- In the last 6 months, 16 Maryland banks received $426 million in TARP funds. Provident Bank and Chevy Chase Bank were both sold, due to losses from investments and risky lending. First Mariner Bank and Wilmington Trust FSB are considered "DMZ Banks" at risk of needing to sell. - 4 Maryland banks received enforcement actions since June 2008, and Suburban FSB has been taken over. Up to 30 of Maryland's 94 banks may fail or be sold in the next 5 years. - To survive, banks need to focus on growing core deposits rather than wholesale funding. Emphasizing branch banking, deposit products, and marketing can help attract deposits, which are important for

1. Community Banks and
Core Deposits
Strategies for Building Core Deposits

2. WAMU
(What A Mistake in Underwriting)

3. What’s Happened in the
Last 6 Months
Let’s take a moment to look at the past
and see what’s happened in the banking
industry in Maryland.
• Who got TARP money
• Who sold
• Who were issued enforcement actions

4. TARP Money
• 16 banks (15 holding companies) in Maryland have
received TARP funds totaling ~$426million

5. Who Got Sold
• Provident Bank sold to M&T Bank
– Issues:
• Heavy investment portfolio losses – Trust preferred and Agency MBS.
• Lack of core funding.
• Relied on home equity loans as driver of growth.
• Chevy Chase Bank sold to Capital One
(I know Chevy Chase Bank isn’t really a Maryland Based bank. But it really is. It
moved its charter from Maryland to Virginia in 1996 so as to take advantage of tax
laws related to its credit card business. Let’s remember it maintains its corporate
headquarters and more than 50% of its branches in Maryland)
– Issues:
• Heavy non-traditional mortgage lending products (the Infamous Cash-Flow
Option Arm Mortgage).
• Invested heavily in wholesale mortgage banking.
• Got caught holding the bag with a significant amount of loans it could not sell
or securitize when the secondary mortgage markets collapsed.

6. Who May Need to Sell
• First Mariner Bank
– First Mariner is bleeding red, though it is considered to be well
capitalized, including an additional $6 million from its parent, First
Mariner Bancorp, is one of those banks in the $500 million to $2 billion
asset size that I call a“DMZ Bank.”
• Wilmington Trust FSB
– Another DMZ bank. I am not sure how this bank qualifies as a Maryland
based bank. It has no branch offices in the state and a suite address at
111 Calvert St. It operates essentially as an internet bank (and we know
how successful internet only banks have been). Its holding company,
Wilmington Trust Corporation of Delaware, received $330 million in
TARP money yet its year end capital ratio is 5.13%.
• K Bank
– And yet another DMZ bank. This bank had been doing well year on year
until 2008. It losses this year has been primarily driven by the need for
increased loan loss provisions. The question is how much more will it
need in 2009. Also, the bank’s core funding is very weak. Approximately
20% of it deposits is core funds.
“DMZ Bank” defined: Banks ranging in assets from $500 million to $2
billion. A zone just like a military DMZ, where anyone or anything
entering that zone is at risk of termination. Not an easy place to be.

7. Enforcement Actions
• Four Maryland banks received enforcement actions
since June of 2008
• Suburban FSB has since been taken over. It had a
Cease and Desist issued against it in March 2008.
• None of our credit union brethren have received
enforcement actions from its primary regulator, National
Credit Union Administration (NCUA)

8. What Does the Future Hold?
quot;We are seeing the next wave of industry consolidation, either in the
form of managed consolidation, encouraged by the regulators, or
strategic acquisitions of banks with solid core deposits and an
established franchise“ As quoted, Kevin James Shay and Steve Monroe. “Chevy Chase
Bank, Citi in talks, Sale would boost New York institution's presence in state. The Business
Gazette of Politics and Business, 14 Nov 2008.
• The signs are not positive:
– One third of all U.S. banks will disappear in the next five years. It’s
getting harder and harder to be a mid-tier bank (those in the $500
million to $2 billion range).
– What does that mean for Maryland Banks? Maryland can expect to lose
up to 30 of the 94 banks in the next five years.
– In the last five years, especially during the boom, Maryland chartered
only seven new banks. That’s less than one bank a year.

9. What’s a Bank To Do?
• Concentrate on deposit gathering and not
on borrowing.
– Wait a minute! Isn’t that what the new
administration wants banks to do…LEND?
Not so fast.
– Wholesale funding was and still is the
problem.
– Deposits matter. Repeat after me, slowly –
DEPOSITS MATTER.
– Focus on the right lending coupled with
deposit growth.

10. Why Deposits?
• Deposits remain the real value of banking.
• It’s virtually impossible to run an effective
bank of any size without a culture of
deposit gathering and deposit growth.
• Good deposit growth leads to good
lending.
• The bank branch is not dead. It is the
cornerstone of any bank.

11. Start Thinking Outside the Box
• Stop thinking like a banker and start thinking like
a retailer.
– Create a deposit culture.
– Create value added branch programs.
– Branches – need to become financial advisory based,
not just transaction based.
– Develop attractive deposit products.
– Marketing, Marketing, Marketing
• For example: Target, Best Buy, Macy’s…
– They sell lifestyle (Isn’t saving money a lifestyle?)
– They’ve always got a Sunday insert selling products

12. A New Way to Branching for
Deposit Growth
• Joint Venture Branching
– A branch is jointly “owned” by the Sponsor Bank and
by local individuals
– For Example: Bank of Hometown, A division of Big Bank (in
really fine print)
– Not Complicated
– local “ownership” need not take the form of a direct equity
interest in a separate jointly owned entity.
– It can be incentive based compensation.
– Great way to enter a market with relatively low capital.
– Local “owners” have a vested interest in branch
success

13. Get Back to Portfolio Lending
• Residential mortgage opportunity
– Return to basic common sense credit and property underwriting and solid loan
documentation.
– Stay local, don’t venture outside your geographic market (if you cant drive there in 2 hours,
it’s too far)
– Seek opportunities in niches where the capital markets are gone
– Hybrid: 5/1, 7/1 (there’s nothing wrong with these if they are done
correctly and realistically, better than going long 30 years).
– Low LTV non-conforming loans (good loans when done right).
• Mortgage bankers and brokers either out of business or
are just about out of business.
– Just visit mortgage implode (www.mortgage-implode.com)
• Secondary markets gone
– Yes, I know. The Feds are trying bring back the secondary
markets. Isn’t that part of what led up to this crisis? All the good
products were securitized, so to keep fueling the engine they
started looking for stuff to securitize whatever and wherever.

14. Conclusion
• Now is a good time to be a banker. It’s
about leadership.
• Don’t just stand there like a deer caught in
headlights.
• Be creative and prepared to seize
opportunity.
• The branch is back with a vengeance.
• Turn your branch people into advisors
instead of order takers.

15. Who Am I
Paul Joegriner
• High-performance C-level executive in banking and financial services.
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teams. Value proposition include:
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drive.
• Exceptional orientations in operations and finance.
• Corporate and business development expert.
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• Experience-backed judgment, innovation, strong work ethic, humor, and
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– Contact: 240.246.5587 / pjoegriner@yahoo.com