For immediate release

The Federal Reserve Board today announced its approval of the application of First Mariner Bancorp, Baltimore, Maryland, to acquire up to 100 percent of the voting shares of Glen Burnie Bancorp, and thereby acquire control of its banking subsidiary, The Bank of Glen Burnie, both of Glen Burnie, Maryland. Attached is the Board's Order relating to this action.

First Mariner Bancorp Baltimore, Maryland Order Approving Acquisition of Control of a Bank Holding Company

First Mariner Bancorp ("First Mariner"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 3 of the BHC Act (12 U.S.C. § 1842) to acquire control and up to 100 percent of the voting shares of Glen Burnie Bancorp ("Glen Burnie"), and thereby acquire control of The Bank of Glen Burnie ("Bank"), both of Glen Burnie, Maryland.1 Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (63 Federal Register 11,446 (1998)). The time for filing comments has expired, and the Board has considered the proposal and all comments received in light of the factors set forth in section 3 of the BHC Act. First Mariner controls approximately $223 million in deposits, representing less than 1 percent of total deposits in commercial banking organizations in the state of Maryland ("state deposits").2 Glen Burnie controls approximately $192 million in deposits, also representing less than 1 percent of state deposits. On consummation of the proposal, First Mariner would control approximately $415 million in deposits. Financial and Managerial Considerations The BHC Act requires the Board to consider the financial and managerial resources and future prospects of the companies and banks involved in the proposal. The management of Glen Burnie ("Commenter") has objected to the proposal, contending that First Mariner does not have the financial resources to acquire all the voting shares of Glen Burnie, particularly in light of Glen Burnie's shareholders rights plan.3 Commenter also contends that state law would effectively limit First Mariner to acquiring approximately 20 percent of the company's voting shares,4 and that First Mariner's position as a minority shareholder would cause dissension and disruption within the management of Glen Burnie.5 The Board has carefully considered the comments in light of all the facts of record, including supervisory reports of examination assessing the financial and managerial strength of the institutions involved, accounting adjustments that Commenter alleges would be required in connection with the proposal, and confidential financial information provided by First Mariner regarding the source of funding for purchasing the voting shares of Glen Burnie. The Board notes that First Mariner and its subsidiary bank are currently well capitalized. In addition, First Mariner has committed that its purchase of any voting shares of Glen Burnie in addition to the 18.9 percent of the shares that it already has under contract to purchase will be funded only with equity that qualifies as tier 1 capital, and that First Mariner, Glen Burnie, and their subsidiary banks will remain well capitalized after all share purchases. First Mariner proposes to become the largest shareholder in Glen Burnie, and its acquisition of a minority interest is a first step in seeking to acquire all the shares of Glen Burnie. First Mariner has committed, however, not to elect its nominees to Glen Burnie's board of directors unless its nominees would constitute a majority of the board.6 Accordingly, First Mariner will either control the board of directors of Glen Burnie or not participate in the board of directors of the company.7 These circumstances substantially reduce the possibility that dissension or disruption within the board of directors will interfere with the operations of Glen Burnie.8 The Board recognizes that First Mariner may not succeed in acquiring control of Glen Burnie. The Board has indicated that the acquisition of less than a controlling interest in a bank or bank holding company is not a normal acquisition for a bank holding company.9 Nonetheless, the requirement in section 3(a)(3) of the BHC Act that the Board's approval be obtained before a bank holding company acquires more than 5 percent of the voting shares of a bank suggests that Congress contemplated the acquisition by bank holding companies of between 5 and 25 percent of the voting shares of a bank or a bank holding company.10 Nothing in section 3(c) of the BHC Act, moreover, requires denial of an application solely because a bank holding company may acquire less than a controlling interest in a bank or bank holding company. On this basis, the Board has on numerous occasions approved the acquisition by a bank holding company of less than a controlling interest in a bank.11 Commenter argues that the Board may not approve the proposal because, in the view of Commenter, the proposal is not permissible under applicable state law. Commenter argues that Maryland law prohibits consummation of the proposal unless Bank (the banking institution to be acquired) files a separate application for and receives approval to become an affiliate of First Mariner and its subsidiary bank.12 The Board may not approve the acquisition of a bank by a bank holding company if the acquisition is prohibited by state law.13 The Maryland Commissioner of Financial