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Maryland mutual bags a couple transformative deals, could look for more

A Maryland community bank is set to double its assets this year thanks to two deals, and it has the capacity keep buying.

Baltimore-based BV Financial Inc. (MHC) announced it will purchase Cambridge, Md.-based Delmarva Bancshares Inc. in an all-cash deal totaling $54 million. Delmarva Bancshares' unit, 1880 Bank, has six branches on Maryland's eastern shore.

The deal was negotiated between the two banks, said BV Financial co-CEO, co-President and Director David Flair in an interview.

Negotiations for the deal began in late January and into February, said Flair. The COVID-19 pandemic has terminated or delayed deals throughout 2020, but Flair said he feels comfortable moving ahead with the deal. And the all-cash structure provides certainty for Delmarva's shareholders. BV Financial did additional due diligence and examined potential vulnerabilities due to the pandemic as it was assessing the deal, Flair said.

"We never rolled off-track during the process," he said.

The all-cash nature of the deal provides more certainty in the face of a pandemic that has increased stock market volatility, said Kim Liddell, Chairman, President and CEO at Delmarva, in an interview.

"It's natural to be concerned about what's going to happen to the economy," said Liddell. "The valuation was attractive relative to what's happened. I think if COVID-19 hadn't happened, we would've gotten a higher price."

The banks project the deal will close by the fourth quarter. Assuming that happens, BV Financial will more than double its assets in 2020 thanks to two deals, the other being the closed acquisition of Forest Hill, Md.-based MB Bancorp Inc. After starting the year with $294 million in assets, the bank projects $750 million in assets upon closing the Delmarva deal.

The bank is prepared for the growth, said Flair, because it has a history of transformative deals. In 2019, Baltimore-based Kopernik Bank merged into BayVanguard Bank (MHC), BV Financial's subsidiary, in a merger of equals.

BV Financial does not currently have more deals planned, but Flair said they will continue looking. BV Financial's mutual structure means it could become a fully public company in order to raise capital for more deals, but the bank has no immediate plans to do so, Flair said. He said the bank would also be open to a merger with another mutual institution, like it did in the Kopernik deal, in order to raise capital for additional acquisitions.

In addition to a history of deal-making, BV Financial employs a unique management structure that eases the merger process, Flair said. Flair is co-president and co-CEO alongside Timothy Prindle. This allowed Flair to concentrate on the deals the bank has done while Prindle focuses on loan operations.

"We have a good executive team ... but it's still difficult to focus on deals and running an institution at the same time," Flair said.