It's hard enough when a capital infusion depends on a struggling bank raising additional money from other sources. Baltimore's largest community bank will have to do that with a lame-duck CEO and no designated successor.

To close on a $36.4 million injection from Priam Capital Fund I LP, 1st Mariner Bancorp must raise another $123.6 million — and part ways with Edwin Hale Sr., the company's founder, chairman and chief executive.

Uncertainty about who will succeed Hale could complicate the job of soliciting investors, observers said. "Normally, when a bank raises money in big chunks … the most important factor for the new investors is the identity of the new CEO," said Kip Weissman, a partner at Luse Gorman Pomerenk & Schick. "You can't really have a new plan without the leadership to implement it."

The $1.3 billion-asset company agreed to find a successor who is agreeable to Priam and the regulators by the time the recapitalization is completed. Hale was offered a position on the board until 2012, which the company said he is considering.

1st Mariner must identify a successor if it is to raise capital effectively, said Gary Townsend, the president and CEO of Hill-Townsend Capital LLC. 1st Mariner is already compromised given the perception that it "has had a history of mismanagement," he said.

Calls to 1st Mariner's executives were not returned.

Most recapitalizations of distressed banks involve management and board changes but observers said major changes are usually made after the capital is raised.

For example, Pacific Commerce Bank in Los Angeles announced in February after it raised $5 million that it had appointed five new directors.

The $194 million-asset company's CEO, Brian Kelly, resigned April 15, saying he wanted to return to practicing law.

Typically a bank will announce that all of the capital has been raised through a consortium of investors that partner with a newly named management team, said Joe Thomas, the managing director of Hovde Private Equity Advisors. "Investors require it, because he who created the problem could not fix the problem," he said.

1st Mariner and its bank have been under a cease-and-desist order with regulators since September. Since November the company has had an agreement with the Federal Reserve Board to raise capital.

The C&D order required the bank to have a 6.5% Tier 1 leverage ratio and a 10% total risk-based capital ratio by March 31. Those levels are supposed to climb to 7.5% and 11%, respectively by June 30. (The bank had a Tier 1 ratio of 6.84% and total risk-based ratio of 8.10% at Dec. 31.)

The company said in its annual report that it did not meet the requirements and would need at least $37.6 million to meet the bank's higher capital requirements.

Weissman said the company admitted to having serious financial difficulties when it referred to an exemption with Nasdaq rule 5635 in last week's announcement. The company is exempt from seeking shareholder approval on issuing a certain amount of shares if there is a delay that would threaten its financial viability.

The company plans to conduct a rights offering with existing shareholders at the same price it is selling common stock to Priam.

Weissman said this will likely ease shareholders' concerns about dilution. "I like the idea a lot, of the company giving shareholders the opportunity to buy in at the same price, and it cuts off the argument that it's too low," he said.

Priam agreed to buy common stock at 50 cents a share and preferred stock at $1,000 a share. The preferred shares would convert to common stock at 50 cents apiece if 1st Mariner's shareholders approve an increase in shares outstanding. Priam will also receive a 10-year warrant to buy another 15.4 million shares of common stock at 50 cents each. It would initially own about 21.5% of 1st Mariner's outstanding common stock and eventually 24.9% after converting preferred shares and warrants.

"As a rescue package, the private-equity guys are going to drive a hard bargain, and that's what they did here," Weissman said. "The obligation of them to fund this is subject to very significant contingencies. … This thing is a long way from being finished."

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