Regulation reviewed the transaction in light of the arguments raised by Commenter and approved the proposal by finding that the proposal was permissible under Maryland law. The Commissioner's order concluded that, when a bank holding company files the appropriate application under Maryland law for a proposed acquisition, a separate application from the Maryland banking institution to be acquired is not required.14 A state court in Maryland has upheld the Commissioner's decision. Accordingly, based on all the facts of record, the Board has determined that its approval of the proposal is not prohibited by state law.15 Based on these and other facts of record, the Board concludes that considerations relating to the financial and managerial resources and future prospects of First Mariner, Glen Burnie, and their respective subsidiaries are consistent with approval of the proposal, as are the other supervisory factors that the Board must consider under section 3 of the BHC Act.16 Competitive Considerations The BHC Act prohibits the Board from approving an application under section 3 of the BHC Act if the proposal would result in a monopoly, or if the proposal would substantially lessen competition in any relevant banking market, and the Board has not found that the anticompetitive effects of the proposal are clearly outweighed in the public interest by the probable effect of the proposal in meeting the convenience and needs of the community to be served.17 First Mariner and Glen Burnie compete directly in the Baltimore, Maryland, banking market.18 On consummation of the proposal, First Mariner would become the 11th largest depository institution in the market and control approximately $348 million of deposits in the market, representing 1.5 percent of total deposits in depository institutions in the market.19 The banking market would remain moderately concentrated under the Department of Justice Merger Guidelines, and the Herfindahl-Hirschman Index ("HHI") would increase by 1 point to 1145.20 Numerous competitors would remain in the market. Based on all the facts of record, the Board concludes that the consummation of the proposal would not have a significantly adverse effect on competition or on the concentration of banking resources in the Baltimore banking market or any other relevant banking market. Convenience and Needs and Other Considerations The BHC Act requires the Board to consider the convenience and needs of the communities to be served in connection with its review of the acquisition of a bank holding company. The Community Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA") also requires the Board to take into account, as part of its review of a proposal to acquire a depository institution, the record of performance of each relevant depository institution in helping to meet the credit needs of the institution's entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of the institution.21 The Board has carefully reviewed the convenience and needs factor and the CRA performance records of the banks involved in light of Commenter's contention that the proposal would not provide any significant benefit to the communities to be served. As provided in the CRA, the Board has evaluated the convenience and needs factor in light of examinations of the CRA performance records of the relevant institutions conducted by the appropriate federal financial supervisory agency. An institution's most recent CRA performance evaluation is a particularly important consideration in the applications process because it represents a detailed on-site evaluation of the institution's overall record of performance under the CRA by its appropriate federal supervisor.22 First Mariner's subsidiary bank, First Mariner Bank, Baltimore, Maryland, received a "satisfactory" rating from its appropriate federal supervisor, the Federal Deposit Insurance Corporation ("FDIC"), at the bank's most recent examination for CRA performance, as of June 1996. Bank also received a "satisfactory" rating from the FDIC at is most recent examination for CRA performance, as of September 1995. Based on all the facts of record, the Board concludes that the convenience and needs factor, including the CRA performance records of the subsidiary banks of First Mariner and Glen Burnie, are consistent with approval. Conclusion Based on the foregoing and all other facts of record, the Board has determined that the application should be, and hereby is, approved.23 The Board's approval is specifically conditioned on compliance by First Mariner with all the commitments made in connection with this application and on its compliance with all the requirements of Maryland law that are found to be applicable to the actions taken by First Mariner to acquire an interest in Glen Burnie or Bank. The commitments relied on by the Board in reaching this determination are deemed to be conditions imposed in writing by the Board in connection with its findings and decision, and, as such, may be enforced in proceedings under applicable law. The proposed acquisition of Glen Burnie shall not be consummated before the fifteenth calendar day following the effective date of this order, and not later than three months after the effective date of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Richmond, acting pursuant to delegated authority.

