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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 9, 1998
FIRSTFEDERAL FINANCIAL SERVICES CORP
(Exact name of registrant as specified in its charter)
Ohio 0-17894 34-1622711
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) No.)
135 East Liberty Street, Wooster, Ohio 44691
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (330) 264-8001
N/A
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS
On February 9, 1998, FirstFederal Financial Services Corp
("FirstFederal") issued the press release included as Exhibit 99 to this report
and incorporated by reference herein, announcing the signing of a definitive
agreement for the affiliation of First Shenango Bancorp, Inc. with FirstFederal.
The merger is expected to be consummated in the third quarter of 1998, and is
subject to First Shenango and FirstFederal shareholder approval, regulatory
approval, and other customary conditions of closing.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99 Text of press release, dated February 9, 1998, issued by FirstFederal
Financial Services Corp
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRSTFEDERAL FINANCIAL SERVICES CORP
By: /s/ Gary G. Clark
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Gary G. Clark
Chairman and CEO
Date: February 9, 1998
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INDEX TO EXHIBITS
Sequentially
Numbered Page
Where Attached
Exhibit is Located
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99 Press Release of FirstFederal, dated May 19, 1997 5
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EXHIBIT 99
[FIRST FEDERAL FINANCIAL SERVICES CORP LETTERHEAD]
FOR IMMEDIATE RELEASE - FEBRUARY 9, 1998
N E W S R E L E A S E
Gary G. Clark Francis A. Bonadio
Chairman President
FirstFederal Financial Services Corp First Shenango Bancorp, Inc.
135 East Liberty Street 25 North Mill Street
Wooster, OH 44691 New Castle, PA 16101
(330) 264-8001 (412) 654-6605
FIRSTFEDERAL FINANCIAL SERVICES CORP AND
FIRST SHENANGO BANCORP, INC. SIGN DEFINITIVE MERGER AGREEMENT
Wooster, Ohio and New Castle, Pennsylvania- FirstFederal Financial
Services Corp (Nasdaq: "FFSW", "FFSWO") and First Shenango Bancorp, Inc.
(Nasdaq: "SHEN") jointly announced today the signing of a definitive agreement
for the affiliation of First Shenango with FirstFederal Financial. First
Shenango's wholly-owned subsidiary, First Federal Savings Bank of New Castle, is
expected to become a separate operating subsidiary of FirstFederal Financial and
operate under its current name and banking charter.
Under the terms of the agreement, FirstFederal Financial will exchange
1.143 shares of its common stock for each of the 2,069,007 outstanding shares of
First Shenango stock and 109,074 outstanding options. Based on the closing price
of FirstFederal Financial on February 6, 1998 of $41.75, the transaction would
be valued at approximately $103.9 million, or $47.72 per share of First Shenango
stock. The merger, which will be accounted for as a pooling of interests, is
expected to be consummated in the third quarter, pending First Shenango and
FirstFederal Financial shareholder
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approval, regulatory approval and other customary conditions of closing. The
transaction is expected to be a tax-free reorganization for federal income tax
purposes.
First Shenango has four banking offices in Lawrence County,
Pennsylvania. At December 31, 1997, First Shenango had total assets of $375.0
million, deposits of $275.2 million and shareholders' equity of $47.9 million.
First Shenango reported net income of $4.6 million for the year ended December
31, 1997 with a return on average assets of 1.15% and a return on average equity
of 10.20%.
Gary G. Clark, Chairman and Chief Executive Officer of FirstFederal
Financial, stated, "This affiliation is consistent with our previous stated
growth plans and is a logical and attractive opportunity for FirstFederal
Financial. We are impressed with the way in which the management and Board of
Directors has operated First Shenango and served their communities over the
years. First Shenango is a great community savings bank with a strong reputation
for providing exceptional customer service. It is a natural market extension to
our existing franchise in Ohio and allows us to expand into a market that is
culturally and demographically similar to our existing markets. We look forward
to welcoming the First Shenango customers and employees."
Clark continued, "FirstFederal Financial will benefit from First
Shenango's strong capital position and its attractive funding base. We expect to
be able to enhance First Shenango's net interest margin and achieve cost savings
of 20% of First Shenango's operating expenses. We expect the transaction to be
neutral to FirstFederal Financial's earnings per share in the first full year."
Robert H. Carlson, Chairman of First Shenango, commented, "In
FirstFederal Financial we found local community bankers of a like business
philosophy who are both intensely focused on satisfying customers' financial
needs and maintaining strong commitments to the communities they
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serve. Also, FirstFederal has demonstrated an outstanding track record in
building shareholder value. We have built a strong franchise and are excited to
be affiliating with FirstFederal Financial.
Francis A. Bonadio, President and Chief Executive Officer of First
Shenango, stated, "We believe that this transaction will benefit our
shareholders, customers, employees and community. Having FirstFederal Financial
stock will enhance the liquidity for our shareholders. Also, our customers can
expect us to offer additional banking products and services, and our employees
can grow and prosper as part of a larger company. As part of FirstFederal
Financial, we will be in a stronger competitive position in the years ahead."
