Howard Bancorp will acquire the parent of Patapsco Bank in a $10 million deal that would create one of the largest locally owned banks in the region, the two institutions announced Tuesday.
The merger, expected to close later this year, pending approval of regulators and shareholders, would give the Ellicott City-based parent of Howard Bank more than $900 million in assets and boost its presence in Baltimore city and county, where it currently only has a branch in Towson.
With 14 branches, Howard Bank's strongest foothold is in Howard County, while Dundalk-based Patapsco Bank has three offices in Baltimore County and one in Baltimore's Hampden neighborhood; it has $226 million in assets. The merger comes amid a nationwide wave of bank consolidation, particularly among smaller and mid-size banks.
Howard Bank Chairman and CEO Mary Ann Scully said the acquisition was part of the company's long-term strategy to grow organically and through targeted acquisitions.
In October, Howard Bank acquired all of Rising Sun-based NBRS Financial Bank's $183.1 million in deposits and most of its $188.2 million in assets after that bank's failure. In 2013, Howard bought the Aberdeen branch of Cecil Bank.
"It's actually been paced pretty well from an internal capacity standpoint," Scully said of the recent growth. "We've always said that we think we're in an environment where shareholders and customers tend to benefit from a larger size but don't want to lose the feel of a larger bank. $1 billion was a very important point for us."
No branch closings or layoffs are planned as a result of the acquisition.
"We obviously have a lot of work to do on both sides if there are any savings opportunities," Scully said. "But as a rapidly growing company, it means we have a huge need not only for people on the customer facing side … but a need for support personnel as well."
Patapsco shareholders will receive a mix of cash and Howard Bancorp stock for their shares. Shares of Patapsco, which trade over the counter, surged 56 percent Tuesday to close at $4.70 each.
"This transaction represents excellent value for Patapsco Bancorp shareholders," said Phil Phillips, Patapsco Bancorp's president and CEO. "We are excited to partner with Howard Bank who shares our values of community service and will continue our legacy of over 100 years of banking service to the Dundalk and eastern Baltimore County community."
Phillips has been invited to join Howard in an executive leadership position, while Patapsco Chairman Thomas O'Neill and Director Gary Bozel are expected to join the board of both Howard Bancorp and Howard Bank.
Howard Bancorp also announced Tuesday that it would raise $25 million in new capital after receiving binding commitments from private investors to acquire nearly 2.2 million shares of its stock for $11.50 per share.
Howard shares slid 9.8 percent Tuesday to close at $12.40 each.