A New Jersey investor and his family want to significantly increase their holdings in First Mariner Bancorp with a $4 million investment — an infusion of cash that could come as the company tries to raise capital to appease federal banking regulators.
Irving Schwarzbaum of West Orange, N.J., and several family members hold less than 1 percent of stock in First Mariner, but they want a much larger stake, according to filing this month with the Federal Reserve Bank of Richmond.
"The investors believe that allowing them to increase their investment in [First Mariner] will provide the company both with needed capital and the benefit of Mr. Schwarzbaum's substantial business experience, which includes successful efforts in restoring troubled companies to profitability," the filing states.
Under their proposal, which requires approval from the Federal Reserve, the Schwarzbaum family would acquire more than 14 percent of the company, the filing showed. By comparison, the company's founder and chief executive, Edwin F. Hale Sr., owns 22 percent of the outstanding shares, according to recent regulatory filings.
The stakes are high for First Mariner, the holding company of Baltimore's largest independent bank, and Hale, who personally invested $2 million in the company recently to help reduce its debt. Last year, it came under the scrutiny of the Federal Reserve Bank of Richmond, the Federal Deposit Insurance Corp. and Maryland banking regulators.
Because of low capital levels and distressed loans on its books, the bank has been forced to raise up to $20 million to bolster its financial condition and satisfy regulators. Last week, the bank announced that it had raised $10.9 million through recent stock sales, and Hale said another stock sale is possible in the near future.
First Mariner has said it must raise its capital levels to satisfy regulators by a June 30 deadline. Company officials declined to comment on Schwarzbaum's filing.
Under his proposal, Schwarzbaum would be given a seat on First Mariner's board of directors. Schwarzbaum also has consulted with a banking turnaround expert and wants to become a top executive who could make recommendations about changes in management, according to the filing.
Anthony Polini, an equity analyst who covers the bank for Soleil Securities in New York, said it appeared that Schwarzbaum would try to act as an activist investor.
"This isn't the time for an activist to come in," Polini said. "It's a time for a capitalist to come in."
A message left at Schwarzbaum's office was not returned.
The Schwarzbaum filing was first reported Friday by the Baltimore Business Journal, which also reported hat the bank was suing a transportation company owned by Hale's son. The Sparrows Point company, Hale Transport LLC, owed the bank $299,193, according to the report.
Hale Transport filed for Chapter 7 bankruptcy last year and has since been liquidated, according to court records.