If a stockholder vote on April 20 goes as expected, Freedom Valley will be the third Chester County owned bank to disappear in 14 months.
The Bank of the Brandywine Valley was acquired by Wilmington Trust Co. in February 1992, after it was seized by the Federal Deposit Insurance Co. In November, Brandywine Savings Bank was merged into Provident National Bank.
Such acquisitions are part of a consolidation in the banking industry that has created banking giants with multi-state operations.
Ironically, Freedom Valley was created in 1986 to compete with the big banks by marketing personal service and offering access to top bank officers to customers in Chester and Delaware Counties who didn't like dealing with big banks.
Many of the current stockholders were part of a group that organized and sold the bank in 1986 before it even opened.
IBI, a holding company with four separate banking subsidiaries in suburban Philadelphia counties and a philosophy of serving as a neighborhood banker, bought it and sold it back in 1990.
There was a rush to create new banks in the 1980s.
Some were created to compete with the big banks.
But experts say some were created by entrepreneurs hoping to sell out to major regional and national banks expanding across state lines.
Freedom Valley's chairman said this was not part of his bank's agenda.
"It was definitely not the idea to create it and sell it out," said William J. McCuen Jr., chairman.
"None of the shareholders felt this type of return would occur in this period of time.
"Our intent was to continue to operate as an independent bank, and I don't know that any of shareholders had any idea of building it up and selling it."
But, he said, Wilmington Trust's offer is difficult to refuse.
"Shareholders who held their shares for two years will get a 35-percent-a- year return," the chairman said.
As for Wilmington Trust, its interest is in marketing to high-income customers in Chester County, the most affluent of the Philadelphia suburbs.
"The Wilmington Trust is the ninth-largest personal trust bank in the U.S., so it would make a lot of sense for us to offer those services through the branches and subsidiaries in Pennsylvania," said the trust's spokesman, Charles King.
"We do serve many people in Pennsylvania already. Having the physical locations will allow us to grow," he said.
Wilmington Trust, with $4.3 billion in assets, is the dominant bank in Delaware, with a total of about a 40 percent share of the state's bank deposits.
It already has two offices in Florida and became the first out-of-state bank to branch in Pennsylvania when it bought the Bank of the Brandywine Valley of West Chester last year.
"At this point, our interest continues to be in Pennsylvania and nearby Maryland, Cecil County and areas of Maryland directly adjacent to Delaware," King said.
He said the bank still has not decided how many Freedom Valley employees it will retain.
McCuen said he expects many front-office personnel will retain their positions.
"I will probably be leaving but I believe the same people will be in the branches in September that are there now, the branch managers and tellers," he said.
He said he expects bank vice chairman Steve Pahides, the chairman of the Chester County Chamber of Business and Industry, will continue at the bank.
While regulators have encouraged the merger of some weaker banks with stronger ones, McCuen said that was not the case at Freedom Valley.
The bank would have continued on its own if Wilmington Trust had not made its offer, he said.
"The bank's operations are profitable, as shareholders will see at the meeting, but we have continued to add to our loan loss reserve as a precautionary move," he said.
"The shareholders feel the offer Wilmington Trust made was very appropriate.
"It showed those of us who started it that we built the right product, that the (bank's) people and officers did a good job."
The pace of acquisitions and mergers in the state has slowed in the wake of the banking crisis, according to an official of the Pennsylvania Department of Banking.
The department approved two applications each in 1991 and 1992 and three thus far in 1993.
This contrasts with seven approvals in 1987, 12 in 1988 and seven in 1989.
These figures include both Pennsylvania banks acquiring out-of-state banks, and out-of-state banks acquiring banks in Pennsylvania.
"Consolidation really has been the buzzword since the mid '80s, but by contrast, when you look at us compared to other countries with similar GNPs, we have way more banks per population than other industrialized countries," said Michael Wishnow, a spokesman for the state banking department.
"So there is, indeed, room for further consolidation in the banking industry."