First Mariner Bancorp files bankruptcy to sell 1st Mariner subsidiary

Investor group to pay $4.78 million

By Caroline Salls

Pittsburgh, Feb. 10 - First Mariner Bancorp filed Chapter 11 bankruptcy on Monday in the U.S. Bankruptcy Court for the District of Maryland to facilitate the sale of wholly owned subsidiary 1st Mariner Bank to a new bank formed by investors, according to a company news release.

The bank will be sold for $4.78 million via a transfer of First Mariner's shares in the bank and bank-related assets to the investors.

First Mariner said the sale will recapitalize the bank with about $100 million, enabling it to meet all state and federal capital standards, significantly improving the strength of its balance sheet and advancing its business plan to become one of the region's leading financial institutions.

The investors, led by Priam Capital, Patriot Financial Partners, GCP Capital Partners and TFO Financial Institutions Restructuring Fund LLC, as well as several members of the Baltimore business community, formed an interim bank that signed an agreement with the holding company to acquire 1st Mariner Bank for a cash payment to the holding company, subject to a competitive bidding process for higher and better offers.

If the interim bank is the successful bidder, the agreement calls for it to acquire the bank from First Mariner Bancorp and then recapitalize the bank to a level that will satisfy all capital requirements imposed by the bank's federal and state regulators.

The company said the 1st Mariner Bank name will be retained.

Business as usual

First Mariner said the bankruptcy filing affects only the holding company. The bank will not file bankruptcy, will operate separately from the holding company and will conduct business as usual throughout the reorganization process.

Deposits continue to be insured to the fullest extent possible by the Federal Deposit Insurance Corp., and there will be no impact on depositors, creditors or vendors of 1st Mariner Bank, according to the release.

"The $100 million capital infusion will create a bank poised for growth," interim 1st Mariner Bank president Mark Keidel said in the release.

"Upon approval by the court and regulatory authorities, the bank will become strong and secure. We will meet all federal and state regulatory requirements for capitalization."

First Mariner said the bank maintains strong levels of liquidity, comprised of cash, cash equivalents and securities, totaling $286 million at Jan. 31, to meet its obligations.

Board approval

The board of directors of the holding company unanimously approved the transaction with the interim bank. In the meantime, the holding company said it intends to ask the court to expedite approval of the proposed sale and recapitalization of the bank.

Robert D. Kunisch Jr., a proposed investor, is slated to be named president and chief operating officer of 1st Mariner Bank.

Michael R. Watson, a First Mariner Bancorp director and interim chairman, said reorganizing is the "best way to preserve the bank." He said the parties have had ongoing discussions regarding the recapitalization plan with state and federal banking regulators, which need to approve the transaction.

"We have worked for more than five years to raise capital while seeking to protect the value of the enterprise," Watson said in the release.

"With time, it's become clear, however, that the sale transaction is the best option to preserve 1st Mariner Bank, to maintain its independence and to protect its employment base."

DIP financing

In connection with the bankruptcy filing, the company obtained a commitment for $2.5 million of debtor-in-possession financing from stalking horse bidder RKJS Bank.

Interest will be 6%, provided, however, that there will be no interest on the loan if RKJS is the winning bidder.

The DIP financing will mature on the earliest of four months from the date of the first loan, subject to change if the lender is the winning bidder, the acquisition closing, the first business day after the court approves a sale with a winning bidder other than RKJS, the termination date of the merger and acquisition agreement, the earlier of the Chapter 11 plan effective date and the date the obligations come due as a result of a default and the date the FDIC is appointed as a receiver or conservator of the bank.

Debt details

According to court documents, First Mariner had $5.46 million of total assets and $60.53 million of total debt as of Dec. 31.

The company's largest unsecured creditors are

• Trustee Wells Fargo Bank, NA of Wilmington, Del., with a $17.79 million trust preferred securities claim, an $11.52 million trust preferred securities claim and a $6 million trust preferred securities claim;

• Trustee Wilmington Trust Co. of Wilmington, Del., with a $12.17 million trust preferred securities claim and a $5.66 million trust preferred securities claim; and

• Trustee Bank of New York of Newark, Del., with a $7.29 million trust preferred securities claim.

The company is represented by Yumkas, Vidmar & Sweeney, LLC.

First Mariner is the Baltimore-based holding company for 1st Mariner Bank. The Chapter 11 case number is 14-11952.

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