Maryland Banker 3q 2011

the

Third Quarter 2011

b a n k e r MBA and Member Banks Demonstrating

Community Leadership

Through Financial Education

The Official Publication of THE Maryland Bankers Association

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the

Third QuarTer 2011

b a n k e r

Chairman Mary Ann Scully Chairman, President & CEO Howard Bank

Chairman-Elect Michael L. Middleton Chairman & CEO Community Bank of Tri-County

Vice Chairman Robert A. DeAlmeida President & CEO Hamilton Federal Bank

MBA And MeMBer BAnks deMonstrAting

CoMMunity LeAdership Through Financial EducaTion

The Official PublicaTiOn Of The Maryland bankers assOciaTiOn

186 Duke of Gloucester St. Annapolis, MD 21401 410-269-5977 / 800-327-5977 www.mdbankers.com

Publication Editor Cynthia L. Gentilcore

Maryland Bankers Association

Denise L. Pope Market Executive for Mid-Atlantic Market Capital One, N.A

Andrew M. Bertamini Regional President, Maryland Market Wachovia, A Wells Fargo Company

Tom N. Rasmussen President & CEO New Windsor State Bank

message from the immediate past chairman Adversity Precedes Growth

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message from the chairman Effectively Advocating for MBA Members

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Maryland BankPAC Makes a Difference

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2011 MBA Regional Meetings

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message from the president 2011 – Another Memorable Year

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Finance & Administration Jeffrey E. Lewis, Controller / Director of

Operations

economic update Is Inflation Good for Banks?

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Editorial Christina P. O’Neill, Custom Publications Editor Cassidy Norton Murphy, Associate Editor

departments:

Ralph W. Emerson, Jr. Senior Vice President M&T Bank

Carissa L. Rodeheaver, CPA, CFP Executive Vice President & CFO First United Bank & Trust

Raymond W. Hamm, Jr. Market Executive PNC Bank, N.A.

John A. Scaldara, Jr. Chairman, President & CEO The Columbia Bank

Kelly Whitley Hobbs Vice President of Public Policy and State Government Relations-Mid-Atlantic Bank of America

Daniel J. Schrider President & CEO Sandy Spring Bank

Michael E. Hough President - Maryland Division Susquehanna Bank

Brantley J. Standridge President, Maryland Operations BB&T

Michael G. Livingston President & CEO The Bank of Glen Burnie

Raymond M. Thompson President & CEO Calvin B. Taylor Banking Company

Philip E. Logan President, Chairman and CEO Slavie Federal Savings Bank

280 Summer Street, Boston, MA 02210 Phone: 617-428-5100 Fax: 617-428-5118 www.thewarrengroup.com

cover MBA and Member Banks Demonstrating Community Leadership Through Financial Education

President & CEO Kathleen M. Murphy Maryland Bankers Association

Published by

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Past Chairman J. Scott Wilfong Chairman, President & CEO SunTrust Bank, Greater Washington/Maryland

Board of Directors George J. Behr, Jr. President Arundel Federal Savings Bank

Contents

Directors Timothy M. Warren, Chairman Timothy M. Warren Jr., CEO & Publisher David B. Lovins, President Vincent M. Valvo, Group Publisher

& Editor in Chief

Advertising George Chateauneuf, Publishing Division

Sales Manager Richard Ofsthun, Advertising Sales Manager Cara Inocencio, Advertising Sales Manager

news and notes

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5

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EVENTS Sarah Cunningham, Events Director Jason Long, Events Manager Emily Torres, Advertising,

Marketing & Events

Coordinator Design & Production John Bottini, Creative Director Scott Ellison, Senior Graphic Designer Ellie Aliabadi, Graphic Designer

©2011 The Warren Group Inc. All rights reserved. The Warren Group is a trademark of The Warren Group Inc. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without written permission from the publisher. Advertising, editorial and production inquiries should be directed to: The Warren Group, 280 Summer Street, Boston, MA 02210. Call 800-356-8805.

6 Third Quarter 2011 | 3

Message from the Immediate Past Chairman J. Scott Wilfong | MBA Immediate Past Chairman Chairman, President & CEO

SunTrust Bank, Greater Washington/Maryland

Adversity Precedes Growth “Adversity can be viewed as a detour and not a disaster.

