The parent of Lockport Savings Bank has agreed to buy a thrift in Cortland about one-sixth its size, pushing its rapidly expanding territory into Central New York.
Niagara Bancorp Inc. agreed to buy CNY Financial Corp., the owner of Cortland Savings Bank, for $87.9 million in cash, the company announced Wednesday.
Cortland Savings Bank is the No. 1 bank in Cortland County with about 33,000 deposit accounts -- 39 percent of the market -- Niagara Bancorp President William E. Swan said.
"We're putting the capital to work that we raised in our IPO," he said. Niagara Bancorp raised $135 million in a 1998 stock offering to fund acquisitions and become a multibank holding company.
The Cortland deal is expected to close in the second quarter of 2000, if shareholders and regulators approve.
Based 30 miles south of Syracuse, Cortland Savings Bank has three branches in Cortland County plus loan-production offices in Ithaca and in Liverpool, a Syracuse suburb. The $296 million assets savings bank will keep its name and operate as a wholly owned subsidiary of Niagara Bancorp.
"It is a separate market . . . (and) Cortland Savings is a well-known name," Swan said.
Niagara Bancorp stock reacted negatively on Wednesday, losing 6 1/4 cents to end at $10.25 a share.
Stock in CNY Financial rose $1.18 3/4 to $18.
Since mid-month it has risen from $15.
The deal will give Niagara Bancorp operations in the central part of the state on the heels of its entrance into the Rochester area.
The merger announcement comes during Niagara Bancorp's pending acquisition of Albion Banc Corp. The company, owner of Albion Federal Savings and Loan Association, has branches in Albion and Brockport and a loan-production office in Rochester.
The Albion deal, expected to close by March 31, will bring Lockport Savings Bank's network to 21 branches throughout Western New York.
"We would be seeking other attractive opportunities," Swan said.
However, few opportunities exist to fill in its home market in Western New York, Swan said. Many smaller institutions here are closely held commercial banks not interested in a merger.
"We go where the opportunities are," Swan said.
The purchase of CNY Financial should add to Niagara Bancorp's profits in 2001, the bank holding company predicted.
Niagara Bancorp will pay $18.75 per share for CNY Financial's 4.6 million outstanding shares. Cash-out of outstanding options brings the total cost of the transaction to $87.9 million.
The price represents a 30 percent premium over CNY Financial's Sept. 30 book value. In connection with the merger agreement, Niagara Bancorp received an option to purchase up to 10 percent of CNY Financial's stock.
CNY Financial's board will be retained to provide leadership to the subsidiary bank, and chairman Harvey Kaufman will join Niagara Bancorp's board of directors.
The merger will give the smaller institution access to Niagara Bancorp's Internet banking, insurance, leasing and cash-management services, Kaufman said.
Earlier this year, Niagara Bancorp acquired the insurance agency Warren-Hoffman & Associates Inc. and NOVA Healthcare Administrators, a third-party administrator of employee benefits. Its banking operations extend to Erie, Genesee, and Orleans counties from its base in Niagara county.
Bank merger at a glance
The parent of Lockport Savings Bank is expanding eastward.
Niagara Bancorp Inc. * CNY Financial Corp.
Banking Unit: Lockport Savings Bank Cortland Savings Bank
Assets: $1.78 billion $296.3 million
Deposits: $1.16 billion $196.4 million
Equity: $242.2 million $75.3 million
Branches: 21 3
Founded: 1870 1866
* - Figures reflect pending acquisition of Albion Banc Corp.