Merger gets OK

Provident shareholders approve sale to M&T bank

April 09, 2009|By Eileen Ambrose | Eileen Ambrose,eileen.ambrose@baltsun.com

Maryland is closer to losing its largest independent bank, one that has been a Baltimore fixture for more than 120 years. On Wednesday, shareholders of Provident Bankshares Corp. approved a merger with New York-based M&T Bank Corp.

"You can't help but feel a sense of sadness about that. At the same time, we feel we have acted in the best interest of our shareholders," Provident Chairman and chief executive Gary N. Geisel said before the shareholder vote was announced.

More than two-thirds of shareholders approved the buyout by M&T, which will become Maryland's second-largest bank in market share once the merger is completed. That's expected to happen May 22.

Provident's Baltimore roots go back to 1882, when a former Portuguese seaman started holding money for sailors at sea and others for safekeeping. The bank received its charter in 1886 and developed into a community institution that helped finance neighborhoods such as Catonsville, Arbutus and Towson.

Provident survived the Great Baltimore Fire of 1904 and the Depression but not this latest financial crisis, which has triggered other bank mergers and failures.

Provident in the past year took a series of charges related to the declining value of its mortgage-related securities and other investments. It was forced to restate its second-quarter earnings last year because of a charge on investments. The bank reported a $39.5 million loss last year, after posting a $32.1 million profit the year before.

"It's not the final chapter we would have written," Geisel said after the meeting.

He had long maintained that Provident's intention was to remain independent, but last summer he said the bank would consider compelling offers. Even now, the bank could remain independent, but it wouldn't be easy, he said.

"We would have struggled through lots of challenges, both from the standpoint of asset quality and earnings," he said. "The question becomes how long is the storm, how difficult is the storm."

Baltimore banking consultant Stuart Greenberg said size was Provident's problem; "They were too big to be a community bank and too small to be a regional bank."

Provident entertained other offers, but Geisel said M&T offered the best option for shareholders, employees and the community. M&T entered the Baltimore market with its acquisition of Allfirst in 2003.

Provident shareholders will receive 0.17 shares of M&T stock for each of their shares. The deal had been valued at $401 million when announced in December. Since then, M&T's stock has fallen. It closed Wednesday at $47.25 a share, up 85 cents. Provident rose 17 cents, closing at $7.58.

About 50 people attended Wednesday's shareholder meeting.

"It is sad that a community bank [around for] this long has got to disappear," said Tom Dawes of Baltimore County, a shareholder for two years who voted for the merger.

Shareholder William Lorenz, whose locksmith company includes Provident as a client, said he voted for the merger on the advice of his stockbroker.

"I didn't like the idea," Lorenz said, adding that the merger would lead to job losses.

M&T promised to keep Provident employees who interact directly with customers, but it announced plans to cut 29 percent of Provident's work force, or about 521 jobs. These workers will receive preferential consideration for vacant positions at M&T, said spokesman Phil Hosmer.

Bank officials also are reviewing which branches to close. Provident has 142 offices in Maryland, Virginia and southern Pennsylvania. M&T has more than 680 branches, including 156 in Maryland. In some cases, Provident and M&T branches are a mere 150 yards apart, Hosmer said.

The merger also still needs the approval of the Federal Reserve and banking regulators in New York and Maryland.

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