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Howard Bank, Baltimore’s largest local bank, agrees to takeover by FNB

Howard Bank, Baltimore’s largest locally based bank, will be absorbed by F.N.B. Corp., the parent of First National Bank of Pennsylvania, in a deal valued at $418 million when it was announced Tuesday.

The deal expands Pittsburgh-based FNB’s foothold in the Baltimore market, which began with its 2012 acquisition of BankAnnapolis and 2014 deal for Baltimore County Savings Bank.

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The acquisition of Baltimore-based Howard and its roughly $2 billion in deposits will about double FNB’s deposit market share in the Baltimore-Columbia-Towson metropolitan area, leapfrogging them over Sandy Springs Bank, based in Olney and the largest bank headquartered in Maryland. FNB still would rank behind Bank of America, M&T Bank, PNC, Truist and Wells Fargo in Baltimore-area deposits, according to the Federal Deposit Insurance Corp.

“Combined, we will have the sixth largest deposit share in the Baltimore market, reinforcing our strong presence and presenting our organizations with the opportunity to deliver an enhanced experience for our customers, communities and dedicated teams‚” said Vincent J. Delie Jr., FNB’s chairman, president and CEO.

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Howard Bank has approximately $2.6 billion in total assets and 13 branches across the Baltimore region. FNB has about 20 Baltimore-area branches, and bank mergers typically result in overlapping offices being closed.

Howard spokesperson Jennifer Reel, in an email, declined to say whether the merger would result in consolidation.

“We are very early in the process and cannot quantify the specific employee impact since we are still evaluating the combined organizations,” Reel said. “Those decisions will be finalized and communicated as appropriate as we move through the process.”

After the merger, CFG Community Bank with branches in Baltimore and Lutherville will become the area’s largest locally based financial institution, followed closely by Rosedale Federal Savings and Loan Association. Annapolis-based Severn Savings Bank agreed in March to be acquired by the parent of Easton-based Shore United Bank.

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Under the terms of the deal, FNB will give Howard Bancorp stockholders 1.8 FNB shares for each of their Howard shares.

The stock market devalued the deal somewhat Tuesday after it was announced. While initially valued at $21.48 a share, that slipped to $21.13 a share after FNB’s stock slid 47 cents a share to close at $11.74 each.

Meanwhile, shares of Howard Bancorp closed up $4.17 at $19.79 each Tuesday, well shy of the deal price.

Bert Ely, a national banking consultant, said Howard’s stock price may indicate skepticism from investors.

“Usually what will happen is the price is announced and the gap will close, particularly if it’s a high-likelihood deal,” Ely said. “That’s something to watch: Does the gap close? And if it doesn’t, that raises interesting questions.”

Ely said the acquisition’s value, and timing, came as a surprise.

“Did they sell at too low a price? It struck me as a little on the low side given the American economy appears to have come out of the pandemic pretty well,” Ely said. “What puzzles me is the timing coupled with the price.”

The merger must be approved by banking regulators and Howard’s shareholders.

Howard Bank has made much of the fact that it has been the Baltimore area’s largest locally based bank since it acquired 1st Mariner Bank in 2018.

But in an interview Tuesday evening, Mary Ann Scully, the bank’s founder, chairman and CEO, said she decided to shift to an “upstream approach” after analyzing the market and determining it offered a path to grow. Several small and mid-sized banks have merged with larger partners in recent years, she noted.

“The congruence of a good product set for our customers, the right cultural fit and the right price combined, and we reached an agreement,” said Scully, adding that she considered it a fair price value. “It’s tough for all of us who love Baltimore and local headquarters, and to see local headquarters go away, that’s tough.

“But it means we’re going to be able to compete that much more.”

Scully, who worked at First National Bank of Maryland for almost three decades, founded Howard Bank in Ellicott City in 2004 primarily to help small and medium-sized businesses in the region. In previous interviews, she said founding Howard Bank required starting from scratch.

“[We] started from nothing,” Scully told The Baltimore Sun’s editorial board last year. “It’s not all about making the right decision. There’s always luck and good fortune involved in these things.”

Scully said she will spend the next six months ensuring that the deal moves forward and then step back from her role as an executive. She said she will become a major shareholder as well as an ambassador and friend of FNB.

FNB, meanwhile, has seen explosive growth, especially in Maryland, where it had no presence in 2010, according to a public slideshow the company created for its investors. In the last decade, FNB expanded into Maryland, North Carolina and South Carolina, and grew its footprint in Ohio.

FNB currently has nearly 340 banking branches with a network that also extends into Virginia, West Virginia and Washington, D.C.

After the merger, expected to close in the first quarter of 2022, FNB will have about $41 billion in assets and $32 billion in deposits.

Scully said Howard Bank remains committed to its stakeholders as well as the communities it serves. She also said the acquisition will “inevitably” result in some job loss, but also will yield more opportunities for career development for employees that remain.

“When we went through this normal process of, ‘What’s the best way to grow and have an impact?’ this time, we said, ‘Given where the industry is, we think it needs to be bigger,’” she said. “The product set was a rich one; the bank has other sources of revenues no matter what interest rates are doing. FNB gave us the best fit and the best price.”

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