Possible out-of-state MNC ownership raises concerns

June 12, 1992|By Thomas Easton | Thomas Easton,New York Bureau

NEW YORK -- Maybe not tomorrow, and maybe not next month, but soon, MNC Financial Inc., a Baltimore-based institution since 1933, is widely expected to have a new owner from outside Maryland.

If expectation becomes reality, of the six major banking companies that once dominated Baltimore's skyline, only Mercantile Bankshares and Baltimore Bancorp would be locally owned.

Union Trust is now part of Signet, First National is part of Allied Irish, and Equitable is part of MNC -- and thus part of whatever befalls that beleaguered institution.

Would that be a bad turn of events?

"We have looked closely at outside ownership [in the industry] for six years and we don't see major change," says Margie Muller, Maryland's bank commissioner.

The impact of an outside acquirer would far more likely be determined by its philosophy and its health rather than where it is located.

Undermined by more than a billion dollars in bad real estate loans, MNC has provided little ballast to the local economy during the recent recession. It has steadily been shrinking its loan portfolio, reducing employment and all but eliminating charitable contributions.

In contrast, First National Bank of Maryland has been successful and stable since an initial equity investment was made by its Dublin-based parent in 1983. It has consistently expanded its lending. Charitable contributions to local institutions have tripled several million dollars annually, exceeding the amount MNC averaged even during its salad days in the 1980s.

"When an owner has confidence in the management that's in place, when the company's name is unchanged and when the acquisition is treated as an investment rather than as a merger, ++ then the company can keep its local identification," said Charles W. Cole, First Maryland's president and chief executive.

Statistics collected by Ms. Muller's office through the middle of last year indicate that the 13 Maryland banks acquired during the 1980s by out-of-state owners have, on average, expanded their assets far more quickly over the past five years than the major local banks have.

They have also cut back their exposure much more lightly in the recent recession.

Ms. Muller said that consumers rarely notice the difference and that the added competition brings new services while ensuring new capital.

"Maryland appears to be a state that attracts investment," Ms. Muller said. "That's why these companies are here in the first place."

State records indicate that among acquired banks, employment has declined from 5,149 in 1986 to 5,129 last year, a loss of 20 positions.

Still, many in Baltimore worry about the loss of yet another headquarters.

The white-collar jobs needed to populate a vibrant downtown disappear, along with the decision-makers who can quickly adjust to local situations and play pivotal roles in local civic organizations.

Despite First Maryland's approach, James Brady, manager of the Baltimore office of Arthur Andersen & Co. and last year's head of the United Way Campaign, said it is easier to make a case for local employers to contribute to local institutions.

Some business executives estimate that as much as 50 percent of a company's philanthropic effort, and a far higher percent of the community-oriented activities of executives, takes place near headquarters.

Before its well-publicized problems, MNC contributed annually to organizations, roughly 60 percent in Maryland and 40 percent in Washington. With its two main banks, Maryland National and American Security, divided between the two jurisdictions, the giving was in accordance with the breakdown in its business, the company said.

Employees at or above the vice president level took part in 131 charitable, civic, or non-profit organizations, said bank spokesman Daniel Finney. Chief Executive Frank Bramble is on xTC the board of the Baltimore Museum of Art and the Maryland Science Center, among others.

Importantly, though, company Chairman Alfred Lerner does not serve on any local boards. But that is just a small part of a broader sense that his commitment to the institution is fleeting.

A Cleveland resident who has never moved to Baltimore, Mr. Lerner is perceived to be an investor, not an aspiring operator. His 9.5 percent stake in MNC, the largest individual holding in the company, came in a prior acquisition; he had previously purchased a large stake in Equitable Bancorporation, which was sold three years ago to MNC.

By the end of the year, Mr. Lerner must give up his chairmanship at MNC or the identical post at the company's former credit card subsidiary, the highly profitable, Delaware-based MBNA, to conform with regulatory policies. MBNA is considered the more lucrative asset to retain.

Analysts believe Mr. Lerner's resignation as MNC's chairman would only further the likelihood that he would sell his shares -- and possibly the company.

As an investment, MNC has been a long-term disaster. Its shares crashed from almost $30 in 1989 to a low of $2 early last year.

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