If the Federal Deposit Insurance Corp. takes over, everything shareholders invested in First Mariner goes up in smoke. Should the new capital-raising deal go through instead, current investors will be left with a much smaller piece of the company because of stock dilution, but they will still own something.
Hale, thinking of the local people who heeded his call last year, including friends of his mother, said: "I just feel an obligation to them to help them restore some of the money that they had lost."
The housing bust and financial meltdown hit the mega-financiers first, but community banks across the country have been buffeted by the aftereffects. These institutions with assets below $10 billion account for most of the 8,000 banks in the country, and also most of the ones now struggling, said banking analyst Christopher Marinac of Atlanta-based FIG Partners LLC.
More than 3,000 banks of all sizes are under the close supervision of regulators, 870 are on the FDIC's "problem list" and 200-plus have failed since 2008, he said.
But "the vast majority" of community banks have enough capital on hand to steer their way through the choppy waters of the uneven recovery, said Paul Merski, chief economist for the Independent Community Bankers of America. That's particularly true for banks that aren't on the East and West coasts, he said.
"You didn't have a huge bubble in real estate prices and real estate investing, and you didn't have that huge burst," he said. "For many banks right through the middle swath of the country, it's almost business as usual."
Hale says he knows the buck stops with the CEO, but he feels he was blindsided by the loans that have brought his bank to the brink. During the foray into the "Alt-A" mortgages, he said he asked many times, "Are you sure that these loans are going to be sold without recourse, they will be sold to Wall Street and never come back?" The mortgage-team leaders assured him that was the case, he said.
They've since been fired.
"It started off as a trickle, and it became a torrent," Hale said of the returning loans. "A total of $80 million came back to us. It was unstoppable. And when that happened, that ultimately cost us about $60 million and created the capital hole we have today."
Maas, the shareholder critic, isn't impressed with that explanation. It strikes him as "incompetence" for the CEO of a bank to not know the terms under which it sold loans.
But he was unhappy with management long before the housing bust. Hale's intertwined business relationships — First Mariner rented its headquarters from him until 2009, sponsors his soccer team and made loans to his son that later went bad — don't sit well with Maas.
For years, the university professor tried to get the company to split the CEO and chairman positions so Hale would not be both the man in charge of day-to-day operations and the head of the board overseeing the company — including the CEO. The reason none of his annual shareholder resolutions to that effect passed, Maas said, is because company insiders control so much of the stock.
A Baltimore native who invested in the company early on, Maas feels his concerns about Hale have been borne out by events. "He was the problem," Maas said.
Other shareholders have warm feelings for Hale, despite the sharp drop in stock price. They blame economic forces, not him.
"I think the people in Baltimore who like the idea of a community bank identify with Ed," said Leigh Brent, president of Baltimore insurance firm Maury Donnelly & Parr.
Brent, whose company banks with 1st Mariner, bought shares when Hale appealed to the community last year. A few weeks ago, he purchased more. "I believe in the bank," he said. "They're still our bank, and I hope they make it."
Hale, who earned about $540,000 last year as head of the company, is due a payout of more than $1.5 million when he leaves. The financial hits he has taken over the past few years far outweigh that amount, and not just because he's the largest shareholder of a company that has dropped in value from nearly $120 million to $13 million in a little over four years.
The real estate bust meant his property holdings lost value, too. Then the loan came due on 1st Mariner Tower in 2009 and, unable to refinance, he sold it for less than he thought it was worth to avoid foreclosure. As part of that deal, he moved out of the penthouse condo that — like an upscale version of living over the storefront — had been his home.
He said last week that he could have saved "a fortune" if he'd filed for bankruptcy protection rather than sell the tower, and his lawyer urged him to take that route.
"If I went into Chapter 11, if I did have to do that, it would cause a run on the bank because people wouldn't understand the distinction between Ed and Ed's bank," Hale recalled telling the attorney. He added: "I just flat refused to do it."