YDKN Yadkin Financial Corp.

F.N.B. Corp. agreed to buy Yadkin Financial Corp. for about $1.4 billion, a deal that continues the consolidation of regional lenders as they battle low interest rates and higher regulatory costs.

The all-stock deal, which was first reported by The Wall Street Journal late Wednesday, values Yadkin at about $27.35 a share, a 5.4% premium over Wednesday's close. Yadkin shares climbed 3.4% to $26.95 premarket, while F.N.B. declined 2.3% to $12.89.

The announcement came as both bank reported higher earnings and net interest income for their second quarters.

Pittsburgh-based F.N.B., with a market value of $2.8 billion, owns First National Bank of Pennsylvania and operates more than 300 branches in Pennsylvania, Ohio, Maryland and West Virginia.

It also provides wealth management, insurance and consumer-finance services. Buying Yadkin, which is based in Raleigh, N.C., would expand F.N.B.'s banking footprint into North Carolina and South Carolina.

F.N.B. has about $20 billion in assets after having done a string of acquisitions recently. Yadkin has more than $7 billion in assets.

The companies expect to complete the deal in the first quarter of next year, and Yadkin shareholders will own about 35% of the combined company..

Midsize lenders are among the most active deal makers in the financial industry these days, as larger banks sit on the sidelines amid heightened regulatory scrutiny since the financial crisis.

Smaller banks face pressure to grow or try to sell themselves, as low interest rates sap profits and regulatory costs mount. By becoming larger, they can spread costs over a broader base of customers and assets.

While there are still thousands of banks in the U.S., most of which are tiny compared to national lenders, there has been steady consolidation among them in recent years.

Such activity has ticked up lately. Through June 29, $14.8 billion worth of U.S. bank mergers had been announced, compared with $20.2 billion in the same period in 2015, according to Dealogic.

A number of other bidders took part in the auction of Yadkin, which was run by investment bank Sandler O'Neill & Partners LP, according to people familiar with the matter. They include First Horizon National Corp. and Canada's Toronto-Dominion Bank, which already has significant U.S. operations, one of the people said.

Write to Rachel Louise Ensign at rachel.ensign@wsj.com

(END) Dow Jones Newswires

July 21, 2016 09:35 ET (13:35 GMT)

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