BCSB puts off stock offering

Baltimore Co. bank didn't get minimum sale of $30 million

December 04, 2007|By Laura Smitherman | Laura Smitherman,Sun reporter

Baltimore County Savings Bank, struggling to drum up investor interest in its stock sale amid a market that's wary of financial companies, plans to delay the offering for three months while it seeks a new appraisal of the bank's value, the company disclosed late yesterday.

BCSB Bankcorp Inc., the community bank's parent company, said it has sought the approval of federal regulators for its latest plan. The delay means that the bank must return money to investors who subscribed to the current offering and again seek shareholder approval of the proposal to become a fully public company and raise much needed capital.

Chief Executive Officer Joseph J. Bouffard said the bank wasn't able to sell $30 million worth of stock, the minimum needed to complete the offering. He blamed market conditions that have caused investors to sour on the stocks of financial institutions hurt by a credit crisis sparked by defaults on subprime mortgages. Bouffard said Baltimore County Savings Bank has "no exposure" to subprime home loans.

"There are a lot of problems in the financial markets preventing institutions just like ours from completing their conversions. It's not unusual," Bouffard said. He "remains optimistic" that the bank will be able to complete the offering as markets stabilize.

In the past week, other banks have extended or called off stock sales in connection with these so-called second-step conversions, under which banks that have some stock on the market sell more shares to become fully public. Kaiser Federal Bank in California canceled its offering, while Atlantic Coast Bank of Georgia extended its deadline to pull in more investors.

Baltimore County Savings has said the offering would help shore up capital reserves. The bank, which has its headquarters in Perry Hall and 18 branches in the region, was hit hard last year by an alleged check-kiting scheme perpetrated by a commercial customer. The bank lost $11 million in the alleged scheme, though it has recovered $3.4 million of the loss from its insurance provider.

It had been operating under heightened federal regulatory scrutiny before the suspected kiting for a number of reasons, including lack of a sufficient business plan.

After the stock sale and corporate restructuring, the bank had anticipated that the company could be worth more than $60 million. It currently has a market capitalization of about $40 million. Shares of BCSB Bancorp have fallen more than 50 percent in the past year, and were unchanged in trading yesterday at $7.01 on the Nasdaq stock market.

The bank has reduced the size of its proposed stock offering three times and pushed back the deadline for buying shares. It also gave investors the chance to back out when it warned that its earnings would be lower than anticipated.

Mike I. Shafir, an analyst with Sterne, Agee & Leach Inc., said "it's not an ideal time to try to raise capital." He said that through a reappraisal, the bank could change a closely watched measurement of its share price compared with its book value to attract more investors.

"They clearly want to proceed with the transaction to become fully public," Shafir said, "but they need to take it to a level that's enticing to investors."


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