The following information was presented during a conference call meeting of shareholders on Friday, November 3, 2000 at 11:00 A.M., EST.
All statements, trends analyses, and other information contained in this material relative to trends in the Company's operations or financial results constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results to be materially different from those contemplated by the forward-looking statements. There can be no assurances that other factors not currently anticipated by management will not also materially and adversely affect the Company's results of operations
Transaction Summary
Pricing and Structure
Transaction: PSB Bancorp, Inc. (Nasdaq: PSBI) acquisition of
Jade Financial Corp. (Nasdaq: IGAF)
Price: $13.55 / share
Form of
Consideration: Cash for outstanding shares; except for ESOP shares
Tax Treatment: Taxable Exchange for Shareholders, except for ESOP
shares
Accounting
Treatment: Purchase accounting
Synergies: 10% cost savings(pre-tax) from IGAF; revenue
enhancements identified but not quantified
Walkaway: $2.5 million payable by IGAF to PSBI under certain
conditions specified in the Merger Agreement
Transaction Summary
Organizational Issues
Organizational
Structure: PSBI holding company will acquire IGAF's holding
company. Subsidiary institutions will merge and be
known as First Penn Bank.
Management Team: Chairman of PSBI - Vincent J. Fumo
President and CEO of PSBI - Anthony DiSandro
Chairman of First Penn Bank - John J. O'Connell
Executive VP and COO of First Penn Bank - Mario
Incollingo, Jr.
Board Composition: Two IGAF directors to join PSBI board; five IGAF
directors to join First Penn Bank board
Regulatory
Approvals: Customary
Conditions: Approval by IGAF shareholders
Transaction Summary
Timing
-- Announcement: November 2, 2000
-- Regulatory filings: As soon as possible after announcement
-- Mailing of Proxy Statement: December 2000 / January 2001
-- Special Meeting of IGAF Shareholders: January 2001 / February 2001
-- Closing: 1st Quarter 2001
Strategic Rationale
Value Creation for PSBI Shareholders
-- A transaction that is projected to be GAAP EPS accretive immediately
-- A transaction that is projected to be immediately accretive to
tangible equity
-- An opportunity to leverage PSBI's equity/asset ratio to a more
appropriate level
-- Creates a larger and more prominent institution with better market
coverage
-- Significant increase in core deposits
-- Significant increase in consumer loans
-- An opportunity to grow PSBI's banking business in suburban
Philadelphia
-- Accelerate PSBI's evolution to full service community bank
Strategic Rationale
Overview of Jade Financial Corp.
-- Founded in 1975 as a credit union for the employees of the
Philadelphia Electric Company
-- Converted to a mutual thrift charter in 1998
-- Converted from mutual to stock in October 1999 at $8.00 per share
-- Loyal customer base, served by a five branch network
-- Excellent asset quality
-- Strong core deposits
Strategic Rationale
Financial Highlights of Jade Financial Corp.
(As of or for the latest twelve months ended September 30, 2000)
Total Assets: $214.9 million
Total Loans, net: $127.3 million
Total Deposits: $165.9 million
Shareholders' Equity: $27.7 million
Equity/Assets: 12.9%
Allowance for Loan Losses: $1.7 million
Allowance/Total Loans: 1.28%
Non-performing Assets: $139 thousand
LTM Normalized Income(A): $975 thousand
Strategic Rationale
Overview
-- Logical geographic extension of PSBI franchise:
- PSBI is familiar with IGAF's market area
- Exposure to larger market area for PSBI
-- Complimentary products and services:
- PSBI focus on mortgages, construction lending, small business
lending; IGAF focus on consumer lending
- Accelerate evolution of proforma company to full service community
banking franchise
-- Leverages PSBI's capital
Transaction Summary
Comparable Transactions
Price/LTM Earnings(B) Not meaningful 26.26X Not meaningful
Price/Book Value(B) 91.64% 140.66% 65.15%
