Although many locally owned banks in Maryland are continuing to reel from the fallout of the mortgage crisis, BlueRidge Bank sees an opening to expand in the Baltimore region.
The Frederick-based bank — the only banking institution to open in the state in more than two years — recently opened an office in Towson to serve business customers. BlueRidge executives plan to open a retail branch in the Baltimore area by the end of the year, while eyeing other parts of Maryland, such as Montgomery County, for growth.
"Quite frankly, the time to expand is when others aren't," said J. Brian Gaeng, BlueRidge's president and chief executive. "The fact is, we've got a strong capital base, our loan portfolio is very clean and we're not saddled with some of the problems that other banks have been dealing with."
Nationwide, 86 banks insured by the Federal Deposit Insurance Corp. have failed this year. Last year, federal banking regulators seized two Maryland financial institutions, which were among 140 closures nationally.
About a dozen Maryland banks remain under federal supervision put into place over the past two years, as many have been hit with waves of soured loans and low capital levels. And over the past four years, two longtime Maryland institutions, Mercantile Bankshares Corp. and Provident Bankshares Corp., have been sold to out-of-state banks.
The upheaval in the local banking market has created a window of opportunity for an institution such as BlueRidge to attract new customers, said Dave Danielson, president of Danielson Associates, a Bethesda consulting firm that specializes in community banks.
"I would call Baltimore a wide-open market for the right locally based commercial lender to take advantage of the power vacuum," said Danielson, whose firm tracks new banks. "There's no heir apparent."
Danielson said private businesses with good credit can't turn to big national banks, which have curtailed lending in recent years. In the past, businesses would have taken their business to regional banks such as Mercantile and Provident, but that option no longer exists, he said.
"BlueRidge is trying to fill that gap as much as they can as a $100 million bank," he said.
Whether BlueRidge can become big enough to cover its overhead costs is the challenge, Danielson said.
"Every new bank has to get its size up to cover overhead, and the only way to do it is with a good margin," he said. "They're only going to have a good margin if they get loans on the books."
Since opening in April 2008, BlueRidge has increased its loans to nearly $62 million and has $82 million in deposits, according to its most recent regulatory filing.
It was the 2006 sale of Mercantile to Pittsburgh-based PNC Financial Services Group Inc. that prompted Gaeng and other bankers to found BlueRidge. All but one of the bank's 17-person workforce, including top executives, worked at Mercantile-Safe Deposit & Trust Co. or its smaller affiliates at one point in their careers.
Gaeng, whose 30-year banking experience includes many years as an executive at Mercantile affiliates Fredericktown Bank & Trust and Fidelity Bank, said he and other BlueRidge founders wanted to fill a void left by Mercantile. He said the Mercantile model and philosophy — "a very high level of service, experienced bankers, and professional and local decision-making" — was a good one.
"All those things that we call relationship banking that plays well in Frederick also plays well in a lot of communities and in places like Baltimore," he said.
BlueRidge's Towson office is run by three executives with a combined 88 years of banking experience in the Baltimore market.
"That's really important," said Hugh L. Robinson II, a senior vice president, who most recently was an executive vice president and senior lender at Bay National Bank in Baltimore. "Small- to midsize privately owned companies enjoy a banking relationship with people who've been here for a long time. We really know the market."
Tim Daly, an executive vice president who spent 24 years at Mercantile, including a stint as chief credit officer, said the Towson office will provide commercial products and services, such as accounts receivable and inventory financing, as well as equipment and real estate loans.
Along with Daly and Robinson, Mary Ellen Barthelme, who once ran Mercantile's Towson branch, has been meeting with business owners and contacts they have built over their careers to establish the BlueRidge brand.
"New banks don't open every day," Robinson said. "We're a young but aggressive, well-capitalized bank."
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