First Mariner Bancorp, locked in a fight for survival, suffered another setback Wednesday when its stock was delisted from the Nasdaq stock market.
Starting Thursday, First Mariner shares will be traded on the over-the-counter bulletin board.
The latest development comes as the company is trying to raise desperately needed capital to close a deal that would keep regulators at bay and the bank in business.
The deal requires the Baltimore company to raise nearly $124 million by Thursday or risk losing a cash infusion from a New York investment firm. Bank officials have remained mum on the deal's progress.
The company said Wednesday that the delisting "in no way affects the daily operations" of the bank and its branches.
At a minimum, industry observers said, the delisting hurts the bank's reputation. Clifford Rossi, a former regulator, compared it to a ball player being downgraded to the minor league. Practically, the bank could have a more difficult time attracting new investors, analysts said.
"It paints at least a bad taste in the mouth of investors who're looking at First Mariner," said Rossi, a former bank executive and regulator who now teaches at the University of Maryland's Robert H. Smith School of Business.
"Management will have an uphill battle on explaining how it got there and what makes them think they could pull themselves out of the problems they're in right now," Rossi said.
First Mariner's delisting results from its financial troubles, which began when the housing bubble burst.
Bad mortgages fueled the company's string of losses. In 2009, federal banking regulators ordered that First Mariner come up with more capital.
While the company was able to raise some $25 million, losses continued to mount. In March, auditors warned that the bank might not be able to remain in business.
Soon afterward, Howard Feinglass, a Baltimore native, stepped in. His New York-based Priam Capital agreed to provide $36.4 million if First Mariner could raise an additional $123.6 million from other sources.
As part of the deal, First Mariner's chairman and chief executive officer, Edwin F. Hale Sr. — who built the bank from scratch — agreed to step down.
At the time, several banking analysts questioned whether the company could raise that amount of money.
Analysts remain skeptical.
Given First Mariner's large losses in recent years, it would be hard to find additional investors whether or not the company's stock was still trading on the Nasdaq, said Ethan Cohen-Cole, an assistant professor of finance at the Smith School.
"It's hard to interpret this as anything but bad news," Cohen-Cole said of First Mariner's delisting.
The agreement with Priam Capital allows Priam to walk away if First Mariner does not raise the money and maintain listing on the Nasdaq.
Reached at his office Wednesday, Feinglass declined to comment. If Priam Capital bows out of the deal, First Mariner must make that news public.
At its peak, First Mariner's share price topped $20. Now the price hovers at around 40 cents.
First Mariner appealed Nasdaq's delisting determination at a hearing last week, but the exchange said the company had failed to meet standards to remain listed. Those standards include maintaining a $1 per share minimum and keeping at least $2.5 million in shareholder equity.
The bank posted a negative $13.4 million in shareholder equity as of June 30, according to regulatory filings.
While First Mariner stock will trade over the counter, company spokesman Bill Atkinson said investors would not see any change in how they buy and sell shares.
Besides First Mariner, banks in the Baltimore region that trade on the OTCBB include Cecil Bancorp and Howard Bancorp.
First Mariner shares closed at 42 cents on Wednesday.Copyright © 2015, The Baltimore Sun