Maryland community banks finally have a bankers' bank to call their own.
After three years in organization, Maryland Financial Bank has received approval from state and federal regulators, clearing it to begin accepting deposits this week.
The opening of the bank in the Baltimore suburb of Towson gives local banks that have been using bankers' banks in Virginia or Pennsylvania another option for correspondent services. Like other bankers' banks, Maryland Financial will also facilitate loan participations for small banks with low lending limits.
The bank is the brainchild of Richard E. Hook 4th, who began laying the groundwork in 2000. Mr. Hook is the chief executive of the bank consulting firm Madison Financial Group, which he started in 1991 after founding and leading the $335 million-asset Bank of Maryland in Towson, which was eventually sold to what is now BB&T Corp. of Winston-Salem, N.C.
He decided that Maryland needed a bankers' bank because most of the 100 or so banks in the state are community banks, but there was no local resource for correspondent banking.
Unlike the other 19 bankers' banks, where banks are the only investors, both institutions and individuals can own a stake in Maryland Financial. Mr. Hook said he wanted this structure so that Maryland Financial's management, as well as local businesses, could share in its success.
In fact, about 60% of Maryland Financial's 135 shareholders are individuals, and five members of its 14-member board are not bankers.
"I wanted a stockholder base that could also participate in the management, and I also just wanted diverse stockholders," Mr. Hook said.
Because of this quirk, however, forming Maryland Financial took longer than expected. And because the federal charter for a bankers' bank requires all stockholders to be banks, Mr. Hook found another avenue.
With the help of Frank Bonaventure, a lawyer with Ober, Kaler, Grimes & Shriver of Baltimore, Maryland Financial was able to get a limited-purpose state charter to facilitate its shareholder mix.
"We met with the commissioner several times and finally worked out an arrangement," Mr. Bonaventure said.
Maryland Financial opened for business Monday with $7.5 million of capital. It plans to provide correspondent banking to all community banks in Maryland - regardless of size or investment.
"Some bankers' banks give special treatment to shareholders," Mr. Hook said. "But we want to bank with everyone and provide banking services to all within the state of Maryland."
He said he expects most banks using out-of-state bankers' banks to start doing business with Maryland Financial. Customers of the bankers' banks in Virginia and Pennsylvania could also become clients, he said.
"It's just like why someone would choose a community over a Bank of America. We are local and know who they are and what they do."
