First Niagara to Acquire Harleysville National

First Niagara Financial Group Inc. said Monday it will acquire Harleysville National Corp. for $237 million in an all stock deal — its second Pennsylvania acquisition in four months.

The acquisition helps First Niagara, which operates banks across Upstate New York, continue its expansion efforts into Pennsylvania. In April, First Niagara agreed to purchase 57 branches in western Pennsylvania from National City, a unit of PNC Financial Services Group Inc.

First Niagara operates 113 branches across upstate New York.

During a conference call with media, First Niagara's president and CEO John Koelmel said the two new Pennsylvania markets provide a "wonderful complement" to the bank's existing New York operations.

The deal with Harleysville National allows it to expand operations into eastern Pennsylvania. Harleysville operates 83 bank branches across the eastern portion of the state, including the Philadelphia area.

With operations stretching from Buffalo to Albany in New York and now Pittsburgh to Philadelphia in Pennsylvania, Koelmel added that the bank's footprint can now be expanded from those corners or business can expand within that area moving forward.

The deal values Harleysville shares at $5.50 per share, a 37.5 percent premium over Harleysville's Friday closing price of $4.

Shares of Harleysville jumped $1.51, or 37.8 percent, to close at $5.51. First Niagara shares rose 77 cents, or 6.6 percent, to $12.51.

Under the terms of the agreement, Harleysville shareholders will receive 0.474 shares of First Niagara for every share of Harleysville they owned.

First Niagara said the acquisition, which is expected to close during the first quarter of 2010, should boost earnings per share by about 14 percent in 2011.

As of June 30, First Niagara had $6.2 billion in deposits. Harleysville has about $4.1 billion in deposits. The National City branch acquisition, which is expected to close in September, will add $4.2 billion in deposits.