Bank sale nets $19 million for Fumo

Stockholders of the bank chaired by State Sen. Vincent J. Fumo yesterday approved selling it, signaling the end of an institution founded by his grandfather 84 years ago - and delivering a payout of about $19 million to Fumo.

At the close of a nine-minute meeting, the parent company for First Penn Bank announced that more than 99 percent of 3.6 million shares cast were in favor of selling the bank for $94 million.

The buyer, Conestoga Bancorp, is a private firm that operates one bank office in Chester Springs, Chester County.

Fumo, 63, the bank's largest individual stockholder, will receive $6.3 million in a golden parachute payment and about $13 million for his stock.

Conestoga agreed to pay up to $17 per share in cash for the stock in the parent company, PSB Bancorp. That offer was a 54 percent premium over PSB's daily closing price before the proposed sale was made public in August.

Under the deal, the price could drop to $16.34 per share if PSB is unable to unload seven major loans.

Richard A. Elko, Conestoga's president, said PSB's existing network of branches made it a good buy. He said he believes his firm can improve the bank's profits, which records show have consistently lagged behind those of comparable institutions.

"Admittedly the earnings could use some sprucing up, and we think we can do that," he said.

For Fumo, a veteran Democratic political powerhouse, the sale comes during an especially anxious period.

Federal prosecutors who have spent four years exploring his ties to a nonprofit in South Philadelphia are expected to announce in the next few weeks whether Fumo will be indicted.

The Inquirer reported Thursday that prosecutors sent Fumo a so-called "target letter" last summer, an indication that he was likely to be charged.

In presiding over yesterday's annual PSB stockholders meeting at a Center City hotel, Fumo said at the start that he would take no questions from stockholders.

As he departed, he declined to speak with a reporter about the PSB sale or the federal probe.

"We are not going to comment on an ongoing investigation," Fumo said.

PSB operates 13 branches in Philadelphia and its suburbs under the name First Penn Bank. Once the sale becomes final this spring, that name will become part of local banking history and the branches will take on the Conestoga Bank name. Fumo has no role in Conestoga.

Fumo's grandfather, Joseph J. Fumo, founded Fumo Building & Loan in 1923 "in an era when Italians in South Philadelphia found it difficult to get building loans," according to Fumo's official Web site.

Fumo took charge after his father, Vincent E. Fumo, pleaded guilty to federal bank-fraud charges in 1976 and received probation. Fumo's father died in 1991.

Under the senator's leadership, the bank grew dramatically through mergers. While he was in command, its assets climbed from $1.5 million to about $550 million.

In a series of articles last year, The Inquirer reported that the bank board, made up of Fumo's friends and political allies, had given Fumo a generous compensation package that analysts said was startling given the bank's size and performance.

Before PSB's board put the bank up for sale, it awarded Fumo 600,000 shares and stock options - a benefit alone worth about $5 million based on the Conestoga offer.