Reaching across to a neighboring state, Summit Bancorp of Princeton, N.J., announced an agreement Thursday to acquire a Philadelphia-area banking company for $292 million.
The target, Prime Bancorp of Fort Washington, Pa., would bring Summit eight branches in Philadelphia and 19 in surrounding counties.
Summit, with $32 billion of assets, is No. 1 in New Jersey deposits despite operating in the shadows of major New York banks and superregionals such as First Union Corp. It has been intent on expanding in eastern Pennsylvania, where it is sixth in market share, with $3 billion of assets and 74 branches, including two in Philadelphia.
Prime Bancorp, with $1 billion of assets, would enhance Summit's ability to compete against First Union, the dominant force in Philadelphia banking since its takeover of CoreStates Financial Corp. last year.
Summit agreed to pay a rich 3.25 times book value, but president and chief operating officer Robert G. Cox said, "For Summit to grow and prosper, it needs to enter new markets."
"There are a lot of middle-market companies that would like to move their business to Summit, but we haven't had enough locations to make it convenient," Mr. Cox said in a telephone interview.
Prime Bancorp, in a market rich with small and middle-market companies and affluent individuals, "will go a long way in changing that," Mr. Cox said.
Connecticut has been another new market for Summit. In November it acquired NSS Bancorp of Norwalk. NSS and the pending acquisition of New Canaan Bank and Trust in New Canaan, Conn., would give Summit a combined $825 million of assets and 12 branches in the Nutmeg State.
Pennsylvania promises to bring growth opportunities as well, analysts said, though Summit has been quiet in the state for the last few years. "They just haven't had a chance to wrap their arms around it," said Jacqueline Reeves, an analyst at Salomon Smith Barney.
"They have been very public about wanting to get bigger in the area," added Marni Pont O'Doherty, an analyst at Keefe, Bruyette & Woods. "The franchise has been a little tilted" toward New Jersey.
"There is a lot of business to be had" in the wake of the First Union- CoreStates deal, Ms. O'Doherty said.
Smaller banks in the region have stepped up their competition for "runoff" from the big merger, and Mr. Cox of Summit said, "We have seen some business come to us because of consolidation."
Analysts said the Prime Bank management team, with its knowledge of the local market, would be an asset to Summit as it turns more attention to Pennsylvania.
The deal is expected to close in the third quarter. James J. Lynch, Prime's chairman and chief executive officer, would become chairman and CEO of Summit Bank Pennsylvania. Mr. Lynch was president from 1992 to 1994 at the now defunct Continental Bank of Philadelphia, and later was an executive vice president of Midlantic Corp. in Edison, N.J.
Mr. Cox did not rule out additional acquisitions in Pennsylvania. "We have an interest in improving our presence," he said. "If another opportunity came along we would look at it."
Each Prime Bancorp share is to be swapped for 0.675 shares of Summit common stock in a tax-free exchange. Summit shares closed down 31.25 cents to $39.0625. Prime shares closed up $7 to $25.