N.J.’s First Bank agreed to buy Chester County’s Malvern Bank, and expects to cut expenses by $10 million a year

First Bank, of Hamilton, N.J., says it has agreed to pay $149.5 million in cash and stock, for Malvern Bancorp, a Paoli-based company with nine branches that has struggled to boost profits in recent years.

The deal valued Malvern at $19.63 per share, above Malvern’s recent trading range, but a discount from its historic high of around $27 per share in 2017. First Bank’s stock price declined after it announced the acquisition.

While community banks such as Malvern have been disappearing in mergers as more Americans bank online, bank share prices have lately been depressed by rising interest rates and the threat of a recession.

Malvern Bancorp employs 77 workers, according to the Federal Deposit Insurance Corp. First Bank expects to cut Malvern’s expenses by around 50%, or $10 million a year, though some “key” managers would be invited to stay, according to projections the company sent shareholders after announcing the deal Wednesday morning.

Three Malvern directors would join the board of First Bank, which has purchased three smaller New Jersey banks since 2017.

Malvern Bank was founded in 1887, in what was then a small manufacturing and retail center amid the Great Valley farming country, as a building-and-loan society that helped members finance homes.

The lender evolved into a depositor-owned savings bank and then a publicly traded commercial bank serving what are now some of the richest townships in suburban Philadelphia, along the Upper Main Line. Malvern reported a small loss in 2021 but in earnings reports this year has again reported profits.

The Malvern directors who approved the sale “are excited to be combining with a financially strong” bank that offers “high-touch customer service,” Malvern’s chief executive Anthony Weagley said in a statement. Malvern has a higher proportion of single-family home-mortgage loans; First Bank funds more business loans.

After a banking career in New Jersey, Weagley was named in 2014 to the top job at Malvern, with orders to grow the bank and boost profits. His predecessor was ousted in a shareholder revolt. Weagley beefed up small-business lending and private banking services .

The deal adds Malvern’s $1 billion in loans and other assets — mostly in Chester County, the richest of Pennsylvania’s 67 counties, and neighboring areas — to First Bank’s current 18 branches with $2.7 billion in assets. That includes offices in central New Jersey, Philadelphia’s South Jersey suburbs, Bucks County, and West Chester, Pa. It also has an outpost in Florida.

First Bank chief executive Patrick L. Ryan called the deal a “high-quality and low-risk transaction,” noting that Malvern’s focus includes private banking and customer service. As part of a larger bank, the Malvern offices will be able to make larger loans and more “cost-effective” deposits, he added.

Ryan said it would also be good for investors with the “earn back” on the purchase price more than making up from the cost by mid-2025.