· | On August 14, 2017, the Company announced the signing of a definitive agreement and plan of reorganization whereby the Bank will acquire First Mariner Bank (“First Mariner”). Upon the closing of the transaction, First Mariner will merge with the Bank, and the combined bank will operate under the Howard Bank name and be headquartered in First Mariner’s existing Baltimore City location. Under the terms of the agreement, stockholders of First Mariner will be entitled to receive 1.6624 shares of the Company’s common stock for each share of common stock and preferred stock of First Mariner. We anticipate that the closing of the merger will occur either late in the fourth quarter of 2017 or early in the first quarter of 2018, subject to approval by the Company’s stockholders, receipt of required regulatory approvals and satisfaction of other customary closing conditions. |
· | Net income available to common shareholders increased to $5.3 million for the first nine months of 2017 compared to $4.2 million in for the same period of 2016, representing an increase of $1.1 million or 27%. Earnings per common share (EPS) for the first nine months of 2017 were $0.56 compared to $0.60 for the same period in 2016, representing a decline of $.04 or 6%. The disparity between the net income increase of 27% versus the EPS decline of 6% was impacted by the 36% increase in the average number of shares outstanding for the 2017 period as a result of our issuance of 2.7 million shares of our common stock in the first quarter of 2017 pursuant to our common stock offering. |
· | Net income available to common shareholders was $1.7 million for both the quarters ended September 30, 2017 and September 30, 2016, while EPS was $0.17 per share during the third quarter of 2017 compared to $0.25 per share a year earlier. The third quarter of 2017 EPS results were similarly impacted by the 40% increase in average shares outstanding for the third quarter of 2017 compared to the same quarter in 2016. |
· | During the third quarter of 2017, the Company began to incur merger-related expenses associated with the First Mariner merger, which negatively impacted the net income and EPS results for both the three and nine month periods ended September 30, 2017. Merger-related expenses during the third quarter of 2017 totaled $378 thousand before taxes. Assuming a tax rate of 38%, these merger- related costs reduced both the third quarter and the year-to-date EPS by $0.03. Excluding these costs, EPS for the three and nine month periods of 2017 would have been $.20 and $.59, respectively. |
· | Total assets grew to $1.132 billion at September 30, 2017, representing growth of $106 million, or 10%, from assets of $1.027 billion at December 31, 2016 and nearly $117 million or 12% from assets of $1.015 billion at September 30, 2016. Total loans held in our portfolio of $892 million increased $71 million, or 9%, from $822 million at December 31, 2016 and by over $82 million, or 10%, from $810 million at September 30, 2016. |
· | Deposits increased to $862 million at September 30, 2017 from $809 million on December 31, 2016 and $804 million at September 30, 2016, representing growth of $53 million, or 7%, since December 31, 2016 and $58 million, or 7%, since September 30, 2016. Demand deposits, which not only represent the lowest cost source of funding available to a bank but also are most reflective of the core customer relationships targeted by the Bank, grew from $183 million at both September 30, 2016 and December 31, 2016 to $213 million at the end of the third quarter of 2017, representing growth in this highly coveted deposit category of $30 million or 16%. |
