Shore Bancshares in Easton, Maryland, plans to acquire in-state peer Community Financial Corp. in an all-stock deal billed as a merger of equals.
The transaction, valued at $254.4 million, would combine the $3.4 billion-asset Shore with the $2.4 billion-asset parent of Community Bank of the Chesapeake in Waldorf, Maryland. It is projected to close late in the second quarter or early in the third quarter.
Though the deal is touted as a merger, shareholders of Shore would own about 60% of the company. Its board would consist of 12 directors from Shore and eight from Community Financial. The company would be headquartered in Easton.
"This combination creates a solid and very promising future for the combined organization," Scott Beatty, president and CEO of Shore, said in a press release Wednesday.
Shore expects the deal to prove more than 40% accretive to its 2024 earnings per share. It estimated the company would need about two years to earn back 13.9% dilution to tangible book value. Shore said it expects to trim about 11% of the combined bank's noninterest expenses.
Community Financial has 12 branches, $1.7 billion of loans and $2.1 billion of deposits.
The merged bank would have about $6 billion of assets and more than 40 branches. Its footprint would span the Delmarva Peninsula, southern Maryland, the Baltimore-Washington, D.C., area and central Virginia. It plans to expand into nearby markets, such as Prince George's County in Maryland.
Notably, Beatty plans to retire from the CEO post upon closing. James Burke, president and CEO of Community Financial, would become president and CEO of the combined company.
"An important consideration for this combination was to find a successor for me," Beatty said. "Jimmy Burke is not only a capable banker, but he has also been a banker in Maryland for a long time. He has proven that he is worthy of taking over" as chief executive.
Shore Chairman Alan Hyatt would become chairman of the combined company, and Community Financial Chairman Austin Slater Jr. would step into the role of vice chairman.
A termination fee of $10.5 million would be payable by either company if the deal is terminated under certain circumstances, according to the release.
Keefe, Bruyette & Woods and Holland & Knight advised Shore. Piper Sandler and Kilpatrick Townsend & Stockton advised Community Financial.
