First Niagara Financial Group and NewAlliance Bancshares have entered into a merger agreement to create a combined bank to have more than $29bn in assets, including more than $14bn in loans, as well as $18bn in deposits with 340 branches.

The merger agreement approximate total value is of $1.5bn, a cash-and-stock transaction.

The completion of the transaction is expected to create a top-25 US bank, by assets, according to the NewAlliance Bancshares.

Connecticut-based NewAlliance has $8.7bn in assets, including $4.9bn in loans, as well as $5.1bn in deposits, with 88 branches serving in eight counties from Greenwich, Connecticut to Springfield, Massachusetts.

Currently, First Niagara serves communities across Upstate New York, Western Pennsylvania including Pittsburgh, and Eastern Pennsylvania from the Philadelphia suburbs to Allentown, Pennsylvania.

NewAlliance 88 branches are expected to be converted and rebranded as First Niagara locations. NewAlliance’s has workforce of about 1,200 employees.

NewAlliance’s headquarters in New Haven is slated to become First Niagara’s New England regional market center.

Three NewAlliance directors will be joining the board of First Niagara at transaction closing, increasing the total number of directors from nine to 12.

First Niagara president and CEO John Koelmel said that by joining forces with NewAlliance and their talented leadership team, the bank adds another attractive and well-positioned franchise with tremendous upside potential in a region with very strong demographics.

The completion of the transaction is expected to be closed in the second quarter of 2011, subject to regulatory and other customary approvals.