Competition intensified in south-central Pennsylvania this week when the bank company with the fourth-largest market share announced that it was buying the one with the sixth-largest.

Harris Financial Inc. in Harrisburg said Tuesday that it had a deal to buy $1.7 billion-asset York Financial - probably for about $179.5 million of stock. The combined company would have 62 branches and $4.5 billion of assets. Its $2.5 billion of deposits would be 13.3% of the regional total, and the company would rank second by that measure in Dauphin, Cumberland, York, Lancaster, and Lebanon counties.

Charles C. Pearson Jr., Harris' president and chief executive officer, said it wanted to increase a "minor presence" in south-central Pennsylvania.

"It is an attractive market where we wanted to be in a major degree," Mr. Pearson said.

While producing "obvious efficiencies," the merger would also create overlap, Mr. Pearson said. As a result, Harris plans to close about seven branches and eliminate about 150 positions - or roughly 15% of the combined company's work force - within 12 to 18 months.

The cost cutting would save Harris roughly $10 million annually in operating expenses, added Mr. Pearson, who would be co-chairman, president, and chief executive officer of the new company. York's president and CEO, Robert Pullo, would stay on as co-chairman of the new company.

South-central Pennsylvania is home to a number of midsize community bank companies, including Susquehanna Bankshares Inc. in Lititz, Keystone Financial Inc. in Harrisburg, and Fulton Financial Corp. in Lancaster.

"The merger provides us with sufficient resources to transition from a bank to the type of financial services company that will dominate in the new millennium," Mr. Pullo said.

Harris also announced this week that it plans to complete its conversion from mutual holding company to a fully public institution. Harris Financial currently owns about 76% of its stock.

In the planned stock deal, the exchange rate would be set after independent appraisal of Harris. The companies said in a joint statement that if stock issued in Harris' conversion is worth $289.5 million to $341.5 million, each York share would be exchanged for $17.25 of Harris common stock.

If the appraisal fell outside of that range, the exchange rate would be adjusted accordingly. Both companies could terminate the agreement if the share value were less than $15.50.

Pooling-of-interest accounting is expected to be used, but purchase accounting might be if both parties decided to go that way. If purchase treatment were chosen, 15% to 30% of the payment would be in cash.

The conversion and the merger are expected to be completed in the fourth quarter.

Harris shares closed at Wednesday at $7, down 25 cents from Monday's close. York shares closed at $4.4375, down 18 cents from Monday.

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