‘Grow or get out’

Friday, Oct. 12, 2007

‘Grow or get out’

by Kevin J. Shay | Staff Writer

E-mail this article \ Print this article

The increasingly intense competition for customers in an environment of dwindling profits for many banks is a key reason behind mergers, says banking analyst Bert Ely, owner of Ely & Co. in Alexandria, Va.

‘‘For many, it’s grow or get out,” Ely said.

Congress passed a law in 1994 that made it easier for banks to merge, providing a surge in such unions and buyouts, he said. In 1994, there were 166 banking organizations operating in Maryland, and that declined to 146 in just two years and to 133 by 2007, according to Federal Deposit Insurance Corp. figures.

This year’s acquisition of Mercantile Bankshares by PNC Financial Services Group is just the biggest recent deal, but certainly not the only one. M&T Bank Corp. of Buffalo, N.Y., which has grown to be the fourth largest bank in deposits in the state, recently purchased four branches in the state from First Horizon National Corp. of Memphis, Tenn.

Commerce Bancorp of Cherry Hill, N.J., which has six branches in Maryland and plans numerous more, agreed to be purchased by TD Bank Financial Group of Toronto in an $8.5 billion deal expected to be completed early next year.

A bank’s growth through a merger can benefit corporate and individual customers by increasing the number of branches they can visit and ATMs they can use without paying fees, said Stephen Trapnell, a spokesman for Susquehanna Bancshares of Lititz, Pa.

Next month, Susquehanna, which has about 40 branches in Baltimore, Annapolis, Hagerstown and other Maryland cities, is expected to finalize the $860 million acquisition of Community Banks, a Harrisburg, Pa., institution that has six Maryland branches.

While some Pennsylvania branches will be consolidated, none in Maryland will, Trapnell said. Community Banks has offices in areas Susquehanna does not, including Westminster, Owings Mills and Columbia, he said. Community Banks finalized a $22.6 million purchase of four-branch BUCS Financial Corp., which was based in Owings Mills, before the Susquehanna deal was signed.

Mergers in the industry are not expected to slow any time soon, analysts say. What can make or break how well such acquisitions are ultimately received by customers should come as no surprise, said economist Anirban Basu of Sage Policy Group.

‘‘It comes down to a question of execution,” he said.