Tower Bancorp to Buy First Chester County Corp.

Tower Bancorp Inc., Harrisburg, Pa., has agreed to buy First Chester County Corp., West Chester, Pa., including its American Home Bank unit, in an all-stock deal valued at $65 million. As part of the agreement, Tower's subsidiary bank, Graystone Tower Bank, has agreed to increase its lending facility with First Chester to up to $26 million as well as to purchase up to $100 million of residential mortgage and commercial loans from First National Bank of Chester County. These moves are aimed at allowing the bank to satisfy the regulatory capital requirements of the Office of the Comptroller of the Currency. Upon the closing Tower "will be one of central and southeastern Pennsylvania's largest independent community banks," said Tower chairman and chief executive officer Andrew S. Samuel. Under the terms of the agreement, each First Chester shareholder will receive 0.453 shares of Tower common stock for each First Chester share. The market value as of Dec. 24 of $10.22 per First Chester share represents 90% of the company's tangible book value. The exchange ratio is subject to upward or downward adjustment if loan delinquencies at First Chester increase or decrease beyond specified amounts. Management anticipates that there will be no branch closures, but Tower expects to achieve a 15% cost savings, or approximately $12 million, through the reduction of administrative and operational redundancies. The acquisition will immediately be significantly accretive to earnings per share. It is expected to close in the second quarter of 2010 if it obtains necessary shareholder and regulatory approvals. First Chester's American Home Bank originates through retail and wholesale channels, as well as through joint venture mortgage partnerships with builders and others.