Financially troubled Meritor Savings Bank of Philadelphia announced yesterday that it will pull out of the Washington market, selling its 15 branches in Maryland, Virginia and the District to First American Bankshares Inc., parent of First American Bank, for an undisclosed amount.
In a separate deal, Providence Savings & Loan Association of Vienna yesterday made an unsolicited offer to acquire Maryland Federal Savings & Loan Association of Hyattsville for $9 a share, or about $27 million. A spokesman for Maryland Federal said the proposal would be considered by its board of directors.
Analysts said the two events signaled the beginnings of a consolidation of the thrift industry in the Washington area, which because of its relative health has escaped the high level of merger and acquisition activity that has swept through the Southwest and other regions in the last two years.
Although Meritor's Washington operations were profitable, the thrift's decision to eliminate its local presence was driven by an overall need to strengthen Meritor's financial position, thrift officials said. Meritor has been losing money for more than two years and has been struggling to increase its capital, the cash and assets thrift owners must have on hand to protect the federal deposit insurance fund from losses.
By shedding its Washington branches, Meritor hopes to reduce operating costs and the amount of capital it must have on hand to operate soundly, said Meritor spokeswoman Leslie Voth.
The sale, which must be approved by state and federal regulators, would boost First American's deposits by $380 million and would add up to 15 branches to the bank's network of 185 branches in the Washington area.
First American will merge some of Meritor's branches into already existing offices, said bank executive Russell Gledhill. The sale should be completed in April, at which time Meritor customers would automatically become customers of First American, he said.
First American's purchase of the Meritor branches marks the bank's first thrift acquisition, Gledhill said, adding that similar deals would be considered in the future. First American purchased some of the assets of a Baltimore thrift this past summer, but prior to Meritor, it had never acquired entire branch offices, Gledhill said.
Crestar Financial Corp. became the first commercial bank in the Washington area to take advantage of the savings and loan crisis when it bought 16 branches earlier this year from three Virginia savings and loans. Those purchases added $320 million in deposits to Crestar's customer base.
The unsolicited bid by Providence Savings & Loan Association to acquire Maryland Federal would add 16 suburban Maryland branches to Providence's 11-branch network in Northern Virginia, said Providence President Ronald S. Faett, who called the proposed interstate merger "a perfect fit."
Providence is owned by real estate developer Miller & Smith Cos., which also owns a 9 percent stake in Maryland Federal, Faett said. Under the proposal, Providence would pay $4.50 a share in cash to acquire the Hyattsville thrift, and it would pay another $4.50 a share in the form of a 10-year, 10 percent note. Faett said Maryland Federal received the proposal on Friday, but has yet to take action on the bid. Maryland Federal stock closed up 75 cents at $7.25.