FirstFederal Financial Services Corp operates in two business segments:
community banking and specialty finance. The community banking segment consists
of Signal Bank N.A., with 26 full service offices and three limited service
facilities serving north central Ohio, and Summit Bank N.A. with two offices in
Summit County, Ohio. The specialty finance segment consists primarily of Mobile
Consultants Inc., a broker and servicer of manufactured housing finance
contracts operating in 41 states. At its annual meeting in April, FirstFederal
Financial expects to change its name to Signal Corp.
McDonald & Company Securities, Inc. is serving as First Shenango's
financial advisor and Keefe Bruyette & Woods, Inc. is serving as FirstFederal
Financial's financial advisor in connection with the transaction.
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FORWARD LOOKING INFORMATION:
THIS PRESENTATION CONTAINS CERTAIN ESTIMATES AND PROJECTIONS REGARDING
THE COMBINED COMPANY FOLLOWING THE MERGER. THESE ESTIMATES AND PROJECTIONS
CONSTITUTE FORWARD-LOOKING STATEMENTS (WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995), WHICH INVOLVE SIGNIFICANT RISKS AND
UNCERTAINTIES. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED
IN THESE FORWARD-LOOKING STATEMENTS. INTERNAL AND EXTERNAL FACTORS THAT MIGHT
CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO: (1) EXPECTED COST
SAVINGS FROM THE MERGERS CANNOT BE FULLY REALIZED OR REALIZED WITHIN THE
EXPECTED TIME FRAME; (2) REVENUES FOLLOWING MERGERS ARE LOWER THAN EXPECTED; (3)
COMPETITIVE PRESSURES AMONG DEPOSITORY INSTITUTIONS INCREASE SIGNIFICANTLY; (4)
COSTS OR DIFFICULTIES RELATED TO THE INTEGRATION; (5) CHANGES IN THE INTEREST
RATE ENVIRONMENT REDUCE NET INTEREST INCOME; (6) GENERAL ECONOMIC CONDITIONS
DETERIORATE, EITHER NATIONALLY OR IN THE STATES IN WHICH THE COMBINED COMPANY
WILL BE DOING BUSINESS; AND (7) LEGISLATION OR REGULATORY CHANGES ADVERSELY
AFFECT THE BUSINESSES IN WHICH THE COMBINED COMPANY WOULD BE ENGAGED.
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FIRSTFEDERAL FINANCIAL SERVICES CORP'S ACQUISITION OF
FIRST SHENANGO BANCORP, INC.
SUMMARY FACT SHEET
ANNOUNCEMENT DATE: February 9, 1998
DEAL STRUCTURE: Pooling of interests
Tax-free exchange
Due diligence completed
Definitive agreement signed
$3,000,000 break-up fee
First Shenango option to terminate
transaction if FirstFederal Financial's stock
falls below $35.40 and underperforms the SNL Bank
Index.
TERMS: 1.143 shares of FirstFederal Financial common for each
share of First Shenango.
TIMING: Subject to normal regulatory approval and shareholder
approval by both companies.
Closing expected in third quarter 1998.
PRICING: Purchase price per share (a) $47.72
Price to book value (12/31/97) 206.3%
Price to 1997 EPS 21.3x
Estimated transaction value (a) $103.9 million
FirstFederal Financial shares issued 2,489,547
(a) based upon FirstFederal Financial's closing price
on February 6, 1998 of $41.75.
TRANSACTION RATIONALE:
o Logical expansion into complementary market with similar
demographics.
o First Shenango has the second leading market share in Lawrence
County with 20.4% of total deposits.
o Source of stable low-cost core deposits.
o Provides FirstFederal Financial with the ability to leverage
costs of retail banking over a larger base.
o FirstFederal Financial will have the opportunity to enhance
First Shenango's net interest margin through a reduction in
First Shenango's liquidity levels and the introduction of
commercial loan and deposit products.
o Transaction is expected to be neutral to earnings per share in
the first full year.
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FIRSTFEDERAL FINANCIAL'S ACQUISITION OF FIRST SHENANGO BANCORP, INC.
PRO FORMA COMBINED FACT SHEET (UNAUDITED)
DECEMBER 31, 1997
($ IN THOUSANDS EXCEPT PER SHARE)
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FIRSTFEDERAL First Shenango Pro Forma
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Total assets $1,457,415 $374,971 $1,832,386
Loans receivable - net 1,001,311 256,006 1,257,317
Deposits 981,675 275,221 1,256,896
Borrowings 347,243 47,725 394,968
Shareholders' equity 104,735 47,862 152,597
Equity/assets 7.23% 12.76% 8.33%
Return on average assets (a) 1.22% 1.15% 1.21%
Return on average common equity (a) 16.19% 10.20% 14.33%
Basic shares outstanding 6,725,535 2,069,007 9,090,410
Diluted shares outstanding 7,763,203 2,178,081 10,252,750
Book value per share $14.10 $23.13 $15.48
Market capitalization ($ millions) (b) $324.1 $83.9 $428.1
Number of banking offices 28 4 32
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(a) Year ended December 31, 1997. Pro Forma financials do not reflect merger
synergies.
(b) Based upon FirstFederal Financial's and First Shenango's closing prices
on February 6, 1998.
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