NBT-Alliance deal driven by the need to grow

SYRACUSE — Leaders at Alliance Financial Corp. (NASDAQ: ALNC) didn’t decide to sell their banking company because it was buried by bad lending decisions or mortgage-backed securities.

In fact, Alliance’s balance sheet is “pristine,” said Martin Dietrich, president and CEO of NBT Bancorp, Inc. (NASDAQ: NBTB), which announced plans to acquire Syracuse–based Alliance Financial on Oct. 8. Instead, Alliance executives started looking for an acquisition partner because of regulations.

The company simply wasn’t going to be able to grow as profitably alone because of new rules emerging in the wake of the financial crisis, Alliance Financial Chairman, President, and CEO Jack Webb said during a conference call to discuss the acquisition with investors, analysts, and the media. More regulation means adding staff to areas that don’t generate revenue, he explained.

“They’re not the ones out there talking to customers,” he said. “They’re the ones checking boxes and filling out reports.”

Alliance Financial had explored a number of deals in recent years in which it would have been the acquirer, Webb said, but the company didn’t emerge as the winner in any of them. The bank had to get bigger one way or another, he said.

The advantages of the sale to NBT extend beyond a broader base to share regulatory costs, Webb added. More size means the ability to compete on more loans, especially in the commercial sector.

Alliance Financial received multiple offers, but NBT’s stood out, Webb said. The two banks knew and respect each other and NBT’s offer was financially solid, he added.

The $233.4 million deal values Alliance’s stock at $48 a share. The stock closed at $39.41 on the Friday before the acquisition became public. The deal is expected to close in the second quarter of 2013.

NBT, based in Norwich, has $6 billion in assets and 135 branches in New York, Pennsylvania, Vermont, Massachusetts, and New Hampshire. The banking company also owns a 401(k) record-keeping firm and an insurance agency.

Alliance Financial has more than $1.4 billion in total assets and 28 bank branches in Cortland, Madison, Oneida, Onondaga, and Oswego counties. The company also owns an equipment-lease financing company and operates an investment-management administration center in Buffalo.

Following the closing, all Alliance Bank branches will become NBT locations. Webb will join NBT’s board of directors and the company’s management team as executive vice president for strategic support.

Two other current members of Alliance’s board will become directors at NBT as well. The deal must still receive regulatory and shareholder approval. The boards of both banking companies approved it unanimously.

NBT already has 97 branches in upstate New York and much of Alliance’s footprint is contiguous with counties where NBT currently operates. The acquisition will bring NBT $890 million in net loans held for investment and $1.1 billion in deposits.

NBT expects to retain all of the Alliance Bank branches, Dietrich said. The acquisition will likely involve some job cuts, mainly in support areas, but exact numbers haven’t been determined, he added.

The new markets are similar to the ones where NBT operates now, Dietrich noted. The company has been looking for the right way to enter the Syracuse–area market, where it currently has no branch presence and no deposits.

“Alliance is that perfect opportunity,” he said. “Syracuse and the greater–Syracuse area have long been very attractive markets to us.”

Alliance Bank is third in the Syracuse metro area deposit market with 22 branches, more than $816 million in deposits, and a market share of 7.6 percent.       

Contact Tampone at 

ktampone@cnybj.com