Heritage of trust

Mercantile called a part of city and state's fabric

October 10, 2006|By Meredith Cohn | Meredith Cohn,Sun reporter

Back in its day, Mercantile-Safe Deposit and Trust Co. was affiliated with just about every important family and cultural institution in Baltimore and others below the Mason-Dixon Line.

Created as a repository of Southern wealth in 1864, it was a place where executives served their elite clientele quietly and ran their business conservatively. It was a place where vault security rivaled Fort Knox and federal insurance for deposits was considered a sign of banking weakness.

It's no longer the largest trust company east of the Mississippi River and south of Philadelphia. And its influence waned as the economy became more global. But it has remained a trusted and respected giant to many who have watched, worked for or banked with "the Mercantile" over time.

To some of them, an era is ending in light of yesterday's announcement that Mercantile Bankshares Corp. is being sold to PNC Financial Services Group Inc. of Pittsburgh.

"It survived fires, the Depression, wars," said Jim Hardesty, who worked there for more than 20 years, leaving his post as executive vice president in the trust division in 1995 to start his own firm, Hardesty Capital Management LLC. "It was the financial battleship. A capital ship of capital ships in finance," he said. "It's a sad day."

The bank's clients included local names such as Abell, Pratt, Peabody and Hopkins. It also became an institution sought out by nationally known names such as Eisenhower and R.J. Reynolds.

It had old money, tobacco money, railroad money and newspaper money in its care.

Frank DeFilippo, a former press secretary to former Gov. Marvin Mandel and a political commentator on WBAL Radio, said Mercantile executives became kingpins in the community because of the trusts they controlled. And the company hung on to some power even as some of its clients were bought by out-of-towners or shifted to banking institutions that increasingly were no longer local.

"The Mercantile had its tentacles everywhere," DeFilippo said. "Its board overlapped with other boards. Mercantile was the springboard to boards of other corporations and other social and cultural institutions. It controlled the town by controlling the money."

The global economy didn't completely diminish the Mercantile, however. Created from a merger in 1953 of The Safe Deposit Co. and Mercantile Trust and Deposit, it continued to evolve into a modern bank.

It added commercial banking services to its trust management business. A holding company, Mercantile Bankshares Corp., was created in 1969 with the bank as its largest affiliate. Several community banks were acquired.

But times continued to change. Advances in technology and new banking laws meant most other large independent banks in Maryland were being bought by out-of-state financial institutions. The mergers were designed to help those banks better compete with their larger rivals.

It's not surprising that the Mercantile is finally being sold itself, said Lou Galambos, professor of business and economic history at the Johns Hopkins University.

"This is what's happened in every industry that's been deregulated: There have been a series of consolidations as market forces pushed toward economies of scale," he said. "In banking, I can check my account balance online and access my money through an ATM in Helsinki. There are no longer the small-town banks."

That has meant Baltimore has lost out, he said. When corporate headquarters move to other cities, jobs often are lost and fewer donations go to local charities.

And in a business built on relationships, a little bit of the bond between financial institution and client may go now, too, others said.

But, said Charles W. Cole Jr., a former president of First National Bank and now chairman of Legg Mason Investment Counsel & Trust Co., the Mercantile has to continue evolving.

"It's a fine institution that's been part of Baltimore and Maryland fabric for decades," he said. "It's a highly respected institution, and I'm sorry it's being sold. On the other hand, the company had to do what's in the best interests of its shareholders. PNC is a first-class institution and clearly it will do a fine job going forward."

Richard O. Berndt, a member of Mercantile's board and Baltimore attorney, agreed. He said the Mercantile has never let down its depositors or investors, even during the Great Depression.

He said customer loyalty and service will remain in Baltimore, as will its managers and loan officers and other employees.

"No one is ever going to feel good about the loss of a local name and control," Berndt said. "But we're not going to see it taken apart. That's not going to happen here. It has a strong future."

meredith.cohn@baltsun.com

Mercantile timeline

March 1864:

The Safe Deposit Co. is incorporated as a secure repository for valuables.

1876:

Name changed to Safe Deposit and Trust Co. and it becomes the first corporate fiduciary in Maryland.

1884:

Mercantile Trust and Deposit Co. is founded.

October 1953:

The Safe Deposit and Trust Co. and Mercantile Trust and Deposit merge to create Mercantile-Safe Deposit and Trust Co.

1967:

Announces formation of the Mercantile Investment Management Service.

1970:

Mercantile Bankshares Corp. becomes Maryland's first registered multibank holding company.

June 1970:

Moves to new headquarters in Hopkins Plaza.

Feb. 1973:

Announces formation of Mercantile Financial Corp., a subsidiary for lending and financing.

Dec. 1977:

Announces it will buy its Hopkins Plaza headquarters.

1995 through 2006: Announces a series of community bank acquisitions in Maryland and Virginia.

Oct. 2004:

Agrees to sell its headquarters tower in downtown Baltimore.

July 2006:

Acquires Boyd Watterson Asset Management LLC of Cleveland.

Oct. 9, 2006:

Announces sale to PNC Financial Services Group.

[Sources: Mercantile Bankshares Corp.; Sun archives.]

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