Sides in fight over bank put own spin on loss

August 22, 1991|By Timothy J. Mullaney

Both sides in the proxy contest over Baltimore Bancorp have revved up the printing presses again, this time to argue over the meaning of the company's announcement that it will cut its dividend by 40 percent and take a third-quarter loss because of newly soured real estate loans made by the company's Bank of '' zTC Baltimore subsidiary.

Shareholders are to vote by Aug. 29 on a plan to add 10 seats to the company's board of directors, enough to let rebel shareholders led by Edwin F. Hale Sr., owner of the Baltimore Blast soccer team, claim a majority. In an earlier round of voting, the dissidents grabbed six seats on the existing 17-member board.

The company's management announced last Friday that three developers who owe the bank $30 million in loans on four real estate projects have stopped making interest payments on their debt. The company will add $4.5 million to its loan-loss reserves to protect against defaults, wiping out the profit it otherwise would have made in the third quarter and causing about a $1 million loss. The loan problems also forced the dividend cut.

Because of the proxy contest, both sides were eager to explain the issue to shareholders -- in their own way. The Hale camp's letter was sent yesterday; management's letter was dated last Friday but not released to the press until yesterday.

"There's only one thing to do with bad loans -- recognize and deal with them as quickly and effectively as possible -- even if it's 10 days before an election," said the company's letter, signed by Robert F. Comstock, chairman of the board. "That's what we intend to do."

"This loss is exactly what we've been telling people -- that they don't have control of the business," said Daniel H. Burch, a proxy solicitor advising Mr. Hale.

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