PNC Financial to Acquire First National Pennsylvania
Bank Analysts Praise $80 Million Stock Deal
Adding heft in its stronghold in western Pennsylvania, PNC Financial Corp.
said it will acquire First National Pennsylvania Corp. for about $80 million in stock.
The acquisition of Erie-based First National, which has $695 million in assets, will increase PNC's presence in the northwestern part of its home state. PNC also owns Erie-based Marine Bank, which has $1.8 billion in assets.
Pittsburgh-based PNC said it would merge First National's lead bank, First National Bank of Pennsylvania, into Marine.
Loss in 1990
The Erie holding company earned $1.8 million in the first half of the year, following a loss of $6.3 million in 1990.
PNC spokesman Jonathan Williams said the deficit stemmed from a major loan-loss provision but the company is confident that credit quality has been restored.
"We think the asset quality problems are past," said Mr. Williams, who noted that First National received a clean bill of health after a recent regulatory exam.
Analysts said PNC's acquisition of First National was a good strategic move.
PNC Stock Declines
"It makes sense for them to consolidate where they have the strongest presence," said Dennis Shea, an analyst for Morgan Stanley & Co. in New York. He added, "Marine has typically been a good performing bank."
Under the terms of the agreement, each share of The First National Pennsylvania Corp. common stock will be exchanged for 0.81 shares of PNC common stock.
PNC's stock was trading late Monday at $38.75, down 67.5 cents. The First National Pennsylvania Corp. has 2,496,756 shares outstanding.
As part of the deal, PNC is required by regulators to divest a number of branches and transfer deposits to First National Bank of Mercer County, a $560 million-asset company based in Hermitage, Pa. The amount that must be transferred has not yet been determined.
PNC, with $43 billion in assets, earlier this year announced the sale of four affiliates of Central Bancorp., its Ohio subsidiary, to Banc One Corp. This sale by PNC was part of an effort to pare off peripheral businesses and focus on key markets. That deal is due to be completed in the third quarter.
In the second quarter, PNC saw its profits dip to $93.6 million, from $108.9 million, while its nonperforming loans dropped $104.3 million, to $871.9 million. Analysts said the decline signaled a small victory over the lending woes that troubled PNC last year.