First Montgomery Bank and Trust Co., a corporation that had hoped to open Montgomery County's first black-controlled bank this fall, has declared the effort a failure and will return money raised in a public offering earlier this year to investors.
The group, originally headed by former board chairman Daniel D. Morse, who resigned last month, offered 40,000 shares of common stock in the venture at $55.50 each last July. "The bank will begin operations with fresh, unencumbered capital," Morse said at that time. To qualify for Federal Deposit Insurance Corp. approval and a Maryland Certificate of Authority to begin operations, First Montgomery had to raise approximately $2.22 million. As of August, however, the bank's directors had succeeded in selling just 12,329 shares, equal to $684,289. Morse recently told the Montgomery Journal that changing economic conditions had made investors "skittish." Company president Kirk Hornbeck added that the stock sale was "slower than hoped."
The Maryland Division of Securities has scheduled an Oct. 21 hearing to determine the status of investor funds, after it was discovered that Maryland National Bank, the administrator of First Montgomery's mandatory escrow account, has only $312,000 in that account. First Montgomery officials said the apparent discrepancy is the result of bookkeeping procedures, and that all investor funds will be returned. State securities commissioner Huston Matney concurred, saying, "It doesn't appear that any of the investors will be hurt."
Last Tuesday the board of directors of First Montgomery voted to return the money to investors with 14 percent interest rather than the 5 percent offered at the time of the offering.