· | Tangible book value per share increased to $13.03 at September 30, 2017 from $11.72 at September 30, 2016. When comparing September 30, 2017 to the same point in 2016, total common equity increased by $45 million or 54%. This was largely the result of $38.4 million in net proceeds from our 2017 stock offering, with the remainder generated primarily from earnings. |
September 30, 2017 | December 31, 2016 | ||||||||
▪ | Total common equity | $ | 130,313,000 | $ | 85,790,000 | ||||
▪ | Book value per share | $ | 13.28 | $ | 12.27 | ||||
▪ | Tangible book value per share | $ | 13.03 | $ | 11.86 | ||||
▪ | Tangible common equity ratio | 11.31 | % | 8.10 | % | ||||
▪ | Leverage ratio | 11.74 | % | 8.36 | % | ||||
▪ | Tier I risk-based capital ratio | 13.40 | % | 9.71 | % | ||||
▪ | Total risk-based capital ratio | 14.36 | % | 10.83 | % |
HOWARD BANCORP, INC. | |||||||||||||||||||||||||||
Nine months ended | Three months ended | ||||||||||||||||||||||||||
(Dollars in thousands, except per share data.) | Sept 30, | Sept 30 | June 30 | Sept 30 | |||||||||||||||||||||||
Income Statement Data: | 2017 | 2016 | 2017 | 2017 | 2016 | ||||||||||||||||||||||
Interest income | $ | 31,688 | $ | 28,989 | $ | 11,112 | $ | 10,708 | $ | 9,824 | |||||||||||||||||
Interest expense | 3,685 | 3,323 | 1,357 | 1,211 | 1,176 | ||||||||||||||||||||||
Net interest income | 28,003 | 25,666 | 9,755 | 9,497 | 8,648 | ||||||||||||||||||||||
Provision for credit losses | 1,031 | 1,302 | 491 | 340 | 402 | ||||||||||||||||||||||
Noninterest income | 14,855 | 11,806 | 5,104 | 5,292 | 4,384 | ||||||||||||||||||||||
Merger and restructuring expenses | 378 | - | 378 | - | - | ||||||||||||||||||||||
Other noninterest expense | 32,974 | 29,417 | 11,259 | 11,215 | 9,880 | ||||||||||||||||||||||
Pre-tax income | 8,475 | 6,753 | 2,731 | 3,234 | 2,750 | ||||||||||||||||||||||
Federal and state income tax expense | 3,158 | 2,404 | 1,018 | 1,196 | 1,002 | ||||||||||||||||||||||
Net income | 5,317 | 4,349 | 1,713 | 2,038 | 1,748 | ||||||||||||||||||||||
Preferred stock dividends | - | 166 | - | - | - | ||||||||||||||||||||||
Net income available to common shareholders | $ | 5,317 | $ | 4,183 | $ | 1,713 | $ | 2,038 | $ | 1,748 | |||||||||||||||||
Per share data and shares outstanding: | |||||||||||||||||||||||||||
Net income per common share, basic | $ | 0.56 | $ | 0.60 | $ | 0.17 | $ | 0.21 | $ | 0.25 | |||||||||||||||||
Book value per common share at period end | $ | 13.28 | $ | 12.15 | $ | 13.28 | $ | 13.11 | $ | 12.15 | |||||||||||||||||
Tangible book value per common share at period end | $ | 13.03 | $ | 11.72 | $ | 13.03 | $ | 12.84 | $ | 11.72 | |||||||||||||||||
Average common shares outstanding | 9,468,577 | 6,970,714 | 9,808,542 | 9,779,772 | 6,985,559 | ||||||||||||||||||||||
Shares outstanding at period end | 9,811,992 | 6,988,180 | 9,811,992 | 9,796,103 | 6,988,180 | ||||||||||||||||||||||
Financial Condition data: | |||||||||||||||||||||||||||
Total assets | $ | 1,132,533 | $ | 1,014,787 | $ | 1,132,533 | $ | 1,104,322 | $ | 1,014,787 | |||||||||||||||||
Loans receivable (gross) | 892,213 | 810,340 | 892,213 | 880,137 | 810,340 | ||||||||||||||||||||||
Allowance for credit losses | (5,661 | ) | (5,634 | ) | (5,661 | ) | (5,385 | ) | (5,634 | ) | |||||||||||||||||
