FNB buying Howard Bancorp to bulk up in Baltimore

FNB Corp. in Pittsburgh is buying Baltimore’s biggest local bank.

The $38 billion-asset FNB said it agreed to pay $418 million in stock for the $2.6 billion-asset Howard Bancorp.

Howard was founded in 2004 in suburban Ellicott City, Maryland, by Mary Ann Scully, American Banker’s Community Banker of the Year in 2017. It entered Baltimore in March 2018 by acquiring the $1 billion-asset 1st Mariner Bank.

Mary Ann Scully founded Howard Bank in 2004.
Mary Ann Scully founded Howard Bank in 2004.

Buying the $2.6 billion-asset Howard would make FNB Baltimore’s sixth-largest bank, with about 4% of the region’s $94 billion deposit market, according to the Federal Deposit Insurance Corp. It would be FNB’s fourth bank acquisition in Maryland, starting with the $439 million-asset BankAnnapolis in 2013.

For FNB, which has been focused on expanding its presence in the mid-Atlantic and Southeast regions, acquiring Howard would check a key strategic box.

“We think the mid-Atlantic region has been a key driver to our success,” Vincent Delie, FNB’s chairman, president and CEO, said Tuesday in a phone interview.

“To be able to do a transaction with a company like Howard made complete sense to us," Delie added. “When you look at the financial metrics…it improves the efficiency ratio by more than 200 basis points. Eighty-five percent of the cost take-outs are fully realized in year one and we’re only paying 1.6 times tangible book, which I think is a great price for a franchise Mary Ann has done a terrific job building.”

Given the transaction’s local nature — FNB operates 20 Baltimore-area branches already — the company is projecting cost savings amounting to 50% of Howard’s noninterest expense base, which totaled $12.3 million for the quarter that ended March 31 and $89.4 million for all of 2020. FNB expects to achieve about 85% of the cost savings in 2022.

The $418 million price tag works out to $21.96 per share, or 160% of Howard’s tangible book value. The average price-to-tangible-book-value for whole bank deals in 2021 is 157%, according to Laurie Hunsicker, an analyst with Compass Point Research & Trading.

“The current deal is a little richer [than F.N.B.’s previous Baltimore acquisitions]…but I think scarcity value comes into play, because [Howard is] the largest community bank left in Baltimore ” Delie said.

With Howard out of the picture, Baltimore’s largest bank would be the $339 million-asset Harbor Bank of Maryland.

Howard began looking for a merger partner earlier this year, according to Scully, the company’s chairman and CEO.

“It’s initially a strategic decision. Where does a $2.6 billion-asset company go to get the kind of valuation our shareholders deserve,” Scully said in a phone interview. “Then, you begin translating that to what are the benefits for our customers. It suddenly becomes a question of not if, but who. Who is that ideal upstream partner?”

The ultimate answer surprised her, Scully said.

“This is a $38 billion company…but it was where we were feeling the greatest fit.

The deal is expected to close in early 2022.

For reprint and licensing requests for this article, click here.
M&A Women in Banking Community banking
MORE FROM AMERICAN BANKER