First Mariner Bancorp yesterday signed a letter of intent to acquire Annapolis Bancshares Inc. -- a bank twice its size -- for $17.7 million in cash and stock.
The move gives upstart First Mariner an immediate earnings stream, combined assets of $118 million, and a listing as a Nasdaq small-cap issue. Those elements made the deal worth more than twice Annapolis Bancshares' book value.
"It's a heavy price," said Edwin F. Hale Jr., chairman and chief executive of the Baltimore-based First Mariner. "It gets us so we can become a publicly traded company. We've had just an outcry since Day 1: 'When can we buy your stock?' This answers the question."
Annapolis Bancshares, a thinly traded stock, had a bid price of $15 a share and an asking price of $17 yesterday.
Under the deal, First Mariner will pay $15.50 in cash, and two-thirds of a share of First Mariner stock for each share of Annapolis Bancshares. First Mariner's shares are valued at $10 each.
The move will immediately make First Mariner profitable. The bank, which opened its doors in May after acquiring MarylandsBank Corp. a year ago, lost about $400,000 for the first nine months of the year, Mr. Hale said. In contrast, the 6-year-old Annapolis Bancshares earned $751,400 for the same period.
"This will make us go into a positive mode," Mr. Hale said.
The deal is expected to close in the second quarter of 1996, providing the banks receive approval from state and federal regulators. If it goes through, Annapolis Bancshares will change its name and operate as a division of First Mariner. Mr. Hale would remain chairman and chief executive, but it is unclear whether John W. Marhefka Jr., president and chief ex-ecutive of Annapolis Bancshares, would stay on in an administrative role.
"I'd rather not speak to that," said Mr. Marhefka, who is slated to become a director of First Mariner. "We've made no arrangement."
Among the company's 18 board members are former Gov. William Donald Schaefer; Dennis C. McCoy, chief executive of Mars Super Markets Inc.; and Bruce H. Hoffman of the Maryland Stadium Authority.
Annapolis Bancshares operates Bank of Annapolis and has $78 million in assets, 25 employees and one office, which First Mariner assumes in the deal. First Mariner has $42 million in assets, 13 branches and 70 employees. Both banks target consumers and small businesses for loans and deposits.
The banks began negotiating about two months ago in what Mr. Hale described as "some pretty tough negotiations."
Annapolis Bancshare officials took the offer because it was a good price, Mr. Marhefka said.
Mr. Hale, a shipping and trucking executive who was chairman of the $3.5 billion-asset Baltimore Bancorp until it was sold a year ago to First Fidelity Bancorp, has stirred up Baltimore's banking scene with his aggressive style.
In July, the bank said it would place automated teller machines in all 14 Mars supermarkets in metropolitan Baltimore. The same month, First Mariner made a bid to acquire Maryland Permanent Bank & Trust Co. of Owings Mills, but lost out.