Agreement and Plan of Merger

9 Months Ended

Sep. 30, 2014

Agreement and Plan of Merger [Abstract]

Agreement and Plan of Merger

(12)          Agreement and Plan of Merger

On August 27, 2014, Mid Penn entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Phoenix Bancorp, Inc., a Pennsylvania corporation (“Phoenix”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Phoenix will merge with and into Mid Penn, with Mid Penn continuing as the surviving entity (the “Merger”). Immediately following the consummation of the Merger, Miners Bank, a Pennsylvania-state chartered bank and wholly-owned subsidiary of Phoenix, will merge with and into Mid Penn Bank, a Pennsylvania-state chartered bank and wholly-owned subsidiary of Mid Penn, with Mid Penn Bank continuing as the surviving entity. The Merger Agreement was approved by the Board of Directors of each of Mid Penn and Phoenix. Phoenix shareholders may seek appraisal rights as dissenting shareholders under Pennsylvania law.

Subject to the terms and conditions of the Merger Agreement, upon completion of the Merger, Phoenix shareholders will have the right to receive, at their election (but subject to customary procedures applicable to oversubscription and undersubscription for cash consideration), 3.167 shares (the “Exchange Ratio”) of common stock of Mid Penn (the “Mid Penn Common Stock”), $51.60 in cash or a combination of cash and Mid Penn’s Common Stock for their shares of common stock of Phoenix (the “Merger Consideration”). The amount of Merger Consideration issuable to Phoenix shareholders is subject to a pre-closing adjustment based on, with respect to one OREO property held by Miners Bank, the estimated costs, if any, for environmental remediation that may be required and any loss in connection with the maintenance and disposition costs of such property, net of any tax benefit and any recoveries from the sale of any parcels. Mid Penn may, at its election, reduce the amount of Merger Consideration if, and only to the extent that, these costs exceed $400,000. The Exchange Ratio is subject to customary anti-dilution adjustments in the event of stock splits, stock dividends and similar transactions involving Mid Penn Common Stock. At the closing of the Merger, 80% of the outstanding shares of Phoenix common stock will be converted into the right to receive shares of Mid Penn Common Stock and the remainder of the outstanding shares of Phoenix common stock will be converted into the right to receive cash.

Mid Penn has agreed to assume all of the issued and outstanding shares of Phoenix’s Senior Non-Cumulative Perpetual Preferred Stock, Series A (the “SBLF Preferred Stock”), which were issued to the U.S. Department of Treasury pursuant to the Small Business Lending Fund program, upon completion of the Merger. As of the date of this Agreement, the SBLF Preferred Stock had an aggregate liquidation preference of $2,625,000.

Completion of the Merger is subject to various conditions, including, among others, (a) approval by Phoenix shareholders of the Merger, (b) approval by Mid Penn shareholders of the Merger, (c)  assumption of the SBLF Preferred Stock by Mid Penn, and (d) receipt of required regulatory approvals.

The transaction is expected to be during either the first or second quarter of 2015.