Stock-picker sees nine banks in Maryland ripe for takeover.

A group of Maryland community banks and thrifts is being touted as hot investments by Wheat First Butcher Singer.

The Richmond, Va.-based brokerage firm says the stock prices of nine banks and thrifts, seven of which are community institutions, should rise as larger banks make acquisitions in Maryland.

"We would target building positions in these institutions over the next few months, with the idea of holding them for gains that are likely to exceed those of the broader market over the next two years," wrote Merrill H. Ross, a bank and thrift analyst in a report this month.

Companies Cited

The institutions include First Citizens Financial Corp., Silver Spring; Loyola Capital Corp., Baltimore; Maryland Federal Bancorp, Hyattsville; and First United Corp. Oakland, Md.

In an interview, Ms. Ross said the moves of Richmond-based Crestar Financial Corp. and First Fidelity Bancorp., Lawrenceville, N.J., alone could cause the stocks to jump within the group. Crestar wants to acquire institutions with assets ranging from $200 million to $500 mil-- lion in the Washington area, and First Fidelity could be an acquirer there, too, she said.

Crestar already owns a small bank in the Maryland suburbs of Washington, and First Fidelity is expected to sew up its acquisition of $2.3 billion-asset Bank of Baltimore later this year.

Ms. Ross said banking companies looking for acquisitions see Maryland as a much improved market, compared with several years ago when it was hammered by the real estate downturn.

Low Market-to-Book

What makes these institutions so attractive as an investment is that their market-to-book value lags behind others in the region.

"There is clearly some room for them to move up in the peer group numbers," Ms. Ross said.

Loyola has a market-to-book ratio of 1.07%, the lowest of the group. It is followed by First Citizens, with 1.13%.

Ms. Ross' favorite banks in the group are Loyola and Laurel-based Citizens Bancorp, the two largest institutions in the group.

She said Citizens' branch network is "second to none," its market share is "excellent," and its nonperforming assets are declining.

"Now the performance of their earnings has to improve," she said. "I think it will."

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