Each outstanding share of ESSA common stock was converted into the right to receive 0.8547 of a share of CNB common stock, a fixed exchange ratio. Based on CNB's 10-day volume weighted average stock price of $24.69 as of January 8, 2025, the deal was valued at approximately $21.10 per ESSA share and approximately $214 million in aggregate merger consideration (deal value shown prior to an ESSA ESOP loan paydown). The transaction was structured as a tax-free reorganization for U.S. federal income tax purposes. At signing, CNB's investor presentation indicated pro forma ownership of approximately 72% for CNB shareholders and 28% for ESSA shareholders. The indicative price represented a price-to-tangible-book-value multiple of 0.99x (a pay-to-trade ratio of 96%) and a price-to-LTM GAAP earnings multiple of 12.2x on an ESSA standalone basis, 6.2x including cost savings, and 4.0x on a fully synergized earnings basis (ESSA GAAP 2024 net income plus fully phased-in cost savings, purchase accounting accretion and other merger-related adjustments), per CNB's investor presentation.
CNB disclosed 2026E pre-tax cost savings of $20.5 million, equal to 40% of ESSA's projected noninterest expense on a bottoms-up basis, modeled at a 40% annual cost-save phase-in assumption. The presentation also modeled a 6.7% total loan mark (interest rate plus credit mark), with a 6.7% portfolio discount (primarily rate-related) accreted into earnings over six years, and balance sheet repositioning involving the sale or divestiture of approximately $200 million of loans and approximately $100 million of deposits. CNB estimated approximately $27.6 million of one-time pre-tax merger-related charges at closing.
CNB projected the merger would be approximately 35% accretive to its 2026 diluted GAAP earnings per share, inclusive of fully phased-in cost synergies, and approximately 14% accretive on a cash diluted EPS basis. Tangible book value per share dilution to CNB at transaction close was projected at approximately 15% on a GAAP crossover basis (shown elsewhere in the presentation as roughly 3% on a different methodology), with an earnback period of approximately 3.3 years under the GAAP cross-over method and approximately 1.7 years under the static cash earnback method. CNB projected a pro forma 2026 return on average tangible common equity of approximately 16%, return on average assets of approximately 1.3%, and an efficiency ratio of approximately 56%. The pro forma balance sheet at close was projected to have a tangible common equity to tangible assets ratio of approximately 7.7%, a Common Equity Tier 1 capital ratio of approximately 10.7%, and a loan-to-deposit ratio of approximately 89%, with roughly 140 basis points of annual CET1 capital generation excluding asset growth.
The combined company was expected to have approximately $8 billion in total assets (CNB's closing press release later cited consolidated assets in excess of $8.0 billion), $7 billion in total deposits, and $6 billion in total loans, with CNB Bank's branch count rising to 78 offices across Pennsylvania, Ohio, New York and Virginia, including ESSA's 20 community offices in the Lehigh Valley, Greater Pocono, Scranton/Wilkes-Barre and suburban Philadelphia areas. The combined Pennsylvania deposit franchise was expected to rank in the state's top 10, and CNB said the deal expanded its footprint into eastern Pennsylvania and the Greater Lehigh Valley without branch overlap.
Michael D. Peduzzi, President and CEO of CNB, said: "We are excited to partner with ESSA which shares such a strong banking tradition with CNB. This combination aligns two high performing banks with an exceptional commitment to client-focused services for its customers and financial support to sustain the economic vitality of the communities in which they operate." ESSA President and CEO Gary S. Olson said: "CNB is a powerful partner for our bank that closely mirrors our culture and values, making the transaction a natural fit. CNB's multi-state, multi-brand business model fosters our entrepreneurial spirit, and continues our commitment and presence in eastern Pennsylvania." At closing, Peduzzi added that the merger would "catalyze greater achievement of our strategic asset and profitability growth objectives by embracing these vibrant markets in Northeastern Pennsylvania."
Per the terms of the merger agreement, CNB and CNB Bank each appointed three new directors from ESSA: Gary S. Olson (ESSA's President and CEO), Robert C. Selig, Jr. (ESSA's Chairman), and Daniel J. Henning (an ESSA director). Olson also took on a role as strategic advisor to CNB's CEO, and CNB Bank formed an advisory board for the ESSA Bank division. Concurrently with signing, CNB entered into voting agreements with ESSA's directors and certain executive officers obligating them to vote their ESSA shares in favor of the merger, and ESSA entered into reciprocal voting agreements with CNB's directors and certain executive officers favoring the related share issuance.
ESSA's definitive merger proxy statement (DEFM14A, filed March 7, 2025) describes a roughly two-year strategic review by ESSA's board before the CNB deal. ESSA's board had maintained a mergers and acquisitions committee and, through its financial advisor, held discussions with one regional bank holding company and six community bank holding companies. Five of those parties declined to proceed. In December 2022, ESSA entered a confidentiality agreement with an unnamed "Company A" that submitted a non-binding indication of interest in January 2023 valuing ESSA shares between $21.06 and $22.60 based on an all-stock exchange ratio; that value fell to between $17.41 and $18.69 amid the regional bank turmoil of early 2023, and discussions were discontinued in August 2023. In March 2024, an unnamed "Company B," a regional bank holding company, submitted a non-binding letter of intent valuing ESSA shares between $21.03 and $21.33 in an all-stock structure, but withdrew its indication of interest at the end of April 2024 to pursue a different acquisition. ESSA's financial advisor, PNC FIG Advisory, then contacted CNB CEO Michael Peduzzi in late July or early August 2024 to gauge interest, leading to direct discussions between Peduzzi and Olson, a mutual confidentiality agreement dated August 13, 2024, and CNB's engagement of Stephens Inc. as its financial advisor.
The merger agreement provided for a termination fee of $8.8 million payable by ESSA to CNB under specified circumstances if the merger was not consummated. The deal was unanimously approved by both companies' boards of directors and was subject to approval by the shareholders of both ESSA and CNB as well as customary regulatory approvals; CNB's Form S-4 registration statement (filed February 20, 2025, amended March 3, 2025) served as the vehicle for the joint proxy statement/prospectus. The transaction was expected to close in the third quarter of 2025 and in fact closed on July 23, 2025, consistent with that timeline.
On the financial advisory side, PNC FIG Advisory, part of PNC Capital Markets LLC, served as ESSA's exclusive financial advisor and rendered a fairness opinion to ESSA's board of directors. Stephens Inc. served as CNB's exclusive financial advisor, and Piper Sandler & Co rendered a fairness opinion to CNB's board. On the legal side, Luse Gorman, PC served as legal advisor to ESSA, and Hogan Lovells US LLP served as legal advisor to CNB.
Upon closing, ESSA Bank & Trust began operating as "ESSA Bank, a division of CNB Bank" within its existing geographic footprint. Holders of ESSA restricted stock awards had their awards automatically vest and exchanged for the merger consideration, while ESSA's performance-based restricted stock units vested at the greater of target or actual performance achievement and were settled in cash, with fractional CNB shares paid out in cash in lieu of issuance, per ESSA's closing Form 8-K.