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1st Mariner Bank plans new era of growth in 2017

New owners have plotted a path forward for 1st Mariner that leans on growing its small business loan business; bolstering mortgage lending, formerly the bank's backbone; and wooing more independent account holders with better customer service than they can get from national banks.

The end of an era is coming for 1st Mariner Bank — early next year Baltimore's largest community bank will move out of its office in the 17-story Canton tower, which was built by the bank's founder, Edwin F. Hale Sr., and bore its name for nearly a decade.

The move is symbolic as the bank looks to leave its troubled past behind and reassert itself in Baltimore's banking community under new ownership.

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Unable to recover from soured mortgage loans after the housing bubble burst, 1st Mariner's parent company filed for bankruptcy protection in 2014. A group of investors bought the bank in an auction later that year and recapitalized it with $110 million.

Over the past two-and-a-half years, 1st Mariner's new managers, President Robert D. Kunisch Jr. and CEO Jack E. Steil, have worked to reduce its bad loans and build up its assets to just under $1 billion.

Kunisch and Steil have plotted a path for 1st Mariner that leans on growing its small-business loan business, bolstering mortgage lending and wooing more account holders with the promise of better customer service than what's offered by larger, multistate banks. After years of working under the radar, 1st Mariner will in 2017 take its progress and plan public, with an aggressive marketing campaign and slew of new branch managers tasked with making 1st Mariner more prominent in the communities it serves.

"The bank went through its troubles for a number of years, but there's a great story out there about its survival, and we really want people to know we're open for business," Kunisch said.

Despite an impressive recovery so far, banking experts said the road ahead for 1st Mariner will be a long and difficult one.

The bank is looking to make a comeback in a regulatory environment that has not been kind to community banks. The number of banks headquartered in Maryland has shrunk from 94 in 2009 to 58 today, according to the Maryland Bankers Association.

Large nationwide and regional banks pose stiff competition for community players like 1st Mariner, and low interest rates make it hard to make much money off the business they are able to secure, finance experts said. Financial analysts agreed that going after small-business loans is smart, but it's a goal every other bank 1st Mariner's size is chasing too.

Small businesses may not be growing — or borrowing — fast enough to result in a boon for banks, said Arnie Danielson, a retired bank consultant who has followed 1st Mariner since its founding in 1995.

"They're certainly choosing the right strategy and doing all the right things, but at this stage there's just so little success in this area," Danielson said. "We're not finding the success stories."

The bank's managers say they are aware of the challenges ahead and are ready to meet them.

Kunisch thinks customer service gives 1st Mariner an opening to stand out from the pack. With that in mind, 1st Mariner in February brought on Drew McKone, who previously worked for M&T Bank and Capital One, to lead a more robust push for new accounts as director of retail banking.

The bank also shook up leadership at its 14 branches over the past year, bringing in 10 new branch managers, many of whom previously worked at larger banks. They will be tasked with making stronger inroads into local communities.

"We want to appeal to the consumers who are sick and tired of the level of service they're getting from the big banks," McKone said. "Checking accounts are all largely the same — service is what makes people change."

Small-business loans, another growth priority for 1st Mariner, also could translate to more individual accounts, Kunisch said. If 1st Mariner does right by its business loan customers, the employees within those companies may want to do their personal banking with 1st Mariner as well.

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As the bank goes after more small-business loans and mortgages, Kunisch expects its assets to grow between 10 percent and 15 percent in 2017. The bank had just about $930 million in assets as of Sept. 30.

The regulatory environment that has been so tough for small banks could be on the cusp of change.

Many experts expect Republican President-elect Donald J. Trump to pursue reforms to tax policy and deep cuts to business regulations, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act, federal legislation that sought to more tightly regulate banks following the 2008 financial crisis, said Michael Faulkender, an associate professor of finance at the Robert H. Smith School of Business at the University of Maryland, College Park.

Some of Dodd-Frank's provisions, such as capital requirements and rules prolonging the mortgage lending process, have been more burdensome for community banks than large financial institutions, which can more easily support large capital reserves and issue many more loans.

A full repeal of the law is unlikely, but even a retooling of the rules in a way that eases the strain on small and mid-sized businesses could make it easier for companies like 1st Mariner to grow, Faulkender said.

As far as community banks looking to grow go, 1st Mariner is doing all right, said Bert Ely, a banking consultant in Alexandria, Va. Its loan quality has improved and the bank is well financed — an accomplishment itself as other small banks continue to struggle with sufficient capital, he said.

"I think the mountain can be climbed, but it's not going to be an easy mountain to climb because of the competitiveness of the market and because they're still in rebuilding mode," Ely said.

For 1st Mariner to succeed, the bank needs a comeback not only in its books, but in the public eye.

A marketing campaign that kicks off next year with billboards and radio spots is intended to do just that, by telling the story of what 1st Mariner has accomplished over the last couple of years.

"We're just making sure everybody knows what we're doing in the community and what we've accomplished," Kunisch said.

Over the past few years, 1st Mariner also worked with a number of online analytics companies, most recently Florida-based MoreVisibility, to improve the results that come up when someone searches online for the bank.

MoreVisibility works with clients to create their own online content that will easily show up in searches and, ideally, drive more traffic to the company's website and make unfavorable Internet links less prominent.

"The goal is when you do a search for any kind of business to have the best results come up," said Andrew Wetzler, MoreVisibility's co-founder and president and a Baltimore native.

Regardless of the challenges ahead, 1st Mariner's supporters are rooting for its success.

Founder Ed Hale, who retired as CEO in 2011, is among them.

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Community banking has declined considerably since the 1990s, when 1st Mariner opened, but Hale said he thinks there is still a demand for small banks and important role for them to play in their communities.

"We certainly need to have one of those," Hale said of community banks. "That's why we started it in the first place."

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