Mariner unveiling consumer loan firm

Lender expects to serve variable-wage workers who seldom use banks

July 12, 2002|By William Patalon III | William Patalon III,SUN STAFF

First Mariner Bancorp. will unveil today its Finance Maryland LLC subsidiary, a consumer-finance firm the bank intends to build into the dominant player in the state during the next five years.

"This will be a core business for us and will offer quality, service and convenience to consumers," Edwin F. Hale Sr., First Mariner's chairman, said yesterday.

The business is expected to generate a small loss for the rest of this year but turn profitable for all of next year, said Hale, who said the business has performed much better than expected in its early tests.

Finance Maryland is a unit of the First Mariner holding company, leaving it separate from the bank so that it can meet federal regulatory requirements, Hale said.

Consumer loan companies such as Finance Maryland operate differently from regular banks and serve a different clientele, said banking expert Henry J. Coffey Jr., an analyst who covers First Mariner for Ferris Baker Watts in Baltimore.

Coffey said consumer-credit companies tend to serve hourly workers with annual wages of $17,000 to $40,000 in the South, and perhaps $20,000 to $55,000 in this part of the country.

Many of those consumers have little contact with banks because their weekly paychecks can ebb and flow with their hours worked. That unpredictability often leaves them short of cash - and without a household emergency fund - and can make them repeat customers of a consumer-lending firm, Coffey and First Mariner officials say.

The best of these firms often have a following that jumps from one generation to the next, making them dependable businesses to own, Coffey said.

The firms' "branches" often are in strip malls or shopping centers and typically have same-store sales growth of 2 percent to 4 percent annually. Consumers may borrow as little as $1,000 and pay interest rates that exceed the market average, experts say.

Finance Maryland's main branch for now is at 1770 Merritt Blvd. in Dundalk.

Coffey and Hale declined to make specific profit and profit-growth forecasts for the Finance Maryland unit. Coffey said it's too early to make accurate predictions, and Hale said the bank wants to wait for the business to find its footing before making pronouncements about growth.

For First Mariner, Finance Maryland won't make significant additions to profits because the unit "is a small piece of a relatively large pie," Coffey said. "We wouldn't expect extraordinary [rates of] growth. But it's a good business."

It's also a business Hale has desired since shortly after First Mariner's opening in 1995. About two years later, a contact of Hale's at Alex. Brown & Sons tried to talk the First Mariner chairman into buying Rose Shanis Financial Services, a consumer-finance firm that was on the auction block.

But First Mariner was too new and was working to add branches and establish a sizable market "footprint," and it lacked the financial reserves for such a big deal without weakening itself, Hale recalled.

Rose Shanis ended up as part of BB&T Corp. and today is a key market player. First Mariner is benefiting nevertheless because Finance Maryland's three top executives are Rose Shanis alumni, Hale said.

The executives are Joshua Johnson, the former Rose Shanis president and chief executive officer, who will assume the same roles at Finance Maryland; Bonnie Klapaska, who joins as senior vice president of consumer finance; and Scott Frankle, who joins as senior vice president of business development.

During the next five years, plans call for Finance Maryland to expand across its home state, throughout Delaware and into Northern Virginia, Johnson said.

This steady-but-cautious growth plan will be fueled by conservative lending. Finance Maryland will help its First Mariner parent by growing slowly instead of saddling the bank with credit-quality problems, Johnson said.

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