Already looking like it will miss Thursday’s deadline to raise more than $123 million, First Mariner Bancorp’s efforts were made that much harder Wednesday after its stock was delisted by Nasdaq.
Private equity firm Priam Capital Fund I LP agreed in April to pump $36.4 million into the Baltimore-based parent company of 1st Mariner Bank — if it could raise an additional $123.6 million. Priam is allowed to terminate the deal if certain goals aren’t met.
First Mariner was to have raised $70.6 million by July 18, but didn’t meet that deadline. The company was to have raised the entire $123.6 million by Thursday.
First Mariner Chief Financial Officer Paul B. Susie declined to say Wednesday if the company had raised the money.
Priam could let Thursday’s deadline pass without taking action.
Priam officials could not be reached for comment.
The effort to attract investors will not be helped by the company’s shares being moved to an exchange that specializes in penny stocks. First Mariner said Wednesday that its stock had been delisted from the Nasdaq Stock Market for failing to sell at more than $1.
Having its stock delisted is a condition of the agreement that would allow Priam to walk away from the deal.
First Mariner said that effective Thursday, its shares will be traded on Over The Counter Bulletin Board under the symbol FMAR.OB.
The bank had fought to get the stock price above $1 after it received notice on July 15 that its request to stay listed on the Nasdaq Capital Market had been denied. First Mariner appealed that decision on Aug. 25, and on Wednesday Nasdaq denied the appeal.
With the move to OTC, stockholders do not lose their ownership rights in the company.
First Mariner first began trading publicly on Dec. 20, 1996, and closed its first day at $13.06. On its last day of trading on the Nasdaq, First Mariner’s shares closed at 41.9 cents.
Anita G. Newcomb, president of A.G. Newcomb & Co, a bank consulting firm in Columbia, said the key issue facing First Mariner is bolstering its capital reserves to cover potential bad loans.
“I think the delisting is really the least their worries,” Newcomb said. “The elephant in the room is the condition of the bank, and that’s been the ongoing challenge.”
In 2009, the company was hit with a cease-and-desist order from the Federal Deposit Insurance Corp. and the Maryland Division of Financial Regulation. First Mariner was to have raised 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. The bank has not hit those levels and has slipped further behind as it has been operating in the red.
In July, the company reported that bad loans and real estate losses contributed to a quarterly loss of $11 million, compared to an $8.5 million loss during the corresponding period in 2010. For the first half of the year, the company reported a net loss of $18 million, compared to an $8 million loss during the first half of 2010.
“The delisting is important, but not as important as the fact they need to raise capital,” Newcomb said. “They’re bleeding to death.”
The bank has been counting on the agreement with Priam to turn the company around. Priam agreed to invest the money with the caveat that the Baltimore-based bank raise an additional $123.6 million, giving 1st Mariner a $160 million infusion of much-needed capital. In the April 25 agreement, Priam reserved the right to terminate the deal if the bank and its parent company, First Mariner Bancorp, had not raised $70.3 million by July 18 or $123.6 million by the start of September. The deadlines are not automatic and must be acted on by Priam, which has so far let the deadlines pass.