First Maryland Bancorp has signed a definitive agreement to sell most of its mortgage loan origination business, which includes 29 offices, to Ohio-based National City Mortgage Co., the companies said yesterday.
The Baltimore-based banking company will sell subsidiaries First National Mortgage Corp. and Eastern Mortgage Services Inc. for an undisclosed price.
The deal is expected to close in early 1998, the companies said.
Frank P. Bramble, president and chief executive of First Maryland, said in a statement that the company is selling the majority of its mortgage loan origination business because most TTC of the loans it generates come from outside the bank's "franchise area."
The 29 mortgage origination offices are in Maryland, Virginia, Pennsylvania, New Jersey, Massachusetts, Kentucky and Mississippi. Some of them were inherited when First Maryland acquired Harrisburg, Pa.-based Dauphin Deposit Corp. last summer.
"This was a strategic decision made after very careful study of the competitive environment," Bramble said. "The additional resources and capital resulting from the sale will allow us to make more investments here in our primary market to better serve our customers."
First Maryland will continue to originate mortgage loans through its network of 300 branches in Maryland, southern Pennsylvania, Washington and Northern Virginia.
First National Mortgage has about 100 employees at its Glen Burnie headquarters and a total of 350 employees, and Trevose, Pa.-based Eastern Mortgage has 650, said Reese Nank, a spokeswoman for First Maryland.
"There will be some jobs affected," Nank said. "It is kind of early. We don't know exactly how many."
National City is buying the origination side of the business, and it could pick up First Maryland employees, said John Owens, a spokesman with National City Corp., of Cleveland, the parent of National City Mortgage.
It is unclear what will happen to the employees who process mortgage loans, because National City Mortgage operates large processing centers in Ohio and Texas.
Some employees could also find jobs at First Maryland, either generating mortgages from the branches or supporting the mortgage origination effort, Nank said.
Nank said the bank will offer career counseling and severance payments to people who lose their jobs.
When the deal is completed, National City Mortgage will rank as one of the 10 largest residential mortgage originators in the country, with 137 mortgage loan offices in 34 states.
National City expects to generate $1.6 billion in mortgage loans from the First National and Eastern Mortgage operations next year. In 1997, they generated about $1 billion.
"What you see here is a recognition by the bank that you're either in big or you're not big," said Arnold Danielson, chairman of Danielson Associates Inc., a bank consulting firm in Rockville.
"Over the years, [banks] bail out and they bail back in. What you are seeing now is a handful of very large companies doing the buying while most others, one after another, are getting out," Danielson said.
The move comes less than three weeks after First Maryland, the $17.3 billion-asset subsidiary of Allied Irish Banks PLC of Dublin, agreed to sell its $623 million credit-card portfolio to Bank of America N.A. for an undisclosed price, and leave the credit-card issuing business altogether.
Nank said the merger with Dauphin sparked a review of all First Maryland businesses, including the mortgage operation. Two outside consultants were brought in to offer advice.
"The whole company is being scrutinized from the strategic perspective," Nank said.
"To be a good competitor in this kind of marketplace we are going to continue to have to do that."
Pub Date: 12/31/97