Change is a catalyst for growth – and growth brings incredible opportunities.” – Rosemarie Rossetti

T

hat quote comes from Rosemarie Rossetti, a business owner and author. Paralyzed from the waist down in 1998 after a 3 ½ ton tree came crashing down on her during a bike ride, Rossetti had to rebuild not only her business, but her life. The key element of her survival is creating the desire to change, the confidence to act and the tools to succeed.

As my year as chairman of the Maryland Bankers Association comes to a close, I have seen my fellow bankers rise to the occasion after our industry was dealt a devastating blow not only to our bottom line profits but also to our image as a noble profession.

Banks have all had to make detours to begin the re-growth for new opportunities. Instead of succumbing to the assumption that the new, as yet uncodified regulations would run many of us out of business, we got to the task of refining our business plans, reviewing risk management practices and identifying areas in which we could reduce costs and improve revenues. You could see the improved results in many first-quarter 2011 earnings reports, and I expect that second-quarter results, just around the corner, will continue that trend. As an industry and leaders in that industry we are committed to our shareholders, employees and

4 | The Maryland Banker

communities to not only survive but to thrive.

In my first column in The Maryland Banker as chairman, I indicated we would continue to build on four key areas: advocacy, financial growth, industry image, and member engagement. I also noted that when the economy is distorted by excess, as it was during the housing bubble, what looks good on the surface serves as a disguise for the discord underneath. Once that distortion was identified for what it was, our member banks got to work – and so did the MBA. Needless to say, it’s been an active year!

We created the Member Value and Financial Growth Task Force led by former MBA Chairmen Jim Pierne and Bill Grant, to develop strategies to enhance the profitability of our professional development programs and member services. If you think of it, it’s not that far removed from the model of how banks target their most valuable customers. The task force surveyed members to evaluate which benefits are most valuable to them and created an implementation plan based on that feedback. Early in 2010, the MBA launched its new website, improving members’ access to information while creating a social network by establishing a Member Community at

www.mbamembercommunity.com.

I want to thank the many members who have provided unwavering support during this most challenging year. I would also like to thank the tremendously capable and committed staff of the MBA led by Kathleen Murphy. We are fortunate to have such strong leadership.

Today membership is more engaged and we are more focused on delivering the value you told us you wanted from the MBA. Our finances have been improved with the restructuring of our balance sheet and we are appreciative of M&T Bank and Buddy Emerson in this regard, as they continue their legacy of support.

In closing, the MBA has leveraged the adversity of the last couple of years to redefine and refocus our efforts to be stronger, more impactful and more relevant to our membership.

Hopefully you share in that sense of accomplishment. I am proud to have been given the opportunity to serve you, the members of the Maryland Bankers Association.

■ J. Scott Wilfong is the immediate past chairman of the Maryland Bankers Association. Reach him by email at scott.wilfong@suntrust.com.

Message from the Chairman Mary Ann Scully | MBA Chairman Chairman, President & CEO Howard Bank

Effectively Advocating for MBA Members

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he Maryland Bankers Association membership consistently tells us that the top value they get out of their MBA membership is the advocacy we provide at all levels of government. This year, we will be continuously educating members on the full value of that role as a key reason to get and stay engaged in the Association. In turn, the leadership of the MBA will continue to ensure that, as we provide that advocacy role, we are focused on consistently increasing each member’s effectiveness in fully leveraging the voice of the industry.

From the local level to the national level, the landscape has really changed.

Lobbying, tracking legislation and working with local, state and federal government is now a year-round task. A decade ago, it was confined to when the legislature met; for three or four months, the activity was intense, but it was concentrated. After the Great Recession,

we are all operating in a very different – and much more aggressive – landscape.

Local and national threats loom, not just state legislative drafts. While there is, naturally, much more activity in the financial legislation arena these days, all members need more help in researching, educating and lobbying.

As a collective body, the MBA is aware of upcoming advocacy issues at every government level, and has developed relationships with legislators throughout all levels of government. Our staff and our members are skilled in working together with the legislative bodies on the bills proposed, providing feedback and guidance to help support and defend our industry.

