Recent collapses in the dot-com sector apparently have not shaken Progress Banks confidence in the high-tech industry.
In fact, to capture more technology business, the Blue Bell, Pa., thrift has branded what had been a nameless specialized lending division and opened a new loan office in the technology hotbed of Princeton, N.J.
The Progress Financial Corp. subsidiary now calls the unit TechBanc, having bought rights to that name from the Eastern Technology Council, a Pennsylvania trade group. TechBanc president Steven D. Hobman said the name will raise Progress profile outside its home base near Philadelphia.
The $878 million-asset thrift may expand into two other technology strongholds, Baltimore and northern Virginia, once it builds a critical mass of loans in New Jersey, Mr. Hobman said.
TechBanc has no plans to stray far from the mid-Atlantic region, and though the division will do some Internet marketing it intends to rely heavily on referrals, Mr. Hobman said.
Its a business about relationships, he said.
Progress was the first Philadelphia-area bank to lend to tech firms, and remains one of the few community banks in the technology lending business. So it knows firsthand how volatile the category can be.
In 1999 the company netted $2.8 million in income from warrants in technology firms it had financed. In the third quarter of this year it reported a paper loss of $103,000 from warrants in companies in which it held stakes, and its stock has plunged as a result. It closed at $8.3125 Thursday, down 35% from its mid-July peak.
Dan McNeal, an analyst with Sandler ONeill and Partners in New York, said investors have overemphasized Progress connection with the tech market and expect the company to do poorly when the technology sector falters. But even though Progress stock is down, its earnings through the first nine months were up 26%, to $5.9 million.
People are now looking at it almost as a proxy for the Nasdaq, Mr. McNeal said.
The analyst added that losses in warrants will not damage Progress creditworthiness overall.
The only thing we grapple with is, Is that one of the things the banks credit committee uses to decide what loans to take? Mr. McNeal said of the warrants.
Mr. Hobman said TechBanc will continue investing in emerging companies but will not back start-ups.
The companies we lend to have revenue and products, he said. They are early-stage companies in growth mode.
There are exceptions to this rule, and not all of the 80 to 100 of the companies are high-tech. About 25% to 30% of the $120 million portfolio is in health-care companies, Mr. Hobman said.