Bank deposits sluggish

Experts point to new fees, bull market

Bank deposits in Maryland grew by only 2.4 percent to $95 billion from June 2006 to June 2007, the weakest rise since 1997 and below the national average increase of 3.9 percent.

But some Maryland banks experienced strong growth during that time.

HarVest Bank of Maryland, which was established in 2004 with headquarters in Rockville, saw Maryland deposits increase by 37.2 percent to $87 million from June to June. Assets leaped by 63 percent to $120.2 million.

That was among the biggest deposit jumps in the state among individual banks. The bank with the most Maryland deposits, Charlotte, N.C., giant Bank of America Corp., saw an increase of less than 1 percent to $17.4 billion. Some, including M&T Bank Corp. of Buffalo, N.Y., which fell to fifth place from fourth in Maryland, and Susquehanna Bancshares of Lititz, Pa., experienced declines.

Out-of-state banks can claim to be community-minded and spend money through charitable foundations, but banks that are actually formed and built locally resonate better with people, said John P. ‘‘Jack” Hollerbach, HarVest president and CEO.

‘‘People understand that our deposits stay here and go to help the community,” Hollerbach said. ‘‘They like that our decision-makers are here. We’re a metaphor for the community.”

To attract business from across Maryland and other states, it also helps to get actively involved in local chambers of commerce and other organizations and have top-line technology such as remote deposit capture, he said.

‘‘Our banking technology is as good as anybody’s,” Hollerbach said.

The slowdown nationally can be attributed to more people investing in the stock market from June to June, as well as the FDIC starting to charge banks premiums for deposit insurance during this year’s first quarter for the first time in a decade, said Keith Leggett, senior economist for the American Bankers Association in Washington, D.C.

The new fees came about from a change in the law last year, he said. ‘‘Banks had an incentive to minimize deposits,” Leggett said.

Another factor: The slowdown in loans might have reduced incentives for banks to build deposits, he said.

In Maryland, deposits declined in two jurisdictions — Baltimore City and Charles County.

Growth in Carroll

Meanwhile, deposits grew faster in Carroll County than in any of Maryland’s 10 largest counties, increasing almost 9 percent in the past year.

That was despite Carroll gaining only one bank office; in neighboring Frederick County, where deposits grew only 1.4 percent, a net five offices were added.

Carroll banks gained $227 million in deposits versus $44 million in Frederick banks from June 2006 to June 2007, according to the FDIC. BB&T Corp. was the top bank in Carroll, while PNC Financial Services Group, which purchased Mercantile Bankshares earlier this year and was second in Maryland deposits, led in Frederick.

Joseph Weise, manager of a Wachovia Corp. branch in Eldersburg, said Wachovia’s growth — $20 million in Carroll between the bank’s two branches there — is likely because of a new customer incentive program that began last spring. The program rewards both the referred and referring customers with a $25 Visa gift card.

‘‘That definitely increased our accounts,” Weise said.

Statewide, Wachovia moved ahead of M&T to take the fourth spot. Wachovia initially implemented the incentive as a short-term program, but Weise said the company will continue it because it has proven successful. The first Wachovia branch in Frederick County opened along Carroll Creek this summer.

Weise said he couldn’t explain why Carroll’s deposits increased more than Frederick’s but called Carroll’s banking market ‘‘competitive.”

Carroll County is now the eighth largest banking market in Maryland, overtaking Harford County in the past year. The top seven remained the same: Montgomery County, Baltimore County, Baltimore City, Prince George’s County, Anne Arundel County, Howard County and Frederick County.

Deposits in Montgomery and Prince George’s grew a little more than in Frederick with a 2 percent rise in the two former counties. Chevy Chase Bank, the third largest across Maryland, continued to be the most popular bank in Montgomery, adding a net three more branches. Bank of America and SunTrust Banks lost deposits in Montgomery to fall behind Wachovia.

Bank of America also lost deposits in Prince George’s but held on to the top spot there.

Two new entries for Frederick are Graystone Bank of Harrisburg, Pa., which opened Monday, and Blue Ridge Bank, slated to open early next year.

Frederick’s local banks, including Woodsboro Bank with seven locations and Middletown Valley Bank with four locations, ‘‘are just as competitive as some of the nationals,” said Laurie Boyer, director of the county’s Office of Economic Development.

There’s also room for the new banks to succeed, she said.

‘‘There are lots of individuals out there who have money and need someone to manage it,” Boyer said.

Bank earnings

Bank of America reported a 32 percent slide in net income for its third quarter to $3.7 billion from a year ago.

Executives cited a decline in earnings in corporate and investment banking due to ‘‘the significant disruption in the financial markets” and weakened housing market.

PNC of Pittsburgh saw a 73 percent decline in net earnings to $407 million from a year earlier, when results included a $1.3 billion gain from an investment in fund manager BlackRock.

Excluding the BlackRock gain, adjusted net income rose by 23 percent to $469 million for the quarter, executives said. The bank owns about 34 percent of BlackRock.

Net income at M&T Bank dropped by 5 percent for the third quarter to $199.2 million from a year ago. Total assets increased by 6 percent to $60 billion in the past year.

Provident Bankshares Corp., the Baltimore parent company of Provident Bank, reported a 21.5 percent decline in net income to $16 million for the third quarter from a year ago.

Executives cited an increase in the bank's loan loss provision and a reduction in total revenues. Average loans still grew by 5 percent to $4 billion.

Eagle Bancorp, the Bethesda parent company of EagleBank, saw net income for its third quarter of 2007 decline slightly to $1.8 million from $1.9 million a year ago.

EagleBank executives cited the ‘‘challenging interest rate and economic environment” and noted that average deposits and loans increased. Total assets rose by 10 percent in the past year to reach $802.1 million as of September.

Frederick County Bancorp, the parent of Frederick County Bank, reported a decline in its third-quarter net income to $408,000 from $468,000 in the prior-year quarter. Bank leaders attributed the decline to operations costs for new locations in Walkersville and Frederick, which both opened in September 2006.