What a difference a decade can make.
Ten years ago, half of the 10 banks with the most market share in Maryland were based here. But, as Allfirst Bank, First Union, Provident Bank of Maryland, Mercantile Bankshares Corp. and Farmers Bank of Maryland were bought, the state’s banking landscape changed dramatically.
Today, the biggest banks operating in the state are headquartered out of state, and only two headquartered in Maryland — No. 8 Sandy Spring Bank and No. 10 The Columbia Bank — are among the top 10. In all, Maryland-based banks account for only a little more than 3 percent of the market here.
“Banking in Maryland has really become bifurcated into the mega-banks on one side and the community banks on the other,” said R. Michael Menzies, CEO of Easton Bank and Trust Company and past chairman of the Independent Community Bankers of America.
In this radically changed market, these out-of-state banks are working to raise their profiles and prove their worth to the communities they serve while employing thousands and maintaining vast networks of branches and ATMs.
Baltimore’s pro football team plays in a stadium whose naming rights were purchased by Buffalo, N.Y.-based M&T Bank. And advertisements for banks headquartered out of state can be found on buses, billboards and buildings in communities across Maryland.
“Banking local, what does that mean? That’s the ultimate question,” said Louis R. Cestello, PNC Bank regional president for Greater Maryland. “PNC has national bank capabilities and products and an excellent capital position and a desire to grow. But, we’re focused on the community and employing decisions locally. That gives us the feel of a local bank — the decisions are being made by people here in Maryland.”
Pittsburgh-based PNC had the third-highest market share in Maryland (9.1 percent) and more branches — 231 — than any institution, as of the end of June.
The bank’s biggest inroad into Maryland occurred with the purchase of Mercantile and its affiliates five years ago. PNC now employs 2,500 people in the state, and Cestello said that number will continue to grow.
To be successful, big banks recognize that they need to make themselves part of the communities they operate in even if they’re not headquartered in those areas.
“We have a saying that our goal is to out-national the local banks and out-local the national ones,” said Andy Bertamini, regional president for Maryland at Wells Fargo. “The names can change, but we still need to serve the community. There are a lot of banking alternatives out there, and that means we have to prove our value.”
Wells Fargo is the latest of the big players to come to Maryland. The San Francisco-based banking giant already had a presence here with its mortgage and other businesses, but its acquisition of Wachovia Bank gave it a little more than 7 percent of the Maryland market.
Wells Fargo phased out the Wachovia name and transitioned its last branch in October. A long-running marketing campaign that included bus wraps, billboards and an increase in signs at branches touted the changeover. Bertamini declined to say how much was spent on the campaign locally but said it was a strategic marketing plan that was intended to run for a long time.
“It was a slow, deliberate process,” he said.
Wachovia entered the state in a big way with its “merger of equals” with Rockville-based First Union Bank in 2001. After the all-stock deal, Wachovia was the surviving entity and the headquarters was moved to Charlotte, N.C.
The remaining state-based institutions have adapted to the changed market by playing to their own strengths. The larger ones compete with their out-of-state rivals with their own branches and ATM networks, while the smaller banks with fewer branches continue to focus on the neighborhoods and communities where they were founded.
One fast-growing Maryland bank is EagleBank, which started operations in 1998 and is headquartered in Bethesda. The bank has 15 offices in Montgomery County, Washington, D.C., and Northern Virginia.
With total deposits of $1.25 billion as of June 30, EagleBank leapfrogged its way to become the third-largest bank, headquartered in Maryland, in terms of market share.
“We’ve had tremendous growth,” said Thomas D. Murphy, president of community banking for EagleBank. “We’ve kept our balance sheet clean and we’re working in a pretty good market.”
Changes at the top
The major players in the state’s banking industry have changed dramatically over the last decade due to consolidations, mergers and the occasional closing. According to the Federal Deposit Insurance Corp.’s deposit market share report, of the top five banks operating in 2001, only two still exist under the same names — market leader Bank of America (20.4 percent) and SunTrust Bank, in sixth place with 7.0 percent.
Atlanta-based SunTrust has taken to highlighting this in advertising with its “SunTrust is still SunTrust” billboards.
J. Scott Wilfong, president and CEO of SunTrust Bank of Greater Washington/Maryland, said the bank tries to position itself in markets where it is not the biggest bank in town.
“We don’t see a need to be anything other than SunTrust, and we have the capital and liquidity to continue to be just SunTrust,” he said. “We’ve been driving home for a while that we are the right size bank.”
Wilfong said that whether a bank is based in the community it serves or not, it plays vital local roles from furnishing basic banking services to making charitable donations to providing volunteers for nonprofit organizations.
