First Mariner reports $7.3 million 1Q loss

Loss comes as company seeks more capital

April 27, 2011|By Hanah Cho, The Baltimore Sun

Another loss for First Mariner Bancorp has raised yet one more question about whether the company can come up with more than $120 million to ensure its survival.

The Baltimore institution posted a first-quarter loss Wednesday of $7.3 million, up from a loss of $3.4 million in the same period last year. The company said last year's earnings benefited from a tax settlement.

First Mariner Chairman and CEO Edwin F. Hale Sr. said in an interview Wednesday that the loss was anticipated.

"I don't think it's going to hurt" the company's capital-raising efforts, Hale said. But, he acknowledged, "it's not going to help."

"It would be much better if we had mitigated our loss or had a profit," he said. "It is what it is."

After securing help last week from a New York investment firm, First Mariner has embarked on another round of fundraising. Priam Capital, headed by Baltimore native Howard Feinglass, agreed to provide the company $36.4 million in much-needed cash.

The deal, however, is contingent on the bank's raising an additional $123.6 million from other investors.

Hale said the capital-raising efforts remain the company's "first and foremost" priority.

Towson banking consultant Brian Casey said First Mariner's loss escalates the difficulty of raising capital in what he called a still-fragile economy.

"It's like being on a treadmill at the gym," said Casey, who performed work for First Mariner when it went public in 1996 but has not had a business relationship with the company for years. "You put the grade up a bit more."

First Mariner is on the clock to find additional investors. The company must raise at least $70.3 million by July 18 or the entire $123.6 million by Sept. 1, or risk losing the deal, according to regulatory filings.

"The market will answer all our questions within the next 90 to 120 days," Casey said.

If those conditions are met and the deal closes, Priam Capital would have a nearly 25 percent ownership stake in the company, and Hale would step down.

Separately, the agreement also gives Priam an option until June 18 to buy all of the bank's nonperforming assets at book value, according to regulatory filings. That provision is tied to the completion of Priam's cash investment.

As of March 31, First Mariner had $71 million in nonperforming assets, or debt obligations in which borrowers have not paid any interest or principal to the bank.

Since September 2009, the bank has been under federal regulatory orders to improve capital levels. While First Mariner has raised at least $25 million since then through various methods — among other steps, Hale appealed to local teachers and retirees to buy stock in the company — it has not met the higher capital requirements.

Citing "recurring losses" and "a limited capital base," auditors warned in March that First Mariner might not be able to remain in business.

Regulators also ordered the bank to deal with its problem loans.

Hale said the company has made progress in reducing costs related to delinquent assets.

During the first quarter, provision for loan losses was $800,000, down from $2.2 million last year.

Net charge-offs, or delinquent loans that the bank has deemed uncollectible, dropped to $800,000 in the first quarter, down from $1.8 million last year.

Total revenue declined 22 percent to $9.9 million, from $12.7 million, largely because of a drop in noninterest income.

Hale said that was largely due to lower mortgage volume amid the slow real estate and refinancing market. But he said demand is starting to pick up again.

First Mariner shares rose 2 cents to close Wednesday at 65 cents.

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