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
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.
