Shareholders of Baltimore Bancorp have voted for a dissident slate of directors headed by Baltimore Blast owner Edwin F. Hale Sr., apparently ensuring that at least six of the 16 opposition candidates will sit on the board of the bank holding company.
However, whether the Hale group will gain a majority on the board will be decided in a legal battle in the coming months over the bylaws of the corporation.
Baltimore Bancorp, the parent company of the Bank of Baltimore, last night announced that after a preliminary count, Hale's group got more than 5.51 million votes and management's slate of six incumbent directors got about 3.79 million votes.
A proposal to enlarge the board from 18 to 28 directors similarly passed by a large majority with 5.2 million votes in favor of the motion, 3.7 million votes against, and 1.5 million abstentions.
However, the proposal to expand the board did not receive the 80 percent approval required under the company's bylaws. The Hale group has challenged that requirement and a hearing on that and other legal issues in the battle for control of the bank has been set for Monday before U.S. District Court Judge J. Frederick Motz in Baltimore.
If the dissidents are successful in enlarging the board, they could gain 16 seats on the 28-member board and, therefore, control the bank holding company.
Baltimore Bancorp, the fifth largest banking operation in the state, held its annual meeting on May 22. However, shareholder voting was extended to May 28. The counting of the ballots was only completed yesterday.
Hale, who also owns trucking and barge companies, called the results a "clear mandate" from the shareholders and asked that bank management drop all its legal challenges to the dissidents.
However, bank management gave no indication that it will surrender.
"We are studying these results carefully and our representatives will be participating over the next few days in the process of inspection and challenge," said Harry L. Robinson, chairman and chief executive officer of Baltimore Bancorp, in a prepared statement. "We believe that the preliminary results with respect to the proposal to increase the size of the board contain serious errors which we intend to seek to correct," he said.
But while he will continue to battle the Hale group, Robinson conceded that the vote sent a message of discontent to the management.
"We recognize, no matter what the outcome of that process, that a broad spectrum of stockholders have expressed their strong desire for management to improve operating results and the market price of the stock," Robinson said in the prepared statement. "We have kept the bank healthy during a very difficult time, but clearly more must be done."
Robinson added that the election would have no immediate impact on the bank's depositors and customers.
The bitter proxy fight has its roots in the company's rejection a year ago of a buyout offer from First Maryland Bancorp, the parent company of First National Bank of Maryland. First Maryland was offering $17 a share, or a total of about $217 million.
Even though the offer was several dollars above what a share of the company's stock was selling for at the time, Baltimore Bancorp's board rejected the offer, saying it was not adequate. At the time Robinson also expressed a desire to keep the bank independent. That move sparked widespread shareholders' discontent.
The main strategy of the Hale group was to enlist the support of large institutional investors, which control 35 percent of the 12 million shares. The voting results indicate that the dissidents also were able to pick up strong support among the individual shareholders.
The Hale group has been particularly critical of Robinson's performance and has said it will fire him if it gains control of the board. Under that situation, Hale would become chairman and Charles Whittum, a former executive at Signet Bank, would become the interim chief executive officer.