Citizens Bancorp of Maryland, long rumored to be a plum target for acquisition, announced yesterday that it will buy McLachlen Bancshares of Washington in a stock swap valued at $27 million.
The acquisition will give Citizens its first bank offices in the District and will make it the second Maryland bank company to buy a bank in the District under interstate banking laws passed in recent years by the two jurisdictions. Citizens' main subsidiary is Citizens Bank & Trust Co., a bank with $1.7 billion in assets and 100 offices in southern Maryland and in Baltimore.
McLachlen's main subsidiary is McLachlen National Bank, one of the District's oldest but smallest banks. It is a closely held bank with 250 shareholders, $170 million in assets and eight offices in the District.
The purchase, which must be approved by shareholders of both companies and by bank regulators, is expected to be completed in five months, according to McLachlen officials. Under terms of the deal, each 100 shares of McLachlen Bancorp stock will be exchanged for 95 shares of Citizens Bancorp stock.
The $27 million stock swap is more than twice the bank's book value, or the stated value of its assets.
Bank company mergers in the Washington area have taken place at prices that range from 1.5 to nearly three times a company's book value.
McLachlen Bancshares Chairman L.B. Doggett said that the agreement with Citizens came after talks with several other corporate suiters, including Citicorp.
"We've had overtures from Citicorp and others," said Doggett. "But it never got further than one meeting because we wanted to stay local."
He said Citizen offered an good match because the bank has concentrated on the consumer banking business while McLachen has concentrated on small commercial customers.
Citizen, claiming it was not interested in interstate mergers, has concentrated in recent years on buying banks in Maryland. That sparked rumors it is positioning itself for eventual acquisition.
The acquisition of McLachlen leaves the District with 12 independent banks, down from 19 in 1985.
Since interstate banking laws were passed in the District, Maryland and Virginia, four District banks have been purchased by Virginia bank companies. One District bank has merged with another D.C. bank. Including McLachlen, two District banks have been purchased by Maryland bank companies. And two new banks have been formed in the District