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First Mariner
(The Daily Record/Maximilian Franz)

1st Mariner sale gets approval; merger to close this month

The sale of 1st Mariner Bank to a local group of investors has gained the regulatory approvals needed to move forward, the bank announced Monday.

The Federal Deposit Insurance Corp. and the Maryland State Banking Commissioner have approved the acquisition, and the sale is expected to close this month.

When that happens, the bank will be recapitalized with about $110 million, said Jack E. Steil, one of the leaders of RKJS, the investment group, in an interview Monday. He expects that the sale will be executed next week.

In the dramatic auction process that ultimately resulted in a win for RKJS, it was revealed that financial advisers to First Mariner Bancorp, 1st Mariner’s parent, had questioned RKJS’ ability to gain regulatory approval as buyer of the bank. But the local investors stole victory from Penn National Bank when a bankruptcy court judge allowed the auction to reopen.

“We were definitely surprised at that,” said Kunisch, referring to the advisers’ doubt, “but we are pleasantly surprised by how quickly we obtained the approval.”

Those concerns about the speed of regulatory approval were likely based on the prior cases, said Mark Kaufman, Maryland’s commissioner of financial regulation, and were not specific to the RJKS investors.

“The bank regulations do not make it easy for non-banks to invest in the banking industry,” he said. “While these kinds of transactions take place, they’re cumbersome, they’re difficult and they’re not easy to institute.”

But the investors involved in this case are local names with significant banking experience. That should be an asset in revitalizing the company, Kaufman said.

1st Mariner Bank is planned to be the surviving entity in the deal. Leading the bank will be Robert D. Kunisch Jr., as president and chief operating officer, and Steil as chairman and CEO.

They plan to keep the company’s 16 branches and 433 employees. Steil said the company plans to add management but is unable to comment further currently on that front. He also said the bank will seek opportunities to grow in both the retail and commercial businesses.

Both Kunisch and Steil have long histories in Maryland’s banking community. Most recently, Steil served as president of Wilmington Trust Mid-Atlantic Region and Kunisch was president of Wilmington Trust FSB, Maryland. Before that, they both worked for Mercantile Bank, focusing mostly on the Maryland market.

“We’re thrilled to see the institution continue with local ownership,” said Kaufman. “I think it’s good for the institution, it’s good for the city and it’s good for the state.”

Kunisch and Steil are backed by an investment group that includes Priam Capital, Patriot Financial Partners, GCP Capital Partners and TFO Financial Institutions Restructuring Fund LLC, as well as members of the Baltimore business community.

“I think it’s all just kind of plays in with why we were so passionate about the opportunity to be the largest locally owned bank in Baltimore,” said Kunisch. Some of the investors will serve on the bank’s board of directors, he said, while the others, he hopes, will continue to support the bank through their business in the area.

1st Mariner Bank had been troubled for years prior to its bankruptcy and sale. The bank tried a variety of methods to recapitalize, after the FDIC issued a cease and desist order in 2009, but the poor conditions in the economy, especially in the mortgage business, crippled those efforts, said Steil.

He and Kunisch became involved with 1st Mariner when the bank was working with Priam Capital on a potential capital investment. After that investment fell through, they were kept as advisers to the company.

“We didn’t envision it would take almost three years,” he said.

As of March 31, 1st Mariner had about $889,000 in deposits. In 2013, it posted a loss every quarter, totaling a $19.1 million loss for the year.

RKJS’ final purchase price for the bank was about $17.7 million, plus another $1 million that was promised if the deal did not get regulatory approval by April 30.