WASHINGTON - In a long-anticipated move, Mellon Bank Corp. announced an acquisition that will double its foothold in the capital's Maryland suburbs.
Mellon said Tuesday that its Rockville, Md., subsidiary signed a definitive agreement to buy eight branches from Standard Federal Savings Bank, Gaithersburg.
Pending regulatory approval, Mellon will pay $12.5 million, a 4% premium, for $313 million in 38,000 deposit accounts. The Pittsburgh-based company currently controls $182 million in deposits in eight Maryland branches.
Standard Federal, a capital-strapped thrift that is a leading servicer of mortgage loans, will be left with 11 branches.
The deal comes seven months after Mellon lost a bidding contest for the failed Perpetual Savings Bank. That Virginia-based thrift, with $3.4 billion in assets and 61 branches in the Washington area, was awarded to Crestar Financial Corp. of Richmond.
Mellon, which has $30 billion in assets including $250 million at Mellon Bank (MD) of Rockville, has made no secret of its desire to be a major competitor in the lucrative Washington metropolitan market.
Seeking Growth Opportunities
Kenneth R. Dubuque, chairman and chief executive of the Maryland unit, said the loss of Perpetual was disappointing, and the company has been "looking locally for opportunities" to grow.
Mr. Dubuque, who formerly headed the parent company's strategic planning department, was sent to Maryland to pursue a growth strategy. "We are looking at lots of possibilities," he added.
Mr. Dubuque said Tuesday that the eight Standard Federal properties - in such heavily traveled, affluent areas as Bethesda and Silver Spring - will help the bank to tap the small-business loan market.
"We went out to find something that would give us a fair degree of visibility," the executive said. "We've clearly had some success down here with other product lines. Our mortgage product has just blown the doors off the competition," he stated.
Standard Federal, a closely held institution with $1.9 billion in assets, sold the branches to build capital and reduce costs, said Emmett R. Garlock, president and chief executive officer.
Standard Federal was short of its core and risk-based capital requirements on March 31 and is operating under a capital plan approved by the Office of Thrift Supervision, Mr. Garlock said.
Tighter Capital Requirements
The sixth-largest mortgage servicer in the country, Standard holds a portfolio of 600,000 loans totaling $37 billion. Standard was affected by tighter capital requirements for S&Ls that buy rights to service mortgages.
Mr. Garlock said the motivation to sell the eight branches was not "shrinkage." They were attractive to Mellon and were offices we were willing to remove from our network because [the sale would not] have any significant impact on us," he said.
In the first quarter, Standard earned $1.2 million, according to Ferguson & Co.