Tuesday, May 5, 2015

Update: Investors triple cash as Philly bank sold

Univest plans Valley Green takeover

Update: Investors triple cash as Philly bank sold

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Univest Corp., the Souderton company that runs one of the largest banks still based in the Philadelphia area, is moving downtown with its deal to buy Valley Green Bank, of Philadelphia's Mount AIry section, for $76 million in stock, worth around $27 a share at recent prices.  

"My shareholders are very happy today," Valley Green chief executive Jay Goldstein told me. He said the sale price is triple the $9 a share the bank's 300 shareholders invested, on average, starting from when it opened in 2005 and including later investments that enabled the bank to keep lending when others cut back after the 2008 credit-market collapse. (By comparison, investors in the S&P 500 boosted their money about 93% over that period, while investors in the KBW Index of 25 big-bank stocks lost about 15%.)

What's it mean for customers? Thanks to Univest's larger size, "we can triple the size of the loans that we can do now," to as much as $15 million, Goldstein said. A $7 million or $10 million neighborhood apartment or retail-center loan that used to be too big for the bank "will be in our sweet spot." He also hopes to add more branches around Philadelphia, modeled on the South Philly office that has attracted $50 million in loans and a similar level of deposits in its first year. 

Why this move for Univest? "Philadelphia is a growth market. We saw the investment and revitalization going on there, and we wanted to be part of it, and that meant getting people who know the market, like Jay and (Valley Green business-development chief) Bob Marino and (chief lending officer) Mark Biederman," affirmed Univest CEO Jeffrey M. Schweitzer, who met Goldstein at an industry conference in Arizona in February.

Univest has used different tactics to penetrate the Allentown area: it hasn't bought or added traditional bank branches, but instead added and then expanded a loan, mortgage and investment office, which now employs 31, near the Pa. Turnpike Lehigh Valley exit. But Schweitzer affirmed the bank is still scouting new Philadelphia branch sites, to serve what he anticipates will be a surge in consumer demand: "There's a lot of jobs coming to Philadelphia, at Comcast and other companies, and an influx of people from the suburbs." 

The deal adds Valley Green's three branches, $329 million in loans, and $335 million in deposits to Univest's Montgomery and Bucks County network of 38 branches, $1.7 billion in loans and $2 billion in deposits. 

Valley Green will operate, at least at first, as a division of Univest, under Goldstein, who will join the Univest board with another as-yet unnamed Valley Green director. In a statement, Univest boss Jeffrey M. Schweitzer praised Valley Green as a "disciplined" lender focused on local borrowers in "the very desirable Philadelphia market." 

Will Univest, based in the old Pennsylvania German heartland of upper Montgomery County, clash with Valley Green's city ways? "I don't see that as a challenge at all," said Goldstein. "We serve Philadelphia the way they serve their own community. Jeff (Schweitzer, the Univest CEO) is young and he's dynamic. He really sees the value in what's happening in the city of Philadelphia... We already have a loan office in Center City. We expect we will have more loan officers there" under Univest. 

Valley Green was named two years ago by Blue Bell business-loan broker Amir Kassar as one of the few Philadelphia-area banks still focused on small business loans, as I noted here. Valley Green's "well-connected board of directors — led by chairman Algot F. Thorell Jr., ex-head of Lincoln Benefits, and including real estate broker Robert Elfant, Homecare Associates boss Karen Culp, Trolley Car Diner owner/developer Ken Weinstein, and Saul Ewing law partner/ex-State Rep. Richard Hayden (D-Phila.)" -- helped bring in customers through their neighborhood connections.

Valley Green also made loans through the partly city-owned Philadelphia Authority for Industrial Development for loans to local manufacturers like Zitner's Chocolates, and made loans subsidized by the taxpayer-backed Small Business Administration.

Shareholders and bank regulators still have to approve the deal. New York investment bank Keefe Bruyette & Woods and Philadelphia lawyers with Stradley Ronon Stevens & Young advised Valley Green.

Griffin Financial Group, LLC served as financial advisor to Univest; Stevens & Lee, PC of King of Prussia and Reading was legal counsel. 

The deal recalls National Penn Bank's prior acquisition of another Northwest Philadelphia lender, Chestnut Hill Bank -- which Valley Green's chairman, Thorell, also headed. But National Penn long ago ceased to operate Chestnut Hill as a separate division, and as a result "it's hard for them to compete with us," Goldstein said. 

"This is exciting. It's a validation of the high-density, stable urban business model we share," said Christopher McGill, chief executive at rival East River Bank in Philadelphia. The price, he noted, is a lot higher than Bryn Mawr Trust Co.'s recent deal for all-suburban Continental Bank. "Interest rates are low, margins stink, so you aren't going to (profit) just from an investment portfolio. You have to get it on the street, lending, and pricing appropriately," McGill added. "There is busines to be had in the city," even when lending is slow elsewhere. "And I think this is just the start."

Other banks acquired by out-of-town lenders have disappeared, I noted. But Valley Green is "getting a real strong partner," McGill told me. "It's a matter of how successful they integrate."  

 

About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
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