When talk of bank mergers surfaces, M&T Bank Corp.'s name understandably comes up.
Over a nearly 30-year period, Buffalo-based M&T made 23 deals to buy other banks or collections of branches, fueling its rise to a top-20 U.S. commercial bank.
It's been seven years since M&T made its last big deal.
Now a massive bank merger is brewing, between BB&T and SunTrust. Neither bank's territory touches the Buffalo area. But the planned $66 billion deal would create the nation's sixth biggest bank, igniting speculation about whether more big industry mergers will follow.
For the past several years, M&T has been in an unfamiliar place in the acquisition game: on the sidelines. The last time M&T struck such a deal was nearly seven years ago, in August 2012, when M&T announced it had agreed to purchase New Jersey-based Hudson City Bancorp.
That deal, however, went anything but smoothly and took years longer to complete than M&T officials expected.
First, M&T ran into regulatory hurdles that delayed completion of its $5.2 billion deal for Hudson City until November 2015. And it wasn't until July 2017 that regulators lifted a four-year restriction on M&T making additional deals, after the bank strengthened its anti-money laundering and Bank Secrecy Act programs – an initiative that cost more than $200 million to complete.
The obstacles M&T faced also created what was perceived in the banking industry as a chilling effect on other big deals, though conditions have since changed.
For a bank famous for dealmaking under chairman and CEO Robert G. Wilmers, it's been a long, quiet stretch.
M&T, under Wilmers, was known to avoid "overpaying" for acquisitions, and instead make opportunistic buys of banks in search of a partner. So what is M&T's mindset about dealmaking nowadays?
In a recent interview, Rene F. Jones, M&T's CEO since December 2017, indicated M&T would stick to its cautious approach.
"I think our legacy has been, and will always be, being one of the best allocators of capital in the industry," Jones said. "And sometimes that means doing acquisitions. But it's more important that we do them in the right place, and the right time and under the right circumstances.
"Just as it is sometimes we are very focused on meeting the lending needs of our customers but at other times, when the market becomes irrational, we may pull back and not participate in that," he said.
The BB&T-SunTrust deal, which still needs regulators' approval, is billed as the largest bank merger since the start of the financial crisis more than a decade ago.
S&P Global Intelligence reported 259 U.S. bank and thrift deals were announced in 2018, up just three deals from the year before. The total value of those announced deals was nearly $30 billion. Nathan Stovall, a writer for S&P Global Intelligence, said banks may increasingly look to deals as an avenue to make investments in technology, rather than to expand into new territories.
John Wilcox, who teaches economics and finance at SUNY Buffalo State, said he doesn't expect the BB&T-SunTrust deal to kick off a wave of bank mergers.
"I just think there's a great deal of uncertainty in the financial industry and I'm not seeing that there's going to be the groundswell of deals happening," he said.
A few factors go into banks' decision-making on acquisitions, he said. The Federal Reserve seems to have put the brakes on raising interest rates. "When you keep rates so low, it makes it hard for them to make money," he said.
Plus, there are concerns about the timing of investing in a big purchase, he said. The national economy is in the midst of a lengthy expansion, beyond the point when a recession has typically has set in.
"I think this [BB&T and SunTrust deal] is going to be somewhat of an anomaly for a time being until we get into more normal economic financial times for financial institutions, and I don't really think we're there yet," Wilcox said.
What about M&T?
M&T's chief financial officer, Darren J. King has said M&T is open to deals, but needs to find a willing partner, at the right price, and that those partners can be hard to find.
Last year, he observed that it seemed "everyone wants to be a buyer and no one wants to be a seller." King has also said M&T might look to acquisitions in areas other than whole banks, such as wealth management operations.
At an RBC Capital Markets Financial Institution Conference this month, King commented on the difference between acquiring a savings bank and a commercial bank.
"A commercial bank presents a little bit more complexity in the integration, because they tend to have more products, they have more systems, they have a broader mix of customers," he said.
