N.C.-based bank to acquire National Penn Bancshares of Allentown
BB&T Corp., the North Carolina-based banking giant, is buying its way into Pennsylvania, where it says it will compete with market leaders Wells Fargo, PNC Bank, and Citizens Bank.
BB&T Corp., the North Carolina-based banking giant, is buying its way into Pennsylvania, where it says it will compete with market leaders Wells Fargo, PNC Bank, and Citizens Bank.
The bank on Tuesday said it had agreed to pay $1.8 billion in cash and stock, or $13 a share, for National Penn Bancshares of Allentown. National Penn has $9.6 billion in assets and 124 branches in Pennsylvania, New Jersey, and Maryland.
The deal, plus BB&T's recent $2.5 billion purchase of Lancaster, Pa.-based Susquehanna Bancshares, will make BB&T the largest or second-largest bank by deposits in Chester, Lancaster, Berks, and Lehigh Counties. It will have a smaller presence in Philadelphia, its older suburbs, and South Jersey.In terms of customer deposits, BB&T said the National Penn deal will make it the fourth-largest bank in Pennsylvania.
Why sell now? National Penn (chartered in 1874) is almost large enough to pass the $10 billion legal threshold, making its loans and other assets subject to additional federal banking compliance rules and limits on customer fees, the bank's CEO, Scott Fainor, said in an interview. "Those things are expensive," he added. "We found the right partner in BB&T."
National Penn's recent weak performance forced it to cut a deal, said Jason O'Donnell, chief investment officer at Bluestone Financial Institutions Fund in Bryn Mawr, which invests in financial companies.
The sale price, though above National Penn's trading range in recent years, remains far below the $20-plus that the stock attracted in the mid-2000s. Since the bank did not boost profitability or share value as other banks revived since 2012, selling National Penn, one of Pennsylvania's busiest small-business lenders and one of the leading farmland lenders in the U.S., "makes tremendous sense," O'Donnell said.
BB&T plans to cut $65 million from National Penn's annual expenses. National Penn spent about $150 million a year on staff and buildings. BB&T plans to shut 25 duplicate branches in towns where National Penn and Susquehanna compete.
BB&T also plans to consolidate administrative and information technology work from Susquehanna's former Lititz, Pa., offices and from National Penn sites in Boyertown and Wyomissing into its national operations.
"There will be dislocation," Ricky Brown, BB&T's president, said. He promised "significant opportunity" for lenders and other new hires as the bank seeks customers in Philadelphia and New Jersey.
BB&T said it will adopt National Penn's four-year-old Allentown headquarters as its lead regional office. National Penn CEO Fainor will head the bank's regional office, with a former National Penn colleague and three Susquehanna managers heading local banking groups and reporting to him.
Measured against long-term bank prices, the deal is "relatively inexpensive," said Matthew Schultheis, analyst at Boenning & Scattergood in West Conshohocken. He noted that the deal represents only a 15.6 percent premium on core bank deposits, and 17.5 times past earnings per share; both numbers are "below the historically normal levels for mid-Atlantic banks of National Penn's size," Schultheis said. He recommends investors sell their National Penn shares to take advantage of the deal price.
"This makes sense for BB&T" after its recent purchase of Susquehanna, said David Hilder, a New York-based bank analyst at Philadelphia-based Drexel Hamilton, who has covered BB&T since 2000.
BB&T sees eastern Pennsylvania as entering a period of modest economic growth, similar to Maryland and Virginia, where the bank has been successful selling loans, insurance and investments, Hilder said.
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