MINERSVILLE - The First National Bank of Minersville - the oldest national bank in Schuylkill County - recently proposed a merger with The Gratz Bank, Bruce L. Lord Sr., president and CEO of FNB Minersville, said Friday.
"On July 2, we entered into an agreement. It's called a letter of intent. We're in the process of contacting the shareholders," said Lord, who is also president and CEO of FNBM Financial Corp., the bank holding company of The First National Bank of Minersville.
The merger is subject to closing conditions enumerated in the proposed agreement, including receipt of regulatory approvals and the approval of GNB Financial Services Inc.'s and FNBM's shareholders. GNB anticipates that the transaction will close early 2015, Wesley M. Weymers, president and CEO of The Gratz Bank and its holding company, GNB Financial Services Inc., said Friday.
One of the reasons GNB is motivated to merge is that the cost of doing bank business is going up. And the reason for that, Weymers said, is the Dodd-Frank Wall Street Reform and Consumer Protection Act, which the Obama administration passed in 2010 in an attempt to prevent the recurrence of events that caused the 2008 financial crisis. It's a federal law that put the regulation of the financial industry in the hands of the government.
"From our standpoint, we wanted to do it to get bigger because of the increased regulatory costs. The Dodd-Frank act affects us probably in two ways. Every bank that's open right now had to increase staffing in compliance departments, and it also put limits on some of the exchange fees that are being charged. So, operating costs are going way up," Weymers said.
So the act is an incentive for banks to merge with other banks, Weymers said.
In March, for example, The Gratz Bank merged with Liberty Savings Bank and acquired Liberty's two locations in Pottsville. The location at 21 S. Centre St. closed March 29 and consolidated with the one at 2221 W. Market St.
Lord could not be reached for comment about the act Friday afternoon. But in the recent press release, Lord said, "Given the demands of a changing banking environment, the board of directors believes this transaction represents an opportunity for our shareholders, customers, employees and the communities we serve to join with a bank of like values and continue our community banking philosophy."
GNB is the approximately $205 million bank holding company of Gratz Bank. A Pennsylvania state-chartered bank headquartered in Gratz, it operates four community bank offices, located in Gratz, Valley View, Herndon and Pottsville, according to the release.
FNBM is the approximately $81 million holding company of FNB Minersville. A national banking association headquartered in Minersville, it has one location, which is based in Minersville, according to the release.
Earlier this year, FNBM was seeking merger proposals from regional banks, and GNB submitted one FNBM found favorable, Weymers said.
"They called us and it's our understanding they also contacted other banks, then looked at all the offers they got and they selected us," Weymers said.
In the proposed agreement, FNBM Financial Corp. will merge into GNB Financial Services Inc., and The First National Bank of Minersville will merge into The Gratz Bank, according to the release.
Lord and Jack A. Aughenbaugh Jr., current FNBM directors, were invited to join the board of directors of GNB, according to www.businesswire.com.
"Under the terms of the agreement, FNBM shareholders may elect to receive in exchange for each share of FNBM common stock they own either $276.57 cash or 4.7684 shares of GNB common stock. The current value of GNB common stock based upon public and privately negotiated transactions is $58.00 per share. This consideration is subject to election and allocation procedures designed to result in transaction consideration that is not greater than 60 percent common stock nor 50 percent cash. Additionally, the consideration is subject to a downward adjustment if loan delinquencies at FNBM increase, or shareholders' equity at FNBM decreases, beyond specified amounts," according to the release.
In May, The First National Bank of Minersville celebrated its 150th anniversary. The bank was granted its charter on May 11, 1864, as part of the new National Banking Acts of 1863 and 1864.
In the proposed merger agreement, an effort will be made to recognize the Minersville bank's place in history, Weymers said.
"Our board and I felt there was a lot of value in the name The First National Bank of Minersville. But since we are a state-chartered bank, we are not permitted to use the word 'national.' So we proposed the official name become 'The First Bank of Minersville, A Division of The Gratz Bank,' " Weymers said.