Banks move ahead with expansions despite recession

Despite a national recession, several banks are moving forward with branch expansions in Anne Arundel County even as they sell off shares to the federal government for fresh capital in return.

Bank officials said they committed to several new county locations before the economic downturn as part of their long-term strategic plans.

"We're trying very much to be a forward-looking entity, trying to figure out which markets we want to be in," said Richard Lerner, chairman and chief executive officer of BankAnnapolis. "We've got to be looking ahead, not just the current economic conditions."

BankAnnapolis has looked ahead with its eighth branch that opened Dec. 16 at the new Annapolis Towne Centre at Parole complex, a $400 million mix of shops, condos and offices on the city's edge.

The locally owned community bank based on Bestgate Road also is planning three branches in west county where thousands of new jobs are slated to arrive as part of the Base Realignment and Closure process known as BRAC.

Meanwhile, the Bowie-based Old Line Bank has expanded into Anne Arundel, opening its first county branch on Jennifer Road in Annapolis near the end of the year. Old Line also will open a second county branch, in Crofton, early this year, officials said.

Jim Cornelsen, president and CEO of Old Line, said his firm is opening branches here as part of a plan to "become the best known and most successful community bank on the east side of the Washington market."

"We think Anne Arundel is a great marketplace," Mr. Cornelsen said. "It's adjacent to our current marketplace and that makes a lot of sense."

Mr. Cornelsen said his bank is in "great" financial shape to expand, with third-quarter earnings jumping to $433,393, a 31.9 percent increase from $328,539 during the third quarter of 2007.

Larger, regional banks also are eyeing the Anne Arundel market: PNC Financial Services is planning to open a "green" branch at the Annapolis Towne Centre at Parole this spring, said Darcel Kimble, PNC spokesman.

"We're really pleased to be expanding at a time when people need access to capital and solid financial services," she said.

Ms. Kimble said the bank is in a strong position. PNC has maintained a moderate risk profile and will complete its acquisition of National City this month, a move that will double the size of the bank, she said.

M&T, which has 16 county locations, is moving forward with two more branches in the Fort George G. Meade and Arundel Mills area this year. Nick Lambrow, president of M&T's Chesapeake Region, said the county continues to be a viable economic area supported by BRAC and other service-related businesses.

"There's no reason to pull back," he said. "We know the economy is off right now, but we're looking down the road."

The Buffalo, N.Y.-based bank also is relocating a Glen Burnie branch to Ordnance and Route 2, he said.

"We always are looking to improve our location or create density," Mr. Lambrow said.

In addition to the new county branches, M&T also plans to expand its branch network locally with the planned acquisition of Provident Bank, which has 143 locations, 13 of them in Anne Arundel.

The bank plans to purchase Provident Bank in a stock-for-stock transaction valued at about $401 million, pending regulatory and shareholder approval. Bank officials said they expect the deal to be finalized in the second quarter.

"They're a very strong Baltimore-based bank that has a very strong tie to the community, and it's a very strong community bank, which we emulate as well," Mr. Lambrow said.

Seeking funding

The banks are pushing forward with these new capital projects amid a recession marked by a deteriorating housing market, rising foreclosures and poor quarterly earnings. Amid the banking crisis, several banks have sought funds from the U.S. Treasury Department's Troubled Assets Relief Program, or TARP, which allows healthy banks to sell off shares in return for capital.

For example, Old Line announced it has received a $7 million investment from the Treasury. BankAnnapolis announced it recently received approval for $8 million from the program. PNC has received approval to issue to the department $7.7 billion of preferred stock with a related warrant to purchase about $1.1 billion of PNC common stock.

M&T Bank announced in November that it received preliminary approval to issue $600 million of preferred stock under the program.

Also in November, Severn Savings Bank officials announced it received notice that its application for the TARP program was approved for $23.5 million.

Despite the current economic conditions, "traditional banking is still in style," said John Hall, spokesman for the American Bankers Association in Washington, D.C.

He said most banks did not get involved in risky subprime lending, adding that the majority of that lending was performed by non-bank entities such as mortgage brokers who have gone out of business.

"There are still good loans to be made in your community," Mr. Hall said, adding that there is always a "welcome mat" available for credit-worthy borrowers.

But Arnie Danielson, chairman of Danielson Capital, a bank consulting firm in Vienna, Va., said he still shudders when he hears banks opening more branches.

"It's like when the party's over people still go for that one more drink," he said. "It's really a different market now."

Mr. Danielson said there's always a unique situation in which a bank needs new branches to round out a franchise, he said. But by and large, banks are best off holding back on branches, he said. Mr. Danielson said he suspects a lot of the local expansions were planned long before the economic downturn began.

The State Employee's Credit Union, or SECU, a state-charted credit union based in Linthicum, has been planning its new branch that opened at Annapolis Towne Centre at Parole on Dec. 16 for more than a year, said Peggy Young, vice president of marketing for SECU.

The new branch will help SECU expand its coverage of local state employees, she said.

"We expect it to be a strong performer just like our other branches," she said.

She added that the credit union, a nonprofit organization, is owned by its members and "is in a very strong position."

Mr. Lerner of BankAnnapolis said plans for his bank's Towne Centre branch have been in the works for two years.

The new location is part of a plan to grow the bank's branch network to about a dozen locations within the next three to five years, he said.

"We're well on our way toward that," he said.