Aside from a heated debate with a few vocal critics abou executive pay, Baltimore Bancorp's officers and directors enjoyed the support of a friendly crowd yesterday at the company's annual meeting, as Chairman Edwin F. Hale Sr. said dividend payments could return by early next year.
In his second annual appearance before shareholders, this time "as an incumbent," Mr. Hale defended his performance -- and his pay. He also promised the company, which owns the Bank of Baltimore, would meet its regulatory capital target by the third quarter of this year, nine months earlier than required. Capital is the cushion of money that financial institutions must keep in reserve to protect against possible losses.
If regulatory financial requirements were met, and if the company is able to reduce significantly its $195 million portfolio of nonperforming assets, Mr. Hale said he hoped to ask federal and state regulators to release Baltimore Bancorp from an order signed last summer that, among other things, prevents the company from paying dividends without regulatory approval.
If all goes as planned, the parent of the Bank of Baltimore should be able to restore a dividend by the first quarter of next year, Mr. Hale said. A 15-cent quarterly dividend was eliminated in the fourth quarter of 1991, after a group of dissident shareholders led by Mr. Hale ousted the previous management of the company.
He also re-emphasized his willingness to negotiate a sale of the company if the right offer comes along. In response to a question, Mr. Hale said a price range of between 1.25 to 1.65 times the banking company's book value would be reasonable. Based on the company's book value of $9.61 per share as of March 31, a possible sales price would range from $12 a share to $15.86, or as much as $228 million.
After the company's upbeat forecast hit the news wires yesterday, Baltimore Bancorp rose $1.50 a share, to close at $8.75. The stock had fallen to about $7 in the months before Mr. Hale took over in 1991, from $11 a share.
"I have steadfastly said the company is for sale . . .," explained Mr. Hale, whose business experience has been primarily in shipping and trucking. "But we will not be bottom-fished, because we are not hurting like we were before."
For the most part, shareholders at yesterday's meeting at the Stouffer Harborplace Hotel appeared pleased with the job Mr. Hale and his management team have done in turning the $2.35 billion company around. After losing $125 million in 1991, Baltimore Bancorp reported a $14.5 million profit last year and earnings of $4.9 million in the first quarter of 1993.
But several in attendance questioned the size of the compensation package awarded to the top officers, including Mr. Hale's salary of $342,954. Although it was 2.5 times higher than the $100,598 he was paid in 1991, Mr. Hale served only for the last quarter of that year. He also received 325,000 stock options in 1992, or 2.25 percent of all shares currently outstanding. He did not receive any options in 1991.
"What I'm concerned about as a stockholder is that we are giving unusual consideration to stock options and compensation," said Edward S. Stolarz, a stockholder from Connecticut. "You were on the compensation committee, so in effect you were voting for you own rewards," he told Mr. Hale.
Mr. Hale and other officers served on the board's compensation committee for at least part of last year, a situation several other bankers have said was unusual. They were replaced in January.
Mr. Hale said he abstained from voting on his own compensation and left the room when the issue came up for debate. But according to Securities and Exchange Commission rules, the compensation committee's report is the responsibility of all its members, including Mr. Hale and former member Alan M. Leber knight, president of the company. (Former Chief Executive Officer Charles H. Whittum Jr. served on the committee but resigned from the company last September.)
Another shareholder, Howard Kuehn of Baltimore, derided the directors for increasing the amount they receive for serving on the board to $17,000 from $10,000, not including extra fees for each meeting attended, and for the generous stock options granted to top management.
Robert A. Pascal, who chairs the compensation committee, noted that most of the options are of little value today because the stock price has barely risen above the exercise prices, which range from $6.375 to $7.875 a share. And he championed Mr. Hale's leadership.
"A banker could not have gotten us to where we are today," he said. "We were in a street fight . . . You needed a street fighter and you got one. Otherwise the stock would be worth zero."