As an inclusive organization – working for members of all sizes and charters – we are especially proud of the fact that our advocacy role is of value to members of all sizes. We provide a very large benefit to

large institutions in helping their in-house government relations experts understand very local issues. For the smaller institutions, we serve in many respects as their outsourced government relations staff. The MBA levels the playing field for Maryland banks, providing a unified voice and assistance for all.

The value of a state banking association is undeniable. Whatever size you are, your voice will resonate when it is combined with that of others in the industry.

Working together gives everyone more leverage in making sure that our industry is heard as well as understood.

I am personally looking forward to working more closely with each of you over the coming year to help us make our industry stronger.

■ Mary Ann Scully is the chairman of the Maryland Bankers Association. Reach her by email at mascully@ howardbank.com.

Maryland BankPAC Makes a Difference Maryland BankPAC is the Political Action Committee (PAC) of the Maryland Bankers Association. Its purpose is to raise funds within the Maryland banking community to support candidates running for office at the national, state and local levels.

Candidates supported by the Maryland

BankPAC share a strong belief in the need for free competition in the financial marketplace.

Maryland BankPAC was created to be the collective voice of thousands of individuals working in the banking industry who recognize the need to participate in the legislative process

and elect strong, business-friendly candidates to the U.S. Congress, the Maryland State Legislature and local governments. The laws passed at all levels of government affect not only the taxes paid on income and investments, but also the kind of

continued on page 14

Third Quarter 2011 | 5

2011 MBA Regional Meetings

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ore than 140 bankers from over 50 institutions attended the MBA’s 2011 regional meetings, held across Maryland in Hagerstown, Crofton and Baltimore.

MBA members received first-hand information on the outcome of Maryland’s 2011 General Assembly Session and heard about new and exciting member opportunities and benefits and ways to stay engaged and connected to their Association.

We would like to extend our sincere thanks to the following regional meeting sponsors:

The leaders in providing legal advice to Maryland’s financial services industry

D. Robert Enten Carla Stone Witzel Marjorie A. Corwin Peter B. Rosenwald, II Andrew D. Bulgin Brian L. Moffet John C. Morton Timothy A. Perry Attorneys at Law 233 E. Redwood Street � Baltimore, MD 21202 410-576-4000 � www.gfrlaw.com

6 | The Maryland Banker

• • • • • •

Community Bank of Tri-County Federal Reserve Bank-Baltimore M&T Bank Slavie Federal Savings Bank Susquehanna Bank Wachovia, A Wells Fargo Company

Welcome New Members The Maryland Bankers Association (MBA) is the only professional association representing the Maryland banking industry.

We are pleased to welcome the following new members: Charter Members: • Bay-Vanguard Bank Associate Members: • Alpha Engineering Associates, Inc. • Danielson Associates • Terrapin Financial Services, LLC

Message from the President Kathleen M. Murphy | President & CEO

Maryland Bankers Association

2011 – Another Memorable Year

A

t midnight, April 11, the Maryland General Assembly concluded its 2011 Session, the 428th time the General Assembly has met since the state government was formed in 1776. Senators and House Delegates addressed some weighty issues again this year – perhaps issues that paled in comparison to those addressed by their predecessors, yet momentous nonetheless.

For our industry, it was another memorable year. After reviewing each of the 2,369 bills that were introduced, we took a position, testified, and worked to pass, amend or defeat nearly 200 bills that impacted our industry – the largest bill portfolio ever managed by the MBA on behalf of our members.

The state’s dismal fiscal environment made for a particularly challenging situation, where legislators turned their attention to consumer protection, foreclosure and other issues that would have no fiscal impact on the state, but that would negatively impact our ability to serve customers and communities.

Our members have told us that they value the MBA’s advocacy work most highly in comparison to all of the other benefits of membership. Collectively, the Association and our members, through your involvement and legislative outreach activities, enabled us to tackle the public policy challenges and risks before us this year.

Priority of Liens – The most significant change our industry faces from a precedence perspective is to the “first in time, first in line” premise that has existed in our state since its founding.

