F.N.B. Corp.'s acquisition of UB Bancorp, the holding company for Union Bank, is part of a long-term strategy to grow the bank's presence in North Carolina by expanding the depositor base for existing platforms.
Pittsburgh-based F.N.B.'s typical strategy involves entering a market either organically or through acquisition and leading with deposit share growth before following up with growth in commercial and consumer loans, F.N.B. CEO Vincent J. Delie Jr. said in an interview.
The strategy behind acquiring Greenville, N.C.-based UB Bancorp has less to do with adding scale and more to do with positioning the company for organic growth through F.N.B.'s existing platforms, like its e-store, more consultative prototype branches and its ATM delivery channel, Delie said.
"It creates an opportunity for us to be part of the considered set for the bank to pursue commercial opportunities and other opportunities," Delie said. "This adds more clients to that mix."
Growth in North Carolina
The transaction comes at a good time to bulk up core deposits before they rise in price, Piper Sandler analyst Frank Schiraldi wrote in a note on the deal. Additionally, F.N.B. should be in the market for another deal after closing, and banks in the region looking to sell will be watching to see how UB's integration into F.N.B. goes, Raymond James analyst Daniel Tamayo told S&P Global Market Intelligence.
The 100% stock deal is relatively small for a bank of F.N.B.'s size, amounting to just 2.7% of the bank's total assets. It also adds to the company's already substantial footprint in North Carolina. The company first entered the North Carolina market in 2016 when it acquired Yadkin Financial Corp.. Investors were skeptical at the time and raised concerns about the deal, but Delie said it allowed F.N.B. to reach a "critical mass" in terms of scale, and the bank has seen massive growth in noninterest income since closing the deal in 2017.
"If you look back to 2015, we've had substantial growth," Delie said. "That's all a function of us integrating our acquisitions and really deploying our organic growth model and actually pushing the products that we've developed on a proprietary basis."
F.N.B.'s noninterest income from fees capital markets, wealth management, insurance premiums and other fee-based income grew substantially following its acquisition of Yadkin, rising to $330 million today from $200 million in 2016, Delie said. The UB Bancorp acquisition will further entrench F.N.B. in the top 10 in deposit shares in the Raleigh-Durham market as well as North Carolina overall, which will allow the company to pursue more business in the region, Delie said.
Elevated profile
F.N.B. can continue growing its footprint in the state while adding loans and deposits with minimal impact on the bank's ability to pursue further M&A after the transaction closes, Tamayo said. Additionally, the deal brings F.N.B. one step closer to being a top bank in North Carolina capable of competing with the biggest names in the state.
"I think when you'd really start to see a big increase is when you'd move into like the top four or five, but it's another step in; it's more traction," Tamayo said. "They're certainly not the name that people are running to yet, but I think that's certainly what they're hoping to be … down the road."
F.N.B. has a 30-story headquarters in Charlotte and a 22-story regional headquarters in Raleigh, as well as a facility in Greensboro right next to First National Bank Field, a minor league baseball stadium, all of which Delie said were part of an effort to bolster the company's image in North Carolina markets.
"Our profile has been elevated substantially," Delie said. "I believe we're becoming more entrenched in the communities there and that's how we win."