One hundred and sixty million dollars is a lot of money, a measure of the ambitious promise by new investors to give 1st Mariner Bank "one of the highest capital ratios of any Maryland bank" and save it from seizure by federal regulators.
But it's also a measure of how far the Baltimore-based bank has fallen. When you lose nearly $100 million of shareholders' money over four years, it takes more than a couple of cupcakes to restock the larder.
Success is by no means guaranteed. Priam Capital's investment of $36.4 million is dependent on finding an additional $123.6 million from unidentified sources. While investors show more willingness to do deals these days than a year ago, unprofitable community banks with continuing losses and loan problems aren't exactly at the top of the list.
And "success," at any rate, would not feel especially successful for 1st Mariner founder Ed Hale and the rest of the bank's owners. The deal would substantially dilute existing shareholders, although Hale said in a prepared statement that the board "strongly believes it will benefit our shareholders and customers."
If everything goes right, New York-based Priam will own nearly 25 percent of 1st Mariner's common stock, with newly issued shares. It's unclear what form of investment the other $123.6 million might take. But if the transaction goes through, present shareholders would own little of the recapitalized company unless they, too, put up new money.
That includes Hale. His 19 percent stake, including stock options, would shrink drastically along with his management role. The trucking entrepreneur who founded 1st Mariner, who personified the bank and pitched it on TV as an alternative to the out-of-town financial giants, would resign as chairman and CEO. Priam says that it has offered him a board seat at the reorganized company and that he is considering taking it.
He had to know this was coming. At Tuesday's closing stock price of 69 cents, 1st Mariner's entire market capitalization was $13 million. Anybody putting up another $36 million, let alone $160 million, wants to put in his or her own people. So pat Hale on the back for working to remove himself from the spotlight for the sake of the bank.
Hale will go down in Baltimore banking history as overambitious and hard-edged but selling a dream that many shared: that of a hometown lender to replace Maryland National, the Bank of Baltimore and numerous other institutions swallowed up by absentee owners.
He himself helped sell a struggling Bank of Baltimore to First Fidelity after winning a proxy battle for control in the early 1990s. Hale started 1st Mariner, he always said, to help fill the void.
Whether 1st Mariner continues its locally based role under the new arrangement is an open question. For politicians and economists worried about local jobs, the Priam Capital deal seems better than a shotgun marriage organized by federal regulators if the bank had failed. That might have instantly had 1st Mariner branches reporting to some out-of-state CEO.
Baltimore Sun reporters were unsuccessful in reaching Priam managing director Howard Feinglass on Tuesday night. But in the company's news release he talks about the bank playing "an instrumental role in the ability of the Baltimore metropolitan area to continue to develop and prosper."
Maybe that means he would keep 1st Mariner's management in Baltimore for the long term. Or maybe it means the new investors would ride the economic recovery and sell 1st Mariner off when the time is right. Feinglass is from Baltimore.
Presumably Priam doesn't want to own more than 25 percent of 1st Mariner's common stock because that would involve being classified as a bank holding company and putting up with lots of regulation. But it probably also doesn't want to put too many eggs in one basket.
So the search for capital continues. At least Tuesday's announcement should buy some more time with the Federal Deposit Insurance Corp., which is probably getting impatient with 1st Mariner's blown deadline for improving its financial position.
For months, Hale has been making the rounds, looking for money. The deal with Priam gives him a partner in the capital quest, somebody with Wall Street connections to help finish the job.
Perhaps Priam sees potential in 1st Mariner that has eluded everybody else.
Everybody, that is, except Ed Hale.