For more than 20 years, we have seen

bills introduced by condominium and homeowners associations (HOAs) that would give a portion of unpaid assessments priority over prior recorded liens in foreclosure. This year’s environment was different, given the continued foreclosure challenges and the fact that the sponsors of the bills are well-liked, highly respected legislators from jurisdictions with a high number of condos in foreclosures.

When it became apparent that the bills would pass, we turned our focus and efforts to amending them so as to limit their impact on our members. Maryland now joins 16 other states with condo/ HOA lien priority statutes, yet no other state limits the amount to four months not to exceed $1,200 of regular assessments only, applies only to mortgages/deeds of trust recorded after the bill becomes effective on Oct. 1, 2011, and requires condos/HOAs to give notice to the lender within 30 days of filing the contract lien in order to give them the lien priority. We will send a notice to our members prior to the effective date to ensure our members are preparing for this new law.

Foreclosure Issues – We had anticipated seeing bills that would move Maryland to a full judicial foreclosure process where every foreclosure would go before a judge and to address the robo-signing issues that came to light in December. Neither came to fruition, due in large part to a briefing conducted for the House Environmental Matters Committee in January, which set the tone early that Maryland has been in the forefront nationally because of the comprehensive changes enacted since

2009. While we addressed 43 bills related to foreclosures alone, it was in recognition of how far we have come as a state in revising and lengthening the foreclosure timeline and instituting a process where borrowers may request mediation before their loan goes to foreclosure sale. Bills passed which made more technical changes to the foreclosure process.

Members will be reminded of these changes in advance of the bills becoming law.

Banking-Focused Bills – Very troublesome were two bills that specifically targeted the banking industry.

One would have created a commission to study formation of a state bank to compete against banks – because a state bank was created in North Dakota in 1919 to provide access to credit for farmers and therefore “must be needed here” – and another that would have repealed a limited exemption banks have from paying personal property taxes on computer software and equipment used to make loans and take deposits.

The limited personal property tax exemption went into effect when banks and savings and loans moved from the franchise tax to the corporate income tax structure. That move subjected banks to paying personal property taxes for the first time. At that time, the MBA argued and the General Assembly agreed that banks should have the limited exemption because computer hardware/software used for making loans and taking deposits is the banking industry’s manufacturing equipment. Manufacturers and research and development companies are exempt continued on page 11

Third Quarter 2011 | 7

MBA and Partners Work Together for Financial Education

By Cassidy Murphy

Bob DeAlmeida, MBA’s Vice Chairman and former Chairman of MBA’s Financial Education Council, and Kathleen Murphy, MBA’s President & CEO, at the May 5 Open House held by the MBA and Habitat for Humanity Maryland.

F

inancial education is a top priority of the Maryland Bankers Association (MBA) and its member banks.

Since 1986, MBA members have reached more than 510,000 residents through financial education programs. Within Maryland, banks conduct a variety of financial education sessions, in public and private schools, for adults and seniors, and independently and in partnership with non-profits and civic organizations.

Maryland bankers continue to demonstrate their commitment to making a difference in their communities – and the MBA continues to recognize and support them in those efforts. The MBA recognized some of these banks with MBA’s Financial Education Awards (see next page for 2010 winners), and continues to partner with other organizations to take financial education to new levels. Two of MBA’s newest relationships are with EverFi and Habitat for Humanity Maryland.

EverFi EverFi is a financial education technology company that brings an interactive personal finance website to high school students.

Their Financial Education Scholars Program teaches, assesses and certifies students in Financial Literacy using the latest new media tools, animation, video, adaptive-pathing and other technologies to engage students in the lessons they need to learn about their financial future.

8 | The Maryland Banker

Maryland Bank Services, Inc. (MBSI) selected EverFi as a prefered provider for member banks to private-label the Financial Education Scholars Program at high schools within their footprint, at a discounted cost, to help equip schools with a tool that covers over 600 topics in personal finance, all of which maps to national and state financial literacy and curriculum standards.

Teachers receive a 30-minute training session and the program is introduced to the students. The program is designed to fit into portions of the curriculum already taught in math or social studies programs. It explains mystifying terms like “credit score” and explores the basics of credit, renting versus owning, taxes and student loan management – and “the students love it,” said EverFi’s vice president of business development Ryan Swift.

