Stock Watch
Columbia Bancorp: Niche Financing
This small bank is coming into its own by converting mortgage borrowers into regular banking customers.
March 25, 2003
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