"And so the physical integration, the technical integration, is a little more complex than (buying) a thrift, where you generally have a couple of products and it's pretty straightforward. But the real work in an acquisition always starts the day after the system conversion, with all due respect to my colleagues in IT, and that's the cultural integration."
At a commercial bank, King said, "you will have more new colleagues who are used to operating in a commercial bank environment, representing a broader set of products, understanding commercial credit a little bit more. And the cultural integration, when you do a commercial acquisition, is more helping people understand the credit culture. But you don't have to create a sales culture as much."
Converting a thrift to a commercial bank involves more "heavy lifting," King said. "You typically have folks that have spent more time focused on service than sales, wouldn't haven't done as much commercial lending, branch managers who wouldn't have been callers on businesses. And so building that skill set and getting that comfort takes a little bit longer.
"All of that factors into the math that we do when we might price a deal and would affect how much we would be willing to pay or not, knowing the different risks and the time frame for the payoff," King said.
Wilcox said M&T has a formula it tends to use with acquisitions.
"Historically, they have done deals that are one-third to one-half their size, in contiguous markets," he said. "This kind of limits the risk on the deal. You're dealing with markets you have some familiarity with."
But as M&T has grown into a larger financial institution, Wilcox said, finding more partners which fit that criteria can be difficult, he said.
If M&T does make a deal, where might the bank look next?
The bank already has a dominant presence in the Buffalo market, controlling 63 percent of deposits, according to Federal Deposit Insurance Corp figures. M&T has expanded its territory far beyond its Buffalo roots, into other parts of New York State, as well as Pennsylvania, Connecticut, New Jersey, Maryland, Virginia, West Virginia and Washington, D.C.
M&T doesn't have any branches in Massachusetts, but it does have a New England market headquarters in Boston, Mass. The commercial banking office serves clients in Massachusetts, Rhode Island, and parts of New Hampshire and Maine.
Whatever M&T decides, Wilcox said he expects to see the bank follow the same steady approach under Jones and president Richard Gold that it did under Wilmers.
"They do calculate their risks, they really work by the numbers, they try not to do these deals based upon emotion, or say, 'Gee whiz, we've got to get bigger,'" he said. "You don't find that. They want to operate correctly. They want to operate profitably."
M&T makes all types of capital decisions, Jones said.
"Historically, acquisitions have just become part of them. And often times, that happens in distressed times. I'm a believer that we haven't seen the last of our distressed times, and that's when our customers tend to need us most, and that's actually when communities need us most," he said.
"So I like to think that a little less than going out and seeking acquisitions, there are times when there's a need for an M&T Bank in a community, and when we see those opportunities, then yeah, we would take them, we would move into those communities," he said.
"But we don't do banking for the sake of banking," Jones said. "We think that our mission is really to be part of the glue that holds institutions in a community together. So it would really have to be an opportunity where we think there's a need for an M&T Bank, and we think we can kind of play that role in that community."
Jones mentioned M&T's acquisition of Allfirst Financial in 2003, for $3.1 billion in cash and stock. The deal expanded M&T's presence in the mid Atlantic. M&T now has a regional headquarters in Baltimore.
"We didn't just sort of go there and have a bank," he said. "We actually are deeply immersed in that community."
M&T Bank acquisitions
1987: East N.Y. Savings
1990: Monroe Savings
1990: Empire Federal Savings Bank
1992: Central Trust, Endicott Trust
1994: Ithaca Bancorp
1994: Chemical Bank branches
1995: Chase Manhattan branches
1997: GreenPoint branches
1999: FNB Rochester
1999: Chase branches
2000: Keystone Financial
2001: Premier National Bancorp
2003: Allfirst Financial
2006: Citibank branches
2007: Partners Trust Financial Group
2007: First Horizon branches
2009: Provident Bankshares
2009: Bradford Bank
2010: K Bank
2011: Wilmington Trust
2015: Hudson City Bancorp
Source: M&T Bank