Once students complete the Financial Education Scholars Program, they are certified in financial education, which can be a valuable addition to their resumes and college applications. “It really speaks their language, and the gaming platform is, of course, very popular,” Swift said. “But it also doesn’t take long for them to realize that the information is important, even vital, to their lives right now, and their lives in the future.”

Partnering with the MBA will allow EverFi to reach more students. “At the local, community level, we’re telling a compelling story for the banks,” said Swift – a story about banks and their commitment to financial education.

Habitat for Humanity Maryland Formalizing the work of many banks across the state, the MBA has partnered with Habitat for Humanity Maryland, the state support organization for local Maryland Habitat for Humanity affiliates. The MBA and Habitat for Humanity Maryland will work together to provide financial education for partner families who are, or will be, the recipients of houses built by local volunteers.

Susan Devlin, Habitat of Humanity Maryland Board President, explained that a family partnering with Habitat for Humanity “goes through a very rigorous process,” and that banks are a crucial part of that process.

The partnership is twofold: often, a family will apply for a home with Habitat, but their credit rating is not where it needs to be to own a home. Habitat works with those families, providing financial education and support to increase their credit standing.

Once families enter into a partnership with Habitat, they work with a local bank to learn about all aspects of financial responsibilities: explanations of the various types of banking available to them; how to create a budget; how and when to pay local taxes. “[Partner families] are often the first to own houses, and they did not grow up with that life-long learning process of what it means to own a home, or a family history of financial responsibility,” Devlin said. “Part of Habitat’s responsibility is to educate them to that reality.”

Maryland banks “are very generous with their time and expertise; they are pros in the field, and it’s very beneficial to work with experts. Working one-on-one works best, and getting banks involved is very important. Banks large and small are willing to give their time and resources.”

The partnership with the MBA allows Habitat to reach more people in more locations, she said.

■ Cassidy Murphy is associate editor of The Maryland Banker.

MBA Financial Education Awards Reaching Thousands

By Linda Goodspeed

T

o help fill the gaping hole in basic financial literacy, Maryland banks run a wide array of educational programs in schools and in their communities. Each year, the MBA recognizes member banks and their financial education programs.

Following are the 2010 MBA Financial Education Award-winning banks, telling the compelling stories of their financial education programs: School-Age Children (Assets Less Than $1 billion) For the seventh straight year, New Windsor State Bank’s elementary school banking program took top honors. The bank’s K-5 program has grown from one school to 10 schools, and now reaches 3,962 students.

Volunteer bank employees visit participating schools on a weekly or monthly basis, enlisting older students as tellers and having them take deposits.

“They can deposit a quarter, that’s fine,” said New Windsor State Bank’s senior vice president and chief deposit officer Lisa Monthley. “We want to encourage the habit of saving.”

Baltimore County Savings Bank, with more than 1,000 participants in 14 schools, took second place.

“The range of deposits is quite surprising,” said Nikie Paul, branch manager of Baltimore County Savings Bank. “The total is more than $50,000.

Some students bring a quarter, some $20, some $200. They get money at Christmas or for a birthday and bring it in. Many of them keep the accounts all the way through high school and college. It’s neat to see kids excited about saving.”

School-Age Children (Assets Greater Than $1 Billion) First-place winner Sandy Spring Bank has been running its Young Savers Program for nearly 25 years. Over that time, the program has expanded into 28 schools with thousands of participants.

“We continue to enhance, deepen, and expand the program,” said Kulley Bancroft, Sandy Spring Bank’s vice president of public and community relations. “Now we’re looking to bring in upper levels, middle, high schools.

We all benefit from teaching kids and young adults how to make good financial decisions.”

Second-place winner The Columbia Bank has two dedicated reinvestment officers who run the bank’s many financial education programs. The bank’s schoolage program partners with 15 local elementary schools to make presentations and provide banking and saving experiences for nearly 2,500 students.

“We’re extremely excited about the level of participation,” said marketing manager Kelsi Karcher.

Young Adults First-place winner New Windsor State Bank partners with four local high schools to talk to teens about budgeting and using credit wisely.

