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National Penn Acquires TF Financial In Cash And Stock Deal

Jim Probasco

National Penn Bancshares (NASDAQ: NPBC), parent of National Penn Bank, announced Wednesday that it would acquire TF Financial (NASDAQ: THRD), parent of 3rd Fed Bank, in a cash and stock deal through which TF Financial shareholders would receive either $42.00 in cash or 4.22 shares of National Penn common stock.

The transaction, which was consistent with National Penn’s announced acquisition and capital management strategies, was not a surprise to Marketfy Maven and value investor Tim Melvin, who told Benzinga there was nothing magic or unexpected about the acquisition of TF Financial by National Penn.

According to Melvin, TF Financial fit all his investment criteria including the fact it was a small, safe bank with plenty of capital, and a low price to tangible book value ratio. 

In addition, Melvin said that TF Financial presented a couple of bonus features that caught his attention – it was significantly insider owned and had three major activist investors.

Activist investors can be critical, Melvin said, because their presence tends to increase chances for performance improvement and higher stock prices.

Emphasizing that point, Melvin added, “An activist investor is a strong catalyst.”

Finally, according to Melvin, Bucks County, Pennsylvania, where TF Financial is located is “overbanked,” a condition that lends itself to mergers and acquisitions.

Jim Cramer’s The Street rated TF Financial a Buy, saying, “The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, attractive valuation levels, expanding profit margins, and increase in net income. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

TF Financial and 3rd Fed Bank had $846 million in assets, $609 million in loans and $692 million in deposits as of March 31, 2014. The organization operates 18 full service retail and commercial banking offices in Bucks County and Philadelphia, as well as in Burlington, Mercer and Ocean counties in New Jersey.

In a news release, National Penn President, Scott V. Fainor said, "Expanding our market presence in the attractive Bucks and Philadelphia Counties in Pennsylvania and the opportunity to enter New Jersey fits perfectly into our strategy.”

Shares of TF Financial closed Wednesday up $10.26 or 32.2 percent at $42.10. National Penn was down $0.10 at $10.43.

At the time of this writing, Jim Probasco had no position in any mentioned securities.

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