At a family-owned restaurant in Dundalk one evening this spring, 1st Mariner Bank CEO and Chairman Edwin F. Hale Sr. stood before schoolteachers, retirees and business owners and made an urgent pitch: Buy stock in Baltimore's largest independent bank and help ensure its survival.
Among those who have purchased shares: friends of Hale's mother and substitute teacher Will White.
"We didn't have a lot to invest, but we felt more comfortable investing it locally," said White, an Edgemere resident who ponied up $2,000 with his wife, Meg. "Of course, Ed, he's a guy who's larger than life."
Hale founded 1st Mariner Bank as the "hometown" alternative to giant out-of-town competitors, marketing that point by appearing in television commercials, most recently with Baltimore Ravens quarterback Joe Flacco, and by putting the bank's name on a downtown arena.
So it seems only fitting that Hale has turned to the customers and communities the bank serves to raise the capital needed to satisfy federal banking regulators. The hyper-local stock sale contrasts with Wall Street roadshows, during which chief executives make their pitch to well-heeled investment bankers. It also demonstrates the lengths to which Hale is willing to go.
If Hale doesn't boost the bank's capital levels, regulators could order the bank to find a merger partner or even place the bank under receivership. He's facing a June 30 deadline, and by his own estimate, he probably won't meet it. The bank still needs to raise another $7 million to $10 million.
Meeting that goal is "probably just not going to happen," Hale said, adding: "But we haven't given up."
He said he has been in talks about the bank's progress and a possible extension with regulators who placed the bank's parent, First Mariner Bancorp, under increased scrutiny last fall.
Hale's appeal to potential investors at Squire's Italian Restaurant in Dundalk, where he bought pizza and beer for the crowd, and other locales around the region netted $7 million — a feat Hale said few on Wall Street thought could happen in Baltimore. The bank raised another $3.9 million through a stock sale to prior shareholders.
"It was really a grass-roots, in-the-trenches effort," Hale said in an interview at the bank's headquarters in Canton.
He said this new batch of stockholders makes success even more critical. "You want pressure," he said. "My mother and her friends have our stock. … The people who invested were friends, relatives, vendors and bank customers. You don't want to let people down."
In total, the bank's parent First Mariner Bancorp has raised about $25 million since October, including a $14.5 million deal to sell its consumer finance unit. In addition, Hale pumped $2 million of his own money into the company in a complicated deal that eliminated $20 million in debt.
Hale and other executives also took on the role of underwriters in the stock sale. Most publicly traded companies hire large investment bankers as underwriters that typically buy any remaining shares not snapped up by investors.
Hale does plan a second round of capital raising that would involve appealing to institutional investors outside Baltimore, though he said he can't reveal the timing and other details because of securities rules.
Shares of First Mariner closed Thursday at $1.06.
The environment for raising capital is improving, said banking analyst Bert Ely. But 1st Mariner Bank continues to lose money — $3.4 million during the first quarter — which means it has to raise even more capital to compensate, Ely said.
"The real question here is, when you cut through all the stuff, is this a viable bank going forward?" Ely said. "Investors are going to look at: 'What kind of return can we get with our money?' "
"Local investors may be more charitable or optimistic," Ely added. "When you go to institutional investors, they're more hard-nosed about it. They don't care about Baltimore or 1st Mariner. They're looking for a good return on their investment."
Hale acknowledges that 1st Mariner still needs to shore up its finances, but he says the bank has come a long way.
"We don't know anyone else who's made the strides we've made to get to this point," Hale said.
He added that some analysts and Wall Street firms were skeptical of a local capital-raising effort. "They thought it was foolish and it would never happen. The people we talked to in New York [said], 'You'll never get it done.' "
"It was not easy, and it wasn't pretty," he said. "But we did get it done."
At a series of meetings with potential investors in hotel conference rooms, country clubs and at the bank's headquarters in March, Hale was blunt about the bank's troubles. White, the substitute teacher, said it wasn't Hale's outsized personality but the fact that he's a "hard worker" and "gets things done" that persuaded him to invest.
Hale told the crowd at Squire's that "everyone has gone through some tough times, 1st Mariner Bank included," recalled White. "They lost money, and they were trying to make it back up. … He laid it on the line and said, 'I'm not going to paint a rosy picture here.' "
Hale also appealed to their civic-mindedness, emphasizing the bank's local roots and involvement in the community. He told them he wants to make more loans when 1st Mariner turns around, especially as some big banks have sharply curtailed lending money since the foreclosure crisis hit and the recession set in.
As Hale made his local stock sales, the new television commercial featuring Flacco began running in April. Signing Flacco was a minor coup for 1st Mariner because M&T; Bank is the team's major sponsor. The bank has signed Flacco as a pitchman for another two years, and the quarterback is now a 1st Mariner customer, Hale says.
The TV spot carried the same message that Hale has been promoting since the bank's founding in 1995 — that unlike big, out-of-state banks, 1st Mariner was built for this community.
Leigh Brent, president of Baltimore insurance firm Maury Donnelly & Parr, which has been a longtime customer of the bank, said Baltimore needs community-based banks like 1st Mariner.
"I am investing in the bank for personal reasons, but I hope that they survive for other reasons," said Brent, who bought more than $50,000 worth of shares during the public stock sale. "Without them, we'll have no one to deal with except the Wachovias and Bank of Americas of the world."
Hale, a former shipping and trucking executive, got into banking when he was recruited by dissident shareholders to take over the Bank of Baltimore in the early 1990s. Hale has taken his share of lumps but this past year marked a particularly low point.
As he sought to shore up the bank's finances and deal with soured mortgages, one of Hale's real estate ventures, separate from the bank, also went bad. Last fall, French bank Natixis SA declared a default on an $84 million loan and began foreclosure proceedings on 1st Mariner Tower, the signature property at Canton Crossing, a mixed-use development.
Hale was forced to sell the property — and to vacate his penthouse, the sole residence at the 17-story tower. He has since moved into a condo in Canton.
Hale ranked that episode as the No. 1 challenge he's faced during his career, just ahead of the bank's recent woes. "That was the worst, dealing with people [at Natixis] who were unwilling, for whatever reasons, to do anything with me," he said.
Also last year, a transportation company owned by Hale's son, Edwin Hale Jr., filed for Chapter 7 bankruptcy and owed the bank $284,596, according to a regulatory filing from the bank. The loan was charged off in June 2009 and sent to collection, according to the filing. The bank also reported charging off a personal loan of $149,874 granted to Hale's son, who filed for personal bankruptcy.
Hale said the bank is now in "a strong position," and he has been encouraged by what he called "overwhelming" support from local investors. Nonetheless, he knows the job isn't complete.
"We're going to keep trying every day," he said of efforts to raise additional capital.
And new shareholders like Eastern Shore resident Doug O'Dell are counting on a comeback by Hale — and ultimately, the bank.
"I had seen him on television," said O'Dell, who owns the Imperial Hotel in Chestertown. "Being the face of 1st Mariner, that was interesting in and of itself. You don't normally see the CEO of a bank on television, explaining the bank's view of its role in the community."
O'Dell bought 10,000 shares at $1.15 apiece.
"I don't know what 1st Mariner will be worth 10 years from now," he said, "but it's not going to be $1.15 a share."
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