Howard bank to be sold to Pa. institution

Columbia Bancorp deal is worth $313 million

Fulton Financial is purchaser

Few jobs to be lost if sale is OK'd, executives say

July 28, 2005|By Laura Smitherman | Laura Smitherman,SUN STAFF

Columbia Bancorp, whose emergence mirrored the growing wealth of Howard County, the place where it began two decades ago, has agreed to be sold to Fulton Financial Corp. of southern Pennsylvania for about $313 million in cash and stock.

The sale, announced yesterday by the banks, means that Columbia Bank would no longer be largely locally owned by executives and directors who control about one-fourth of the stock. But Columbia founder John M. Bond Jr. would remain chairman and chief executive of the bank, which would become a Fulton subsidiary. He said he would have free reign to handle day-to-day operations.

"It's still the Columbia Bank," the 61-year-old executive said yesterday. "It's still the same people serving customers, and we're going to stay right there in the communities we're in. Our signage will be the same. Our letterhead will be the same."

Bond and Rufus A. Fulton Jr., chairman and chief executive officer of Fulton Financial, based in Lancaster, Pa., said they anticipate few job losses among Columbia Bank's 375 employees. Fulton said his company expects to shave up to 10 percent from expenses over the next two years by eliminating redundant operations, though he said that doesn't necessarily mean jobs will be cut.

"We don't want to let anybody go," Fulton said, "and to the extent a job is eliminated, we're going to try to find a job for them that becomes available through attrition."

The deal allows Columbia Bank to expand the range of services it offers to customers, including the ability to form trusts used mostly by wealthy families, and to increase the amount of money it can lend. Bond said the bank typically makes commercial loans of less than $11 million because of the risk involved, but with Fulton behind the bank that amount could be $16 million or higher.

The acquisition is the largest yet by Fulton Financial, which has 14 banking subsidiaries from northern New Jersey to Virginia Beach, Va. They include two in Maryland - in Cecil County in the north and in Washington County in the west. With Columbia Bank, Fulton will be making a move into the lucrative Baltimore-Washington corridor.

Columbia Bank has the largest market share in Howard County, one of the nation's wealthiest, beating out much larger banks such as Bank of America Corp. The median household income in the county is an estimated $84,200, or $20,000 above the state's median. Columbia Bank also has branches in Baltimore City and in Baltimore, Montgomery and Prince George's counties.

"That whole area is an attractive market, and it's growing," said Meganne Warner, a banking analyst with SNL Financial, a financial services data provider. "Those counties are rich as it is and only getting richer."

15 percent premium

In the deal with Fulton, Columbia Bancorp shareholders will receive 2.325 shares of Fulton stock or $42.48 in cash for each share they own. That's a premium of about 15 percent on Tuesday's closing price.

Columbia Bancorp shares gained $4.45, or nearly 12 percent, yesterday to close at $41.70 on the Nasdaq stock market.

The acquisition must be approved by the Federal Reserve, the Maryland Commissioner of Financial Regulation and by Columbia shareholders. It's expected to close in early 2006.

Bond and other executives will be able to cash in on their stock as well as stock options. The deal triggers a clause in employment agreements that means all of their options will fully vest, meaning they become available to exercise. Bond had $1.8 million in stock options at the end of last year, and about 85 percent couldn't be exercised, according to the company's latest proxy statement.

Bond started the bank with seed money from friends and backers, including the late James W. Rouse, who planned and developed Columbia. Bond had worked at Citibank and moved back to Baltimore, where he was born, to work with First National Bank of Maryland and then Chase Bank.

Bond conceived the idea of starting a bank, he recalled yesterday, over a tennis game with Christopher Kurz, a local real estate developer. Columbia opened for business in May 1988 - when Howard County's population was about 180,000 and household income averaged about $54,000 - and built a niche of lending to small contractors and developers.

With Howard County surpassing 260,000 residents in recent years, the bank's loan portfolio has grown through commercial loans as well as residential loans and reached $616 million at the end of last month. Columbia reported yesterday that its second-quarter profit grew nearly 50 percent to $3.4 million, or 38 cents a share, from $2.3 million, or 26 cents a share, in the quarter last year. Its deposits increased 22 percent over the past year to $669 million.

Bond has called Columbia's community banking model "old-fashioned" and has said that he doesn't like to drive farther than an hour for work. He said that he still answers his phone and that the bank's ties to the area draw customers.

Local ties

"We may have children who play soccer together, or we go to the same church," he said.

Bond said he met Fulton two years ago, and the two have had "a growing friendship." With Fulton, he said, he realized that he would be able to expand while keeping the bank's local character.

"The Columbia area really does have a sense of self and identity, and it provided a great platform into the Baltimore-Washington corridor," he said. "If I had been in a terrible market, my friendship with Rufus wouldn't have been enough to get a deal done."

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