First Mariner Bancorp, which has been hammered by the financial crisis, will defer interest payments on debt owed to its trust preferred subsidiaries.

First Mariner Bancorp (the “Corporation”) announces that it has elected to defer regularly scheduled quarterly interest payments with respect to an aggregate of $73.724 million of its junior subordinated debentures (the “Subordinated Debentures”) associated with its seven statutory trust subsidiaries that were formed for the purpose of issuing trust preferred securities. Pursuant to the indentures for the Subordinated Debentures, the Corporation can elect to defer payments of interest for up to 20 consecutive quarterly periods, provided that there is no event of default (as defined in the indentures) existing at the time of deferral. The Corporation is not in default under any of the indentures.

FMAR's trust preferred subsidiaries look pretty standard for bank holding companies. The trust sells preferred stock, and then the bank borrows from the trust in the form of these debentures. It's a weird setup, but there are tax and regulatory advantages, the primary one which appears to be that the money is counted as capital/equity rather than debt for assessing a banking company's solvency. Also standard are these deferral options.

But it's not a good development. FMAR is deferring quarterly interest on annual interest payments amounting to $2.8 million. The bank's deposits are covered by deposit insurance, but its stock has fallen below $1 from the $18 range not long ago.