In just one week, Citizens Bancorp has announced two significant developments that denote a sharp turn from its traditional image of a staunchly conservative institution.
Although it is one of Maryland's larger bank companies, with assets of $1.7 billion and a network of more than 100 branch offices, Citizens is generally regarded as little more than a community banking organization. Indeed, there are those who regard its principal subsidiary merely as a profitable but conservatively run suburban institution that only recently outgrew its rural bank roots.
Whether officials of the company agree or not, Citizens is well on the way to erasing the stereotype image of the small-town Prince George's County bank.
With the announcement this week that it has agreed to acquire Washington's McLachlen Bancshares in its first interstate merger, Citizens served notice that it's ready not only to build a new identity but to compete on a different level.
The deal with McLachlen is a masterstroke in timing, strategy and evaluation of the market in the District.
McLachlen National Bank is the only independent middle-tier or medium-sized bank remaining in the District. At the same time, none of the third-tier banks in the city have the assets, deposits or business mix that fit Citizens' growth strategy.
None of the larger D.C. banks that haven't been bought by institutions outside the city seem likely to become merger candidates soon. Riggs National Bank, the District's largest, is much too big to be acquired by Citizens. First American Bank of Washington is a subsidiary of Washington's First American Bankshares Inc., which is privately owned and controlled by Middle Eastern investors. Control of The National Bank of Washington only recently changed hands and the principal owners have indicated their preference for an independent course for the time being. James Madison Limited has also embarked on an independent course with acquisitions in Virginia and Maryland.
That leaves a handful of small independent institutions, many of them so-called boutique banks with limited resources and fewer than seven years in the banking business.
McLachlen's appeal for Citizens is its reputation as an established and conservative but well-run bank -- much like Citizens -- with a modest but profitable commercial loan portfolio. Citizens' basic strength, on the other hand, is its consumer banking business. The merger, if approved, would be another "perfect fit" in bank merger parlance.
Washington area banking industry sources familiar with Citizens' operations see the proposed merger and the recent appointment of a new president as significant indications that the Riverdale banking firm is breaking with the past.
Less than a week before the merger agreement with McLachlen was announced, Citizens' Chairman Alfred H. Smith Jr. announced the appointment of Jeffrey R. Springer as president of the company's principal subsidiary, Citizens Bank of Maryland. The 42-year-old Springer, described by Smith as "progressive but in the conservative mold," succeeds Robert Bone who retired after 32 years with Citizens.
It is the second major change in top management at the holding company and its principal subsidiary within the past year. Smith was named chairman of Citizens Bancorp, succeeding his father who molded the rigidly conservative image of the bank and its parent while shrewdly building it into one of the area's more profitable banking organizations.
The elder Smith's retirement and his recent death prompted considerable speculation about possible major changes in Citizens' operations. Although Citizens' growth more than tripled in the past 10 years, it confined its expansion strategy to acquisitions of smaller Maryland banks. Under Alfred H. Smith Sr. Citizens developed a core of decidedly narrow consumer business lines, its aggressive acquisition strategy notwithstanding.
"Nothing's changed," Alfred Smith Jr. insisted in an interview shortly after announcing the McLachlen deal. The fact that McLachlen happens to be in the District makes little difference in Citizens' philosophy, he implied.
Citizens' entry into the District through a merger with McLachlen will make it a more competitive player in the interstate banking game that has developed in the area. With the addition of a D.C. bank, Citizens will have added a vital part to its strategy of capturing a bigger share of the market in the Washington-Baltimore corridor. Although most of its offices are in Prince George's County, Citizens' market penetration extends from Baltimore to St. Mary's in Southern Maryland and to Frederick County, north of Montgomery County.
"We want to be aggressive and maintain our market share," Smith emphasized. Although Smith insists nothing's changed, the McLachlen deal is indicative of a much more aggressive approach by Citizens. Admittedly slow in selecting merger partners in the past, Citizens apparently will accelerate its search for acquisitions that "meet our criteria." "We're not interested in taking on a sick sister. There are a lot of those out there," Smith said. "We don't want to go overboard and hurt our earnings."
On the other hand, there is ample reason to believe Citizens will broaden its search for acquisition opportunities throughout the Middle Atlantic region. "I wouldn't contemplate not going into Virginia or anywhere else," Smith said.
His preference for a president and, presumably, banks in the "progressive but conservative mold" notwithstanding, it's clear that Smith is taking Citizens in a bold new direction.