CNB and ESSA Move Forward with Merger

Supplemental disclosures aim to resolve shareholder lawsuits without delaying the strategic union of the two banks.

April 10, 2025

A Legal Challenge—and a Strategic Response

CNB Financial and ESSA Bancorp are staying the course on their planned merger—even as legal headwinds emerge. Since announcing the deal in January, both banks have received multiple legal demands and shareholder complaints focused on the information disclosed in their joint proxy statement. Rather than let these challenges stall progress, the institutions are responding with a slate of updated disclosures aimed at addressing concerns, preserving momentum, and keeping the transaction on track.

Between late February and the end of March, CNB and ESSA were served a combined total of ten demand letters from shareholders, with ESSA facing two additional lawsuits in New York’s Supreme Court. The central claim: the joint proxy statement omitted key financial details and misled shareholders ahead of the merger vote.

Both institutions stand by the completeness of their original filings and deny any wrongdoing. Still, they’ve opted to enhance the joint proxy with added data—designed to reduce litigation risk and prevent delays. The updated materials don’t admit liability. Instead, they aim to address the core allegations while keeping shareholders informed and the process moving forward.

What’s New in the Disclosures

Several sections of the joint proxy have been revised, starting with the financial advisor opinions that underpinned the fairness of the deal. CNB’s advisor, Piper Sandler, and ESSA’s advisor, PNC FIG Advisory, have provided updated peer group analyses for each bank. These tables break down metrics like return on equity, net interest margin, and tangible book value multiples across comparable institutions—helping frame how each bank stacks up within its regional market.

Discounted cash flow models have also been refreshed. For ESSA, the projected value of its common stock now ranges from $11.18 to $17.16 per share. CNB’s range runs higher—from $20.85 to $33.18 per share. These models cover seven years of projected dividends and terminal values, based on inputs including research forecasts and assumptions from each bank’s senior management. The discount rates used— 11.73% for ESSA and 10.43% for CNB—were calculated using independent data sources to maintain transparency and objectivity.

In addition to the valuation refresh, both banks added context around services provided by their financial advisors. PNC’s compensation from ESSA and CNB totaled less than $50,000 and $300,000, respectively, in the last year—numbers intended to clarify potential conflicts of interest. More importantly, these updates ensure shareholders have a full picture of the relationships involved.

Financial Forecasts and Forward-Looking Metrics

The updated joint proxy also includes additional forward-looking information from CNB and ESSA’s internal projections. For ESSA, expected annual dividends are projected through fiscal 2031, alongside net income estimates. CNB’s dividend assumptions, which were used in both Piper Sandler’s and PNC’s models, are now disclosed as well.

These updates serve to validate the modeling work that supports the merger—and to show shareholders how management expects value to be created over time. Together with the revised peer comparisons and pro forma financials, the added detail creates a more complete, actionable view of the combined company’s potential.

Where Things Stand Now

With the supplemental disclosures in place, CNB and ESSA are signaling their intent to move forward. Shareholder meetings are expected soon, and the merger remains subject to regulatory approvals and customary closing conditions. While legal claims are still pending, the goal of these disclosures is clear: eliminate uncertainty, avoid delays, and keep the transaction timeline intact.

At the same time, the companies have laid out a wide set of risk factors that could affect the deal—from integration complexity to market volatility. Those risks are real, and the next steps will depend on shareholder votes, regulatory outcomes, and continued alignment between the two banks.

A Deal Built on Alignment

This merger reflects a strategic alignment between two regional institutions with complementary footprints and long-term growth goals. By stepping up their disclosures in response to legal pressure, CNB and ESSA are showing they’re prepared to act decisively and transparently. The updates may not resolve every issue, but they put both banks in a stronger position to deliver a clean, timely close—and to shift focus toward integration and execution once the deal is done.