The Herald, Sharon, Pa.

October 23, 2012

FNB to buy Md. bank; earnings up 29 percent

Buyout will put bank in 4 states

By Michael Roknick
Herald Business Editor

HERMITAGE — FNB Corp. on Monday announced it is buying a Maryland bank and that its earnings were up more than 29 percent in the third quarter.

The Hermitage-based holding company said it signed a definitive deal to buy Annapolis Bancorp Inc., headquartered in Annapolis, Md. The Maryland holding company owns BankAnnapolis.

Terms call for the purchase to be an all-stock deal valued at $12.09 a share, or $51 million using the closing stock price as of Oct. 19.

The deal will provide FNB with an additional $437 million in assets, including $343 million in total deposits, $297 million in loans and 8 banking offices in Anne Arundel and Queen Anne’s counties in Maryland. The deal will create a four-state banking presence for FNB, which will have $12.2 billion in assets.

Both holding companies’ boards have approved the deal which calls for shareholders of Annapolis Bancorp to get 1.143 shares of FNB common stock for each share of Annapolis Bancorp stock. The exchange ratio is fixed and the deal is expected to qualify as a tax-free exchange for Annpolis Bancorp shareholders.

A cash credit-related adjustment provides that shareholders of Annapolis Bancorp may get up to an additional 36 cents a share in cash for each share of Annapolis Bancorp stock they own, dependent on Annapolis Bancorp’s ability to resolve an agreed-upon credit matter.

“This transaction is an attractive market entry opportunity and is consistent with our expansion strategy,’’ Vincent J. Delie Jr., FNB’s president and chief executive officer, said in a news release. “The favorable demographics and long-term growth potential of Annapolis Bancorp’s core markets, as well as additional opportunities in the greater Baltimore and Washington, D.C., areas, provide a compelling platform to leverage our successful business model. In addition, Annapolis Bancorp is a well-established, respected institution with very strong local relationships and an excellent customer service culture.’’

FNB expects the merger to be highly accretive on a marginal basis to its earnings per share and slightly accretive to earnings per share in the first full year, excluding one-time sales costs. Additionally, the deal is expected to be neutral to FNB’s tangible book value per share.

The sale is expected to be completed in April after normal regulatory approvals and approval of Annapolis Bancorp shareholders. FNB said it is expected Annapolis Bancorp will redeem all of its preferred stock held by the U.S. Treasury under the Capital Purchase Program prior to closing or it will be extinguished upon closing of the merger.

Separately, FNB reported it earned $30.7 million, or 2 cents a diluted share, in its third quarter, compared to 23.8 million, or 19 cents a diluted share, in the same year-ago period.

Highlights for the quarter include a net interest margin of 3.70 percent, and revenue growth was 4.8 percent annualized. The company’s average Pennsylvania commercial portfolio loans grew $91.5 million or 8.9 percent annualized – the 14th consecutive quarter of organic growth for this portfolio.

“The third quarter was another very positive quarter highlighted by our ability to deliver consistent, strong operating results,’’ Delie said. “Our sustained momentum is apparent in the third quarter results, with top line revenue growth, loan and deposit growth, good credit quality and continued expense control.’’

Average consumer loans grew $72.2 million or 12 percent annualized.

FNB is a diversified financial services company which is best known locally for owning First National Bank of Pennsylvania, also based in Hermitage.

FNB’s stock closed Monday at $10.68 a share, up 10 cents or 0.95 percent. Both the purchase of Annapolis Bancorp and earnings announcements were made after the stock markets closed.