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By Terence O'Hara
November 28, 2005

Gloria Redman, in her more than 20 years managing a business, has been a client of big banks and small banks and everything in between.

But she's never had so many bankers chasing her business as today.

"Oh gosh, it's three or four hard sells a month," said the chief executive and owner of Triumph Technologies Inc., a Falls Church government systems and security contractor. "It's good to be popular."

Companies like Redman's are the prize in what has become the banker's equivalent of a street brawl for the region's booming commercial loan business. Several large new competitors have entered the market this year, intent on winning clients among the area's growing stable of mid-sized firms.

That, coupled with the rapid growth of several local banks, has created one of the most competitive commercial banking markets in the country. It's an environment where loan deals are often only the start of the discussion, as clients demand reduced fees for cash management, better technology, discounted personal banking and other services.

"You've got to give a good price, but that's just a starter," said Hugh Newton, a longtime area banker who heads local commercial and real estate lending for Baltimore-based Provident Bank. "Companies all expect you to be competitive on price but also want you to deliver the service. They want a concrete, consistent partner."

Banks are also battling over top talent, creating a situation where a friendly beer among competitors can turn into a hard pitch to switch companies and presumably bring clients along. Commerce Bank in New Jersey over the past year has lured about a dozen veteran commercial loan officers away from its competitors as part of an aggressive move into the Washington market. Since its takeover of Riggs Bank, Pittsburgh-based PNC Financial Services Group Inc. has increased the small-business lending group from three to 25 loan officers and nearly doubled the staffing for its larger corporate lending group. A host of other out-of-town banks, from global giant HSBC Group to Tennessee's First Horizon National Corp., have sought to pick off some of the best commercial customers.

"In other markets I've worked in, it's easy to know exactly the kind of competition you're up against, and it's usually two or three easily identifiable banks," whereas in Washington six or seven institutions will routinely chase the same deal or company, said Wayne Hunley, the head of corporate banking for PNC in Washington. "Here, you're defending every one of your clients every day, and every competitor has a wildly different value proposition."

In the year ended June 30, commercial lending by the 44 traditional branch banks and thrifts based in the Washington area grew 15.7 percent -- nearly four times the national average, according to a Washington Post analysis of data from the Federal Deposit Insurance Corp.

Banks in most metro markets must be content to increase their loan portfolios -- still the primary component of bank earnings -- by about 3 or 4 percent a year. At a time when rising short-term interest rates are squeezing earnings, being in a high-growth market like Washington is important to increasing profit.

Locally, the growth of defense and government technology spending, coupled with changes to contracting rules, have led companies to demand more access to credit, both to finance contract expenses until they get paid, and to help manage growth. In fact, local bankers say that expected growth among small and mid-sized government contractors figures prominently into their own expansion plans.

Add to that the region's robust job creation, a strong commercial and residential real estate market, and the myriad business services that go along with a growing economy, and you have something of a gold rush mentality taking root among bankers.

"Bankers like to talk bearish, but in Washington they're all acting boomish," said Arnold G. Danielson, a Rockville bank consultant who has studied the local banking market for decades. He added that he sees no slowdown in lending unless the local economy falters. None of a dozen bankers interviewed in recent weeks predicted such a slowdown, nor expressed any worry about the risks inherent in rapid loan growth.

The growth in the commercial loan business here is one reason why Washington, already home to one of the most intense concentrations of banks in the country, continues to attract newcomers.

"We are in the bull's-eye of every major lending organization in the country," said Bernard H. Clineberg, chief executive of Tysons Corner-based Cardinal Bank.

PNC bought the deeply troubled Riggs Bank primarily to enter the Washington market. Provident Bank has been expanding rapidly in Washington in recent years and now has more branches in the Washington region than in Baltimore, its home base for 120 years. Fulton Financial Corp. in Pennsylvania and Baltimore's Mercantile Bankshares Corp. are acquiring banks here.

The biggest bet is being made by Commerce Bank, which promises to open 200 branches in the Washington area in the next five years in an ambitious strategy to swipe market share in the region. Commerce's strategy is to build a large, cheap deposit base with convenient consumer banking services and then aggressively put the deposits to work in loans.

Brian Monday, who had worked at SunTrust and various other banks in the Washington area for 23 years before joining Commerce earlier this year as its Washington market manager, laughs at claims by his competitors that he is offering up to 40 percent raises to lure top lending officers from other banks.

He also doesn't directly deny it. "Loan officers want to come here because of what we are building," he said. "We give loan officers the tools and the freedom to build the business, and that's the main selling point for people to come here. Don't come to work here if you like being in committee meetings."

Commerce is making its biggest push into the government contracting sector. In April, it hired away Eric Pietras and Frank Merendino, who ran a $400 million portfolio of government contracting loans at Chevy Chase Bank.

Pietras said he went to Commerce because it wanted to grow, fast. "A lot of banks have good credit cultures and they want to grow loans 3 or 4 percent a year," he said. "Here they have a great credit culture and they want to grow 10 percent or more a year."

He also cited the "technology culture" at Commerce: Every loan officer is issued a BlackBerry, for example, in addition to wireless laptops. "A lot of us come from banks where technology is not exactly a focus of the organization," he said.

Redman said she recently switched her business, which includes a line of credit, lease financing and several fee-based services, to Commerce, in part to follow Merendino, her longtime banker at Chevy Chase. "But that's not the only reason," she said. "The people can do only what the bank can do, and Commerce struck me as very creative, innovative and responsive beyond anything I've ever experienced."

"We're all gunning for lenders who can move $100 million in top credits and a few of their top performers with them," Clineberg said. Last year, he asked a longtime commercial lender at another bank out for a beer "and wouldn't let him leave the table until he agreed to come work here."

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.