One of the lead stories in the July 27 – August 2 edition of the Washington Business Journal trumpeted the departure of First Horizon Bank as the Tennessee- based bank decided to shutter all 13 of its DC-area branches (along with 21 Atlanta and Dallas branches) and retrench back to its home state. Does this decision by First Horizon - formerly ranked no. 6 in local mortgage lending - foreshadow a softening of the red hot Washington-area retail banking market?

Hardly.

Two turns of the page past the tale of First Horizon’s woes and the reader comes across the headlines, “Virginia Commerce to Open Three Branches”. Two more turns of the page: “Chevy Chase Bank Opens Howard Branch”! Besides simply scanning headlines these recent headlines, and as many in the local and regional business community know, Pittsburgh- based PNC Bank recently bet almost $7 billion on the long term potential of the DC-Baltimore banking market in acquiring the former Mercantile Bancshares network of 240 area branches.

No, the state of the D.C.-area banking market is as robust as ever and, in fact, in the very next Washington Business Journal issue (August 3 – 9), the lead story, “Branching, Back In” heralded this very fact. With local market leaders such as the formidable Chevy Chase Bank leading the way, and strong regional (PNC, BB&T) and national players like the erstwhile Bank of America all vying for a share of the area’s ever expanding base of low cost deposits, the demand for new branch locations continues at a tremendous pace.

No, rather than foreshadowing a downturn in area banking fortunes, First Horizons’ contraction back to Memphis is more of a commentary on the cooling of the residential real estate market and the company’s inability to battle some of the aforementioned banks in the battle to attract low cost deposits. First Horizon sought to build a retail and commercial banking network around its strong local mortgage lending presence which, as previously mentioned, was once the 6th largest portfolio in the area as recently as 2005. But cross-selling traditional banking services to its local mortgage customers proved too tall an order for the Memphis-based chain and this, coupled with a $16.1 million second quarter pre-tax loss on its mortgage operations largely as a result of sub-prime lending write-offs, prompted First Horizon to fold its tent in the Nation’s Capitol.

And what will become of the 13 local branches that formerly operated under the First Tennessee and, later, First Horizon banner? In perhaps the most telling statement on the futures prospects of retail banking in the Nation’s Capitol, First Horizon’s eulogy in the WBJ closed by speculating on the companies most likely to purchase First Horizon’s soon-to-be-vacant branches:

BB&T, SunTrust, Virginia Commerce and Cardinal Bank.

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