Shore Bancshares and Severn Bancorp Announce Signing of Merger Agreement Creating 3rd Largest Maryland-Based Bank
Shore Bancshares, Inc. (NASDAQ: SHBI) the holding company of Shore United Bank, and Severn Bancorp, Inc. (NASDAQ: SVBI), the holding company of Severn Savings Bank, FSB, today announced that it has entered into a definitive agreement under which Severn will merge with and into Shore in a stock and cash transaction valued at approximately $ 146 million, or $ 11.30 per share of Severn common stock, based on a closing price for Shore common stock of $ 15.64 as of March 2, 2021 and $ 1.59 per share in cash. Shore expects the transaction to generate more than a 30% increase in EPS in 2022, based on anticipated cost savings of around 35%.
Severn is headquartered in Annapolis, Md., With $ 952.6 million in total assets, $ 679.2 million in gross loans and $ 806.5 million in total deposits as of December 31, 2020. Severn operates seven bank offices located in Anne Arundel County, Maryland. The transaction will bring Shore’s total assets to approximately $ 2.9 billion on a pro forma basis as of December 31, 2020.
Lloyd L. “Scott” Beatty, President and CEO of Shore, said, “The addition of Severn to our organization is very exciting. We will now have a presence in Anne Arundel County, which is a wonderful market and fills a gap. in our imprint. The merger also brings new products and new talents to our organization. “
“This is an opportunity for Severn to join forces with a larger organization and remain committed to community banking,” said Alan Hyatt, President and CEO of Severn. “We look forward to the opportunities and benefits this combination will bring to our shareholders, in terms of the prospects for future earnings growth, immediate dividend recovery and diversification, as well as the customers, employees and the many communities that we we serve.”
Under the definitive agreement, which was unanimously approved by the board of directors of both companies, holders of Severn common stock will be entitled to receive 0.6207 common Shore shares and 1.59 $ cash for each Severn common share they own. Since the exchange ratio will be set at 0.6207, the value of the counterparty’s common share will float with the share price of Shore. The cash portion of the consideration will be set at $ 1.59 per share.
Existing Shore shareholders will own approximately 59.6% of the outstanding shares of the combined company and Severn shareholders are expected to own approximately 40.4%. Shore will appoint four Severn directors to Shore’s board of directors, including Mr. Hyatt. Mr. Beatty will remain CEO of the amalgamated company and Mr. Hyatt will serve as Chairman of the Board.
The transaction is expected to close in the third quarter of 2021, subject to the satisfaction of customary closing conditions, including regulatory approvals and shareholder approval of Shore and Severn shareholders. The directors, officers and certain shareholders of Severn have entered into agreements with Shore under which they have agreed to vote their Severn common shares in favor of the Severn merger with and into Shore. The directors and officers of Shore have entered into agreements with Severn pursuant to which they committed to vote their common Shore shares in favor of issuing Shore shares to Severn shareholders in connection with the merger. For more information on Severn’s proposed merger with and into Shore, shareholders are encouraged to carefully read the Definitive Agreement which will be filed with the Securities and Exchange Commission.
Janney Montgomery Scott LLC acted as financial advisor to Shore in the transaction and issued a fairness opinion to Shore’s board of directors. Holland & Knight LLP acted as legal counsel to Shore. Piper Sandler & Co. acted as Severn’s financial advisor and issued a fairness opinion to Severn’s board of directors. Luse Gorman, CP was legal counsel to Severn.
About Shore Bancshares, Inc.
Shore Bancshares, Inc. is the largest independent financial holding company headquartered on the east coast of Maryland. It is the parent company of Shore United Bank. The Bank operates 22 full-service branches in Baltimore County, Howard County, Kent County, Queen Anne County, Talbot County, Caroline County, Dorchester County and Wicomico County in Maryland, Kent County, Delaware and Accomack County, Virginia. The Company provides trust and wealth management services through Wye Financial Partners, a division of Shore United Bank.
About Severn Bancorp, Inc.
Severn Bancorp, Inc. is a savings and loan holding company incorporated in the State of Maryland in 1990. It operates primarily through three subsidiaries, Severn Savings Bank, FSB, Mid-Maryland Title Company, Inc. and SBI Mortgage Company. . Founded in 1946, Severn Savings Bank is a full-service community bank offering a wide range of personal and commercial banking products as well as residential and commercial mortgages. It has seven branches located in Annapolis, Crofton, Edgewater, Glen Burnie, Lothian / Wayson’s Corner and Severna Park.