The Federal Reserve on Friday approved M&T Bank Corp.'s (MTB) acquisition of Provident Bankshares Corp. (PBKS).

Buffalo-based M&T Bank, which is 24% owned by Allied Irish Banks PLC (AIB), plans to merge the Baltimore-based Provident Bankshares into a newly formed unit called First Empire, the Fed said.

The stock-for-stock acquisition would make M&T Bank the 21st largest depository institution in the U.S. with consolidated assets of $71.4 billion. Provident has $6.6 billion in assets, and its Provident Bank depository unit operates in Maryland, Pennsylvania, Virginia, and Washington, D.C.

The deal, which was announced Dec. 19, 2008, is expected to close by the end of May.

-By Tom Barkley, Dow Jones Newswires; 202-862-9275, tom.barkley@dowjones.com