It's almost staggering to realize that only four multistate banks account for 40% of Maryland's banking assets. With that trend unlikely to change, the best bet for the remaining small banks may be to carve out a niche that will merit a premium from a potential acquirer.

That's what Columbia Bancorp (CBMD) a 23-branch chain in the affluent Baltimore-Washington corridor, hopes to do. By focusing on mortgages and construction lending in its fast-growing region, the bank has been able to generate deposit growth of 14.5% in the past year.

"If we're financing someone's home, we stand a better chance of getting their overall banking business," CEO John Bond says. Such broad relationships will cushion a falloff in mortgages when interest rates rise, he adds.

Columbia's credit picture has improved. Nonperforming assets -- loans in arrears for at least 90 days -- made up a mere 0.09% of total assets in the most recent quarter, one-fifth the rate of a year earlier.

The bank earned $1.50 per share in 2002, up by one-third from 2001. Shares trade at 16 times the 2003 consensus earnings estimate of $1.57 and 2.2 times book value. Henry Coffey, an analyst at Washington, D.C.-based Ferris, Baker Watts, says Columbia would fetch more than $30 per share if acquired.

-- Courtney McGrath

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