BB&T to buy Susquehanna to expand in mid-Atlantic region

BB&T would become state's fifth largest bank

Bank holding company BB&T Corp. will expand its presence in Maryland and the Mid-Atlantic with a $2.5 billion deal to buy Susquehanna Bancshares Inc. announced Wednesday.

The takeover would make BB&T the fifth-largest bank in Maryland, while extending the Winston-Salem, N.C.-based bank's presence in Pennsylvania and New Jersey. Susquehanna, based in Lititz, Pa., is Maryland's ninth-largest bank and Pennsylvania's seventh-largest ranked by deposits, and has a smaller presence in New Jersey and West Virginia.

While a few overlapping branches in Maryland may close, most job losses likely would come from "backroom" positions, said BB&T President Ricky K. Brown.

BB&T has 125 locations in Maryland, while Susquehanna has 38 branches in the state.

BB&T executives said the cash-and-stock deal would give the bank a larger foothold in the region, while Susquehanna's CEO said the larger BB&T would be better equipped to manage financial pressures that recently depressed Susquehanna's earnings.

"We think that strategically it makes sense; we think the price makes sense on both sides," Brown said. "The stars aligned just right."

The deal comes at a time when small U.S. banks are consolidating as higher regulatory costs and historically low interest rates add to the cost of doing business. Susquehanna is one of a handful of large independent banks still operating in Maryland.

"Once banks get over about $1 billion in size, size does matter," said William J. Reuter, Susquehanna's chairman and CEO. "Economies of scale matter."

While Brown said he expects continuing consolidation, banking deals of over $1 billion have been rare since the 2008 financial crisis amid concerns that some banks have become too complex and too big to fail, posing a threat to taxpayers and the banking system. For example, M&T Bank Corp.'s planned $3.7 billion purchase of Hudson City Bancorp Inc, announced in August 2012, has yet to close after the Federal Reserve raised concerns about M&T's anti-money-laundering procedures.

But Alexandria, Va.-based banking consultant Burt Ely said the M&T case was unique, and he doesn't foresee any significant hurdles to regulatory approval for BB&T.

"They're small enough that this isn't going to ring 'too big to fail' concerns," Ely said.

The deal was approved by BB&T's board last week and by Susquehanna's board Tuesday, the executives said. It is expected to close in the second half of 2015, pending regulatory and shareholder approvals.

Once the merger is complete, BB&T could edge ahead of Wells Fargo and SunTrust in deposit share among Maryland banks. BB&T does not currently have a large presence in Pennsylvania and Brown said the deal was particularly attractive because of the chance to expand in the Philadelphia area.

BB&T operates in 12 U.S. states and the District of Columbia, and had $187 billion in assets as of the end of September. Susquehanna reported assets of $18.6 billion.

The deal makes geographic sense, given Susquehanna's large presence in Pennsylvania and BB&T's much smaller footprint there, said Stuart Greenberg, a banking consultant in Baltimore.

"Susquehanna is predominantly a Pennsylvania bank," Greenberg said. "I think this is a very smart move for BB&T. It's getting more and more expensive from all the regulations, all the technology costs and corporate governance, and even though Susquehanna is certainly not a small bank, when you merge into the larger bank, they can handle this."

BB&T said it expected to incur pre-tax merger costs of about $250 million and achieve annual cost savings of about $160 million, in part by increasing efficiencies. The company said the acquisition would add to its earnings in the first full year after its completion.

BB&T also pledged to create a $10 million economic development fund to support job growth in the area around Susquehanna's headquarters.

Susquehanna shareholders will receive 0.253 shares of BB&T and $4.05 in cash for each share held, valuing the deal at $13.58 per share based on BB&T's closing price on Wednesday.

Shares of Susquehanna, which had a market value of about $1.8 billion as of Oct. 31, surged 32 percent Wednesday to close at $32.12. BB&T shares closed down 1.7 percent at $37.67.

BB&T has been expanding elsewhere in the U.S., agreeing to buy 41 branches in Texas from Citigroup in September after buying 21 branches in the state in December, boosting the number of its branches there to 123 with $5.3 billion in deposits.

Reuters contributed to this article.

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Maryland's top 10 banks by deposit market share

Deposits as of June 30

1. Bank of America, $21 billion, 21.1 percent

2. M&T Bank, $14.9 billion, 14.9 percent

3. PNC Bank, $12.3 billion, 9.9 percent

4. Capitol One, $9.98 billion, 8.1 percent

5. Wells Fargo Bank, $9.25 billion, 7.5 percent

6. Sun Trust Bank, $8.2 billion, 6.6 percent

7. BB&T Bank, $7.08 billion, 5.7 percent

8. Sandy Spring Bank, $2.75 billion, 2.2 percent

9. Susquehanna Bank, $2.57 billion, 2.1 percent

10. EagleBank, $1.87 billion, 1.5 percent

Source: Federal Deposit Insurance Corp.

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