M&T Bank Corp., continuing its expansion in the Mid-Atlantic region, agreed Monday to buy Hudson City Bancorp in New Jersey, adding $28 billion in assets and 135 branches in three states.
The deal also vaults M&T ahead of longtime regional rival KeyCorp in size.
The Buffalo-based banking company will pay $3.7 billion in cash and stock to acquire the Paramus, N.J.-based company, gaining 97 branches in New Jersey, 29 in downstate New York, and nine in Connecticut's tony Fairfield County just outside New York City. The two banks' branch networks are adjacent, with very little overlap.
The deal fills in a major gap for M&T, which has a big business in New York State, Maryland and Pennsylvania, but no retail presence in New Jersey or Connecticut. It claimed the No.?1 position in Delaware last year with Wilmington Trust Corp.
"While we have been somewhat acquisitive over the years, our acquisition focus had always been on deals that made sense from the standpoint of our customers, employees and shareholders," M&T Chairman and CEO Robert G. Wilmers said on a call with investors. "In this case, . the geographic fit also works quite well."
After this deal - which is subject to approval by shareholders, the Federal Reserve and banking regulators in New York and New Jersey - M&T's network of 870 branches will stretch from Connecticut to Virginia. It will gain $25 billion in deposits and $28 billion in loans, and the No.?4 deposit share in New Jersey.
And it will leapfrog from the No.?21 retail bank by deposits in the New York metropolitan area, with 38 branches and $4 billion in deposits, to the eighth-largest, with 153 offices and $27 billion in deposits. It will have the 12th-largest branch network.
The deal is expected to close in the second quarter of 2013, after which M&T will have $109 billion in assets, $89 billion in loans and $87 billion in deposits, the bank said.
That should put it among the top 15 U.S.-based banks, just ahead of KeyCorp and just behind Fifth Third Bancorp of Cincinnati. Cleveland-based KeyCorp, the No.?3 bank in Western New York and 14th-largest nationwide, has $87 billion in assets.
Founded in 1856, M&T has $80.8 billion in assets and $63 billion each in loans and deposits. It's widely regarded because it never cut its dividend during the banking crisis, making it unique among large banks.
It's also known for being opportunistic. Hudson City, with $43.6 billion in assets, was founded in 1868 and is the largest savings bank based in New Jersey. But the bank, known as Hudson City Savings Bank, has been focused exclusively on mortgages and consumer banking.
That's limited its ability to grow in revenues and size, and left it challenged during the financial crisis, Chairman and CEO Ronald E. Hermance Jr. said Monday. And it frustrated branch managers who wanted to be able to offer commercial deposits and other services to retail customers who also owned small or mid-sized businesses, he added. There are nearly 7,600 middle-market companies and 324,000 small businesses in its markets.
Bank executives had already decided to change that, with plans to hire more than 200 commercial lenders and plunge into business lending, when M&T approached them with the merger proposal a few months ago.
"We were prepared to pursue this direction on our own," Hermance, who will join M&T's board, said on the investor call. "But when the opportunity to combine with M&T arose, the argument was a simple one: We can give our customers just what they wanted, but much, much faster. And we can be guided every step of the way by people who are already doing all of these things extremely well."
M&T is heavily focused on commercial banking in all of its markets, where it is generally the No.?1 Small Business Administration lender, and it now plans to bring that emphasis to New Jersey.
It will hire an additional 100 commercial lenders over time, even as it brings a wider array of commercial banking, insurance and wealth management products.
"While M&T has no full-service branches in New Jersey, we have long had a presence across the river in New York City and up into the Hudson Valley, and, of course, we've had our commercial bankers active in the New Jersey marketplace for a number of years now," Wilmers said. "But we've always believed that a strong brand presence is a key component of commercial banking, and Hudson City's branch network should enable us to take our efforts in the greater New York metropolitan area to a higher level."
M&T already has four branches each in Nassau and Suffolk counties, as well as branches in New York City and its northern suburbs. But it will gain 12 Long Island offices, all in Suffolk County, and 17 other downstate offices in Westchester, Putnam and Rockland counties and on Staten Island in New York City. And Connecticut is a new but desirable market.
"We don't talk much about Long Island, but we've done relatively well there, so increasing our share on Long Island is not a small thing for us," M&T President Mark J. Czarnecki said. "We've done some business in Connecticut, and we think we can continue to grow there."
M&T executives said they don't expect any difficulty with the integration, citing the 23 mergers M&T has completed in 25 years and Hudson's simple business.