PNC to buy Yardville National

PNC Financial Services Group said yesterday that it had agreed to buy Yardville National Bancorp, whose 33 branches are concentrated around Trenton, for $403 million in cash and stock.

Yardville had been under pressure to sell because of weak earnings and operational problems that put the bank under the supervision of federal banking regulators. For example, Yardville's bad loans rose to $29.5 million as of the end of 2006 from $18.6 million a year earlier.

Still, analysts praised the deal as a good value for PNC and predicted it would be able to cut 30 percent or more from the cost of Yardville's operations.

The deal with Pittsburgh-based PNC valued Yardville, which is based in Hamilton, N.J., at $35 a share, which was 77 cents less than its close Wednesday.

The shares closed at $34.15 yesterday, down $1.62, or 4.5 percent, in Nasdaq trading.

PNC's shares fell 52 cents, or 0.72 percent, to $71.32.

Neil Hall, PNC's executive vice president of retail banking, said Yardville was attractive because, "if you combine their presence with ours . . . it gives us number-one market share" in Mercer, Hunterdon and Somerset Counties in New Jersey.

According to government statistics from June 30, 2006, PNC's and Yardville's combined deposits of $4.38 billion in those three counties - which have three of the highest median household incomes in the country, PNC said - would surpass leader Wachovia Bank's $3.28 billion in deposits.

In the immediate Philadelphia area, Yardville has branches in Morrisville, Newtown and Bordentown.

PNC's $122.6 billion in assets and $77.4 billion in deposits overshadow Yardville's $2.7 billion in assets and $2 billion in overall deposits.

The deal would expand PNC's operations in markets "with favorable population growth trends compared to the PNC franchise as a whole and median household income figures above the national median," Ferris, Baker Watts Inc. analysts Matthew Schultheis and Henry Coffey said in a note.

PNC expects to be able to sell products and services - such as wealth management and credit- and debit-card processing for businesses - that Yardville was not able to offer, Hall said.

Analysts agreed. "With its breadth of wealth-management products and services, PNC should be able to tap into this customer base in a way Yardville could not," said Jennifer A. Thompson, a banking analyst with Oppenheimer & Co. Inc.

PNC said it would take a onetime after-tax charge of $27 million related to the transaction in the fourth quarter of 2007, when the deal is expected to close, pending regulatory and shareholder approvals.

PNC has been solidifying its operations on the East Coast through acquisitions, including the $664 million purchase of Riggs National Corp., of Washington, in 2005 and the $5.88 billion purchase of Mercantile Bankshares Corp., of Baltimore, in March.

"I guess we've got an Amtrak-corridor thing going on here," Hall said.