Mortgage Subsidiaries and First Mariner Profits
After five years of losses, First Mariner Bank has enjoyed two consecutive profitable quarters thanks to a number of different factors.
That of course, comes as good news to the people who work for the company and for those who invest in it, but how does it possibly affect you?
And, even if it doesn’t affect you, what happened that allowed this company to turn its fortunes around and finally turn a profit after so many years?
Those are questions worth asking, which is why we’ll start exploring First Mariners’ quarterly profit postings and the factors that eventually led to the company turning its misfortunes around and getting back onto the right path.
Background
Early last year, the bank’s parent company, First Mariner Bancorp, was experiencing financial losses from subprime mortgages that came as a result of the housing slump of 2008. Federal regulators requested that the company raise money and it hoped to do so by striking a deal with New York-based investment firm Priam Capital.
As part of the deal, Edwin F. Hale Sr, chairman and CEO of First Mariner Bancorp, would step down and Priam would invest $36.4 million dollars for a 24.9 percent stake in the company.
That money came with one condition; that First Mariner itself would have to raise $123.6 million in additional capital. There is no question that the company had trouble doing that in the past, so the question of just how it was going to be able to raise the capital needed to ensure the deal with Priam went through was a prominent one as things moved forward.
Throughout the remainder of 2011, the bank had let several deadlines involved with raising that additional money pass, a situation that could have cause the entire deal to collapse, as Priam was free to walk away at any time.
Fortunately, the New-York based firm extended the deadline November of that year in order allow the bank to continue its efforts in raising what was needed to complete the deal. But just what happened that made it possible to First Mariner to finally turn years of losses into profitable quarters?
How Things Turned Around
A lot of factors went into making the first quarter of 2012 a profitable one for the company, but the bottom line is that it as able to post a net income of $1.8 million, a much better result than the $7.3 loss it experienced at the same period a year before.
Chief among the elements that came together to create this turn of fortune for the bank was increased business in the bank’s mortgage subsidiary and an increase in non-interest income.
Many people attribute an improving economy that not only produced lower levels of unemployment, but a slow but certain increase in commercial and residential property values as well, to the company’s ability to finally post a profitable quarter.
It seems like an obvious enough explanation for what happened, but it’s one that shouldn’t be easily dismissed, if only because those same conditions made it possible to First Mariner bank to repeat that success in the second quarter.
At the end of July of this year, the company posted a $5.7 million gain over the three month period that ended in June. Again, this could be attributed to increased business through some its subsidiaries like VA Mortgage, which saw an influx of new mortgages as well as refinancing that made it possible for First Mariner Bank to post a second straight profitable quarter.
Where Things Go From Here
Even though things are looking up for First Mariner Bank, they still have a long way to go. The federal order to raise capital still stands and the company still has a long way to go before it gets to where it needs to be from a financial standpoint.
Still, the traction that it gained from the beginning of the year is something to be watched because, if it can continue with the momentum that it seems to be gathering, then these are likely to be just two of many profitable quarters for First Mariner.