CNB Bancshares has held talks to acquire National City Bancshares, people familiar with the situation say.

Though no final deal had been struck as of Friday afternoon, a source said the companies, both based in Evansville, Ind., have been negotiating a one-for-one stock swap. CNB stock closed Friday down 68.75 cents, to $41.50, and National City shares rose 62.5 cents, to $36.875.

National City chairman Michael F. Elliott declined to comment. "Whether we're buying or we're selling, we're not talking about it," he said. CNB chief executive James J. Giancola also declined to comment except to say, "We're a very acquisitive company and always looking for transactions."

A joining of the two companies would create an institution with the fourth-largest deposit share in Indiana, hoisting it above Wells Fargo & Co. of San Francisco, which now holds that ranking.

National City, whose market value is about $570 million, has grown quickly through acquisitions to 69 branches and $2.2 billion of assets. It bought 11 community banks in Indiana, Kentucky, and Illinois in 1998 alone.

The buying spree has not been pain-free, though. In August the company announced a restructuring program that Mr. Elliott said would require a $3.7 million charge against earnings and employee layoffs.

Last October, the company reported third-quarter earnings of 32 cents per share, a 28% drop from the same period a year earlier.

CNB has $6.8 billion of assets and operates 145 branches in the same states as National City, plus Michigan. The market value of all its shares is about $1.5 billion. The company reported 18% earnings growth in the third quarter.

The stickiest point to a CNB/National City deal appears to be divestitures, people familiar with the talks say.

CNB has a 33% deposit share in the Evansville market, according to the Federal Deposit Insurance Corp., and National City has nearly 11%. Regulators are likely to force the companies to shed some market share before they approve the deal.

In a telephone interview Friday, Mr. Elliott said his company's restructuring was "80% complete" and had required fewer layoffs than he had expected, because many employees in smaller towns were willing to work in the bank's newly centralized offices in Evansville.

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