Northwest Bancshares Inc. in Warren, Pa., has agreed to buy NexTier Inc. in Butler, Pa., for $20.3 million, the companies announced late Wednesday.
The $8 billion-asset Northwest is to pay NexTier shareholders $200 in cash for each outstanding share of common stock. The $583.7 million-asset NexTier has tangible common equity of $18 million, or 3.11% of tangible assets, making the sale price 113% of tangible book value, said William Wagner, Northwest's chief executive, in a conference call Thursday.
Wagner said the price is attractive for both parties, though the ratio of price to tangible book value is a bit higher than in other recent M&A deals. The premium is $2.3 million to tangible book, he noted, or a 46-basis-point premium on what he called a very high-quality deposit base.
"This deposit base is completely off the charts from anything we've ever seen in the past," he said.
Also attractive is NexTier's market in affluent Butler County, one of the few areas near Pittsburgh enjoying economic and population growth, Wagner said. The deal fills in a gap in Northwest's Pennsylvania network, making the company second only to PNC Financial Services Group Inc. in Butler County.
The deal's potential downside is NexTier's asset quality. Many of its nonperforming loans are in Arizona, where it invested in a start-up bank about six years ago, Wagner said. These loans make up 20% of NexTier's $314 million portfolio, but they contain 81% of its nonperforming loans, which total $36 million.
The deal, which is expected to close in the fourth quarter, would let Northwest walk away if NexTier's nonperformers top $48 million before the sale closes.