Merger in works for Maryland Bank and Trust

To become part of Old Line, based in Bowie

Friday, Sept. 3, 2010

The parent companies of Maryland Bank and Trust and Old Line Bank will merge, officers of both institutions announced Wednesday, pending shareholder and regulatory approval.

Old Line Bancshares will purchase Maryland Bankcorp for about $20 million, or about $30.93 per share in cash or stock, at the choice of the shareholder.

Old Line will be the surviving parent company and bank, according to a statement about the agreement issued jointly late Sept. 1.

The merger is expected to be finished by the first quarter of 2011, and will increase Old Line Bancshare's total assets by $349 million to about $750 million, and add 10 full-service branches to Old Line Bank's existing 10-branch network, the release stated.

Old Line is a Maryland-chartered commercial bank based in Bowie, and its primary market is suburban Maryland, according to the release.

Maryland Bank and Trust was founded by Jack Daugherty more than 50 years ago in Lexington Park, and is now headquartered in Waldorf.

In a letter to employees, Thomas B. Watts, CEO of Maryland Bank and Trust, and G. Thomas Daugherty, president, said that the merger is "a very exciting event" but acknowledged the possibility of mixed feelings.

"There is a part of me and everyone that has been associated with Maryland Bank and Trust Company that will have some sentimental reaction to the merger," the letter said. "However real those sentiments are, the future business prospects of the combined bank are so meaningful to everyone involved that it leaves no doubt that this merger is an excellent decision."

On Thursday, Daugherty was driving to each of Maryland Bank and Trust locations to break the news in person to those who work for the bank founded by his father, he said in an interview.

"Change is always a funny thing to measure. Most people are a little bit hesitant about change, but I think by me taking a proactive approach — and I'm coming out to talk to my employees — I think that they see the real benefit of this and I think are, overall, enthusiastic about it," he said.

It's too early to know if layoffs are in store for any of Maryland Bank and Trust's 115 full-time employees, but Daugherty is confident Old Line will "be very compassionate and understanding" toward workers, he said. "And one thing that is interesting is that there is very little overlap with our branches, so I don't see much change taking place at all. That is the management call for Old Line."

James W. Cornelsen, president and CEO of Old Line Bank, said in an interview that layoffs are "always an element to be looked at. I think we'll be extremely fair. I think, really, when you look at redundancy in banking, it usually falls at many levels to the branch level, we don't see that at all in this transaction" because branch locations are complementary.

Daugherty and Watts will join the board of directors of the new bank, they said.

It made sense for the new entity to keep the Old Line name because a name referring to Maryland would be a liability if the bank decides to expand out of the state in the future, Daugherty said. Officers of both banks said customers' experiences at local branches would not change after the merger.

Both banks have Southern Maryland roots, with MBT being founded in Lexington Park in 1959, and Old Line starting in Waldorf in 1989, moving to Bowie four years ago. The two banks are roughly the same size, some officers and employees have moved between the two over the years, and as community banks they share similar business strategies, making the merger a logical move, officers said.

Daugherty said it "tugs at the heartstrings" for Old Line to swallow up the bank his father started, and even the bank's examiner expressed regret, but at the same time "I think my father would be proud that we have chosen such a good partner to merge with, because he always cared most about the community and the employees, and I believe the arrangement [we've] made in this merger takes care of the community and takes care of the employees."

If the merger proceeds, the new entity will, as a state-chartered bank, be regulated by the U.S. Federal Reserve and the Maryland State Banking Commission, the same entities that regulate Old Line Bank today, Watts said. Maryland Bank and Trust is regulated by the Federal Reserve and the federal Controller of the Currency.

emitrano@somdnews.com