Situation
Howard Bancorp, Inc. (NASDAQ: HBMD), headquartered in Ellicott City, Maryland, with approximately $691 million in assets at December 31, 2014, and operates fourteen banking offices in Greater Baltimore, sought to augment its strong organic growth with a fill-in acquisition of Patapsco Bancorp, Inc. The combination will reinforce Howard’s present franchise in Baltimore County and provide entry into Baltimore City. Patapsco’s board and management team has returned the bank to consistent profitability after the banking crisis and recession related challenges.
Solution
Griffin was engaged by Howard to structure, advise and assist in the execution of the transaction, to provide an opinion relating to the fairness of the merger consideration from a financial perspective, and to raise $10 million of “Just In Time” capital to support the acquisition.
Measures of Success
The combination of Howard and Patapsco creates the largest publicly traded bank headquartered in the Greater Baltimore Marketplace and the seventh largest bank in the state of Maryland, with total assets of nearly $1 billion and 16 branches. In addition, the combination significantly reinforces Howard’s present franchise in Baltimore County and provides Howard entry to Baltimore City allowing Howard the opportunity to expand its reach of diversified financial solutions in these very desirable markets.
In order to provide Patapsco with valuation certainty and because Howard’s stock price was expected to migrate substantially higher prior to the closing of Patapsco, the transaction pricing was structured so that the aggregate value was fixed but the exchange ratio was determined near closing. The aggregate fixed value purchase price was $10.053 million, 127% of tangible common equity adjusted for accumulated and unpaid TARP dividends at announcement. The per share exchange ratio, based upon Howard’s average closing stock price for the 20 trading days prior to the five business days immediately before closing, was 0.3547.
For more information on this transaction, contact Joseph M. Harenza, CEO/Senior Managing Director, at 610.478.2160 or Stacey V. Weikel, Senior Vice President, at 610.478.2015.
