Banks wage turf battle in W. Md. Fearing takeover, HomeTown fights to prevent FCNB from raising its stake

January 12, 1993|By David Conn | David Conn,Staff Writer

With nine branches and $366 million in assets, it's not often that FCNB Corp., the parent of Frederick County National Bank, gets characterized as a "banking conglomerate." But then, it's not often that towns like Frederick and Myersville find themselves in the thick of a hostile bank takeover.

That, at least, is how HomeTown Bancorp Inc. views the situation. FCNB has applied to the Federal Reserve Bank of Richmond for permission to raise its stake in HomeTown to 14.9 percent, from the 4.9 percent it already owns. The company said it was merely making a prudent long-term investment.

HomeTown, the parent of Myersville Bank, a $55 million bank in western Frederick County, has asked the Fed to deny FCNB's application on the grounds that it's a thinly disguised attempt to acquire the company, a move that HomeTown asserts would be bad for both its stockholders and the tiny community it serves. HomeTown wants the Fed to hold a public hearing in Hagerstown to debate the merits of the application.

The Fed bank is expected to make a decision on the two issues by the end of this month.

Frederick County is hardly the financial center of Maryland. So it might seem odd to find two banking companies fighting so hard for a piece of that turf.

But the county is one of Maryland's fastest-growing, both as a home to new and expanding businesses and as a bedroom community for Washington- and Baltimore-area commuters. It's also true that both the publicly traded FCNB and privately held HomeTown, despite their size, are among the state's most profitable banks, asset for asset.

The dispute started in October, when FCNB President and Chief Executive Officer A. Patrick Linton asked to talk to his counterpart at HomeTown, Terry L. Reiber. At a meeting of the two presidents and their chairmen, both sides agree, the FCNB officials expressed the desire to acquire 4,500 shares, representing a 10 percent stake, in HomeTown. The shares had become available privately, Mr. Linton said.

HomeTown, in filings with the Fed bank, asserted that FCNB's purchase of the shares was only a first step.

"There can be no doubt that this application is a wolf in sheep's clothing," HomeTown said. "It is a classic creeping tender offer, and must be understood and evaluated as such." FCNB's true goal, according to the protest, is to expand and conquer throughout Frederick, Howard, Carroll and Washington counties.

"[A]bsent this master plan to dominate banking in central Maryland, the proposed investment fails to meet any prudent investment policies and strategies by other financial institutions in the industry," HomeTown argues.

HomeTown also argues that the proposed stock purchase would complicate its plan to raise $1.2 million in a private offering of common stock.

HomeTown has sent a letter to shareholders asking for support both at home and with the Richmond Fed, which responded to the conflict by passing the issue along to its board of governors in Washington.

Mr. Reiber knows all about the ongoing consolidation of the banking industry, and he said the board would do its duty and consider any reasonable tender offers. But "Myersville Bank's goal is to stay independent," he said. "We want to make our own destiny."

For his part, Mr. Linton said he's a bit confused by HomeTown's strong reaction. "We want to be a significant player in the markets that we're in," he asserted, "and we'd like to expand our market area a little bit, but certainly we don't want to be a multi-regional whatever."

He acknowledged that FCNB would like to acquire HomeTown at some point in the future, and he told Mr. Linton as such. But until that happens, the proposed stock purchase shouldn't be viewed as an attempt to control HomeTown, Mr. Linton said, especially since FCNB has agreed not to put anyone on HomeTown's board of directors, or to interfere in any way with the management of the bank.

"We think longer term that it will make sense for them to merge, and we think we're the logical partners for that," Mr. Linton said. "They're a little emotional about it right now. We think they'll come around eventually."

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