1st Mariner Bank founder Edwin F. Hale Sr., will step down as chairman and CEO as part of a New York investment company’s plan to take a stake in the struggling Baltimore banking company.
Priam Capital Fund I LP will invest $36.4 million in First Mariner Bancorp, the bank’s parent company, according to an announcement late Tuesday afternoon. The plan is part of a total of $160 million the bank said it expects to raise, which includes money from other unnamed investors.
First Mariner Bancorp said in a regulatory filing last month that it was still short almost $38 million of the capital it needed to meet the terms set by state and national regulators. The company had reported a net loss of $46.6 million in January for 2010 and said in a filing with the Securities and Exchange Commission that its efforts to raise capital had fallen short.
Priam’s investment and related transactions were unanimously approved by First Mariner’s board of directors but are still subject to the remaining $123.6 million of capital being raised, regulatory approvals and other conditions, according to the company.
Hale, who started the bank in 1995, will leave the helm when the deal closes at an undisclosed date. He has been offered a role on the company’s board of directors until 2012, the company said.
Hale’s successor or successors must be agreeable to First Mariner and Priam Capital, according to the announcement. Upon the closing of the capital raise, a designee of Priam will join the company’s and the bank’s respective boards of directors.
“We are excited to have Priam as a lead investor and will be working tirelessly with them and our advisors to move our recapitalization efforts to conclusion,” Hale said in the statement.
Howard Feinglass, managing partner of Priam Capital, is a native of Baltimore.
“We see a unique opportunity to invest in 1st Mariner,” Feinglass said in the statement. The bank will have one of the highest capital ratios of any bank in the state, Feinglass said.
The company was operating under a 2009 agreement for a cease-and-desist order with the Federal Deposit Insurance Corp. and the Maryland Division of Financial Regulation.
According to the terms mandated by federal regulators, First Mariner needed to raise its Tier 1 leverage and total risk-based capital ratios to 6.5 percent and 10 percent, respectively, by March 31, 2010 and 7.5 percent and 11 percent, respectively, by June 30, 2010.
The Tier 1 capital ratio is a bank’s core equity capital compared to its total assets; the total risk-based capital ratio is the requirement that banks keep a minimum ratio of estimated total capital to estimated risk-weighted assets.
First Mariner did not meet those deadlines and said in its last filing that it needed at least $37.6 million more in capital to reach the levels set by regulators. In 2009, the company said it needed to raise $15 million to meet all of the requirements.
Hale, prominent in the Baltimore business community, is owner of the Baltimore Blast and owner of naming rights to 1st Mariner Arena. He is also chairmanof the city’s tourism agency, Visit Baltimore.