What's drawing banks to Baltimore

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As far as Mary Ann Scully is concerned, bankers' growing interest in Baltimore isn’t a threat — it’s validation.

Scully, chairman and CEO of Howard Bancorp, moved the $2.2 billion-asset company's headquarters to the city last year after it bought 1st Mariner Bank for $163 million. Since then, Old Line Bancshares in Bowie, Md.; Union Bankshares in Richmond, Va.; and JPMorgan Chase have each signaled ambitious plans in the city.

“We should not in good conscience do anything but applaud people who agree with us" that Baltimore is an enticing market, Scully said.

“I wouldn’t want to be the only person who sees the city as attractive," she added. "It’s great that other banks are recognizing Baltimore is an attractive region.”

There a number of reasons behind Baltimore's growing popularity. Total deposits in the market increased by 13% over a five-year period that ended in mid-2018, according to the most recent data from the Federal Deposit Insurance Corp. The city's 4.1% unemployment rate and $77,394 median household income are stronger than national averages.

Howard, previously based 13 miles west of Baltimore in Ellicott City, agreed to buy 1st Mariner, the city's biggest locally owned bank, in August 2017. A month later, Old Line struck its deal to buy Bay Bank in Columbia, Md., which had 11 Baltimore-area branches.

Other banks are planning to expand by adding offices, including Chase, which announced plans a year ago to open as many as 70 branches in Maryland, Virginia and Washington. Chase has already applied for regulatory approval to open several Baltimore locations.

Now, the $21 billion-asset Fulton Financial has also joined the party with plans to open a branch just east of downtown later this year. The Lancaster, Pa., company would like to open "probably two or three more next year,” Chairman and CEO Philip Wenger said during a Wednesday conference call to discuss quarterly earnings.

Fulton's initial branch will be just a block away from where it opened a loan production office earlier this year, Curtis Myers, the company’s president and chief operating officer, said in an interview.

Fulton plans to pattern its Baltimore expansion after a template it used in Philadelphia, where it opened three branches earlier this year. Before that, Fulton “had not really been in any" major metropolitan areas, Myers said.

“When we looked at Philadelphia and Baltimore, we realized they're really just a group of communities and neighborhoods,” Myers said. “Our strategy of taking deposits, making loans and supporting the local community we can do neighborhood by neighborhood. ... It really is our same community bank strategy deployed in a metro market.”

Fulton also plans to merge its Columbia Bank unit into its flagship Fulton Bank. Columbia Bank has a branch on the northern rim of Baltimore, along with more than a dozen others in the city's suburbs.

Its numbers in Philadelphia suggest Fulton can gain traction in an urban market. It has booked $350 million in loans and $50 million in deposits in Philadelphia. Deposits are starting to accelerate now that the company has more branches open, Myers said.

As in Baltimore, Fulton made its initial entry into Philadelphia with commercial and residential lending teams. “Now that we have all three branches open, we’re seeing our deposits accelerate as well,” Myers said.

Fulton expects to devote most of its expansion efforts in Philadelphia and Baltimore for the foreseeable future, with an immediate focus on building more branches around the latter.

"Our priority will be to get a few branches in key neighborhoods opened in Baltimore," Myers said. "We want create that base in both cities and really kind of go from there."

Scully, who has spent her entire 45-year banking career working in and around Baltimore, said Fulton has a solid blueprint.

"We’re obviously watching what they do very closely,” she said. "They’ve picked an emerging neighborhood with a great anchor” in Johns Hopkins University Hospital.

Howard’s commercial focus will likely limit the competitive challenge posed by Fulton’s neighborhood-by-neighborhood approach, at least in the near term, Scully added.

While Union has a loan production office in Baltimore, CEO John Asbury has made it clear he would likely to have a much higher profile.

Union completed its purchase of Access National in Reston, Va., in February, giving it a major presence in Northern Virginia. Expanding north would permit the $16.8 billion-asset Union to develop a mid-Atlantic footprint stretching from Baltimore to Richmond. To that end, Union is planning to rebrand as Atlantic Union Bank, starting next month.

Asbury “has been public and very vocal,” Scully said. “We’re very familiar with Union’s strategy.”

Howard is smaller than each of its new competitors, though it does possess at least one competitive advantage, Scully said.

“Baltimore is something [other banks] view as an attractive market extension,” she said. “For Howard, this is our home. … The authority resides in Baltimore.”

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