M&T Agrees to Buy Provident Bank
Saturday, December 20, 2008
M&T Bank has agreed to buy Baltimore's Provident Bankshares for stock valued at $401 million in a deal that will give the merged company a leading market position in Maryland and an expanded presence in Virginia.
The sale continues the consolidation of the local banking industry, following Capital One Financial's agreement to buy Chevy Chase Bank and the sale of Wachovia to Wells Fargo. It also plucks one of the largest companies headquartered in Baltimore. The companies, which together employ more than 4,000 people in Maryland, said they would keep all customer-facing employees but have not yet decided how many other jobs would be cut.
Regulators and shareholders still must sign off on the deal, which M&T hopes will close in the second quarter.
The deal would give Buffalo-based M&T about 250 branches in Maryland, about 60 branches in Virginia and about eight in the District. It would rank as the second-largest bank in Maryland as measured by deposits, behind Bank of America.
M&T and Provident have been approved for investments by the Treasury Department as part of the government's $700 billion rescue of the financial industry. M&T is to get about $600 million, and Provident has already received $151 million. Woody Collins, mid-Atlantic president for M&T, said the government money played no role in the deal.
Provident's sale has been rumored for years, simply because most mid-size banks eventually sell to a larger bank. Some Provident executives have joked in the past that the bank represented "the last beachfront property" in Baltimore because the city's other banks already had been sold.
The deal became more urgent over the past year as Provident struggled financially. The company lost $5.4 million in the third quarter and $12.8 million so far this year, largely because of the declining value of its investment in securities tied to real estate and the financial industry. At the same time, Provident increasingly was struggling to fund itself, forcing the company to offer high interest rates to chase deposits from across the country.
The result of its troubles is that Provident is selling itself relatively cheaply compared with the prices paid for banks in recent years. A bank the size of Provident, measured by equity, might have cost about $1 billion last year, based on data for all bank deals in 2007.
"The sales price is not setting the world on fire," said Lew Sosnowick, vice president for bank securities at Koonce Securities in Bethesda. But he said the deal still made sense for Provident because it needed help to survive and thrive during a prolonged recession.
Frank Bonaventure, a banking lawyer at Ober Kaler in Baltimore, said the deal also could be good for the city.
"My take on it is M&T has made Baltimore at the minimum a second home and has a lot of their operations headquartered here, and given that, they've been very good corporate citizens. It's a pretty good merger for Baltimore in particular and Maryland in general," Bonaventure said.
M&T entered Maryland in 2003 with the acquisition of Allfirst Bank.
Collins, M&T's mid-Atlantic president, said the Provident deal would create a stronger bank to serve the region. He also said M&T had committed to maintaining the charitable giving of both companies for at least three years.
"The reason we've been successful is the support of the community, and in tough times we want to be there for the community," Collins said.