Walden, N.Y.-based Hometown Bancorp Inc. (MHC), having been hit with an OCC enforcement action and already racking up a full-year net loss of $7.2 million, in 2013 began looking at its strategic options. Early the next year, FinPro Capital Advisors Inc. reached out on Hometown's behalf to 19 potential buyers, only five of whom went on to sign confidentiality agreements.
Of those five, none went beyond a nonbinding indication of interest.
Hometown ended 2014 with a full-year net loss of $2.9 million, before returning to profitability in 2015. In 2016, the OCC amended its formal agreement with the bank, requiring it to have a common Tier 1 capital ratio of 9%, a total capital ratio of 13%, a Tier 1 capital ratio of 11% and a leverage capital ratio of 9% by the end of June. Hometown did not think it feasible, and decided to restart the sale process.
This time, FinPro Capital Advisors listed 11 potential acquirers. Five of them executed confidentiality agreements in August and September; two of those dropped out while performing due diligence. Finally, Hometown received two nonbinding indications of interest; one was from fellow New Yorker Wallkill Valley Federal Savings and Loan Association.
Wallkill offered $3.01 per share for Hometown, in cash, and asked for an exclusivity period. The other party, meanwhile, proposed to pay $2.25 to $2.50 per share, also in cash, plus a board seat for Hometown's chairman. At an October meeting, FinPro Capital Advisors told Hometown's board the second party would unlikely be able to increase its offer without a capital raise. Hometown decided to proceed with Wallkill.
As they continued to perform due diligence, Hometown and Wallkill amended their agreement to include a remediation plan in connection with a tax compliance violation. Also discussed was potential conflict from Wallkill having previously been a client of a FinPro Capital Advisors affiliate. According to a proxy statement, they also agreed on a termination fee of $250,000, to be paid by Hometown under certain circumstances.
The merger agreement was finally executed Dec. 16, 2016. Hometown's shareholders will vote on it on May 16, during their annual meeting.