NationsBank Abandons Foray into Upstate N.Y.

Hugh L. McColl Jr. wants to build a bank that will stretch from coast to coast, but he has had a tough time making inroads in upstate New York.

Mr. McColl's NationsBank Corp. opened retail mortgage offices in Albany, Buffalo, and Rochester early this year, but by the end of last month they had been all shut down.

All a spokeswoman for the Charlotte, N.C., banking giant would say was that the three NationsBanc Mortgage offices failed to meet productivity goals.

But mortgage bankers in the three cities said NationsBanc Mortgage misjudged the level of competition in these markets.

One mortgage banker in Albany said NationsBanc Mortgage never advertised and didn't hire a large production staff.

Maybe "they simply felt they could come in and take something over because they were NationsBank," he said. "But you cannot expect to get business without originators."

Though its name implies "nationwide," NationsBank has no retail presence in the Northeast.

NationsBanc Mortgage had to compete not only against large Northeastern banks with extensive retail networks, such as Chase Manhattan Bank and Fleet Financial Group, but smaller regional banks as well.

And these smaller banks are the market leaders in Albany, Rochester, and Buffalo.

Marine Midland Bank, a unit of HSBC Holdings PLC, last year enhanced its lead in upstate New York by buying First Federal Savings and Loan Association of Rochester. Marine Midland Mortgage is the largest lender in Buffalo and Rochester.

"This is mainly a market dominated by local banks and real estate brokers," said Lawrence A. Schiavi, retail sales manager of Marine Midland Mortgage. "Without a bank branch presence, NationsBank came in as just another mortgage banker."

Gary S. Hutchings, administrative vice president of M&T Mortgage Corp., said there was nothing special about NationsBank's loan products to entice borrowers to do business with them.

"They never appeared on our radar screens," Mr. Hutchings said. M&T Mortgage, a subsidiary of Buffalo bank Manufacturers a Traders Trust Co., is the largest lender in Albany and second largest in Buffalo.

And competition is sure to increase now that Charter One Financial, a Cleveland thrift, has bought Rochester Community Savings Bank. Charter One has said it wants to be a dominant player in Rochester and Buffalo, where Rochester Community has 38 branches.

Kevin Timmons, an analyst with First Albany Corp., said it was surprising that NationsBanc Mortgage pulled out so quickly. He said executives at some of the local companies he follows told him NationsBanc's presence had an impact on the market.

But upstate New York's housing market is growing more slowly than those elsewhere, so competition for loans is more intense, Mr. Timmons said.

"In the upstate market the only way to grow your business is by stealing market share," he said. "NationsBank may have underestimated the importance of the local players."

George Bicher, an analyst with BT Alex. Brown, said NationsBank may have decided it makes more sense to concentrate retail mortgage efforts in its old markets.

Some other big lenders have recently made the same decision. For example, this year Fleet Financial Group sold retail mortgage offices that were outside of the Fleet Bank franchise to PNC Bank Corp. Fleet Mortgage now originates retail loans only in the Northeast.

Also this year, Bank United Corp., Houston, sold 61 retail mortgage offices outside Texas to National City Corp.

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