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FNB to North Carolina: Good move, or not-so-subtle message?

On the surface, First National Bank of Pennsylvania’s decision to buy a bank in North Carolina looked strange.

The Pittsburgh-based bank, which entered the midstate when it bought Metro Bank this year, was going outside its footprint to buy the bank, Elkin, N.C.-based Yadkin Financial Corp., holding company of Yadkin Bank. The purchase price is $1.4 billion.

Maybe it’s for all the reasons you’ll hear publicly from FNB executives: It’s a growth region. It’s a cultural fit. It’s a solid bank. But one of the reasons you’ll never hear publicly — if it even is a reason — is that it could send a little message to one of FNB’s newest Pennsylvania competitors, BB&T, that it can enter new regions, too.

FNB President and CEO Vince Delie said one of Yadkin’s strongholds is Winston-Salem, N.C. That’s the same Winston-Salem where BB&T is based. A few months ago, BB&T made a heavy investment in Pennsylvania when it bought Susquehanna Bank and National Penn Bank.

If it is a statement from FNB — which would be about one-eighth the size of BB&T should the Yadkin deal go through — it’s a bold one, for sure. An anything-you-can-do-we-can-do-almost-as-good message.

“So, BB&T. You want to come into our backyard? We can come into yours, too. See you in the teller lines.”

Let it be known: In FNB’s conference call with analysts on the Yadkin deal, BB&T was mentioned only once by Delie. He said that even though FNB will be a foreign name in North Carolina and South Carolina, where Yadkin has branches, the bank already competes with the major players in North Carolina banking and elsewhere:

“The other element of it is … we compete … very effectively against the competitors that are in those markets. They are in all of our markets, PNC is in every market we are in, (Bank of America) competes with us everywhere, Wells Fargo competes with us everywhere. BB&T moved heavily into Pennsylvania,” Delie said on the conference call, according to a call transcript at financial website Seeking Alpha.

Those are four of the five top banks by deposit market share in North Carolina, according to the Federal Deposit Insurance Corp. That statement doesn’t call out any of the banks. It just states that FNB is used to playing with those larger competitors.

And even if it’s not calling out BB&T by planting a flag in its backyard, it’s at the very least sending the signal that it has no problem competing with the big boys of banking with an aggressive expansion plan that included Metro.

But skipping over Virginia is what makes the acquisition curious. Delie had a couple good reasons for it:

“There are a number of strategic reasons why it makes sense for us to avoid Virginia at this point in time” he said. “I mean, first of all, if you look at the price-to-tangible-book (value) on the banks that are in (those) markets, it’s elevated pretty much across the board. Secondly, the real estate exposures in that particular market are extraordinarily high. So when you look at acquisition targets in that market … they have lacked the resources they compete in the (commercial and industrial) space against some of the larger competitors there. Those concentrations are well above 300 percent.”

So, Virginia didn’t make sense, but the Carolinas did. We can buy that.

Michael Sadowski

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