Bailout Report

PNC Finacial Services Group and Valley National Bancorp became the tenth and eleventh banks to sell preferred equity to the US Treasury, the first to volunteer after the original nine major banks were conscripted into the capital infusion program by Secretary Paulson earlier this month.

Pennsylvania based PNC Financial will be using its $7.7 Billion of TARP funds to help finance the acquisition of Ohio-based National City.  The all-stock transaction values National City at $5.2 billion, 19% less than National City’s closing price the day before the announcement ($2.23 a share on an exchange rate of 0.0392 PNC shares for each National City share).  The combined regional bank will be the fifth largest bank by deposits with over $180 Billion.

New Jersey based Valley National took a more modest $330 Million from Treasury which it intends to use for general corporate purposes and to possibly acquire other banks. Valley is a relatively small, relatively healthy regional bank with $14.3 Billion in assets and total risk-based capital, Tier I capital, and leverage capital were 10.12 percent, 8.41 percent, and 6.83 percent, respectively (as of the third quarter).

Eighteen to twenty other banks, including Capital One, SunTrust Bank, Regions Bancorp, and KeyBank, have also reportedly negotiated sales of preferred equity under the TARP Capital Purhase Program.  They are each expected to make their own announcements over the next week.