Other interest-earning assets | 176,210 | 150,728 | 176,210 | 164,683 | 150,728 | ||||||||||||||||||||||
Total deposits | 862,085 | 803,773 | 862,085 | 854,709 | 803,773 | ||||||||||||||||||||||
Borrowings | 135,023 | 119,906 | 135,023 | 116,311 | 119,906 | ||||||||||||||||||||||
Total shareholders' equity | 130,313 | 84,891 | 130,313 | 128,388 | 84,891 | ||||||||||||||||||||||
Common equity | 130,313 | 84,891 | 130,313 | 128,388 | 84,891 | ||||||||||||||||||||||
Average assets | $ | 1,059,262 | $ | 959,835 | $ | 1,090,277 | $ | 1,069,830 | $ | 966,783 | |||||||||||||||||
Average shareholders' equity | 121,718 | 86,760 | 127,787 | 126,687 | 82,199 | ||||||||||||||||||||||
Average common shareholders' equity | 121,718 | 80,983 | 127,787 | 126,687 | 82,199 | ||||||||||||||||||||||
Selected performance ratios: | |||||||||||||||||||||||||||
Return on average assets | 0.67 | % | 0.61 | % | 0.62 | % | 0.76 | % | 0.72 | % | |||||||||||||||||
Return on average common equity | 5.86 | % | 7.20 | % | 5.32 | % | 6.45 | % | 8.50 | % | |||||||||||||||||
Net interest margin(1) | 3.74 | % | 3.78 | % | 3.76 | % | 3.77 | % | 3.76 | % | |||||||||||||||||
Efficiency ratio(2) | 76.94 | % | 78.50 | % | 78.32 | % | 75.87 | % | 75.82 | % | |||||||||||||||||
Asset quality ratios: | |||||||||||||||||||||||||||
Nonperforming loans to gross loans | 1.46 | % | 1.16 | % | 1.46 | % | 1.06 | % | 1.16 | % | |||||||||||||||||
Allowance for credit losses to loans | 0.63 | % | 0.70 | % | 0.63 | % | 0.61 | % | 0.70 | % | |||||||||||||||||
Allowance for credit losses to nonperforming loans | 43.50 | % | 60.04 | % | 43.50 | % | 57.86 | % | 60.04 | % | |||||||||||||||||
Nonperforming assets to loans and other real estate | 1.69 | % | 1.47 | % | 1.69 | % | 1.30 | % | 1.47 | % | |||||||||||||||||
Nonperforming assets to total assets | 1.34 | % | 1.18 | % | 1.34 | % | 1.04 | % | 1.18 | % | |||||||||||||||||
Capital ratios: | |||||||||||||||||||||||||||
Leverage ratio | 11.74 | % | 8.55 | % | 11.74 | % | 11.78 | % | 8.55 | % | |||||||||||||||||
Tier I risk-based capital ratio | 13.40 | % | 9.65 | % | 13.40 | % | 13.39 | % | 9.65 | % | |||||||||||||||||
Total risk-based capital ratio | 14.36 | % | 10.71 | % | 14.36 | % | 14.34 | % | 10.71 | % | |||||||||||||||||
Average equity to average assets | 11.49 | % | 9.04 | % | 11.72 | % | 11.84 | % | 8.50 | % | |||||||||||||||||
(1) Net interest margin is net interest income divided by average earning assets. | |||||||||||||||||||||||||||
(2) Efficiency ratio is noninterest expense divided by the sum of net interest income and noninterest income. |
Unaudited Consolidated Statements of Financial Condition | ||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | PERIOD ENDED | |||||||||||||||||||||
Sept 30, | June 30, | March 31, | December 31, | Sept 30, | ||||||||||||||||||
2017 | 2017 | 2017 | 2016 | 2016 | ||||||||||||||||||
ASSETS: | ||||||||||||||||||||||
Cash and Cash Equivalents: | ||||||||||||||||||||||
Cash and due from banks | $ | 50,715 | $ | 41,536 | $ | 48,170 | $ | 29,675 | $ | 33,553 | ||||||||||||
Federal Funds Sold | 495 | 294 | 314 | 9,691 | 10,325 | |||||||||||||||||
Total cash and cash equivalents | 51,210 | 41,830 | 48,484 | 39,366 | 43,878 | |||||||||||||||||
Interest Bearing Deposits with Banks | 494 | 9,633 | 14,326 | 19,513 | 19,513 | |||||||||||||||||
Investment Securities: | ||||||||||||||||||||||
Available-for-sale | 67,883 | 52,151 | 46,059 | 38,728 | 37,718 | |||||||||||||||||
