The hometown touch

Banks stress roots to lure customers after Mercantile deal

October 11, 2006|By Hanah Cho | Hanah Cho,Sun reporter

First Mariner Chairman and chief executive Edwin F. Hale Sr. wasted no time in crafting a strategy to snare customers of Mercantile Bankshares Corp. yesterday.

A day after Mercantile agreed to sell itself to an out-of-town bank, Hale met with his marketing and advertising teams to produce a television spot highlighting First Mariner's ties to Baltimore.

"I told them literally to pick up the pace and roll out the customer talk about us being the local bank," said Hale, the majority owner of the Baltimore-based bank. "I'm going to spend more money on advertising."

The proposed acquisition of Baltimore-based Mercantile offers a new opportunity for the state's remaining homegrown banking operations to lure new customers, while creating the possibility that they, too, could be targeted for takeover, analysts and local bank officials said yesterday.

"Other banks in Maryland or greater Baltimore are going to be very pleased with the merger," said David Danielson, president of Danielson Capital in Vienna, Va.

"It's a tremendous opportunity to get out of Mercantile's shadow," Danielson said.

Mercantile's deal with Pittsburgh-based PNC Financial Services Group alters Maryland's banking landscape, intensifying competition between locally operated independent banks and regional and national banking giants such as SunTrust Banks, Bank of American Corp. and Wachovia Corp. Analysts say there is also pressure on midsize banks to grow in the competitive market in order to survive.

Provident Bankshares Corp., whose Baltimore roots date back 120 years, would become the state's largest independent commercial bank based on deposits. It would take over the spot currently dominated by Mercantile. The top 10 banks in the state with Maryland roots also include Olney-based Sandy Spring Bancorp and privately-held Chevy Chase Bank in Bethesda.

Matt Schultheis, an equity analyst at Ferris, Baker Watts, Inc., predicts that Maryland-owned banks can gain as much as 10 percent of Mercantile's former customers and employees. But other analysts said PNC will aggressively try to hold on to Mercantile customers and attract new ones in the Baltimore region by highlighting its products and services, such as free ATM transactions.

"PNC is coming in here despite the presence of Bank of America, Wachovia and M&T, so there is still a lot of scope," said Babu Baradwaj, an associate professor of finance at Towson University's College of Business and Economics. "It's not necessary a bad thing that a larger national bank will come in. It will open up services that may not be available at small community banks."

But local banking officials say their commitment is deeply tied to the community, which translates to better service for consumers.

"We're involved in our communities, and our decisions are made locally and our employees and executive management team, they live here, too. That's very powerful," said Kulley Bancroft, vice president of public and community relations at Sandy Spring. Sandy Spring has 32 offices in Anne Arundel, Carroll, Frederick, Howard, Montgomery and Prince George's counties.

For Provident Bank, the Mercantile deal presents an opening to attract new customers as it expands its regional presence. With $6.4 billion in assets, Provident has 154 branches in Maryland and the greater Washington market, including Virginia. The bank competes with PNC in the Washington market.

Gary N. Geisel, chairman and chief executive officer at Provident Bank, said the company sees itself as the "right size" for consumers, meaning it's big enough to offer services provided by its largest competitors but small enough to offer better customer service.

"We think there will be customers and there will be employees that will be more comfortable working for a $6 billion bank that's headquartered locally and has a size that people could get their arms around and feel comfortable with," Geisel said.

That type of local touch is what First Mariner was built on, Hale said. The bank, with $1.3 billion in assets, has more than 25 branches throughout central Maryland and the Eastern Shore.

"The premise in which I started the bank in 1995 was that there will be continuing consolidation, and there would be a lack of locally-owned banks with knowledge and history of Maryland," Hale said.

As much as community banks take pride in having local roots, many have been gobbled up by regional and national banks. That's a function of midsize banks needing larger networks of customers to tap in order to grow.

Bert Ely, a banking consultant in Alexandria, Va., said Provident Bank, Sandy Spring and First Mariner have the potential of being acquired by larger banks. "The banks that are steadily disappearing are the Mercantiles of the world," Ely said. "They are dominant players in the market, and they're too big to be a community bank and too small to be a big survivor."

Chevy Chase Bank is less likely to be purchased because it is privately-held by B.F. Saul Real Estate Investment Trust. Officials at Chevy Chase could not reached yesterday.

Geisel, of Provident Bank, said the bank's strategy is built on remaining an independent institution. Still, as a publicly-traded midsize bank, it's likely to attract attention from larger financial institutions.

"We have a fiduciary responsibility that we can't ignore if a situation is presented to us compelling enough. We need to give that a right consideration," said Geisel, who declined to say whether offers had been made for Provident.

At First Mariner, Hale said he's frequently asked whether the bank is for sale, most recently last week. He is the bank's largest shareholder, owning 19 percent. "I just have no interest in selling it," Hale said. "I like the idea of being in the banking business in Baltimore."

hanah.cho@baltsun.com

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