Community Bank System Inc. of DeWitt, N.Y., which has been quiet in mergers and acquisitions the past few years, has reverted to form with its most expensive deal to date.
The $5.5 billion-asset company announced Monday that it has agreed to buy Wilber Corp. in nearby Oneonta, N.Y., for $101.8 million in cash and stock.
Community offered about $9.50 a share for the $929 million-asset Wilber, for a premium of 1.41 times tangible book value. For healthy banks in attractive markets, particularly in the Middle Atlantic and the Northeast, it is common to pay slightly above book value, said David Darst, a senior analyst at Guggenheim Securities LLC.
Darst said the deal makes sense geographically for Community because buying Wilber would allow it to expand further into upstate New York.
It also fits into Community's pattern of acquisitions. In the early 2000s the company was known for expanding strategically through purchases, having completed eight bank and thrift deals by 2007.
It has bought branches and other services from companies since, though Wilber would be its first whole-bank acquisition in nearly four years.
Community's executive vice president and chief financial officer, Scott Kingsley, said the company never stopped looking for acquisition targets, it just didn't want to end up with a lemon.
"We don't have a track record of acquiring fixer-uppers," Kingsley said in an interview.
Wilber, however, is operating under a written agreement with its regulator, and its nonperforming assets reached 2.6% of total assets as of June 30. Yet Kingsley said Community is prepared to handle the problem loans and has a provision in the agreement that allows it to back out of the deal if nonperforming assets total more than $32 million. Wilber's NPAs were about $24 million when Community began its due diligence.
In the end, Community could not resist the franchise value the company would receive from the deal, especially in a relatively slow-growth area, Kingsley said.
The deal, which is expected to close early in 2011, would boost Community's assets by 18.5%, to $6.4 billion. It would give Community a presence in nearly every market in upstate New York, with 22 more branches.
Also in New York, the $305.1 million-asset Madison National Bancorp Inc. in Hauppauge, Long Island, announced Friday that it had agreed to be acquired by FNBNY Bancorp Inc. and its parent company, Modern Capital Partners LP, for about $33.7 million.
The Madison-FNBNY deal is expected to close next quarter.