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BETHLEHEM, PA-KNBT Bancorp, the holding company for locally based Keystone Nazareth Bank & Trust Co., signed a definitive merger agreement to acquire Hazleton-based Northeast Pennsylvania Financial Corp., the holding company for First Federal Bank. The total value of the acquisition, including the payout of stock options, is approximately $98 million.

This will add 16 Federal Bank branches in Northeastern and Central Pennsylvania to Keystone Nazareth's existing 41 and expand its presence from four to seven Pennsylvania counties. Specifically, it extends KNBT into Luzerne, Schuylkill and Columbia counties while adding to its presence in Carbon and Monroe counties. It also has existing branches in Lehigh and Northampton counties.

"Given the prior experience that I and several of our officers have in First Federal's market area, we are confident that we will be able to successfully implement our community bank business strategy," says Scott V. Fainor, KNBT's president and CEO. He also says NEPF's growing insurance and trust activities add new opportunities to KNBT.

KNBT resulted from last year's merger between Keystone Savings Bank and Nazareth National Bank. Based on the integration of those two entities, Fainor says the systems and expertise to "seamlessly integrate" First Federal into the organization are in place. The merger is expected to reach completion in second quarter 2005. At completion, Thomas L. Kennedy, chairman of NEPF's board, will join the KNBT board of directors.

Under the merger agreement, each outstanding share of NEPF common stock will be converted into the right to receive either $23 in cash or KNBT common stock, at the election of the shareholder. The swap is subject to an overall requirement that 50% of NEPF's total outstanding shares be exchanged for stock.

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Keystone Nazareth Bank Acquires First Federal for $98M

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