“A community’s vitality has a lot to do with the kinds of banks you have in the community,” Wilfong said. “Show me a community with a strong banking community, and I’ll show you a strong community.”
One of the biggest banks to emerge in Maryland over the last decade is M&T Bank. Eleven years ago M&T had no presence in Maryland. In 2001 it had only 25 offices here and less than 1 percent of market share.
Things changed dramatically in 2003 with M&T’s acquisition of Maryland-based Allfirst Financial Inc. and again in 2009 with the purchase of Provident Bank of Maryland, then the largest bank headquartered here.
As of the end of June this year, only Bank of America had a larger market share in Maryland than M&T, which boasted $17.2 billion in deposits, 210 branches and a 14.9 percent market share.
Atwood “Woody” Collins III, president and chief operating officer of M&T Bank’s Mid-Atlantic division, said Maryland is one of the most important markets for M&T and the bank has invested much here to show its commitment.
“We sort of put our money where our mouth is,” Collins said. “We didn’t start with a historic legacy in Baltimore, but we feel that Maryland is a key part of our future.”
Despite M&T’s explosive growth in recent years, Charlotte-based Bank of America continues to hold the largest piece of the Maryland market.
M&T acquired Wilmington Trust this year, but Collins said the acquisition was not made to close the market share gap with Bank of America.
“We don’t have any corporate imperative to be in the top five or anything like that,” Collins said. “I’d like to focus on being the bank people turn to and stockholders see as profitable. I’d rather us be smaller and more profitable.”
However, a number of banks are looking to chip away at Bank of America’s lead. A recent attempt by that bank to recoup lost revenue by implementing a $5 monthly fee for using debit cards backfired and led to a call for customers to shift their business to local banks and credit unions.
“For the mega-banks, a lot of them have focused on things like adding fees to recoup losses,” Menzies said. “They just jumped into doing that and were bloodied by the media and the public and had to withdraw.”
Bank of America dropped its debit card fee idea after an avalanche of bad publicity. It had announced this year that it planned to cut 30,000 jobs as part of a companywide reduction in expenses.
The job cuts are expected to take place over the next few years in a mix of attrition, the sale of non-core businesses, branch closures and possibly layoffs.
William Couper, president of the Mid-Atlantic region at Bank of America, said the region should not see massive layoffs coming from the decision.
“Will some people lose their jobs? Yes, but I’m not expecting anything major in the area, or in a hurry,” Couper said.
Despite the rash of bad news, Couper said that in Maryland, Bank of America has been able to grow its share of the market by playing to its strengths as a national bank.
“For us, 2011 has been a pretty respectable year in the region,” Couper said. “We’ve had some good success in our consumer group, commercial banking and in our wealth management divisions. We are not letting up.”
One bank that has made it clear that it plans to aggressively pursue market share in Maryland is Winston-Salem, N.C.-based Branch Banking and Trust Company, or BB&T. Its 2003 acquisition of Annapolis-based Farmers Bank of Maryland propelled the bank’s rapid ascent.
“It’s fair to say that if you look at our market share, it would suggest that we are growing it,” said William Toomey, regional president for the Baltimore Metro region of BB&T. “We really enjoy the market here and we feel that we have our company letters on the city skyline and that sends a big message about our commitment to the market.”
As of June, BB&T had the seventh-highest piece of the market at 5.7 percent.
“The Baltimore metro region is the fastest growing region in the bank,” Toomey said. “It is a very important market for us and we want to continue to grow.”
Room for growth
“Maryland is one of the most attractive markets in the country right now,” said Bryce Rowe, a senior analyst covering community banks for Robert W. Baird & Co. Inc. in Milwaukee.
PNC’s Cestello agreed and said that loan activity and deposits were both up this year. He said the increased activity underscored the strength in the state’s banking market.
“Maryland is doing pretty well compared to the economy in other places,” Cestello said. “It’s a great time to be a bank in Maryland.”
But, like all markets across the country, Maryland’s banking industry has suffered in the wake of the recession and upheaval in the real estate markets. Since January 2009, Maryland has had six banks fail, starting with Suburban Federal Savings Bank in January of that year. The last bank to fail in the state was Owings Mills-based K Bank, which was closed in November 2010.
While no banks have closed in 2011, a number of them are struggling. According to Charlottesville, Va.-based SNL Financial LLC, since 2007, 19 percent of the banks headquartered in the state are operating under a severe enforcement action.
Sixteen of the 86 banks headquartered in the state have received at least one enforcement action, and in some cases more than one.
“You could argue that all banks do the same things, but they do it with wildly different results,” M&T’s Collins said. “There’s a clear difference between those who do it well and those who don’t.”