Provident agrees to buy Sterling Bank and Trust

December 16, 1993|By David Conn | David Conn,Staff Writer

Provident Bankshares Corp. agreed yesterday to buy Baltimore-based Sterling Bank and Trust Co., a small, privately held institution that specializes in personalized (and expensive) banking services for affluent customers.

Provident -- itself often mentioned by banking analysts as a possible takeover candidate -- has $1.7 billion in assets and 41 branches through its main subsidiary, Provident Bank of Maryland. Sterling, an 8-year-old company, has $70 million in assets and three branches.

Although the two companies would not disclose the purchase price, they said the letter of intent signed yesterday calls for Provident to pay 1.5 times Sterling's book value, which is about the current average price for bank mergers. Based on a book value of slightly more than $7 million as of Sept. 30, Sterling would sell for about $10.6 million.

Sterling, created in 1985 with about $3 million in investments, has more than 100 shareholders, according to President and Chief Executive Arthur L. Silber. Mr. Silber said he was the largest shareholder, with about 10 percent of the stock.

Assuming approval from Sterling's shareholders and from state and federal regulators, the purchase would be paid for in Provident stock. Provident's shares fell 37.5 cents yesterday, closing at $18.375.

"Sterling brings a well-established expertise in personal banking to an organization which can help it grow even more rapidly and profitably than it could on its own," Provident's chairman and chief executive, Carl Stearn, said in a statement.

Like many banks, Provident has been looking for ways to increase its income from fees for various products and services, rather than relying solely on the difference between interest earned on loans and interest paid for deposits.

Private banking fits that bill, with its focus on highly personalized and therefore higher-priced services to wealthy customers. For instance, Mr. Silber has appeared in advertising as the bank president willing to make house calls.

Mr. Silber contacted Provident about a month and a half ago to talk about a deal, Mr. Stearn said in an interview yesterday.

"They felt that the parade was kind of passing them by," he said. "They were stuck where they were."

Mr. Stearn and Mr. Silber said Sterling would continue to be run as a separate banking subsidiary, keeping its branches and its name.

"I'll continue as president and CEO of the bank," said Mr. Silber, 53, who also is owner of the Prince William (Va.) Cannons, a minor league baseball team in the Chicago White Sox organization.

"We have done very well," he added, "but Sterling really can do much more for its customers being affiliated with a larger institution." The biggest limitation the company has faced is its regulatory loan limit of $850,000, he said.

"It's just been really frustrating to us," Mr. Silber said. "We'd like to expand the bank."

Joseph Roberto, a vice president and analyst with Advest Inc. in New York, called the Sterling deal "a positive for Provident. This is an area the company has said they want to get into, i.e., private banking. . . . They indicated they've had trouble getting into it."

Provident itself has been the subject of takeover speculation for more than a year. A year ago a First Boston analyst called Provident one of the four likeliest takeover candidates for 1993. And in an October issue of Business Week, a New York mutual fund manager called the company "a tempting target."

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