MNC Financial Inc. is seeking to merge American Security Bank in Washington into Maryland National Bank as the troubled banking company moves to bolster its finances and regroup around its core banking operations.
MNC, the largest banking company in Maryland, said it asked federal regulators Tuesday for permission to combine the two banks at the end of the year. The company said it would keep the American Security name and that it did not expect layoffs or staff relocations to result from the proposed merger.
King F. Lowe, president and chief operating officer of American Security, plans to leave the bank "in the near future," but as part of a previously announced reorganization, Vickie Tassan, a spokeswoman for the bank, said yesterday.
MNC said the merger of the two banks, which would spell the end of 101-year-old American Security as a separate legal entity, would create uniform services and products at the 27 American Security branches and 218 Maryland National branches by early 1992.
"The proposed transactions will permit substantial expense savings through the merging of redundant processing facilities, administration and operations, increase Maryland National's lending limit to an amount greater than either bank alone could achieve, and provide a larger organization better positioned to compete in the Baltimore-Washington market," MNC's merger application with the Office of the Comptroller of the Currency said.
There was no immediate indication of when federal regulators would act on the merger plan, which would combine computer systems and the two banks' products.
According to one banking regulator, who spoke on the condition of anonymity, the application to move American Security's headquarters into Maryland to facilitate the merger, while maintaining its branches across the border, could run into considerable regulatory hurdles.
Regulators probably would be faced with competing desires in favor of bolstering the two banks' capital and against setting a precedent by allowing a departing bank to keep its branches in place, the regulator said.
Analysts viewed the plan as more than a move to streamline operations. The resulting Maryland National would be in a stronger position to meet capital targets that were set by federal regulators after their recent examination of the two banks, analysts said.
MNC, while declining to be specific, has said that the two banks have fallen below required capital levels after suffering a total of $242 million in losses this year.
American Security, in particular, was walloped during the third quarter as bad loans resulted in a $178.5 million loss. Maryland National lost $103.2 million during the period.
American Security, the second-largest bank in Washington, had $5.9 billion in assets Sept. 30; Maryland National, the state's largest bank, had $15 billion in assets. MNC had total assets of $27.2 billion at the end of the third quarter, making it the 25th-largest banking company in the nation.
Alfred Lerner, MNC's chairman, said the savings would be "substantial" and the merged capital "helpful." But he declined to provide either the amount of savings that are expected from the merger or the projected capital level of the new bank.
"It's a much more efficient way for us to do business in this market, and I think it does have some favorable capital benefits and implications for us," Mr. Lerner said. "It's impossible to be in the banking business in this environment and not pay attention to capital."
Mr. Lerner said it had not been determined whether the boards of the two companies would be partially merged.
The proposed merger, which effectively would end the autonomy that American Security has enjoyed since it was acquired by MNC three years ago, is expected to be one of the final acts in a companywide restructuring that has capped more than a year of tumultuous changes at MNC.
Since the start of this year, MNC has merged Equitable Bank into Maryland National, suffered hundreds of millions of dollars in losses, seen the departure of its chairman and dozens of other executives, and undertaken a massive reorganization that includes the sale of its prized credit-card division.
The company announced in late August a reorganization that did away with separate and identical staffs for its banks. Instead, MNC began to structure along organizational lines, placing William H. Daiger Jr., the head of Maryland National, in charge of hTC retail banking at both banks and Daniel J. Callahan III, the head of American Security, over wholesale banking.
Mr. Lowe was traveling and could not be reached for comment yesterday. Mr. Callahan did not return phone calls seeking comment.