First Mariner gains stake in Arundel bank Bank of Glen Burnie deal expected to lead to bid for full control

First attempt thwarted

Hale pays $4.5 million to 2 for 19% of shares in troubled institution

January 28, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

First Mariner Bancorp announced an agreement yesterday to buy 19 percent of the stock of Glen Burnie Bancorp for $4.5 million, two months after the banking company was thwarted in a similar bid.

The purchase gives First Mariner control of roughly 19.5 percent of the outstanding shares in the Anne Arundel County institution and parent to the troubled Bank of Glen Burnie, and makes it the company's largest stockholder.

It is expected that First Mariner will seek at least one seat on Glen Burnie Bancorp's board of directors, and that the 19 percent stock purchase foreshadows an effort to take control of the entire banking company.

"They have a great franchise, and the fundamentals of the bank make us think it's in pretty good shape," said Edwin F. Hale Sr., First Mariner's chairman and chief executive. "We feel it's a good investment, and we're prepared to help management any way we can."

Hale declined yesterday to comment on plans for Glen Burnie Bancorp, although a U.S. Securities and Exchange Commission filing this morning is expected to reveal both details and First Mariner's intentions.

Regardless of First Mariner's intentions, Glen Burnie Bancorp officials said, they hope the bank will remain independent. "We're a community bank and we want to stay independent so that we can serve the community," said F. William Kuethe, president of the bank with $222 million in assets.

"We'd prefer that [Hale] didn't own the shares, but we'll just have to wait and see what the filing says."

At just 20 percent over the thinly traded shares' $18 book value, First Mariner also got quite a deal on the purchase from Ethel D. Webster and Neil C. Williams, at a time when bank stock often trades at two to three times its book value, according to analysts.

"It's in line with Ed Hale's technique -- get things cheaply," said Collyn Bement, a banking analyst at Ferris Baker Watts Inc. who tracks First Mariner.

"Glen Burnie Bancorp has had some problems, but they appear to be turning. First Mariner is taking a very smart position," Bement said.

The Bank of Glen Burnie certainly hasn't been without its troubles. A former senior vice president was sentenced Jan. 16 to 18 months in jail for making improper loans and accepting lavish gifts.

That sentence came on the heels of a guilty plea from Brian H. Davis, a Baltimore trucking company owner who is serving 63 months in federal prison after admitting to bank fraud and tax evasion charges last year.

Davis' schemes are estimated to have cost the Bank of Glen Burnie $6 million, and investigations and lawsuits surrounding loans continue, bank officials said.

But the recent tumult appeared to be enough for Williams, a former director, and Webster, whose father was among the bank's founders.

"She did what was best for her, and I concur," said Williams, who sold 447 shares to First Mariner. "They're lying to shareholders."

Williams, who said Glen Burnie Bancorp's stock price has fallen from $38 a share to roughly $20 per share, described First Mariner's price as "satisfactory, 'cause we don't know the true condition of the bank."

"It was market price," said Hale, who acquired control of Baltimore Bancorp through a 1991 proxy fight and later sold the bank holding company for $348 million. "If they could have gotten more, I suppose they would have."

First Mariner intends to finance the stock transaction through cash reserves, Hale said.

The deal marked the second time First Mariner had made a run for Webster's and Williams' holdings. In November, First Mariner was stymied in an effort to buy the shares after its law firm filed documents with the SEC before the sale was consummated.

In that filing, First Mariner said it hoped to take over Glen Burnie Bancorp through a merger or outright purchase, and that it ZTC planned to propose its own slate of directors. Under state banking law, though, First Mariner is prohibited from folding the Glen Burnie bank into its operations for five years.

Hale said he was contacted by Webster's and Williams' attorney roughly two weeks ago about resurrecting the deal, which is subject to state and federal regulatory approval.

Meanwhile, First Mariner reported earnings yesterday of $365,336 in 1997, reversing a $2.2 million loss the year before. The bank has $257 million in assets.

Pub Date: 1/28/98

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