A Mercantile Bankshares Corp. investment products executive says he expects the Baltimore company's in-state deal for F&M Bancorp. will strengthen the wealth management unit sufficiently in Maryland to help its plans to grow beyond the state.
"If you want to move outside of your footprint, you have to be strong in your home market," said John J. Pileggi, the president and chief executive officer of Mercantile Capital. "This makes us very strong in our home market. We are now the No. 2 bank in Maryland. Clearly this makes us very strong in our home court, and the strength on the home court will allow us to grow."
The company announced a definitive agreement Thursday to buy F&M of Frederick, Md., for $500 million in stock and cash. Mr. Pileggi said the agreement is primarily a banking deal that adds 54 branches in western Maryland.
One analyst said the deal could rupture the investment product sales relationship F&M has with Raymond James & Associates. And others said the F&M deal could be a precursor of further wealth management acquisitions by Mercantile.
Already this year Mercantile has bought Cleveland's Boyd Watterson Asset Management. The deal, announced in January, added fixed-income products and extended the company's asset management capabilities into western Pennsylvania, Ohio, Michigan, and Indiana.
"This is a bank that is not going to sit and wait," one analyst said. "There is a lot of talk that they are considering deals west of the footprint. They want to offer a full breadth of products through a national network."
Kevin Daniels, an analyst in Boston, said that F&M's customers could see significant changes in their wealth management services. F&M has sold Raymond James investment products and securities offerings. Mr. Daniels said he expects that Mercantile will want the acquired operation to offer the Baltimore company's products.
F&M's "trust department and wealth management capabilities are thin at best," Mr. Daniels said. "Mercantile has its own brokerage affiliate and its own mutual funds. They will probably look to integrate."
Mr. Pileggi would not say whether Raymond James' role would be preserved, but he said Mercantile will look for opportunities to "eliminate redundancies."
"There are certainly opportunities [at F&M] for us, but they are subtle opportunities for wealth management," Mr. Pileggi said. "Mercantile plans to blend these affiliates into the bank's branch structure, and from there we will look for opportunities to blend the branches into our wealth management strategy."
"F&M Bank has been a trusted adviser to its constituency for its financial needs," he said, "and we want to take advantage of that franchise to offer investment products that Mercantile has in its system." Mr. Pileggi said a deal like this would not delay any wealth management deal the bank is working on.
"This deal is compatible with other growth; it strengthens the balance sheet and our distribution capabilities," he said. "We still want to use the power of the Mercantile brand and our manufacturing capabilities to expand the footprint."
