Sovereign Bancorp, whose stock has gained 70% this year, is expanding yet again in New Jersey.
The 1.3 billion-asset Pennsylvania thrift is buying Jersey Shore Savings and Loan Association, its fourth deal inside the neighboring state in the past year.
On Monday the shares were ahead 50 cents, to $13.50. Sovereign, based in Wyomissing, near Philadelphia, was singled out in January as a strong prospect by Peter Lynch, the legendary stock picker who formerly ran the Fidelity Magellan mutual fund.
The latest transaction will involved a merger-conversion of Jersey Shore, a mutual-form thrift based in Toms River. It has assets of $600 million and 14 offices, with significant market share in Monmouth and Ocean counties.
Sovereign will inject $40 million of fresh capital into the thrift, which has been short on capital because of more stringent regulatory requirements but which does not have significant asset quality problems.
Jersey Shore is well managed, conservative, and has been profitable for the last 10 years," said Jay S. Sidhu, president and chief executive officer of Sovereign.
"Sovereign in the most efficient thrift in the Middle Atlantic region, and they're among the very best in the country. This looks like another good move for them," said Samuel J. Beebe, a securities analyst with Robert W. Baird & Co., Tampa, Fla.
The latest move will complement the deal announced on July 1 for Sovereign to pay $85 million to acquire Harmonia Bancorp., Kenilworth, N.J. The $800 million-asset thrift has 17 offices in five central New Jersey counties, including the shore area.
Last August, Sovereign made its first foray into New Jersey with a pair of purchases from the Resolution Trust Corp.: Nassau Savings and Loan Association, Princeton, and United Savings, Lawrenceville.
The thrift has not won every acquisition battle. Most notably, Flagship Financial Corp., Jenkintown, Pa., agreed last January to be bought by PNC Financial Corp., Pittsburgh, after a long courtship with Sovereign.
The company's financial profile is impressive to analysts. Last Friday, Sovereign announced second-quarter net income of $3.4 million, up 93% from last year. Return on average assets was a banklike 0.72%, while return on equity was 14.08%.
In response, analyst Lloyd Widom of Prudential Securities raised his 1992 estimated net income for the company at $1.12 a share, versus 71 cents last year, and $1.36 next year.
Analyst Bruce W. Harting of Salomon Brothers Inc. expects results of $1.16 this year.
The Jersey Shore deal required Sovereign to make minor adjustments in its deal with Harmonia, which carries a price of $18, to $20 a share.
If the Harmonia merger is not completed as expected by March 31 because of the Jersey Shore transaction, Harmonia shareholders will receive an extra 25 cents a share per month until next June 30.