M&T Bank Corporation (MTB) and Hudson City Bancorp, Inc. (HCBK) Union Could Be Right Around the Corner

It was a long engagement, but the union between growth-oriented M&T Bank Corporation (NYSE:MTB) and Hudson City Bancorp, Inc. (NASDAQ:HCBK) looks like it is definitely back on track.

Anti-money laundering controls at issue
The long-awaited merger, agreed upon last August, ran into a roadblock when the Federal Reserve questioned the larger bank’s money-laundering controls. But, M&T Bank Corporation (NYSE:MTB) was determined to see the acquisition through, telling analysts back in April that it would do whatever was necessary to seal the deal.

M&T has announced that it will submit to the Fed a plan that will address the regulatory concerns over its money controls, and will engage an outside consultant to examine specific transactions that occurred at the bank in the latter half of 2012. As long as M&T Bank Corporation (NYSE:MTB) complies with the stipulations in the agreement with the Fed, the $3.7 billion merger should be taken out of abeyance and allowed to move toward completion.

A symbiotic union
The acquisition will be beneficial to both banks. For New Jersey-based Hudson City Bancorp, Inc. (NASDAQ:HCBK), which avoided the subprime mortgage problems associated with the financial crisis, the economic recovery years have been tough. Though generally well-managed, the bank lost more than $700 million in 2011, mostly because of loans it took from the Federal Home Loan Bank of New York. Those loans, with pre-crisis interest rates, became very expensive for Hudson once the Fed began lowering rates. To Hudson, M&T Bank Corporation (NYSE:MTB) must resemble something of akin to a white knight.

Analysts have opined that M&T got a good deal with the purchase, and investors obviously agreed. The large regional also will get something else it craves: a larger footprint. Hudson City Bancorp, Inc. (NASDAQ:HCBK) has a large branch network, and those extra 135 locations will expand M&T Bank Corporation (NYSE:MTB)’s reach in the Northeast and push the bank’s presence as far as Virginia. The bank will also be acquiring Hudson’s $25 billion in deposits, making it the fourth-largest bank, by deposit share, in the state of New Jersey.