The founder of 1st Mariner launched the Baltimore bank as an alternative to big, faceless, out-of-state institutions at a time when banks based elsewhere had rapidly gobbled up 30 percent of the Maryland market.
Now — 19 years and many acquisitions later — out-of-state banks control 80 percent of the pie.
That change hasn't dampened the enthusiasm 1st Mariner's new owners feel for the bank. Just the opposite.
The purchasing group with local ties, approved as the bank's winning bidder Tuesday by a federal bankruptcy judge, makes the same argument now that founder Edwin F. Hale Sr. offered in 1995: Baltimore needs this bank. It's the largest still based in the city — once a significant center of finance — and the bank's new owners say they will keep it that way.
"This is just so essential," said Howard Feinglass, a Baltimore native who worked on the deal for more than three years, recruiting local and out-of-state investors.
Jack E. Steil, the incoming CEO and a longtime Baltimore banker, said he's been inundated with calls since the unusual twist this week: Local bank doesn't get bought by an out-of-state player. (The competing bidder was National Penn Bank from Allentown, Pa.)
"My voice mail is full," he said. "It's been a very strong, positive support. And I think a lot of that is that people really want to see locally ... run institutions."
The loss of locally headquartered banks is a familiar story across the country. Waves of consolidation rippled through after the federal government eased geographic restrictions on ownership in the 1980s and '90s, a key reason the number of bank and thrift charters nationwide has shrunk from 20,000 in 1980 to about 6,800 in December, according to the Federal Deposit Insurance Corp.
Major Baltimore banks subsumed by out-of-state buyers during that time include Loyola Federal, the Bank of Baltimore, Maryland National, First Maryland, Mercantile and Provident.
That has left a large part of the Baltimore region accustomed to banking with institutions that have headquarters elsewhere. At the top of the list is North Carolina-based Bank of America, which controls 20 percent of the Maryland market, according to the FDIC. (1st Mariner has just under 1 percent.)
So does local matter anymore in banking?
Maryland regulators see the value. Mark Kaufman, the state's commissioner of financial regulation, said community banks account for 40 percent of small-business lending in the country, even though their combined assets make up just 12 percent of the total.
He said he's pleased to see recent examples of capital flowing to local community banks, 1st Mariner among them.
"That's what's needed to keep the community banking system vital," Kaufman said.
Still, banking consultant Joe Sullivan warns his community bank clients that it's not enough to simply be the hometown player.
"Forty-one percent of people see no discernible difference between one bank and another," said Sullivan, chief executive of Market Insights in Chicago. "The big banks have really come a long way in the last two years in cleaning up their reputation. ... Is there a place for a smaller bank against a bigger bank? Absolutely, but you've got to get deeper with the story."
Smaller banks can be more nimble and serve niches that big banks ignore, he said.
"The only way a small bank is going to be able to compete is to be hyper-local and hyper-involved in the markets they serve, and to really understand what the needs are," Sullivan said.
First Mariner is at the high end of what Sullivan considers small: about $1 billion in assets. But the value proposition he's talking about is what Feinglass says he has had in mind since beginning his quest to get his New York investment firm a stake in the bank.