After determining that growth potential is limited in many of its markets, F.N.B. Corp. of Hermitage, Pa., has been on a mission to bulk up in the Pittsburgh area.
On Friday the $5.2 billion-asset company struck its second deal there; it is buying the $532 million-asset NSD Bancorp Inc. of Pittsburgh for $136 million.
The deal would give F.N.B. another 10 branches in Allegheny County, where Pittsburgh is located, tripling its branch total there. NSD, the parent of Northside Bank, also has a branch in the neighboring Butler County.
“Northside fits our strategy like a glove,” said Stephen Gurgovits, F.N.B.’s president and chief executive officer. “It’s in some of the fastest-growing and wealthy markets on the north side of Pittsburgh, and it’s a natural extension of where we are now.”
F.N.B., which has 141 branches, has been looking for acquisition opportunities in Pittsburgh and its suburbs. In May it announced an $80 million deal for the $330 million-asset Slippery Rock Financial Corp., which is based just north of Pittsburgh. That deal closed Oct. 8.
In January, F.N.B. spun off its Florida unit into a separate company and moved its headquarters from Naples, Fla., back to Hermitage, where it had been headquartered until 2001. One of the reasons for the spinoff was to make F.N.B. more attractive to potential sellers in Pennsylvania, many of which would prefer to partner with a local bank.
Mr. Gurgovits said that F.N.B. had had its eye on NSD for some time, and that a couple of months ago he got a call from NSD’s management about the possibility of merging.
The deal came just a year after Andy Hasley became the CEO of NSD. He succeeded Lloyd Gibson, who, along with the chief financial officer, James Radick, unexpectedly resigned in September of last year, after NSD had a series of loan troubles. In the second quarter of last year it lost $429,000 after increasing its reserves to cover the losses of a large borrower that went bankrupt. In the third quarter of 2002 it charged off $1.7 million because of external fraud.
Mr. Gurgovits said that F.N.B. conducted meticulous due diligence, and that NSD is resolving its loan problems, which should no longer be an issue.
“We are comfortable with their plans and the reserves they have in place,” he said. “Now we just need to monitor them and follow through with the plan.”
F.N.B. said it would pay the equivalent of $39.01 for each NSD share, or roughly 3.6 times its book value.
NSD investors cheered the deal announcement. Late Friday its stock was up 53% from Thursday’s close, to $36.89 a share. F.N.B.’s stock was down 2%, to $21.25.
Andy Stapp, an analyst with Cohen Bros. & Co. in Philadelphia, said that even though the deal would be a bit expensive, considering NSD’s recent troubles, he is hopeful that F.N.B.’s experienced management team would be able to quickly improve NSD’s asset quality and make the deal worthwhile.
It makes sense for F.N.B. to target Pittsburgh, Mr. Stapp said. “Western Pennsylvania and eastern Ohio are no-growth Rust Belt markets, and the only growth [opportunity] out there is in Pittsburgh.”
Mr. Gurgovits said that once the deal closes this quarter, F.N.B. would pursue similar-sized banks in the Pittsburgh area, and it would look to build branches there.
