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Maryland-based Howard Bancorp buying 1st Mariner for $163.4M


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Maryland-based Howard Bancorp buying 1st Mariner for $163.4M

In Maryland, Ellicott City-based Howard Bancorp Inc. is buying 1st Mariner Bank of Baltimore.

Each 1st Mariner common and preferred share will be exchanged for 1.6624 shares of Howard common stock. Based on the latter's Aug. 14 closing price of $16.85, the deal is valued at $28.01 per share, or $163.4 million in total, including the value to 1st Mariner's options and warrants, which will be cashed out at $32.50.

On an aggregate basis, SNL calculates the deal value to be 116.0% of tangible book. The price is 21.20% of deposits and 16.76% of assets, and the tangible book premium-to-core deposits ratio is 20.71%.

For comparison, SNL valuations for bank and thrift targets in the Mid Atlantic region between Aug. 15, 2016, and Aug. 15, 2017, averaged 132.69% of book, 138.18% of tangible book and had a median of 29.33x last-12-months earnings, on an aggregate basis.

As of June 30, the buyer had consolidated assets of approximately $1.1 billion, portfolio loans of approximately $880 million and deposits of approximately $855 million. 1st Mariner had $975 million in assets, $666 million in portfolio loans and $771 million in deposits, and 14 branches in greater Baltimore.

The merger, still subject to shareholder and regulatory approvals, is expected to close in the fourth quarter. 1st Mariner will merge into Howard Bank, operate under the latter's name but be headquartered in Baltimore.

After completion and branch consolidation, Howard would have pro forma assets of $2.1 billion, portfolio loans of $1.5 billion and deposits of $1.6 billion, as well as 21 offices in the Greater Baltimore Metropolitan Area.

Data compiled by SNL shows that Howard Bancorp Inc. will expand in Maryland by 14 branches to be ranked No. 12 with a 1.16% share of $136.28 billion in total market deposits.

1st Mariner President and CEO Robert Kunisch Jr. will become president of Howard Bancorp and Howard Bank and a director on both boards. 1st Mariner Executive Chairman Jack Steil also joins the boards and will serve as senior business development adviser. The acquirer's boards will have 14 members in total — eight from the current Howard board and six from 1st Mariner. In addition, Randy Jones joins from 1st Mariner as chief credit officer; Steven Poynot will become chief administrative officer.

Howard Bancorp estimated the deal value at 1.16x tangible book value. The deal is expected to result in cost saves amounting to 37% of 1st Mariner's noninterest expense base and generate an internal rate of return of more than 20%. Howard Bancorp estimates $14.1 million in after-tax expenses from the merger. The merger is also projected to be materially accretive to EPS, with an initial dilution to tangible book value of 10% earned back within three years, calculated via the crossover method.

Stephens Inc. and Covington & Burling LLP served as Howard's financial adviser and legal counsel, respectively. For 1st Mariner, it was Keefe Bruyette & Woods and Venable LLP.

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