Revised stock plan wins vote at Baltimore County Savings

October 12, 2007|By Laura Smitherman | Laura Smitherman,Sun reporter

Shareholders and account holders at Baltimore County Savings Bank approved yesterday a plan to make the company fully public through a stock offering that would raise much-needed capital.

The decision to proceed with the conversion was made after the community bank reduced the size of the stock offering three times and pushed back the deadline for buying shares.

The company has been struggling financially since being hit by a suspected check-kiting fraud last year. The local bank also gave investors who had bought shares the chance to back out last month when it warned that its earnings in the fiscal fourth quarter would be lower than anticipated.

Through the stock sale and corporate restructuring, Baltimore County Savings Bank plans to raise as much as $44 million. The bank's parent company would become BCSB Bancorp, traded on the Nasdaq Stock Market, where it has some shares listed now. The resulting company could be worth more than $60 million.

Though investor demand for the stock has been less than originally anticipated, analysts say the bank should be able to sell enough shares to fulfill the offering and complete the conversion, which is expected be completed by the end of the year. Baltimore County Savings, with headquarters in Perry Hall, has 18 branches in the region.

"With the appraised value of the company being reduced several times, the company is having a difficult time reaching the minimum allocation for shares sold," said Mike I. Shafir, a research analyst at Sterne, Agee & Leach Inc. "But ultimately, it is our opinion that BCSB will sell enough shares to complete the transaction."

During separate meetings at the Baltimore County Savings Bank branch in Perry Hall yesterday, shareholders and account holders voted "overwhelmingly" to approve the conversion, Chief Executive Officer Joseph J. Bouffard said. Account holders have until the end of next week to buy shares, at which time the offering will be opened to the public.

The bank plans to sell more than 3 million shares at $10 each. When the bank first filed for the stock sale with the Securities and Exchange Commission in March, it planned to sell as many as 6.6 million shares.

Proceeds from the offering would be used for expansion and to shore up capital reserves after the bank lost $11 million in the suspected check-kiting by a commercial customer, identified in court papers as A&B Check Cashing, of Baltimore. The scheme also affected another bank and a money-order business.

Baltimore County Savings has been operating under heightened federal regulatory scrutiny before the suspected check-kiting scheme for a number of reasons, including lack of a sufficient business plan.

Last month, the bank said it expected a net loss after taxes of $300,000 to $350,000 for the three months that ended Sept. 30. The company plans to release official earnings for the quarter next week.

The bank said expenses increased because it changed its sick leave and vacation policy, and paid employees for unused time; agreed to pay one year's salary and benefits to William M. Loughran, the chief lending officer, who is retiring; and incurred consulting and legal fees.

"They need the influx of cash," Shafir said, "but I wouldn't call it a dire situation."

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