The new management team at Baltimore Bancorp reported yesterday its first profit since taking over the bank holding company in September.
But the elation was muted by the recent defection of five board members amid disagreement among directors.
Baltimore Bancorp, the parent company of the Bank of Baltimore, reported first-quarter income of $5.1 million, or 40 cents a share, half a percent higher than the $5.08 million, or 40 cents a share, earned during the 1991 first quarter.
But it was a welcome sign after 1991 losses totaling $126.5 million, primarily because of large provisions for losses on loans made by the previous management. However, the good news had little effect on the company's stock, which closed at $5.125 a share, down 12 1/2 cents, on the New York Stock Exchange yesterday.
Stock analysts said the results were better than expected, primarily because of lower-than-expected provisions for loan losses, which were $4.8 million this quarter.
"Whether that is right, only time will tell," said David S. Penn, a banking analyst for Legg Mason Inc., a Baltimore-based stock brokerage firm.
John A. Bailey, banking analyst for Ferris, Baker Watts Inc. in Washington, also was pleasantly surprised and predicted the bank's profits will continue for the rest of the year. But he also noted that the directors' resignations were hurting the stock. "Clearly, people are worried about the directors' stories," he said.
The banking company reported Tuesday that five directors have resigned since early February. On Monday, Charles Kelly, an investment banker, J. Richard Leon, a banker, and David Smith, president of Sinclair Broadcasting Group, resigned. They follow resignations of Richard Fasold, president of Treasury Bank in Washington, and Dr. David Hungerford, an orthopedist.
The bank also announced two new board members, Conrad H. C. Everhard, chairman of Cho Yang Line (USA) Inc., and Jay H. Gouline, president of Springlake Corp. a real estate investment firm in Baltimore. The changes leave the board with 15 members.
Edwin F. Hale Sr., chairman of Baltimore Bancorp, said the first-quarter earnings were the beginning of a trend that would continue through the year. "This is not an aberration or an anomaly," he said in an interview yesterday. "This is the way we think it's going to be, because we have made some changes in the culture."
Mr. Hale and his new board members took over Baltimore Bancorp in September after a bitter proxy fight that ousted the previous management. However, the directors who recently quit had been brought on by Mr. Hale.
He said he was not that familiar with four of the departed board members, who were recommended by Dennis Gingold, the attorney who helped engineered the takeover. Mr. Gingold was fired as general counsel in February, Mr. Hale said.
"Have you ever seen a board formed in a three-week period?" Mr. Hale said. "I didn't know these guys."
Mr. Hale said Mr. Gingold was fired after the bank found another law firm with more experience with banking regulators.
Mr. Hale said Dr. Hungerford had left the board to return to his medical
practice. But he chalked the other directors' resignations up to unspecified disagreements.
Responding to private criticism that some of the disagreements were over the poor quality and lack of financial information provided to the board, R. Andrew Larkin, a board member and member of the executive committee who sat in on the interview, said bad information was the fault of the previous management.
"What we are getting now, I consider to be extremely reliable," Mr. Larkin said.
A former senior official, who asked not to be named, said much of the problem stemmed from the firing of top officials in the early part of the takeover, which he he said hurt many parts of the company.
"You have a period of inactivity during a period when you should be going full blast," the former official said.