Edwin F. Hale Sr., a prominent Baltimore maritime and trucking executive, said he is spending more than half a million dollars in his attempt to take over Baltimore Bancorp, the parent company of The Bank of Baltimore.
Contending that Baltimore Bancorp has not lived up to its potential, Hale and 15 other men are seeking election to the bank holding company's board of directors. Documents have been filed with the Securities and Exchange Commission and the group expects to send out proxy material to Baltimore Bancorp shareholders in about a week.
Hale is chairman of Hale Container Line Inc. and Port East Transfer Inc. He is also owner of the Baltimore Blast, an indoor soccer team.
In an interview yesterday, Hale said he was footing the bill for the effort, but he is confident it will pay off. "It's pretty calculated," he said. "We have talked to many people and we feel that we have a very good chance of winning this fight."
Hale said institutional investors that hold large amounts of Baltimore Bancorp stock are dissatisfied with the bank. However, he said that those investors have not made any commitments to his group.
If Hale's group wins, Hale said he would seek reimbursement from Baltimore Bancorp. If he doesn't win, he loses the money.
A source familiar with proxy fights said it is standard practice for successful dissidents to be reimbursed since their efforts are on behalf of the shareholders.
Hale's effort comes about a year after the Baltimore Bancorp board rejected a $17-a-share offer by First Maryland Bancorp, the parent of First National Bank of Maryland. Many investors are still angry over the loss they took after the stock dropped from more than $12 to less than $4 a share after the rejection. The stock closed yesterday at $8.75, down 12 1/2 cents.
If he is successful, Hale said, he does not plan to try to sell the bank. "We're not going to call First National Bank and say, 'Hey listen, we're the new boys on the block and we want to sell. Are you still interested in buying?' " he said. "We're not going to do that."
However, he said, the new board members would consider any offers that might be made in the future.
Even though the group has said there would be management changes, Hale said they would not be widespread. "We're not going to go in and clean house, that would be very disruptive," he said. "We think there are some decent people there who would remain. . . Some would go, yes. But a lot would stay."
Normally, Baltimore Bancorp would elect six directors at the company's annual meeting May 22. Under the company's bylaws, about a third of the 18-member board stands for election every two years.
In their proxy material, the dissidents are proposing to increase the board by 10 members to 28 positions. If all of Hale's group is elected, they would control the board.
Hale has said that one of the first things such a board would do is to fire Harry L. Robinson, chairman and chief executive officer. In his place they would elect Charles H. Whittum Jr., a former executive vice president of Union Trust Bank and its successor, Signet Bank, as interim chief executive officer.
Whittum, who joined Hale in the interview, contends that Baltimore Bancorp has not performed as it should since it became a publicly traded company six years ago. "The record over the last six years has been abysmal," he said.
He said banks generally try to achieve a 15 percent return on stockholders' equity. For Baltimore Bancorp, the return has been 6 percent over the last six years and 3 percent last year, he said.
Whittum concedes that some of Baltimore Bancorp's problems stem from its history as a thrift, which had a heavy concentration of home mortgages, before it converted to a commercial bank in the mid-1980s. But he said the bank holding company should be held to the standards of established commercial banks.
As its yardstick, the group is comparing Baltimore Bancorp to First National Bank, Baltimore-based Mercantile Bankshares Corp. and Riverdale-based Citizens Bank and Trust Co. of Maryland, Whittum said.
The group considered, and then rejected, comparisons with Provident Bank of Maryland, a Baltimore bank that also converted from a thrift, and Loyola Federal Savings and Loan Association of Baltimore, one of the largest thrifts in the state. "We really threw them out because we didn't think they had comparable data and that it was not fair," Whittum said.
However, a Baltimore Bancorp official and a banking analyst say the dissident group's comparison is skewed.
Jerome P. Baroch, senior executive for Baltimore Bancorp, said Mercantile, First National and Citizens are long-established commercial banks and three of the best-earning institutions in the region. "It would be more realistic to use a broader ranking of banks," he said.
"It's a little jaundiced comparison," said a banking analyst, who asked not be named. He said he would rate the management of Baltimore Bancorp as "average," adding that they have kept the bank out of serious problems.
The analyst said it will be "very difficult" for the group to be elected to the board. He said many of the people who were angry about the rejection of the First Maryland offer have since sold their investment. Also, the dissidents have the disadvantage of not being included in the management's proxy statement.