“We talk about choosing the right credit card, interest rates, not paying just the minimum balance,” said Monthley. “It really makes them stop and think.”

Second-place winner Wachovia, a Wells Fargo Company, conducted 52 sessions at local high schools and colleges with a total attendance of 750 students.

In addition to its young adult programs, Wachovia runs dozens of financial education classes for people of all ages based on Wells Fargo’s “Hands-on Banking” curriculum.

“The material is age-appropriate and interactive,” said Andy Bertamini Wachovia’s regional president, Maryland market. “It’s a great way of helping consumers around financial education.”

Adults and Seniors Whatever the topic, chances are first-place winner PNC Bank, N.A. has a financial education class on it.

“We have classes on everything

From left to right: Scott Wilfong, MBA’s Immediate Past Chairman, Terri Copeland, PNC Bank, N.A., and Kathleen Murphy, MBA’s President & CEO.

from how to balance a checkbook, to budgeting, buying a home, raising money-smart kids, money management for seniors, small business cash flow, and small business borrowing,” said Franklin McNeil, PNC Bank’s community consultant for greater Maryland community development banking.

Classes, some in Spanish, are held at bank branches and off-site at churches, nonprofits, senior centers, schools – wherever there is a need. Last year, nearly 1,000 people attended a PNC financial education class.

Second-place winner The Columbia Bank also reached about 1,000 adults and seniors through its many seminars and workshops, which are offered both on and off-site.

“Financial education is a big priority for us,” said Karcher. “Anything we can do to improve financial literacy and give back to the community, we’ll do.”

■ If you are interested in hearing more about MBA’s Financial Education Awards Program and/or want more information on how your bank can get involved with EverFi and Habitat for Humanity Maryland, contact the MBA at 410-269-5977.

Linda Goodspeed is a freelance writer.

Third Quarter 2011 | 9

Economic Update Anirban Basu, MA, MPP, JD | Chairman & CEO,

Sage Policy Group Chief Economic Advisor,

Maryland Bankers Association

Is Inflation Good for Banks?

I

s inflation on the way? It depends on who you ask. There are certainly many economic stakeholders, including food processors, trucking companies, ordinary consumers and owners of treasuries and other bonds, who have become deeply concerned over the specter of inflation.

Despite repeated commentary from Federal Reserve policymakers regarding the general lack of observed inflationary pressures in the U.S. economy, inflation-

oriented concerns have been mounting.

The Thomson Reuters/University of Michigan Survey of Consumers represents a primary source of statistical detail regarding consumers’ expectations of future U.S. inflation. A recent release in late-March attracted significant attention because it reflected a substantial spike in year-ahead expectations for inflation. The median inflation expectation rose from 3.4 to 4.6 percent.

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Meanwhile, the Federal Reserve continues to assure markets that the inflation outlook remains benign. As of this writing, the U.S.Federal Reserve sees the price index for personal consumption expenditure (PCE inflation) growing between 2.1 and 2.8 percent this year, though that range is up from the 1.3 to 1.7-percent range that prevailed in January.

Core PCE inflation for 2012 is now seen in a range between 1.3 and 1.8 percent.

Someone is wrong. It is tempting to believe the Federal Reserve, however, since many people there boast doctorates in economics and/or other graduate degrees.

Meanwhile, the typical U.S. consumer has been utterly preoccupied by the royal wedding and is fascinated by Lady Gaga.

Is Inflation Good for Bank Profits, and Under What Circumstances?

Whatever one’s view on inflation, there is little question that the emergence of inflation would shift the economic context in which banks operate. But the question remains, is inflation good or bad for bank profitability? Many subscribe to the view that inflation is good for bank profits as lending rates rise and the value of assets climbs. However, this view is hardly universal.

Writing in March 1980 during a period of profound inflation in the U.S., Henry C. Wallace, then a member of the Federal Reserve System’s Board of Governors, remarked that “what some people seem to overlook is that bankers are net creditors. Once we focus on that fact, suspicion is bound to mount that it is indeed inflation that is ailing the banks.