Held-to-maturity | 9,250 | 9,250 | 8,750 | 6,250 | 6,250 | |||||||||||||||||
Federal Home Loan Bank stock, at cost | 5,982 | 5,196 | 2,943 | 5,103 | 4,741 | |||||||||||||||||
Total investment securities | 83,115 | 66,597 | 57,752 | 50,081 | 48,709 | |||||||||||||||||
Loans held-for-sale | 52,683 | 53,872 | 35,666 | 51,054 | 46,342 | |||||||||||||||||
Loans: | 892,213 | 880,137 | 845,945 | 821,524 | 810,340 | |||||||||||||||||
Allowance for credit losses | (5,661 | ) | (5,385 | ) | (5,360 | ) | (6,428 | ) | (5,634 | ) | ||||||||||||
Net loans | 886,552 | 874,752 | 840,585 | 815,096 | 804,706 | |||||||||||||||||
Accrued interest receivable | 3,137 | 2,860 | 2,790 | 2,793 | 2,398 | |||||||||||||||||
Bank premises and equipment, net | 19,556 | 19,599 | 19,864 | 20,080 | 20,287 | |||||||||||||||||
Other assets: | ||||||||||||||||||||||
Goodwill | 603 | 603 | 603 | 603 | 603 | |||||||||||||||||
Bank owned life insurance | 28,427 | 28,216 | 21,517 | 21,371 | 21,208 | |||||||||||||||||
Other intangibles | 1,849 | 1,977 | 2,113 | 2,248 | 2,384 | |||||||||||||||||
Other assets | 4,907 | 4,383 | 5,052 | 4,752 | 4,759 | |||||||||||||||||
Total other assets | 35,786 | 35,179 | 29,285 | 28,974 | 28,954 | |||||||||||||||||
Total assets | $ | 1,132,533 | $ | 1,104,322 | $ | 1,048,752 | $ | 1,026,957 | $ | 1,014,787 | ||||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY: | ||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||
Non-interest bearing deposits | $ | 212,519 | $ | 215,124 | $ | 244,408 | $ | 182,880 | $ | 183,118 | ||||||||||||
Interest bearing deposits | 649,566 | 639,585 | 607,564 | �� | 625,854 | 620,655 | ||||||||||||||||
Total deposits | 862,085 | 854,709 | 851,972 | 808,734 | 803,773 | |||||||||||||||||
Borrowed funds | 135,023 | 116,311 | 64,328 | 127,573 | 119,906 | |||||||||||||||||
Other liabilities | 5,112 | 4,914 | 6,441 | 4,860 | 6,217 | |||||||||||||||||
Total liabilities | 1,002,220 | 975,934 | 922,741 | 941,167 | 929,896 | |||||||||||||||||
Shareholders' equity: | ||||||||||||||||||||||
Common stock – $.01 par value | 98 | 98 | 98 | 70 | 70 | |||||||||||||||||
Additional paid-in capital | 110,183 | 109,956 | 109,647 | 71,021 | 70,897 | |||||||||||||||||
Retained earnings | 20,166 | 18,453 | 16,415 | 14,849 | 13,895 | |||||||||||||||||
Accumulated other comprehensive income/(loss), net | (134 | ) | (119 | ) | (149 | ) | (150 | ) | 29 | |||||||||||||
Total shareholders' equity | 130,313 | 128,388 | 126,011 | 85,790 | 84,891 | |||||||||||||||||
Total liabilities and shareholders' equity | $ | 1,132,533 | $ | 1,104,322 | $ | 1,048,752 | $ | 1,026,957 | $ | 1,014,787 | ||||||||||||
Capital Ratios - Howard Bancorp, Inc. | ||||||||||||||||||||||
Tangible Capital | $ | 127,861 | $ | 125,807 | $ | 123,295 | $ | 82,939 | $ | 81,904 | ||||||||||||
Tier 1 Leverage (to average assets) | 11.74% | 11.78% | 12.16% | 8.36% | 8.55% | |||||||||||||||||
Common Equity Tier 1 Capital (to risk weighted assets) | 13.40% | 13.39% | 13.96% | 9.71% | 9.65% | |||||||||||||||||
Tier 1 Capital (to risk weighted assets) | 13.40% | 13.39% | 13.96% | 9.71% | 9.65% | |||||||||||||||||
Total Capital Ratio (to risk weighted assets) | 14.36% | 14.34% | 14.96% | 10.83% | 10.71% | |||||||||||||||||
ASSET QUALITY INDICATORS | ||||||||||||||||||||||
Non-performing assets: | ||||||||||||||||||||||
Total non-performing loans | $ | 13,013 | $ | 9,307 | $ | 9,415 | $ | 9,578 | $ | 9,383 | ||||||||||||
