Sky Financial Group Inc., which announced its latest deal Friday, aims to keep growing through acquisitions and organically, its chief executive says.
The Bowling Green, Ohio, company has increased assets 43% in three years, to $15.7 billion, largely through dealmaking. CEO Marty E. Adams said he would like it to have $20 billion to $30 billion three years from now.
He spoke Friday morning after the company announced an agreement to buy the $2.7 billion Union Federal Bank of Indianapolis from Waterfield Mortgage Co. Inc. of Fort Wayne, Ind., for $330 million in cash and stock. The deal had been rumored since early January and is to close in the third quarter.
Sky is one of a handful of smallish banking companies that have moved into a new league in recent years through steady dealmaking and other strategic moves. Another is South Financial Group Inc. of Greenville, S.C., whose assets have jumped about 40% in two years, to $14.3 billion.
Sky has no branches in the Indianapolis area; it has regularly used acquisitions to enter faster-growing markets. Last year it bought two Ohio banking companies, Falls Bank of Stow and Belmont Bancorp of Bridgeport, and several insurance agencies.
Its last acquisition with a price tag similar to Union Federal’s was Second Bancorp of Warren, Ohio, for which it paid $296 million in July 2004.
Union Federal has $1.9 billion of deposits, and $1.5 billion of loans. Its 44 branches would bring Sky’s total to 334. Sky is also buying Waterfield’s insurance agency.
Waterfield is selling its mortgage operations to American Home Mortgage Investment Corp. of Melville, N.Y., in a deal announced Jan. 13.
“When it comes to acquisitions, we have a very clear strategy — in writing,” said Mr. Adams, who is also Sky’s chairman and president “We want to grow on the bank side in the more metropolitan areas in the Midwest,” he said.
“Where we were four years ago was an institution that had solid numbers and good market share in most of the markets we were in,” Mr. Adams said. “But we still surrounded the more metropolitan areas, and had not actually entered those.”
Now the company has branches in Pittsburgh, Cleveland, and Columbus, Ohio — and it may enter Cincinnati and Detroit, Mr. Adams said.
“We would love to continue to grow in those contiguous markets,” he said. “Does that mean we’re out shopping and trying to wheel and deal? No — but that’s just part of our long-term strategy.”
As for organic growth, Sky plans to build branches, increase loans and deposits, and expand in fee-based businesses, Mr. Adams said. It plans to add five branches in Pittsburgh, two in Cleveland, and 12 in Columbus.
Fred Cummings, an analyst at KeyBank Capital Markets, said that though the deal with Waterfield Mortgage will provide a foothold in Indiana, a long-term goal, Sky will have to work at the integration of Union Federal.
“The big concern I have is revenue opportunity and being able to compete going forward,” Mr. Cummings said. “Union Federal is not a high-performing bank.”
Because Union Federal is a thrift, Sky will have to hire commercial loan officers,” he said, and “there is a lot of competition for talent in that market.”
Jeff Davis, an analyst at First Horizon National Corp.’s FTN Midwest Research, said the deal makes Sky a more interesting acquisition target, “given that the center of gravity shifts further into metro markets, as opposed to its roots in more rural Ohio markets.”
Mr. Adams agreed. “We want to be independent,” he said, “but banking is a consolidating business, so we’re adding franchise value every time we do an acquisition — and that makes us more attractive, and that’s OK.
“We’re not for sale,” Mr. Adams said, “but we’re trying to build a company that creates value, and that’s certainly one of the ways to create value.”
