Banking companies looking to bulk up in western Pennsylvania now have options beyond an outright bank acquisition.
Last week the Department of Justice said Pittsburgh-based PNC Financial Services Group Inc. had agreed to divest 61 National City Corp. branches in the state, along with related loans and deposits, before closing its deal for the struggling Cleveland company at yearend.
Analysts say that larger community banking companies based in western Pennsylvania are the most likely bidders. However, the $63 billion-asset Huntington Bancshares in Columbus, Ohio, which has 63 branches in western Pennsylvania, might also be interested, according to Jeff Davis, a bank analyst and principal at Wolf River Capital LLC.
Community banks like the $8.4 billion-asset FNB Corp. in Hermitage, Pa., and the $4.3 billion-asset S&T Bancorp and $6.2 billion-asset First Commonwealth Financial Corp., both in Indiana, Pa., are likely to look, said David Darst, an analyst at First Horizon National Corp.'s FTN Midwest Securities Corp.
On Thursday, the Justice Department said that PNC had agreed to the divestiture plan, which includes 50 branches, with $3.35 billion in deposits, in Allegheny and the four surrounding counties (Pittsburgh is in Allegheny County), as well as 11 branches, with $555 million in deposits, in three northwestern Pennsylvania counties in and around Erie. The planned divestitures also include an undisclosed number of commercial loans.
"FNB and S&T in particular have high-quality, very strong commercial lenders," Mr. Darst said, "and this is a tremendous opportunity for them to pick up share in the middle-market level."
Bob New, FNB's president and CEO, said Friday that he will take a look. "First National Bank certainly has an interest in the markets where these branches are located; we believe they would fit nicely into our franchise," he said. "We will be keeping a watch on how the bid package develops and will remain hopeful of the opportunity to increase First National Bank's presence in the Pittsburgh region." (FNB has 225 branches, about 70 in the Pittsburgh market.)
Calls to S&T and First Commonwealth were not returned.
Jeri Grier, a Huntington spokeswoman, said Friday that the company would like to increase its market share in the Pittsburgh area.
"However, we don't know enough about PNC's plan about those divestitures to indicate whether we would be interested," she added.
Wolf River's Mr. Davis said that two companies based farther east in the state might also be interested — the $13.6 billion-asset Susquehanna Bancshares Inc. in Lititz and the $16.1 billion-asset Fulton Financial Corp. in Lancaster — though he was unsure whether they were interested in expanding into western Pennsylvania. Stephen Trapnell, a spokesman at Susquehanna, said Friday: "We don't have any intentions at this time [of] expanding operations into western Pennsylvania." Fulton declined to comment.
Mr. Davis said that a community banking company wanting to buy the branches or assets would probably have to raise capital. "But the market is OK with giving companies that don't have big issues money to pick up deposits and assets fairly cheaply," he said.
Without the divestitures, the $128 billion-asset PNC would control more than half the deposits in the Pittsburgh area and nearly 40% of the deposits in the Erie area once it closed its deal for the $151 billion-asset Nat City, according to the Federal Deposit Insurance Corp. As part of PNC's agreement to divest commercial loans, it must also shed half of Nat City's middle-market customers in the Pittsburgh area and virtually all of that business in the Erie area.
PNC spokesman Fred Solomon said the divestitures were expected. The company expects to have sale agreements in hand either shortly before or shortly after the closing of the Nat City transaction, he said. Shareholders of both companies are to vote on the merger Dec. 23, though it still lacks regulatory approval.