Price/Tangible Book Value(B) 91.64% 140.66% 65.15%
Price/Deposits(B) 14.53% 20.93% 69.43%
Premium over Tangible -2.61% 6.42% Not applicable
Book as % of Deposits
(A) Median values for comparable transactions include bank acquisitions of
thrifts, deal value less than $50 million, announced since January 1,
1999, purchase accounting, with 100% cash consideration; 17
transactions in total
(B) Financial data as of or for the latest twelve months ended
September 30, 2000
Transaction Summary
Capital Management Issues
-- Cash consideration and purchase accounting treatment will result in an
Equity / Assets ratio for PSBI of approximately 7.8%
-- Reserve for potentially impaired value of certain investments at both
companies
--Subject to regulatory approval and market conditions, PSBI may continue
buying back its stock
Strategic Rationale
Deposit Market Share
Institution: PSBI
Address 1999 total Total Market
Branch branches deposits share (%)
($000s) ($000s)
12 W. Glenside ave $13,989 5 $278,508 5.02
Phila 19038
1424 Walnut st. 61,861 12 939,368 6.59
Phila 19102
1835 Market st. 30,111 31 3,363,705 0.90
Phila 19103
2444 South Broad St. 20,539 12 498,725 4.12
Phila. 19145
21st. & Passyunk Ave. 45,766 12 498,725 9.18
Phila. 19145
10th & Catherine Sts. 11,661 13 636,906 1.83
Phila. 19148
PSBI TOTALS $201,653 83 $5,908,863 3.41
Institution: IGAF
ADDRESS:
213 West Street Rd. $121,190 4 $140,466 86.28
Feasterville 19053
606 East Baltimore Pk 11,999 125 794,918 1.51
Media 19063
500 Chesterbrook Blvd 5,377 17 664,803 0.81
Wayne 19087
2301 Market St. 12,770 4 10,087,689 0.13
Phila 19101
1501 South Newkirk St. 8,318 3 30,526 27.25
Phila 19146
IGAF Totals* $159,654 43 $11,718,402 1.36
Pro Forma Totals* 361,307 126 $17,627,265 2.05
Overlapping zip codes not included in totals
Source: SNL Securities, L.P. FDIC
Financial Impact of the Transaction
Key Assumptions
Aggregate Consideration: $24.1 million
Purchase Accounting: $3.6 million in negative goodwill,
accreted over ten years
Estimated Cost Savings: $481,000 after tax, or approximately 10%
of IGAF overhead
Merger Expenses: $675,000; capitalized and amortized over
five years
Funding: From investment securities from both
institutions; approximate average yield
of 6.00%
Revenue Enhancements: Identified but not included in the
financial impact
Financial Impact of the Transaction
Balance Sheet
(As of 30, 2000, dollars in thousands, except per share data)
Balance Sheet Items PSBI IGAF ProForma(A)
Investments $82,607 $57,532 $112,563
Loans 162,169 129,372 291,541
Total Assets 266,398 214,876 455,122
Deposits $175,391 $165,937 $341,328
Borrowings 51,385 20,000 71,385
Total Equity 37,439 27,694 35,400
Capital Ratios:
Equity/Assets 14.1% 12.9% 7.8%
Tangible Equity/Assets 14.1% 12.9% 8.5%
Asset Quality Ratios:
Loan Loss Reserves/
Total Loans 0.83% 1.28% 1.03%
NPAS + 90 Days
Past Due 30.92% 1192.1% 66.77%
(A) Adjusted for applicable fair market value, purchase accounting and
ESOP/share repurchase adjustments
Financial Impact of the Transaction
Projected Income Statement and Performance Measures
(For the first full year out from closing, dollars in thousands, except
per share data)
PSBI IGAF Adjustments ProForma
Income Statement Items
Net Income $2,500 $1,600 $-- $4,100
Net Cost Of Financing(A) (1,073) (1,073)
Amortization And
Capitalized Expenses (B) 346 346
Adjusted Net Income $3,372
Earnings Per Share:
Fully Diluted Eps $0.52 $0.85 $0.69
Performance Measures
Return On Average Equity 6.80% 5.83% 9.53%
Return On Average Assets 0.92% 0.77% 0.74%
(A) Cost of funding purchase transaction and ESOP/share repurchase assumed
to be 6.00%, pre-tax
B) Negative goodwill accreted over ten years; capitalized expenses
amortized over five years
Transaction Recap
Summary
-- Logical geographic extension into familiar markets
-- Complimentary product lines
-- Accretive to PSBI earnings
-- Positions PSBI for improvements in Return on Equity
SOURCE PSB Bancorp
CO: PSB Bancorp
ST: Pennsylvania
IN: FIN
SU:
11/03/2000 19:14 EST prnewswire.com |
