Two Maryland Banks Announce Deal to Merge

US Banker  |  September, 2010

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Old Line Bancshares Inc. has a deal to buy Maryland Bankcorp Inc. for $20 million in cash and stock.

The acquisition would give the $400 million-asset Old Line, of Bowie, Md., a stronger presence in the southern part of the state. Old Line also would add $350 million of assets and double its branch network, to 20.

Maryland Bankcorp's credit problems are elevated, and that may well be reflected in the deal price. Old Line agreed to pay $30.93 a share, which works out to 80% of Maryland Bankcorp's tangible book value.

The seller's bank unit, Maryland Bank & Trust, of Lexington Park, would be merged into the buyer's Old Line Bank, the companies said in a press release announcing the deal Wednesday.

In the press release, James W. Cornelsen, president and chief executive of Old Line Bancshares and its bank unit, said Maryland Bank & Trust's deposits—which total $297 million—make it attractive. Noninterest-bearing deposits made up 31% of its total deposits, the largest share of any Maryland-based commercial bank.

"MB&T over the years has built a core deposit base that is truly enviable in today's banking environment," Cornelsen said in the release.

Old Line Bancshares also wants to add heft, he said. "By joining together with our southern Maryland neighbor, we envision being able to achieve significant cost savings of more than 35% over the next two years, and take us a big step closer to reaching our goal of being Maryland's next $1 billion-asset bank."

Though well capitalized as of June 30, Maryland Bank & Trust has been contending with some credit issues. At the end of the second quarter, noncurrent loans made up 5.17% of its total loans, an increase of 121 basis points from the end of 2009.

That compares to an average of 4.33% for all Maryland commercial banks at the end of the second quarter. Old Line Bank's noncurrent loan ratio was 1.62% for the same period.

The deal is expected to close in the first quarter of 2011. The buyer said it would be accretive to earnings by the end of 2011.

Two Maryland Bankcorp executives, Thomas B. Watts, the chairman and CEO, and G. Thomas Daugherty, the president, are expected to join the board at Old Line Bancshares and its bank unit.