The banks are creditors, and creditors

Message from the President continued from page 07

are born losers in inflation. Their paper assets are larger than their liabilities. Their capital, therefore, except for what little real estate and equipment they have, is also invested in paper assets. These paper assets depreciated with inflation. The bank’s capital depreciates with them.”

One can take a more macroeconomic view of the issue as well. In 1995, Robert J. Barro published findings that indicated that across nations, inflation and economic growth were negatively related – higher inflation is associated with lower economic growth. This actually represented a rejection of previously held views regarding the nature of that relationship.

Around the same time, other economists were writing about the essential role that financial intermediaries such as banks play in economic development. Specifically, these economists speculated that the way that inflation damaged economic growth was by interfering with the role financial intermediaries play in an economy. In other words, inflation may harm financial markets and impede their smooth operation, which in turn limits lending confidence and capital formation. That can’t be good for bank profits.

According to economists John Boyd and Bruce Champ, the story goes something like this. Higher inflation can decrease the real rate of return on assets.

Lower real rates of return discourage saving and encourage borrowing. New borrowers entering the market are likely to be of lesser quality and are more likely to default on their loans (after all, the smarter borrowers have less reason to borrow

from paying personal property taxes on manufacturing equipment. Our efforts were successful in keeping both bills from passing.

Banker Involvement Makes the Difference – In March, we had the best legislative dinner ever, with more than 100 bankers and legislators attending.

The relationships our members have built over time back home with your legislators are what enables us to achieve what we do on our members’ behalf each year. As testimony to this local leadership, Delegate Maggie McIntosh, chair of the House Environmental Matters Committee, made the following comments to the MBA witnesses at the end of a briefing on foreclosure and mediation laws on Jan. 18, 2011: “I do want to, while we are here, and before we adjourn, thank you for your cooperation,

and I do want to say that the banking industry in Maryland has been a full partner over the past few years in trying to address the issue with foreclosures. We do appreciate you as a partner, we really do.”

MBA will issue the “2011 General Assembly Final Report” this summer, along with our counsel’s practice pointers for implementing the new laws, which will include all of the bills that have been signed into law that impact the banking industry. The final “Sine Die” Legislative Bulletin was issued on April 12 and is available now on the MBA’s website, www. mdbankers.com.

■

What’s On Your Mind?

It is my honor to serve this great industry. Please contact me at any time to discuss industry issues of importance to you at kmurphy@mdbankers.com or 443-837-1601.

If you’re thinking about how to be a better, bigger bank you’re probably thinking about the technology driving your business today.

Can it get you where you want to go?

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It’s time to think ahead.

are you thinking what we’re doing?

continued on page 14

Third Quarter 2011 | 11

News &

Bill Bromley

David Smith

Edward J. Schneider

Members on the Move Accume Partners named Bill Bromley as regional managing director of the midAtlantic region.

David Smith, CAMS, joined the firm as the compliance manager in the firm’s Financial Services Practice.

Edward J. Schneider was promoted to executive vice president of BankAnnapolis, a new position created in recognition of his performance as senior vice president

The

Notes

Brent McGraw

Matt Rickeman

and chief financial officer. Schneider will continue as CFO. Brent McGraw, vice president of the private business banking division of BankAnnapolis, was named to the board of directors of the Boys & Girls Club of Annapolis & Anne Arundel County (BGCAA). Appointed to a two-year term, he joins other business and community leaders and elected officials in advising the organization, which provides a safe place for young people to grow, learn and have fun. The club currently operates in

Gail E. Smith

Matt Rickeman joined Carroll Community Bank’s commercial banking division as assistant vice president and commercial loan officer. He will be responsible for business loan development and credit underwriting both in Carroll and Howard counties.

Francis X. Bossle was appointed chairman of Chesapeake Bank of Maryland’s

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Robert K. Bloodsworth, Jr

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Have news to share? Celebrating a milestone in 2011? Share your bank’s achievement. Send your news and photos to Cindy Gentilcore at cgentilcore@mdbanker.com.

Mike Rittase

Matt Martin

Andrew McLean

mutual holding company, Banks of the Chesapeake M.H.C. Bossle, the former executive vice president of Northstar Mortgage, has served on the bank’s board of directors since 2005.

