First Mariner: Microcosm of an Industry's Woes

by: Mark Riddix

Last year, I wrote in a previous post that that local bank First Mariner Bancorp (FMAR) was struggling for survival. First Mariner is the largest independent bank in Baltimore and operates 24 branches in the area. The bank has announced plans to close its downtown Baltimore branch after losing over $2 a share the previous quarter. First Mariner is also facing delisting from the NASDAQ exchange as the stock has failed to maintain a value of at least $1 over the past month. First Mariner has recently sold off one of its most valuable assets in Mariner Finance. Now comes news that the Federal Reserve has determined that the bank is undercapitalized and needs to raise an additional $20 million in capital.

Raising $20 million in fresh capital is no small task for a bank with a total market cap of $6 million. Even if First Mariner is able to raise $20 million; the bank still faces questions about its sustained viability.

I believe that First Mariner has only two options going forward. The first option is to merge with a larger more financially sound institution. First Mariner would lose its independence but retain its brand name and branches. The second option is the option of last resorts and that is for the bank to go into receivership. This would involve the dissolution of the bank and the liquidation of all assets.

I believe that First Mariner’s situation is a microcosm of the troubles in the banking industry as a whole. Small and medium sized banks are facing the same issues that megabanks were just a year ago. The difference is that smaller banks are not being “bailed out” by the government like Wells Fargo (NYSE:WFC), M&T (NYSE:MTB), Bank of America (NYSE:BAC), JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C) and PNC (NYSE:PNC). These mega banks are now gaining deposits at the expense of small community banks. Long term this will become troublesome for borrowers because we will have limited choices when seeking loans for homes, automobiles, education and etc.