A Baltimore judge approved Mellon Bank Corp.'s acquisition of the troubled Community Savings & Loan of Bethesda today, moving the reopening of former Community branches one step closer to a target of May 14.
Mellon's purchase "will end the uncertainty surrounding access to Community's insured deposit accounts and enhance general confidence in the viability of financial markets in Maryland," Circuit Court Judge Joseph H.H. Kaplan said when he signed the approval order.
Kaplan's approval was necessary because he is overseeing the receivership of Community.
Under the terms of the deal, the state promised to pay Mellon, a Pittsburgh company, $130.4 million in cash to take control of Community. The Maryland government also pledged an additional $40 million to offset possible future losses from Community's far-flung real estate holdings. Mellon, in turn, agreed to assume $179 million of Community's assets.
The acquisition of Community still faces another court obstacle. Chevy Chase Savings & Loan argued this week before the Maryland Court of Appeals that the state should return $82 million that Chevy Chase had been required to contribute to a private insurance fund controlled by the now-defunct Maryland Savings-Share Insurance Corp. After the thrift crisis, the state took control of that fund and plans to use a large part of the money to pay Mellon, according to Dennis Sweeney, deputy state attorney general representing MDIF.
Chevy Chase, which is now federally insured, is arguing that the state illegally confiscated the $82 million it contributed to MSSIC.
Mellon also still has to receive approval for the acquisition from state and federal banking authorities.
Mellon plans to reopen eight Community branches by May 14, said Andre Reiman, an lawyer with Arnold & Porter, the firm representing the state agency that is managing Community's affairs. The 20,000 depositors at Community whose $324 million has been frozen since August, will have access to up to $100,000 in each account -- the amount to which each account was insured -- at the opening, according to Mellon officials.