Pa. Thrift Company Maneuvers to Clear Regulatory Bar to a Merger

A Pennsylvania thrift plans moves to persuade regulators to approve its merger with a neighboring thrift in an unusual union between a stock and a mutual company.

Northwest Savings Bank, a majority-owned subsidiary of $2 billion-asset Northwest Bancorp, Warren, Pa., has agreed to acquire Corry Savings Bank, Corry. But mutual mergers of this size are generally frowned upon by regulators.

Regulators have ordinarily denied merger conversion applications for mutual thrifts with more than $25 million of assets because they say such mergers typically take away control from the mutual's depositors and benefit only the acquiring party.

In a merger conversion, the smaller institution usually issues shares that are then bought by the acquiring institution. The Office of Thrift Supervision has allowed merger conversions only if the smaller institution is financially troubled or if it can prove that it cannot independently launch an initial public offering.

In 1995, the OTS imposed its ban on merger conversions by institutions with more than $25 million of assets.

Since Corry Savings has $28.5 million of assets, it must show Pennsylvania and Federal Deposit Insurance Corp. regulators why it could not issue stock on its own instead of teaming up with Northwest. Corry is not regulated by the federal thrift agency. However, a spokesman for the Pennsylvania regulatory agency said it uses the OTS merger conversion rules as guidelines when reviewing applications.

Northwest Bancorp plans to appraise Corry independently, then offer shares for sale to Corry depositors for up to about 30% of Corry's appraised value. The remaining 70% of Corry's value will be issued in stock to Northwest's mutual holding company.

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