One year after a group of investors bought the troubled institution, 1st Mariner Bank can boast a number of achievements: It's well-capitalized, fewer distressed loans weigh on its balance sheet and it even turned a small profit in the first quarter of 2015.
The bank's president acknowledges there's more work to be done. With about $830 million in assets, it's Baltimore's largest independent bank, but it's still puny compared to national competitors in the region such as Bank of America and Wells Fargo. And its image continues to suffer from the years in which it struggled under the weight of soured loans and a subsequent bankruptcy by its parent.
Aiming to put the past behind them, the bank's officers want to re-establish the bank's niches in mortgage and small-business lending. The bank hopes to grow organically and by acquiring smaller banks in the region over the next year.
"We want to be a vibrant, growing bank," said Rob Kunisch, the bank's president and chief operating officer. "There's a philosophy in banking that $1 billion [in assets] is the size you need to be to absorb all the regulatory costs, and I think it's right, so absolutely we want to grow this place back to well in excess of a billion dollars."
Founded by trucking executive Edwin F. Hale Sr. in 1995, 1st Mariner staked out a position as a community- and Baltimore-oriented institution as the area came to be dominated by large, out-of-state banks.
When the housing bubble collapsed, the bank was hobbled by soured mortgages that eroded its capital. Facing default for missing interest payments, the bank's parent filed for bankruptcy protection in February 2014 and sold the bank in June after a court-supervised auction to a group of local and out-of-state players led by New York-based Priam Capital, an investment firm run by a Baltimore native.
They bought the bank for $18.7 million and agreed to pump about $92 million in cash into 1st Mariner to recapitalize it.
In the past year, the bank wrote off many of its nonperforming loans, cutting its ratio of bad assets to total assets from 7.5 percent to 2 percent, Kunisch said. In the process, it shrunk total assets to $830 million as of March 31, down about $126 million from a year earlier.
The 1st Mariner name came off a 17-story tower in Canton built by Hale, who stepped down as chairman and CEO in 2012, but the bank's headquarters remain on the tower's second floor with a branch in the lobby.
It remains one of the largest banks based in the Baltimore area, even though its deposits also declined, from $835 million on June 30, 2014, to $709 million as of March 31. Its employment also dropped to 381 from about 430 a year ago.
The bank continues to operate under a Federal Deposit Insurance Corp. order, issued in 2009, to increase its capital. Kunisch said the bank was told by regulators in March that it had met the requirements of the order.
But Baltimore bank consultant Stuart Greenberg said regulators typically want to see a good record for some time before lifting the more intensive oversight.
"I think their first challenge is regulatory approval," Greenberg said. "I'm sure that issue is paramount in their minds, and I think they want to get out from under that."
Greenberg predicted that regulators might be leery of approving any acquisitions while the order remains in place.
Another challenge, Kunisch said, is repairing the bank's image and winning back customers who left amid the bank's turmoil.
"I think there's a fair number of people that aren't fully aware that we are recapitalized, strong, lending money," he said.
The bank also is reassessing its branch network, which spans Baltimore city and county, reaching north into Carroll and Harford counties and south to Annapolis. It recently announced plans to close the Westminster branch with the intention of finding a better location, and it plans to move a branch in Cockeysville about a mile away.
The bank turned a small profit of $503,000 in the first quarter of 2015 — its first since the third quarter of 2012 — something Kunisch said he didn't expect until later this year. He attributed the profit to historically low interest rates continuing to drive growth in the mortgage division.
Community banking consultant Joe Sullivan said he thought the bank was "moving in the right direction" but called acquisitions "necessary."
"The reality is, today to run a community bank, the cost of regulation and doing business is so much more than it was," said Sullivan, the CEO of Market Insights in Chicago. "Banks of their size are looking to buy other banks to pay for the technology, the regulation, the marketing and things that need to be done. The quest for scale is on, and community banks need to figure out how to strategically have alliances where they can grow, and acquisitions are one way."
Sullivan said marketing would be critical to turning around the bank's image, something Kunisch said the bank is working on with an ad campaign that will feature Ravens quarterback Joe Flacco.
"It sounds like they've still got some cleanup work to do and some image that they're trying to repair," Sullivan said. But "I would say they're going to continue on this path to growth."
Kunisch said the bank would prefer to expand in Anne Arundel and Howard counties and believes it can grow organically through its mortgage and small-business lending. The bank's image and reputation, he said, would improve with time.
"I would say we're ahead of our plan, and I would say we're ahead from a financial standpoint," Kunisch said. "But there's always more that you want to get done."