Chevy Chase Bank Attracts Suitors
Friday, November 14, 2008
Chevy Chase Bank, part of the fabric of the Washington business community for nearly four decades, is in discussions with potential buyers, according to people familiar with the situation.
The Bethesda financial institution has attracted the interest of several larger banks including Citigroup. The discussions come at a time when the banking industry is in upheaval. There have been several high-profile mergers among financial institutions over the past two months as the credit markets have frozen and the economy contracts.
"Usually when a bank is put up for sale it's very quiet," said Bert Ely, a local banking analyst. "But this time I'm hearing a lot about it."
Chevy Chase executive vice president Thomas H. McCormick issued a statement yesterday morning following a report in the Wall Street Journal that said Citigroup was in negotiations to buy Chevy Chase.
"Chevy Chase Bank is a strong, successful bank with an enviable share of the Washington banking market," McCormick said in the statement. "Not surprisingly, rumors have arisen from time to time over the years about the interest of other banks in seeking to acquire Chevy Chase Bank. Chevy Chase Bank has never commented on such rumors."
Chevy Chase is the area's fifth-largest bank and the largest headquartered in the region with branches here, with $11.4 billion in deposits and $15 billion in assets. The bank is part of the sprawling Saul companies, which operate out of a towering office building in Bethesda presided over by patriarch B.F. Saul II, 76.
Saul started Chevy Chase out of a trailer in 1969. Over the decades, the institution has made loans to millions of home buyers, businesses, real estate developers and automobile owners.
The company's imprint is all over the landscape, from its distinctive sand-colored, stand-alone brick branches to the sponsorship deals it has signed at the University of Maryland's Byrd Stadium and at the Verizon Center. Bank financing played a key role in suburban housing and retail developments all around the region.
Like many other financial institutions, Chevy Chase staffed up its mortgage department in recent years as home values boomed. The bank underwrote billions of dollars in home loans throughout the country, including many in California.
But as housing prices plunged and demand for mortgages dipped, sales officers and account executives across the country, including in Texas and Florida, have been let go. Chevy Chase laid off 100 employees in its mortgage operations about a year ago.
The bank currently carries on its books more than $4 billion in option-adjustable-rate mortgages, the type of financial instruments that helped cause Wachovia Bank to take a $32 billion loss this year.
In addition to curtailing its mortgage business, Chevy Chase a year ago let go 200 employees as it cut back its banking hours. The bank turned a small profit in the quarter ended June 30, according to regulatory filings.
Chevy Chase contracted its operations further last summer, announcing that it was closing 54 mini-branches in Giant Food stores across the Washington region, ending a decade-long initiative to add banking to customers' shopping lists. The closings coincided with the expiration of a 10-year contract that Chevy Chase Bank signed with Giant.
The end of the Giant Food relationship and other actions, including the pending sale of a golf course in Fairfax County, have helped fuel rumors that Chevy Chase Bank was for sale, with some bemoaning the potential end of a era.
"The bank was Frank Saul's baby," said Lewis Sosnowik, community bank analyst with Koonce Securities. "For Frank Saul to part with this is not a happy moment."