PNC Financial Services Group Inc., a fast-growing Northeast U.S. regional bank, on Thursday posted a disappointing second-quarter profit, sending shares down to their lowest level in four months.

PNC's net income rose to $423 million from $381 million. Earnings per share fell to $1.22 from $1.28 because PNC had more shares outstanding. Weakness in private equity and trading revenue plus tax exposure on cross-border lease transactions weighed on earnings.

PNC's share price fell 3.65 percent, or $2.69, to $70.53.

Separately the company also said it plans to buy Sterling Financial Group, a smaller rival in its home state of Pennsylvania, for $565 million in stock and cash.

Sterling's share price surged 70.33 percent to $17.97.

PNC's adjusted earnings rose to $434 million from $386 million, and fell to $1.25 from $1.30 on a per-share basis.

Analysts on average had forecast profit of $1.36 per share, according to Reuters Estimates.

PNC's adjusted net income for the second quarter excludes integration costs of $11 million after tax, or 3 cents per diluted share.

The company said provisions for credit losses and lower equity management gains and trading revenue weighed on earnings.

Revenue, adjusted for an accounting change for its BlackRock Inc. asset-management affiliate, decreased to $1.72 billion from $1.79 billion in the preceding year quarter.

Consumer banking profit rose 23 percent to $227 million, while corporate and institutional banking profit climbed 6 percent to $122 million.

Profit at the PFPC processing and technology unit rose 23 percent to $32 million. Other profit, including from BlackRock, fell 23 percent to $42 million.

Results reflect the March 2 purchase of Baltimore's Mercantile Bankshares Corp. for about $6 billion. That made PNC the 10th-largest U.S. bank by assets, and substantially expanded its presence in Middle Atlantic states.

Through Wednesday, the shares were down 1 percent this year, compared with a 3 percent drop in the 24-member Philadelphia KBW Bank Index.

Looking ahead, PNC said the Sterling deal will help boost earnings in 2009 and will take a one time after-tax charge of $28 million.

PNC said it expects to have the financial flexibility to continue its current common stock repurchase program for 2007. (Reporting by Jonathan Stempel and Svea Herbst)