion in assets, will boost Onbancorp to $4.7 billion, including other pending deals. Onbancorp will gain a major presence in the Wilkes-Barre area, about 120 miles south of Syracuse. Franklin has 19 branches with $795 million in deposits.

Investors Dislike Deal

Wall Street was clearly negative on the acquisition. By mid-afternoon, Onbancorp's shares were off $1.75, or 7%, to $25.75.

Meanwhile, Franklin's shares were up 37.5 cents, to $21.375. The stock traded at $17.50 as recently as Nov. 9 but rallied last week after the company disclosed it was holding merger discussions with an unnamed party.

E. Gareth Plank, an analyst at Mabon Securities in San Francisco, said it appeared investors are concerned Onbancorp is expanding too fast and paying too much for growth.

Onbancorp is paying a healthy 1.5 times Franklin's book value, or about $24 a share. While that is considered an average premium for a bank, it is steep for a thrift, Mr. Plank said.

Onbancorp, which currently has $2.5 billion in assets, agreed in February to buy Midlantic Corp.'s Syracuse and Albany, N.Y.-based commercial banks, which together have about $1 billion in assets. That deal is slated for completion by year-end.

A Strategy Conflict?

Mr. Plank said investors also may be asking why Onbancorp is buying a thrift instead of a bank, since chairman and chief executive Robert J. Bennett has made turning Onbancorp into a bank his primary focus. The company has applied for a commercial bank charter.

"I was almost prepared to put them in the bank category, but now I think I may hold off," Mr. Plank said. …

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