In the years after its launch in 2004, Howard Bank grew by absorbing other local banks, eventually becoming the largest community bank in the greater Baltimore area.
But despite the bank’s growth, its founder, Mary Ann Scully knew it would have to continue to scale in order to survive. And over the past year-and-a-half, rigorous analysis — as well as the industry’s growing penchant for consolidation — made it clear that she would have to look beyond acquisitions and lateral partnerships to make that happen.
Now, Howard Bancorp, the parent company of Howard Bank, has joined the ranks of community banks in Maryland and beyond being acquired by regional and national banks.
The Baltimore-based company announced Tuesday morning that it had signed an agreement to be acquired by Pittsburgh-based F.N.B. Corporation. Howard is currently the largest community bank in the Baltimore region and had recently announced plans to expand into the D.C. market.
“Earlier this year, we concluded that because of the shape of the industry, that we probably wanted to look at upstream as something that would more sustainably give us that scale that we think is necessary,” Scully said.
The industry is in an ongoing state of consolidation, said Bert Ely, principal of Ely & Company Inc. and an expert on the banking industry.
“We’re seeing community banks like this being acquired as part of the ongoing industry consolidation,” he said. “When I see these kinds of announcements, I’m hardly surprised.”
Additionally, bank mergers and acquisitions have generally been high this year, he noted, after the pandemic halted potential deals.
Scully said that the pandemic played no role in the decision to sell the company or in the timing of the deal. Still, with national and regional banks eager to absorb local banks, there was a push to sell while buyers were interested rather than wait until further down the road.
“We believe it is the right time, in part because of the consolidation in the industry. If we want to be … relevant we want to make sure the partners that we’re thinking about working with are also still available,” she said. “We’ve (also) had a great last few quarters, and that shows what we can do, and we wanted to be able to leverage that momentum with a partnership right now.”
After conclusively deciding to sell Howard, “the question became not if we were going to partner with someone upstream, but who was the right partner.”
Vince Delie, FNB’s CEO, had first approached Scully about the merger in March of 2021 — as did a number of other potential buyers. The two already knew each other (“Baltimore is a small world,” Scully noted), and Delie was interested in purchasing Howard as means to expand further into FNB’s Mid-Atlantic market, which includes Maryland, as well as D.C. and northern Virginia.
Along with deal’s value — $148 million in stock, at $21.96 per share — both Scully and Delie agree that the partnership felt right due to the companies’ shared values and similar company cultures. Scully considers the surrounding greater Baltimore community an important stakeholder in Howard and was eager to find a buyer who would maintain the relationship between the bank and the city.
“Some of the best discussions that Vince and I have had together is about the similar philosophy that they have, how they view leadership in the community, philanthropy in the community, and so on,” she said. “It’s (an) area where we think coming together means we’ll be able to be that much more impactful.”
The companies expect the deal, which will require regulatory approval, to be completed in early 2022.
FNB, which already operates locations around Maryland and has had a presence in Baltimore since 2013, supports a number of local nonprofits and community groups. It has expanded its program for first-time homebuyers into the city, and has provided financial literacy programs.
In Pittsburgh, the company recently committed to building a new headquarters in the Hill District, a long-neglected neighborhood.
Scully also lauded the company for how it has built upon its previous acquisitions in the Mid-Atlantic market.
“One of the things that impressed me about what Vince has done in the Mid-Atlantic is … he built on top of what he’s acquired,” she said. “It’s not just the sum of the acquisitions before; it’s that, times something … that’s clearly what we want for our stakeholders and our shareholders, who, after the deal closes, will be holding FNB stock.”
Howard stockholders will be entitled to receive 1.8 shares of FNB common stock for each share of Howard stock they own.
Similarly, FNB’s internal culture contributed to Howard’s choice to sell to the company, she said. FNB has kept on employees from a number of the companies it has absorbed, which has led its culture to become something of a melting pot of those banks.
Scully felt it mirrored Howard’s own approach to acquisitions, having integrated employees from the banks it absorbed over its 17-year history, such as Baltimore-based 1st Mariner Bank, which it acquired in 2018.
FNB plans to bring on several employees from Howard. Scully said she is not planning to stay on after the merger even though Delie offered her the chance to do so. But due to her significant number of shares in the company, she will continue to be an invested shareholder and an ambassador.
“I have an incredible amount of respect for her as banker and as a leader, so having her as an ambassador is a big statement,” Delie said of Scully
The Baltimore market first appeared as an area of priority for FNB, Delie said, because it shares many similarities, such as size, with the company’s hometown of Pittsburgh, and has slightly more attractive demographics, such as an increasing population and more small businesses.
FNB has already seen significant success in the region. Since arriving in the Baltimore market in 2013, the company has seen loan growth of 34% on a compounded annual basis.
As for Delie’s vision for FNB’s future in Baltimore?
“I think my vision is for all of us to be successful. I don’t have a particular asset size or a goal … I’m more focused on serving the customers, making sure we’re benefiting the community,” he said. “So that’s the vision, the vision is to execute that flawlessly.”
Under the agreement, Howard Bank will merge with and into FNB’s subsidiary, First National Bank of Pennsylvania.
Howard had approximately $2.6 billion in assets, $2.0 billion in deposits and $1.9 billion in loans as of March 31, 2021, and it operates 13 locations in Maryland. Following the merger, FNB will have approximately $41 billion in assets, $32 billion in deposits and $27 billion in loans.