Gail E. Smith was named executive vice president and chief operating officer. She has been with the bank since 2000, most recently serving as senior vice president, and currently serves on the board of directors of the bank.

Robert K. Bloodsworth, Jr., was named senior vice president and chief financial officer. He has been with the bank since 1993 and previously served as vice president and controller.

Lawrence M. Jackson was named controller for the bank. Jackson, a graduate of Towson University, holds CPA certifications in Maryland and Delaware.

Mike Rittase was named vice president and commercial lender of New Windsor State Bank. Rittase was formerly vice president and branch manager of small business development at the bank’s North Carroll branch.

Matt Martin has been appointed to PNC Bank’s market leadership team as retail market manager for greater Maryland. He will oversee the daily management and operations of the bank’s regional branch retail network.

Andrew McLean recently joined the bank as an agricultural banker, serving the Eastern Shore.

Suzette Covalt recently joined the bank as a business banker in Carroll County, primarily serving businesses in Westminster. She provides customized financing solutions and services to help business owners achieve their goals

Suzette Covalt

Michael Livingston

John A. Scaldara, Jr.

through all stages of the business life cycle.

Michael Livingston, president and CEO of The Bank of Glen Burnie, and current member of MBA’s board of directors, was named the Maryland Economic Development Association (MEDA) Volunteer of the Year for 2011. The MEDA Awards recognize members’ efforts to attract and support businesses, redevelop business districts, market communities, and promote workforce development, tourism, and

agriculture. “Michael Livingston has been a selfless volunteer whose actions have had an incredibly positive impact on his community,” said MEDA President David S. Ianucci. “He is a most deserving recipient of the MEDA Volunteer of the Year Award for 2011.”

John A. Scaldara, Jr., president and CEO of The Columbia Bank, was recently appointed chairman of the bank’s board of directors.

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Third First Quarter 2011 | 13

Economic Update continued from page 11

since they understand that real return on assets is falling). Banks may react to the combined effects of lower real returns on their loans and the influx of riskier borrowers by rationing credit. Higher nominal interest rates on loans may also cause low-risk borrowers to exit the market, making the situation that much worse. With overall investment reduced, economic productivity suffers, frustrating growth.

But as Boyd and Champ indicate, there is something peculiar about the effect of inflation upon the financial sector.

Negative effects only seem to emerge when inflation rises above some critical level. At lower rates of inflation such as the ones we observe today, inflation does not appear to cause credit rationing.

That said, once an economy reaches that threshold, even small increases in inflation thereafter can result is significant declines in credit availability. Boyd and Champ compared two sets of nations, one with inflation rates below 5.4 percent and one with median inflation rates of just 6.6

percent. They found that the median ratio of bank lending to GDP in the second group of nations was fully 10 percent smaller than in the first set of nations.

A Little Inflation is a Good Thing, but More Than That is Not For now, we appear to be in an inflationary zone that is conducive to growing bank profitability. As an example, investment advisor Michael Yoshikami, CEO and founder of YCMNET Advisors, recently counseled his clients to prepare for rising inflation in the U.S. by investing in U.S. banks. The thinking is that bank interest rate spreads and asset values are poised to rise and that there are few better hedges against inflation.

Of course, one can be impacted by too much of a good thing. While inflation is expected to tick higher in the year ahead, it is not expected to rise to a level that will upend presently observed economic momentum. However, if the hyperinflationary theorists are even remotely correct, growth in bank profitability could ultimately be jeopardized.

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BankPAC continued from page 5

products and services banks serving Maryland can offer their customers.

BankPAC gives every bank employee a stronger voice in the legislative process by pooling thousands of individual contributions.

These contributions are allocated to candidates who demonstrate a real concern for and understanding of America’s banks – big and small. Your support of BankPAC is a vote for a sound, competitive financial services industry in which you can live and work.

This year’s campaign is off to a great start. As of May 23, 2011, the Maryland BankPAC has raised $35,288 from corporate contributions from member banks, directors and employees of member banks.

To learn more about the Maryland BankPAC, talk with your CEO or contact MBA’s Maryland BankPAC Treasurer Lynn Mitchell at 443-8371603 or lmitchell@mdbankers.com. ■

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