Even the picky S&T Bancorp Inc. in Indiana, Pa., is getting in on the dealmaking in its home state.
In what would be its first acquisition in five years, the $3.4 billion-asset S&T said Monday that it has agreed to pay $171 million in stock and cash for IBT Bancorp Inc. in Irwin.
The deal is the 10th between Pennsylvania companies to be announced this year, up from seven last year, and almost all of the state's large community banks have participated in the action, said David Darst, an analyst at First Horizon National Corp.'s FTN Midwest Securities.
The consolidation is largely being driven by economic conditions. Pennsylvania ranks among the nation's slowest-growing states, and for many community banks, their best chance to compete with large rivals is to team up.
But more notable than the pace of consolidation is the size of the transactions, Mr. Darst said. "You're seeing deals in the couple-hundred-million-dollar range."
Prior to Monday's deal, the average size of deals announced in Pennsylvania this year is $304 million, up from roughly $38 million last year, according to SNL Financial LC.
James C. Miller, S&T's chairman and chief executive, said in an interview Monday that he likes "everything" about the deal for IBT.
"In terms of developing our franchise here in western Pennsylvania, this is probably the best strategic fit we could have found," he said.
Buying the $773.8 million-asset IBT would expand S&T's branch network in the demographically attractive counties of Westmoreland and Allegheny and get it closer to the Pittsburgh area — both longtime goals for the company.
"That's where we see the best prospects for our future growth," Mr. Miller said.
He also said Westmoreland's population is four times larger than that of Indiana County, where S&T is based.
The company already owns an 8% stake in IBT, which has nine branches in addition to its main office. Only one is likely to be closed, because of its proximity to an S&T branch, Mr. Miller said.
The deal, expected to close in the second quarter, values each IBT share at $31, a 61.5% premium over the closing price Friday. After the deal announcement IBT's stock shot up 45.2%, to close at $27.87 Monday. S&T's stock slipped 0.76%, to $28.63.
S&T said the deal should be accretive to earnings in the first full year after it closes, given a plan to cut IBT's expenses by 35%.
Other companies that have announced deals in the state this year have projected an average cost savings of 30%, Mr. Darst said. So a goal of similar size should be "achievable," he said.
Mr. Darst said IBT is "a nice fill-in transaction" that should prove profitable, with the potential for cost savings and access to new markets.
"There are probably some nice pockets of growth, particularly around Pittsburgh," he said.
The deal price works out to 2.9 times IBT's tangible book value and 23.7 times its last 12 months' earnings, Mr. Darst said. That is "a little more expensive" than the median of 1.8 times tangible book value for all deals in the state in the past two years but "in line" with the median of 24.1 times the last 12 months' earnings, he said.
S&T has had a stake in IBT for more than a decade and is very familiar with the company and its management, Mr. Miller said.
Besides IBT, S&T has stakes in at least two other Pennsylvania banking companies: It owns 14% of Allegheny Valley Bancorp Inc. in Pittsburgh, which completed an acquisition of its own recently, and 5.4% of CBT Financial Corp in Clearfield.
"The companies here in western Pennsylvania that would be desirable merger partners — we've taken a stake in some of them, with the hope that if the day comes that their boards decide to look for a partner, we would be in a position of strength," Mr. Miller said.
But S&T is in no hurry. Its last acquisition landed it the $322 million-asset Peoples Financial Corp. Inc. in Ford City in 2002.
"It's been five years since our last transaction, and the one before that was five years before that," he said. "So when we do a deal, we're pretty committed to it, for very good reasons."
Despite the recent flurry of merger and acquisition deals, Pennsylvania remains one of the most crowded states for banking, with 245 companies based there, according to FDIC data. Since organic growth is getting harder to come by, Mr. Darst said the brisk dealmaking pace should continue.