Real estate owned | 2,133 | 2,135 | 2,350 | 2,350 | 2,543 | |||||||||||||||||
Total non-performing assets | $ | 15,146 | $ | 11,442 | $ | 11,765 | $ | 11,928 | $ | 11,926 | ||||||||||||
Non-performing loans to total loans | 1.46% | 1.06% | 1.11% | 1.17% | 1.16% | |||||||||||||||||
Non-performing assets to total assets | 1.34% | 1.04% | 1.12% | 1.16% | 1.18% | |||||||||||||||||
ALLL to total loans | 0.63% | 0.61% | 0.63% | 0.78% | 0.70% | |||||||||||||||||
ALLL to non-performing loans | 43.50% | 57.86% | 56.93% | 67.12% | 60.04% |
Unaudited Consolidated Statements of Income | FOR THE THREE MONTHS ENDED | |||||||||||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||||||||
Sept 30, | June 30, | March 31, | December 31, | Sept 30, | ||||||||||||||||||
2017 | 2017 | 2017 | 2016 | 2016 | ||||||||||||||||||
Total interest income | $ | 11,112 | $ | 10,708 | $ | 9,868 | $ | 9,752 | $ | 9,824 | ||||||||||||
Total interest expense | 1,357 | 1,211 | 1,117 | 1,239 | 1,176 | |||||||||||||||||
Net interest income | 9,755 | 9,497 | 8,751 | 8,513 | 8,648 | |||||||||||||||||
Provision for credit losses | (491 | ) | (340 | ) | (200 | ) | (735 | ) | (402 | ) | ||||||||||||
Net interest income after provision for credit losses | 9,264 | 9,157 | 8,551 | 7,778 | 8,246 | |||||||||||||||||
NON-INTEREST INCOME: | ||||||||||||||||||||||
Service charges and other income | 1,018 | 885 | 637 | (50 | ) | 616 | ||||||||||||||||
Mortgage banking income | 4,086 | 4,407 | 3,822 | 3,026 | 3,768 | |||||||||||||||||
Total non-interest income | 5,104 | 5,292 | 4,459 | 2,976 | 4,384 | |||||||||||||||||
NON-INTEREST EXPENSE: | ||||||||||||||||||||||
Salaries and employee benefits | 5,972 | 6,063 | 5,557 | 4,653 | 4,927 | |||||||||||||||||
Occupancy expense | 1,025 | 1,034 | 1,062 | 997 | 1,062 | |||||||||||||||||
Marketing expense | 991 | 1,185 | 941 | 900 | 864 | |||||||||||||||||
FDIC insurance | 180 | 76 | 217 | 176 | 199 | |||||||||||||||||
Professional fees | 606 | 417 | 423 | 419 | 669 | |||||||||||||||||
Other real estate owned related expense | 32 | 93 | 24 | 12 | 43 | |||||||||||||||||
Merger and restructuring | 378 | - | - | - | - | |||||||||||||||||
Other | 2,453 | 2,347 | 2,276 | 2,111 | 2,116 | |||||||||||||||||
Total non-interest expense | 11,637 | 11,215 | 10,500 | 9,268 | 9,880 | |||||||||||||||||
Income before income taxes | 2,731 | 3,234 | 2,510 | 1,486 | 2,750 | |||||||||||||||||
Income tax expense | 1,018 | 1,196 | 944 | 533 | 1,002 | |||||||||||||||||
NET INCOME | $ | 1,713 | $ | 2,038 | $ | 1,566 | $ | 953 | $ | 1,748 | ||||||||||||
EARNINGS PER SHARE – Basic | $ | 0.17 | $ | 0.21 | $ | 0.18 | $ | 0.14 | $ | 0.25 | ||||||||||||
EARNINGS PER SHARE – Diluted | $ | 0.17 | $ | 0.21 | $ | 0.18 | $ | 0.13 | $ | 0.25 | ||||||||||||
Average common shares outstanding – Basic | 9,808,542 | 9,779,772 | 8,806,404 | 6,990,390 | 6,985,559 | |||||||||||||||||
Average common shares outstanding – Diluted | 9,854,822 | 9,822,165 | 8,856,763 | 7,020,733 | 7,077,420 | |||||||||||||||||
PERFORMANCE RATIOS: | ||||||||||||||||||||||
(annualized) | ||||||||||||||||||||||
Return on average assets | 0.62% | 0.76% | 0.62% | 0.38% | 0.72% | |||||||||||||||||
Return on average common equity | 5.32% | 6.45% | 5.75% | 4.48% | 8.50% | |||||||||||||||||
Net interest margin | 3.76% | 3.77% | 3.68% | 3.56% | 3.76% | |||||||||||||||||
Efficiency ratio | 78.32% | 75.87% | 79.48% | 80.67% | 75.82% | |||||||||||||||||
Tangible common equity | 11.31% | 11.42% | 11.79% | 8.10% | 8.09% |