A Pennsylvania bank with long-standing relations with a Florida institution has agreed to buy it out.
FNB Corp. is to pay $61 million for Naples-based Southwest Banks Inc.
The purchase of $386 million-asset Southwest Banks would propel FNB Corp. well over the $2 billion-asset mark and place it squarely in fast- growing markets in the southeastern United States.
Southwest's two bank subsidiaries would operate as separate entities under Hermitage-based FNB, which already owns six banks in Pennsylvania and Ohio, as well as a consumer finance company operating in those states and southwestern New York.
The purchase would solve growth and capital deployment problems afflicting the two institutions.
Southwest, which operates in one of the country's fastest growing areas, has been increasing its assets at an annual compound growth rate of 45% since it was founded in 1988. But it doesn't have the capital base to support more expansion without going back to the markets.
FNB, on the other hand, has lots of extra cash, but no place to spend it. The markets in its home area north of Pittsburgh are mostly stable, limiting the bank's asset growth to about 3% per year, said John D. Waters, chief financial officer.
"It's a unique opportunity for us. It really gives us an area where we can redeploy our assets and grow at the same time," Mr. Waters said of the merger. "With their growth and our capital, it's probably a natural strategic merger."
The merger would be a logical extension of existing relations between the two institutions. Despite the distance, they have maintained close financial ties since Southwest was founded.
In fact, FNB chairman and president Peter Mortensen was a founding director of Southwest and remains on the board, while Southwest president and chief executive Gary L. Tice is a former officer at FNB subsidiary First National Bank of Pennsylvania.
The two banks have also cooperated on several loan participations in Pennsylvania and Florida during the past few years, making them comfortable with each other's loan policies.
"It wasn't just throwing a dart on a map and saying 'this is where we belong,'" Mr. Waters said. "There's quite a bit of cross-relationship between the two."
The agreement between FNB and Southwest represents about twice Southwest's yearend book value.
FNB would issue 2.9 million shares and exchange about 0.78 share for each of Southwest's.