Harry L. Robinson, chairman and chief executive officer of Baltimore Bancorp, has characterized a group trying to take over the board as "inexperienced opportunists" whose stake in the bank holding company is very small.
The leader of the dissidents, Edwin F. Hale Sr., contends Baltimore Bancorp is not performing to its potential. He said the group is not opportunistic, but instead intends to improve the operations of the Bank of Baltimore.
Baltimore Bancorp, the bank's parent company, has become the prize in a bitter proxy fight that pits long-time board members against a group of disgruntled shareholders.
Robinson, who has been at the helm of Baltimore Bancorp for the last seven years, says the group wants only to seize control of what he calls "this rather successful banking institution."
Hale, a self-made Baltimore trucking and shipping magnate who also owns the Baltimore Blast soccer team, is footing the bill of more than half million dollars to mount the attack. If he and the rest of the group of 16 dissidents are elected, they would control the bank holding company.
Hale would then become the chairman and Charles H. Whittum Jr., a former executive vice president of Signet Bank, would be the interim chief executive officer, according to Hale.
A key strategy of the dissidents is to enlist the support of large institutional investors, which hold large blocks of Baltimore Bancorp stock. Hale said he has gotten one such commitment, but he would not reveal who it is.
The showdown will come on May 22 when Baltimore Bancorp holds its annual meeting.
The dissidents' proxy material has been reviewed by the Securities and Exchange Commission and "we plan to mail to shareholders today," said Stanley J. Kay of Dewe Rogerson Inc., a proxy solicitation firm.
A shareholder, Barbara S. Larkin, has filed suit in U.S. District Court seeking a temporary restraining order to delay the meeting. She contends the bank misrepresented a proposal she submitted calling for a stockholders' advisory board. Larkin is the mother of R. Andrew Larkin, a member of Hale's slate.
Baltimore Bancorp yesterday responded to the suit with a motion agreeing to send shareholders a supplemental solicitation.
The spark for the proxy fight is generally seen as Baltimore Bancorp's rejection last year of a $17-a-share offer from First Maryland Bancorp, the parent company of First National Bank of Maryland. Before First Maryland made its bid, Baltimore Bancorp stock was trading at $10 1/4 . The stock closed yesterday at $8 1/2 , down 1/4 .
Robinson argues that the rejection of the bid has nothing to do with the current takeover effort since only a few of the 16 dissidents owned stock in the company during the First Maryland battle.
According to information filed with the Securities and Exchange Commission, only three of the 16 men held stock before the First Maryland offer on April 27, 1990, and those holdings amounted to only 25,000 shares out of the total 12.8 million shares outstanding. Of the 91,325 shares now held by the group, 49,125 shares were bought in the last two months.
Hale and the profit-sharing program of his trucking company, Port East Transfer Inc., owned only 4,000 shares until the middle of March. Since then, Hale and the profit-sharing program have bought an additional 25,000 shares. Now, Hale owns 17,000 shares and the Port East Profit Sharing plan owns 12,000 shares.
Hale said the rejection of the First Maryland bid is one motivation for his takeover effort. He also said members of the dissident group made their recent purchases of Baltimore Bancorp stock because "I asked them to."
Responding to Robinson's contention that the group held an insufficient amount of stock to be characterized as serious shareholders, Hale said, "I don't think it's a prerequisite for a proxy fight."
Robinson questioned the group's expertise in banking, contending that what little experience they do have has been poor.
"That's extremely weak," Hale said, reacting to Robinson's comments on banking experience.
Robinson specifically criticized the banking experience of Hale, J. Richard Leon and Richard E. Fasold.
Hale was a member of an advisory board to the Baltimore office of the Bank Maryland Corp. of Towson. Robinson pointed out that the holding company has not made a profit since it became a publicly traded company in 1987 and that it has never paid its shareholders a dividend.
Leon is the president of the James Madison Mortgage Co. in Fairfax, part of James Madison Ltd., a Washington-based bank holding company that has a negative net worth of $12 million after losing $73.9 million last year and $8.7 million in the first quarter. In a recent press release, the company said its banking subsidiaries "could be the subject of regulatory actions."
"Clearly, that's not much of an endorsement of his banking abilities," Robinson said about Leon.
He also questioned the banking experience of Fasold, who is president of the Treasury Bank in Washington, a new bank started in August with only four employees that has yet to show a profit.
"When you look at these men who have been associated with banks . . . you would wonder why any shareholder who knew their background would want them as directors of our company. You would wonder how depositors would react if they became directors," he said.
"From my point of view, seeing this effort, I find it rather frightening," Robinson said.
Robinson said the bank's candidates for re-election have been with the bank for several years and are well respected Baltimore businessmen. "If you are going to put your savings in a bank, or your company's funds in a bank, these are the kinds of people you want to deposit your money with," he said.
"Last year, when banks in this area were either going out of business or operating at huge losses, we were profitable. And I would say it is directly attributable to the work of these directors," Robinson said, adding that the bank has been profitable every year of the last 40 years.
Last year the company reported a net income of $9 million, or 71 cents a share, a 49 percent drop from 1989 when the company earned $17.6 million, or $1.36 a share. For the first quarter, Baltimore Bancorp reported earnings of $5.08 million, or 40 cents a share, compared with $5.1 million, or 40 cents a share, for the year-ago period.
Hale said his role at Bank Maryland was very small and consisted of bringing potential borrowers and depositors to the bank. In fact, he had so little power that bank officials ignored his warning about a potential bad loan, which was made and then lost, Hale said.
Hale did have a $100,000 investment in the stock of Bank Maryland, a stake that sold for about $50,000 earlier this year, he said. He has not attended a meeting of the advisory board for more than a year, he said.
Hale has not formally resigned from the advisory board, but he has not attended meetings in a long time, according to Theresa Livesey, vice president and financial officer of Bank Maryland Corp.
While Hale concedes that Madison is a troubled bank, he said Leon's mortgage division has contributed about $4 million to the parent company last year. "He is reputed to be the best mortgage banker between Baltimore and Richmond," he said.
Even though the mortgage banking firm is owned by Madison, Leon said, his company is only loosely connected to the parent company, relying on it for payroll, employee benefits and some personnel services. In fact, the mortgage company does not even borrow money from Madison; instead it has lines of credit with other banks, Leon said.
"We are in fine shape," Leon said, adding that the mortgage company is profitable and has more than adequate capital that is separate from the bank.
Leon has been with the mortgage firm for 21 years, going back to the time that it was an independent company called the A.E. Landvoigt Inc. based in Annapolis. That company was acquired by Madison in 1982 and changed its name to James Madison Mortgage Co. two years ago, Leon said.
Fasold said the Treasury Bank has not turned a profit yet, which is not unusual for a start-up operation. "We are on track," he said.
The Treasury Bank is the only bank of its kind in the country, Fasold said. Unlike other banks, the Treasury Bank does not have a state or federal charter to be a bank. Instead, it has a general corporation charter from the District of Columbia. However, it is designated a "bank of deposit" by the federal Office of the Comptroller of the Currency and its deposits are insured by the Federal Deposit Insurance Corp., Fasold said.