By order of the Board of Governors,24 effective September 28, 1998. (signed) Robert deV. Frierson Robert deV. Frierson Associate Secretary of the Board

Footnotes 1 First Mariner owns less than 1 percent of the voting shares of Glen Burnie and has an agreement to acquire an additional 18.9 percent of the voting shares. 2 Deposit data are as of June 30, 1998. 3 Glen Burnie has adopted a shareholders rights plan that becomes effective when a shareholder who has acquired or obtained the right to acquire 10 percent or more of Glen Burnie's voting shares before the adoption of the plan acquires 20 percent or more of its voting shares. If this event occurs, each of the other shareholders receives the right to purchase additional voting shares for one-half market value or to receive additional voting shares in exchange for their rights under the plan. 4 Commenter represents that Glen Burnie has elected to be subject to a provision in Maryland law that generally prohibits a shareholder who owns 20 percent or more of a company's voting shares ("control shares") from voting the control shares unless the right to vote the control shares has been approved by two-thirds of the company's disinterested shareholders. See Md. Code Ann., Corps. & Ass'ns § 3-702(a) (1997). The control shares provision also contains an exception for the acquisition of shares as part of a merger or other form of business combination. Commenter notes, however, that under the exception, a shareholder who acquires 10 percent or more of the voting shares of a company or any affiliate of the shareholder may not merge or combine with the company for five years after the shareholder's ownership reaches the 10 percent level unless the company's board of directors approves the merger or combination. See Md. Code Ann., Corps. & Ass'ns §§ 3-602(a) and 3-603(c)-(e) (1997). 5 Commenter argues that the proposal is inconsistent with the Board's precedent in NBC Co., 60 Federal Reserve Bulletin 782 (1974) ("NBC Co."), in which the Board denied a bank holding company's application to acquire less than 25 percent of the voting shares of a bank because a single shareholder held more than 50 percent of the voting shares of the bank and vigorously opposed the acquisition. The Board concluded that the proposal "would only perpetuate or aggravate dissension in Bank's management" without the applicant having any opportunity to obtain control of the bank. The Board also noted that the proposed acquisition could detract from the overall financial condition of the applicant, which planned to rely on the bank's dividends to service the applicant's acquisition debt. 6 Commenter questions whether First Mariner's representatives or nominees may serve on the board of directors of Glen Burnie in light of the Depository Institution Management Interlocks Act (12 U.S.C. § 3201 et seq.) ("Interlocks Act"). The Interlocks Act prohibits director interlocks between two depository institutions in the same metropolitan statistical area unless the institutions are affiliates for purposes of the Interlocks Act. Under the proposal, First Mariner would own at least 19 percent of Glen Burnie's voting shares but would not have a director on Glen Burnie's board unless its nominees constituted a majority of the board of directors. Accordingly, there would not be a director interlock unless Glen Burnie was a subsidiary of First Mariner for purposes of the BHC Act. See 12 U.S.C. §§ 1841(a)(2)(B) and 1841(d). In that event, the two organizations would be affiliates under the Interlocks Act, and the interlock would be permissible. See 12 U.S.C. § 3201(3)(A). If First Mariner proposes to establish a director interlock under any other circumstances, that interlock must conform with the Interlocks Act. Commenter also contends that First Mariner would have violated the Interlocks Act if a recent proxy contest challenging Glen Burnie's management by a dissident shareholder that was supported by First Mariner had succeeded. Even assuming that the directors proposed to replace the management nominees were covered by the Interlocks Act, the challenge sought to replace the entire board of directors and would not have violated the Interlocks Act for the reasons discussed above. In any event, no violation of the Interlocks Act occurred because no representative or nominee of First Mariner was elected to Glen Burnie's board of directors. 7 Commenter argues that efforts by First Mariner to obtain confidential information concerning Glen Burnie's management and First Mariner's alleged use of this information to support litigants against Glen Burnie were improper and illustrate the antagonistic and damaging effect that First Mariner would have on Glen Burnie if the proposal were approved by the Board. This matter was reviewed by a court, which ordered the return of certain documents to Glen Burnie, noted that the applicable law was not settled, and determined not to impose any penalty or sanction on First Mariner. 8 Unlike NBC Co., the proposed investment in this case would not impair the financial resources or capital position of First Mariner because First Mariner would neither incur debt to consummate the transaction nor depend on dividends from Glen Burnie to meet any debt servicing requirements. Commenters also do not control a majority of the voting shares of Glen Burnie. Consequently, this proposal more closely resembles the facts in a number of cases approved by the Board involving acquisitions by bank holding companies of minority positions in other institutions without the consent of the institutions' management. See, e.g., Crescent Holding Company, 73 Federal Reserve Bulletin 457 (1987) (acquisition of 37 percent of the voting shares of a bank approved notwithstanding possible management dissension); Hudson Financial Associates, 72 Federal Reserve Bulletin 150 (1986) (acquisition of up to 49.8 percent of the voting shares of a bank holding company); City Holding Company, 71 Federal Reserve Bulletin 575 (1985) (acquisition of up to 30 percent of the voting shares of a bank holding company). 