F.N.B. Corp. in Hermitage, Pa., has agreed to buy Parkvale Financial Corp. in Monroeville, Pa.
The $9.7 billion-asset F.N.B. said late Wednesday that it would pay $130 million for Parkvale in an all-stock deal priced at 1.95 times the seller's tangible book value.
Shareholders of the $1.8 billion-asset Parkvale would receive roughly 2.2 shares of F.N.B. stock for each share owned. Parkvale is expected to redeem its $32 million of preferred stock issued to the Treasury Department for the Troubled Asset Relief Program.
F.N.B. expects to complete the acquisition in the fourth quarter.
The deal would catapult F.N.B. from the seventh-largest bank in Pittsburgh to the third place position. F.N.B. also said the deal would have a positive impact on earnings in its first full year.
After the deal's completion, F.N.B. would have $11.6 billion in assets, $8.9 billion in deposits and 282 branches. The company last month announced plans to raise about $55 million in capital through a public offering.
"This transaction is consistent with our stated expansion strategy of building out the Pittsburgh market," Steve Gurgovits, F.N.B.'s chief executive said during a conference call Thursday to discuss the acquisition. "This is also an effective deployment of our recently raised capital."
Frank Schiraldi, an analyst at Sandler O'Neill & Partners LP, said the deal makes sense, but he expected investors to balk at the price tag compared to tangible book value.
"We expect that some investors will ultimately consider the deal price quite rich for a thrift institution that has not yet redeemed its Tarp shares," he wrote in a Thursday note to clients. "Most important, the deal significantly boosts F.N.B.'s presence in the largest metropolitan area within its current footprint."
Parkvale has spent the last few years struggling with write-downs on its securities portfolio. At the end of the first quarter, such losses had dropped its tangible common equity ratio to 3.6%. Analysts generally prefer to see that ratio above 5%.
Parkvale was also an aggressive mortgage lender on a national level.
Brian Lilly, F.N.B.'s vice chairman and chief operating officer, said during Thursday's that Parkvale's loan portfolio includes about $263 million in residential mortgages spread across 40 states. Lilly said the company took a "harder look" at those loans, examining them "all the way down to the zip code." He added that F.N.B. would discontinue such lending and would consider selling the existing loans "if it makes economic sense."