Midlantic Reaches Deal To Buy Pa.'s Old York For $28M in Cash, Stock

In its first acquisition in five years, Midlantic Corp. said Friday it reached a definitive agreement to purchase Old York Road Bancorp Inc. for $28.25 million in cash and stock.

Analysts said the deal proved that Midlantic had fully recovered from its nonperforming asset problems of three years ago.

The Edison, N.J.-based bank, with $13.3 billion in assets, paid 2.13 times book value for Old York, which is operating under a cease and desist order from regulators. Headquartered in Willow Grove, Pa., Old York has $14.7 million in nonperforming assets and total assets of $236 million.

Institutions making acquisitions in the MidAtlantic region have been paying an average 1.72 times book, according to Elizabeth Summers, a banking analyst with Ryan Beck & Co. But she said the Old York deal still made sense for Midlantic.

"Although the price seems a bit high considering the level of nonperformers, the transaction improves Midlantic's deposit share to a number-two position (from number three)," she said. The bank will have 11.8% of deposits in Montgomery County, Pa., behind Pittsburgh-based Mellon Bank Corp. which has 12.4% there.

Ms. Summers said Midlantic would likely reduce the level of Old York's nonperforming assets in a bulk sale.

Midlantic hasn't acquired a bank since it bought five Bank of New York Co. subsidiaries in upstate New York in 1989. In the early 1990s, Midlantic suffered from problem real estate loans. Nonperforming assets at the bank peaked in 1991 at $1.9 billion.

"This acquisition...provides the opportunity for Midlantic to further strengthen its competitive position in the attractive Pennsylvania market," said Midlantic's chairman, president and chief executive officer Garry Scheuring.

Midlantic said the acquisition is expected to close during the second quarter of 1995 and will be accretive to earnings sometime in 1996.

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