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First Mariner reports $11 million loss in second quarter

Increased red ink fueled by write-downs of real estate, bad loans

By Jamie Smith Hopkins, The Baltimore Sun

8:23 PM EDT, July 29, 2011

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First Mariner Bancorp's bleeding increased during the second quarter as continued write-downs of real estate and bad loans left the Baltimore company with $11 million in losses.

The 1st Mariner Bank parent, locked in a battle for survival, said Friday that its loss during April through June was more than double that of a year earlier.

But the almost $4.7 million loss during the second quarter of 2010 would have been higher if not for a $3.8 million tax benefit during that period, the company said. It received no tax benefit this year.

First Mariner's allowance for loan losses at the end of June was $14.1 million, up from $12 million a year ago, while the company's earning power decreased. Its amount of earning assets fell by 8 percent over the year as customers paid off loans or refinanced out and the amount of new mortgage loan production dropped.

Edwin F. Hale Sr., First Mariner's chairman and chief executive, said the company has cut back on "controllable expenses" but was hampered in the second quarter by the need to write down the value of nonperforming loans and real estate held by the bank after foreclosure. It foreclosed on more property in the second quarter than it did a year earlier, and declining appraisals on that real estate affected the bank's bottom line.

"There's just been a spiraling down of values that's continuing," Hale said in an interview.

Costs related to loan losses and foreclosed properties — including the write-downs that acknowledge falling values — accounted for two-thirds of the red ink in the second quarter, First Mariner said.

Asked whether he thought the worst was over, Hale said, "I thought the worst was over three or four years ago."

First Mariner's long string of losses, fueled by soured mortgages made during the housing bubble, prompted its auditors to warn in March that the company might not be able to remain in business.

In April, company officials struck a deal to get a cash infusion of $36.4 million from New York-based Priam Capital. The money is contingent on First Mariner raising $123.6 million from other investors by Sept. 1.

The agreement said Priam Capital could bow out if First Mariner failed to raise at least $70.3 million by July 18, but neither company said then whether the Baltimore company had cleared that hurdle. Hale said Friday that he couldn't speak even "a syllable about that." But in a statement as the company released its earnings, he said the company is continuing its efforts to increase capital levels as regulators have demanded.

First Mariner is also trying to prevent the delisting of its stock from the Nasdaq Capital Market. The company said last week that it has appealed Nasdaq's delisting decision, which will delay any action until First Mariner makes its case to a hearings panel.

The company's stock closed at 50 cents a share Friday, down 8 cents.

jhopkins@baltsun.com

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