When Pittsburgh-based PNC Financial Services Group announced its purchase of Mercantile Bankshares Corporation in October, Baltimore got a little teary-eyed, waxing nostalgic over the loss of yet another venerable local institution to an out-of-town mega merger. Now that the wistful reflections have died down, the people who will really feel the sale—redundant employees and local nonprofits that thrived off Mercantile's generosity—are cautiously optimistic about a future without Baltimore's most storied bank.
"Let's face it, it's never good," says James Hardesty, a former Mercantile executive VP and president of Hardesty Capital Management, of the sale of yet another Baltimore business to an out-of-state interest.
"Mercantile was a major employer in Baltimore. Some of those people will now be forced to move to find jobs elsewhere and take their money with them when they go."
Many of those "back-office redundancies" so often mentioned in such mergers are middle-income positions accounting for a big chunk of payroll. PNC and Mercantile state that the sale is expected to result in the reduction of more than $100 million of operating expenses through the elimination of redundancies.
Mercantile was also a major player in the nonprofit world, not just as a donor but as a role model to other companies. "I know there's concern that the sky is falling," says Betsy Nelson, executive director of The Association of Baltimore Area Grantmakers, who remains optimistic about the role PNC will take in Baltimore.
While it is more painful when an institution that trades solely in the community—like a bank—is lost, some of the huge out-of-state concerns that have bought up other Baltimore interests have continued to maintain a charitable presence in the area. "In the case of a bank, we've had a better track record of continued community presence," says Nelson, pointing to companies such as M&T Bank and Bank of America as models of how a company can continue to give back locally and meaningfully. "[Banks] are customer-oriented—they have employees who will live here and they will rely on people in our local community patronizing the bank. That community presence for a bank is very important."
PNC has committed $25 million to a charitable foundation in Baltimore, yet it's unclear how long the bank will maintain its interest in a community so far from its corporate headquarters. Ian Wilhelm, a senior reporter with The Chronicle of Philanthropy, states that similar concerns were raised in Boston when Bank of America purchased Fleet Bank in 2003. While Bank of America committed to community giving and has demonstrated good faith on its offer, there is pressure for companies to acknowledge their national priorities, too. "Partially it's a way to market their philanthropy," says Wilhelm. "In philanthropy, there's been a move to be more strategic, the idea being that you're more effective if you focus on one particular, national issue."
According to Wilhelm, Baltimore nonprofits should be concerned, especially because fundraising and obtaining grants is about who you know. If the big players in Mercantile are now hanging their hats in Pittsburgh, a large networking opportunity is lost. "That said, the bank isn't pulling out of Baltimore even though the headquarters has moved," says Wilhelm. "It will still want to engender good will in Baltimore. 'How much?' is the question that probably won't shake out for several years."
Editor's note: This is a corrected version of the story. Baltimore earlier reported that Mercantile chairman, president and CEO, Edward "Ned" Kelly III had a 10-year consulting contract as part of the PNC purchase deal and that the value of his holdings in Mercantile increased by tens of millions of dollars when the deal was announced. In fact, there was no consulting agreement with PNC, according to Mercantile, which says Kelly expressly refused to negotiate any personal agreement with PNC prior to the announcement and currently has no employment contract. While the ultimate financial benefit to Mr. Kelly from the merger is uncertain until after all regulatory filings have been completed and the transaction closes, it is considerably less than tens of millions of dollars, the bank says.
Baltimore regrets the error.