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Howard’s purchase of 1st Mariner to reshape Baltimore banking landscape

Mary Ann Scully

Mary Ann Scully

Howard Bancorp will acquire 1st Mariner Bank, creating the largest community bank in Maryland, the two banks announced Tuesday.

Howard’s Mary Ann Scully will remain chairman and CEO of the combined bank. Howard will also move its headquarters to 1st Mariner’s current Baltimore headquarters.

1st Mariner CEO Robert Kunisch will serve as president of Howard. Kunisch had just been named as CEO of 1st Mariner last month.

“We have long respected the executive team at 1st Mariner and have been very impressed by their turnaround and recasting of the bank since their restructuring in 2014,” said Scully in a statement. “Both Howard and 1st Mariner share a focus on privately held businesses in the Greater Baltimore market. We think this transaction is transformational not only for our shareholders but also for our teams, our customers, and the Greater Baltimore community.

Howard, the parent company of Howard Bank, will total 21 branches and $2.1 billion in assets after the companies combine. Currently, the two banks combine for 27 branches, but consolidation is planned for some locations.

Rob Kunisch (submitted photo)

Rob Kunisch (submitted photo)

“We are thrilled to be partnering with the Howard Bank team,” Kunisch said in a statement. “Our shared commercial focus and long ties to the market will be particularly attractive to our customers and employees. We are excited to join together to build the best business bank in Baltimore.”

Scully said similar philosophies should help the banks’ merger go smoothly. 1st Mariner also presented Howard a competitive loan portfolio, one that Scully called, “the most attractive loan portfolio mix that we have acquired to date.”

Howard and 1st Mariner expect the agreement to close during the fourth quarter this year. While the deal has been approved by the boards of directors of Howard, Howard Bank and 1st Mariner, it still needs approval from Howard and 1st Mariner shareholders as well as regulators.

The merger will also create a reconstituted board of directors, with eight members from Howard’s board and six members from 1st Mariner’s board.

1st Mariner in June 2014 was sold to local investors after a bankruptcy sale and recapitalization. Previously, the bank had struggled for years, posting a loss in every quarter of 2013.

Last year, it began a restructuring of its branch management to focus on bringing in more small businesses as clients. The bank also opened its first branch outside of Maryland, in Newark, Delaware.

Scully credited the management team 1st Mariner brought on in 2014, Kunisch and former CEO and current Chairman Jack Stiel, with turning around the bank. Scully also attributed any current profitability issues at 1st Mariner on bad mortgages from last decade’s financial crisis.

“The profitability issues are almost exclusively legacy related,” she said in a conference call Tuesday morning. “What we believe (the bank’s current portfolio) does is actually wipe out all of those profitability issues for 1st Mariner.”

Since 1st Mariner’s recapitalization, residential real estate loans have declined as a percentage of its portfolio, from 40.7 percent to 33.6 percent. Meanwhile, its commercial and industrial loans have increased from 3.4 percent to 13 percent.

Through the merger, Howard will be in position to take advantage of an underserved Baltimore commercial market, Scully said.

“We think this is an attractive combination of the two best commercial banks in the Baltimore market,” she said. “It creates a go-to option.”

 


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