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WSFS buys Alliance Bank for $92MM/$22 a share

Is Malvern Federal next?

WSFS Financial Corp. which runs WSFS Bank, one of the biggest independent banks still based in the Philadelphia area, has agreed to pay $92 million for Broomall-based Alliance Bancorp,  which operates eight branches in Delaware and Chester Counties.

The price works out to $22 a share, a ten-year high for Alliance, which has lately traded around $17, but still lower than its 2004 alltime high of $23.82. Alliance has been under pressure from activist investors to boost returns or find a buyer since 2013, when Illinois-based Richard J. Lashley's PL Capital Advisors, which owns about 9% of Alliance, threatened to run insurgent candidate Howard Henick against a management-backed board candidate. To avoid a contested election, Alliance agreed to appoint Henick to its board.

The deal adds $310 million in loans and deposits to WSFS, which already has 9 offices in Pennsylvania and 45 in Delaware plus outposts in Virginia and Nevada. In a statement, WSFS boss Mark A. Turner called the Philadelphia area "a highly desirable and complimentary market expansion opportunity."

"Mark Turner is trying to get into Southeastern Pennsylvania in a big way. It's a nice acquisiton," said Ted Peters, former chief executive of Bryn Mawr Trust Co. and cofounder of the Bluestone Financail Institutions Fund, of Wayne, which invests in banks. He said Alliance chief executive Dennis Cerucci "runs a very good bank and he got a very fair and full price."

If Alliance was doing well, why did activists press for a sale? As a formerly depositor-owned "thrift" bank institution struggling to build sales and profits in a low-interest-rate enviroment, Alliance was a likely target for activist investors, Bluestone's Peters said. "It's difficult being such a small bank, with all the federal regulations and the money you have to spend on cyber security. They didn't have enough critical mass."

He predicted other local banks with under $1 billion in assets, like Malvern Federal Savings, are likely to attract buyers. Peters said Beneficial Corp., the largest bank still based in Philadelphia and another former thrift, is far less likely to be purchased: "I don't see them selling. They have a lot of capital. I think they are an acquirer. In fact, I'm a little surprised they didn't buy Alliance. I wonder if they were outbid by WSFS?"

WSFS has made moves in Delaware and adjoining parts of Pennsylvania to fill the vacuum created by the financial collapse of Wilmington Trust Corp., formerly Delaware's largest bank, and its sale to M&T Corp. four years ago. WSFS owns Christiana Trust, Cypress Capital Management, Cash Connect, Array Financial and other subsidiaries. The bank, founded in 1832, is the largest locally-focused banking company based in Delaware and one of the larges tin the Philadelphia area, with $4.9 billion in loans and other balance-sheet assets and $9.4 billion in investment assets managed for customers.