9 See e.g., North Fork Bancorporation, Inc., 81 Federal Reserve Bulletin 734 (1995) ("North Fork"); State Street Boston Corporation, 67 Federal Reserve Bulletin 862, 863 (1981). 10 12 U.S.C. § 1842(a)(3); 12 C.F.R. 225.11(c). 11 See e.g., North Fork (acquisition of up to 19.9 percent of the voting shares of a bank holding company); Mansura Bancshares, Inc., 79 Federal Reserve Bulletin 37 (1993) (acquisition of 9.7 percent of the voting shares of a bank holding company); SunTrust Banks, Inc., 76 Federal Reserve Bulletin 542 (1990) (acquisition of up to 24.9 percent of the voting shares of a bank); and First State Corporation, 76 Federal Reserve Bulletin 376 (1990) (acquisition of 24.9 percent of the voting shares of a bank). 12 See Md. Code Ann., Fin. Inst. § 5-403 (1997). 13 See Whitney National Bank in Jefferson Parish v. Bank of New Orleans and Trust Company, 379 U.S. 411 (1965). 14 See Order of the Commissioner dated May 4, 1998; Md. Code Ann., Fin. Inst. § 5-904 (1997). 15 Glen Burnie may appeal the decision of the court. The Board expects First Mariner to comply with all requirements of state law that are found to be applicable to the actions taken by First Mariner. 16 Commenter maintains that First Mariner was required to obtain the Board's approval under the BHC Act before First Mariner supported a proxy challenge by a dissident shareholder at a recent meeting of Glen Burnie's shareholders. The Board notes that the conduct identified by Commenter falls within the scope of a well-recognized exception for proxy contests to the prior notice requirements of applicable law. See Board letter dated March 6, 1995, to Murray A. Indick, Esq. The Board also notes that the director nominees supported by First Mariner were not elected at the meeting of Glen Burnie's shareholders and that First Mariner has requested the Board's prior approval under this proposal to control Glen Burnie in the future. 17 12 U.S.C. § 1842(c)(1)(B). 18 The Baltimore banking market consists of the Baltimore, Maryland, Ranally Marketing Area and the remainder of Harford County, Maryland. 19 Market share data for all depository institutions, including First Mariner and Glen Burnie, are as of June 30, 1997, and are based on calculations in which the deposits of thrift institutions are included at 50 percent. The Board previously has indicated that thrift institutions have become, or have the potential to become, significant competitors of commercial banks. See Midwest Financial Group, 75 Federal Reserve Bulletin 386 (1989); National City Corporation, 70 Federal Reserve Bulletin 743 (1984). Thus, the Board has regularly included thrift deposits in the calculation of market share on a 50-percent weighted basis. See, e.g., First Hawaiian, Inc., 77 Federal Reserve Bulletin 52 (1991). 20 Under the revised Department of Justice Merger Guidelines, 49 Federal Register 26,823 (June 29, 1984), a market in which the post-merger HHI is between 1000 and 1800 is considered to be moderately concentrated. The Justice Department has informed the Board that a bank merger or acquisition generally will not be challenged (in the absence of other factors indicating anticompetitive effects) unless the post-merger HHI is at least 1800 and the merger or acquisition increases the HHI by at least 200 points. The Justice Department has stated that the higher than normal threshold for an increase in the HHI when screening bank mergers and acquisitions for anticompetitive effects implicitly recognizes the competitive effect of limited-purpose lenders and other nondepository financial entities. 21 12 U.S.C. § 2903. 22 The Statement of the Federal Financial Supervisory Agencies Regarding the Community Reinvestment Act provides that a CRA examination is an important and often controlling factor in the consideration of an institution's CRA record and that reports of these examinations will be given great weight in the applications process. 54 Federal Register 13,742 and 13,745 (1989); see also Interagency Questions and Answers Regarding Community Reinvestment, 62 Federal Register 52,105 and 52,121 (1997). 23 Commenter requests that the Board hold a public hearing to give Comenter the opportunity to question First Mariner and to obtain additional information about Commenter's alleged violations of law in connection with the proxy contest discussed above. Section 3(b) of the BHC Act does not require the Board to hold a public hearing on an application unless the primary supervisor of the bank to be acquired makes a timely written recommendation of denial. The Board has not received such a recommendation. Under its rules, the Board also may, in its discretion, hold a public meeting or hearing on an application to acquire a bank if a meeting or hearing is necessary or appropriate to clarify factual issues related to the application and to provide an opportunity for testimony, if appropriate. 12 C.F.R. 225.16(e). The Board has carefully considered Commenter's request in light of all the facts of record. In the Board's view, Commenter has had ample opportunity to submit its views, and has submitted substantial written comments, including information regarding the proxy contest, that have been carefully considered by the Board in acting on the application. Commenter's request fails to demonstrate why its written comments do not adequately present its evidence, allegations and views, and, assuming the facts are as Commenter asserts, no material issue is raised by the comments concerning First Mariner's participation in the recent proxy contest for the reasons stated above. Accordingly, Commenter's request is hereby denied. 24 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Meyer, Ferguson, and Gramlich.

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1998 Orders on banking applications