Severn Savings Bank sold
It was the last bank based in Annapolis
Most people who knew Alan Hyatt probably thought they’d carry him out of his office at Severn Savings Bank one day.
It was the financial institution he bought as a tiny, neighborhood thrift in Baltimore while he was a law school student in the 1970s. He shepherded it through the savings and loan crisis of the ‘80s, the real estate bust of 2007 that tanked many financial institutions, and was just starting to see profits rise again during the coronavirus recession.
But when it came down to it, a bank with almost $1 billion in assets just isn’t big enough to compete anymore.
So, Hyatt’s bank — to most people the silver-haired-lawyer is the face of the last bank based in Annapolis — agreed to merge with an Eastern Shore bank that he says has similar community ideals, Shore United Bank.
“I think it’s a good thing,” he said Thursday. “It will allow us to continue as a community bank, which is important to me.”
Severn Savings will become part of the Shore United of Easton in a stock and cash transaction valued at $146 million. The deal will be worth $11.30 per share for Severn
Savings shareholders based on Shore’s value of $15.64 per share. Severn Savings shares closed up 28% Thursday at $10.70.
The sale completes the decline of Annapolis from a banking center for small and regional
banks that started with the savings and loan crisis of the 1980s. Over the years, names like Farmers Bank of Maryland and Annapolis National Bank have disappeared through mergers with bigger, regional players.
The Bank of Glen Burnie is now the largest remaining bank headquartered in Anne Arundel County.
Hyatt said he doesn’t think being based in Annapolis matters as much as it once did. Annapolis and Anne Arundel County have plenty of banks, but more and more people never set foot inside a branch.
The new bank, which will operate under the name Shore United, will keep a significant presence in Annapolis, making decisions on loans up to a certain amount locally. It will keep the well-known building on Westgate Circle, although the name may change.
Hyatt is the largest single shareholder of the bank, according to SEC documents. He owns 14% of company stock, and will become the chairman of the combined board of directors.
The sale of the bank follows the sale of the bank’s real estate subsidiary, Hyatt Commercial Real Estate. Severn Savings acquired the firm founded by Hyatt’s father in 2007 and sold for an undisclosed price to Reliable Group.
But Hyatt said the two sales are unrelated. The return on investment for the real estate company was much lower than the bank, and Hyatt said the time had come to focus on the core business.
Severn has $952.6 million in total assets, $679.2 million in gross loans and $806.5 million in total deposits as of Dec. 31. It operates seven banking offices located in Anne Arundel County. The transaction will increase Shore’s total assets to approximately $2.9 billion on a pro forma basis as of Dec. 31 and marks its expansion into Anne Arundel.
Corporate investors dominate the list of shareholders in Severn Savings, Fourthstone LLC1, EJF Capital LLC, Tontine Capital Management, the Vanguard Group and Wilcoxson Wealth Management. The only other major local shareholder is the Estate Of Frances G. Hyatt, Hyatt’s mother.
Hyatt said those big investors didn’t pressure the sale but did see the limits in remaining independent.
“Growing organically is a very slow process,” Hyatt said.
Existing Shore shareholders will own approximately 59.6% of the outstanding shares of the combined company while Severn shareholders are expected to own approximately 40.4%. The transaction is expected to close in the third quarter of 2021.
Shore will appoint four Severn directors to the Shore Board, including Hyatt. Lloyd L. “Scott” Beatty, president and chief executive officer of Shore, will continue as CEO while Hyatt will serve as chairman of the Board of Directors.
Shore Bancshares, parent company of the bank, is the largest independent financial holding company based on the Eastern Shore. It has 22 full-service branches in Baltimore County, Howard County, Kent County, Queen Anne’s County, Talbot County, Caroline County, Dorchester County and Wicomico County in Maryland, Kent County, Delaware and Accomack County, Virginia.
Hyatt himself is a major presence in the real estate development business in Annapolis through his law firm, Hyatt & Weber. On Monday, the company announced that Steven M. Heinl has been elected as the firm’s newest partner.
The law firm is a separate company not included in the sale, and Hyatt said he would turn his day-to-day attention back to its operations.
Hyatt purchased Pompei Building and Loan in the 1970s, a tiny neighborhood thrift in Baltimore founded in the 1940s. He relocated to Annapolis and renamed it.
The thrift was converted from a mutual fund company to a stock institution in 1984, weathered the Maryland savings and loan crisis in 1985 and survived an aborted merger with two Virginia thrifts in 1989. It tried and abandoned a merger with Annapolis Bank in the 1990s, then continued to grow as the real estate boom continued for almost two decades.
When the mortgage and real estate recession of 2007 crippled many financial institutions, Severn was hurt. By 2008, the bank reported the first negative quarter in its history, posting a loss of $230,000 in the fourth quarter as it continued to compensate for loans that would never be repaid.
Severn Savings Bank received $23.5 million in federal bailout funds through the U.S. Treasury Department’s Troubled Asset Relief Program or TARP. It was the largest amount of any locally based bank in the county.
Four years later, the company was still working through the recession, reporting a $1 million profit in the second quarter even as it devalued more than $11 million in troubled loans.
In the following years, the company ended its supervision by the Federal Reserve Bank. In 2016, it raised $11 million through a sale of shares for unpaid interest and dividends on outstanding stock.
Earnings were down last year. The Bank earned $6.7 million for the year compared to $8.3 million in 2019, although things were looking up by the final quarter as home sales drove up demand for mortgages.
Then in February, Severn did what it has done for most of its existence. It paid a small dividend to its shareholders both large and small, 5 cents.