After sitting on the sidelines for nearly four years, NBT Bancorp Inc. of Norwich, N.Y., has found a deal that it hopes is a perfect fit.
The $4.3 billion-asset company announced Tuesday that it is buying the $418 million-asset City National Bank and Trust in Gloversville, N.Y. - the only bank based in what was once the glove-making capital of the world.
NBT said it would pay $89 million for the bank and its parent company, CNB Bancorp Inc.
All the glove-making jobs have moved overseas, so City National's loan and deposit demand has slowed. But Daryl R. Forsythe, NBT's chief executive officer, said City National remains a solid if unspectacular performer, with a spotless loan portfolio. It also has the No. 1 market share in Fulton County.
"We had been looking selectively and keeping our powder dry, but we thought this was the right deal," Mr. Forsythe said. "A deal like this makes us better, not just bigger."
The purchase would be NBT's first since November 2001, when it bought the $1 billion-asset Central National Bank in Canajoharie, N.Y.
William N. Smith, CNB's chairman and president, said its board concluded that it had few prospects for long-term growth on its own.
"Our share price has been flat for a while, and the way to get it up is to increase earnings," he said. Lately we've seen limited loan demand, and deposit growth has been tough."
Mr. Forsythe said the two companies know each other extremely well, having competed against each other for decades. They have also cooperated in a number of loan participations over the years.
He said CNB had always seemed to focus on maintaining its independence - until recently. "We were one of a number of banks that were given a chance to talk to them," Mr. Forsythe said.
Andrew W. Stapp, an analyst who covers NBT for Cohen Brothers & Co. in Philadelphia, said CNB's loan growth has averaged less than 2% over the past five years. NBT's loan portfolio has grown 17% since the end of 2001.
Mr. Stapp said that Mr. Smith's age - he is 65 - may have played more of a role than loan growth in CNB's decision to sell. "My guess is that is was more of a management-succession issue," he said.
One issue that CNB has not had to struggle with has been asset quality. It reported just 6 basis points of nonperforming assets at the end of the first quarter.
"They're a very clean bank," Mr. Forsythe said. "They have excellent lending discipline."
Mr. Forsythe said he was "very confident" that the deal, which is scheduled to close in the fourth quarter, would be accretive to earnings in 2006. NBT is projecting cost saves of 30%, but Mr. Stapp said that is doable, given that the deal is in-market. He said in-market deals offer more opportunities for trimming expenses, and Mr. Forsythe agreed.
"If we can't make this work, we ought to be in a different business," he said.
The deal is the first involving the acquisition of a New York banking company announced in 2005. That is a far cry from the pace of the past two years, when 14 of the state's banks announced deals.
NBT is to pay $38 in cash or 1.64 of its own shares for each CNB share. That is 2.14 times CNB's book value and 19.7 times its trailing 12-month earnings. Both figures are below the average for bank deals announced this year, Mr. Stapp said.
