Three weeks after signing a letter of intent to be acquired by First Mariner Bancorp, Annapolis Bancshares Inc. yesterday rejected a hefty $17.7 million offer and abruptly ended negotiations.
The news sent the stock price of the Annapolis-based bank skidding 16.3 percent to $18, off $3.50.
John W. Marhefka Jr., Annapolis Bancshares' president and chief executive, said officials from the banks couldn't come to terms on the final agreement.
"There are large issues, there are small issues," Mr. Marhefka said. "We never got really close."
He declined to give specific reasons why the bank broke off the talks. He said the officials involved signed a confidentiality agreement, but added, "There is no cloak-and-dagger stuff going on behind the scenes."
Edwin F. Hale, chairman and chief executive of Baltimore-based First Mariner, said he was disappointed with the decision. Mr. Hale said he received a call from Annapolis Bancshares Chairman Stanley Katsef yesterday morning.
"All they said to me was that the board met and they were terminating talks with us. No explanation," Mr. Hale said.
The banks had signed a nonbinding letter of intent, so there were no penalties for backing out of the talks, Mr. Marhefka said.
The deal would have paid the Annapolis bank's stockholders $15.50 in cash and two-thirds of a share of First Mariner stock for each share of Annapolis Bancshares. The deal was worth more than twice Annapolis Bancshares' book value.
The Annapolis Bancshares acquisition would have given the much smaller First Mariner $80 million in additional assets, an immediate earnings stream and a coveted listing as a Nasdaq small-cap stock.
"It does slow us down," Mr. Hale said. But he said First Mariner is in acquisition talks with other banks.
First Mariner also may raise $10 million to $20 million in an initial public offering to the community, or through a private placement, he said.
In addition, Mr. Hale said the $42 million-asset First Mariner plans to open a branch in Annapolis within three months, and he expects it to be profitable by June.
First Mariner, which opened for business in May after acquiring MarylandsBank Corp. a year ago, lost about $400,000 for the first nine months of the year.
The broken deal marks the second time this year that First Mariner has been spurned. In July, it lost a bid to acquire Maryland Permanent Bank & Trust Co. of Owings Mills when shareholders rejected First Mariner's offer to acquire the $32 million bank.
Asked if he has started to question his acquisition strategy in the wake of Annapolis Bancshares' decision, Mr. Hale replied: "Not me. I start questioning them."