1st Mariner Bancorp ($FMAR), a holding company for regional lender 1st Mariner Bank, announced on Feb. 10 that they would sell the bank chain to a group of investors and declare bankruptcy. The move was a necessity for the struggling Baltimore-based chain, as the company never really recovered from the Great Recession and was in danger of being taken over by the Federal Deposit Insurance Corporation.
While the FDIC has an impressive track record of protecting depositors, without a single American losing his or her money as a result of bank failure in 80 years, turning over operations to the federal government is a last resort for a bank, and is almost never welcome news for that bank’s shareholders.
1st Mariner’s interim president Mark Keidel reassured customers that they would not lose their deposits, and business at the bank chain itself would continue as normal. However, although the bank avoided an FDIC takeover, stakeholders in the company will not be as lucky.
Keidel admitted there was a chance that shareholders of record during the bankruptcy could be wiped out, losing the entirety of their investment. Unsurprisingly, this announcement sparked a massive bloodletting, with investors scurrying to abandon their positions while they still could.
As a part of the deal, the investing group will recapitalize the bank with $100 million. The same investing group, Priam Capital, in 2011 had offered to inject $160 million into the struggling 1st Mariner over shareholder objections that the move would dilute stock. That deal eventually fell through.
Shares of 1st Mariner traded as high as $20 a share in 2006. The financial crisis decimated the bank, pushing it into penny stock territory. The company was delisted from NASDAQ in 2011. Depsite shareholder hopes the bank could come back to life, it appears the impending bankruptcy and sale to investors is the last nail in the coffin.
The company’s stock went into freefall in early action Feb 10, dropping 75 percent to hit 17 cents a share amid exceedingly heavy volume.
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