Howard Bancorp, Inc. (Nasdaq: HBMD) (the “Company”), the parent
company of Howard Bank (the “Bank”), today reported its financial
results for the three month and nine month periods ended September
30, 2016.
A summary of results for the three and nine month periods ended
September 30, 2016 is as follows:
- Total assets grew to slightly over $1.0
billion at September 30, 2016, representing growth of $68 million,
or 7%, from assets of $947 million at December 31, 2015 and over
$90 million, or 10%, over assets of $924 million at September 30,
2015. Total loans held in our portfolio increased $57 million, or
7%, from $760 million at December 31, 2015 and by nearly $61
million, or 8%, from $756 million at September 30, 2015, to $817
million at September 30, 2016. This growth in both total assets and
loans was derived solely from organic activities as the reported
September 30, 2015 levels include the impact of our acquisition of
Patapsco Bancorp, Inc. (“Patapsco”) in the third quarter of
2015.
- Net income available to common
shareholders increased to $4.2 million for the first nine months of
2016 compared to $562 thousand in the first nine months of 2015,
representing an increase of $3.6 million or over 600%. Earnings per
common share (EPS) for the nine months of 2016 were $0.60 compared
to $0.09 for the same nine month period in 2015, representing an
increase of over 500%. The earnings for the first nine months of
2015 were impacted by merger related expenses of $3.3 million
relating to the Patapsco acquisition. Excluding the $3.3 million in
merger expenses for 2015, the 2015 income before taxes would have
been $4.7 million, which compared to the nearly $6.8 million income
before taxes for the same nine month period in 2016 reflects an
improvement in core earnings of $2.1 million or 44% for the 2016
period.
- Net income available to common
shareholders for the quarter ended September 30, 2016 was $1.7
million, or $0.25 per share, compared to $1.5 million, or $0.22 per
share, for the second quarter of 2016 and a loss of $816 thousand
for the three months ended September 30, 2015.
- Primarily as a result of increased
earnings, our tangible book value per share increased by $0.85 or
8% from $10.87 per share at September 30, 2015 to $11.72 per share
at September 30, 2016.
- In May of 2016, Howard Bancorp used
borrowed funds to redeem the $12.6 million of its SBLF preferred
stock issued to the U.S. Treasury in 2011, which reduced total
capital levels but did not impact total common equity. As a result,
both total capital and total common equity were $84.9 million at
September 30, 2016 compared to total capital of $92.1 million and
total common equity of $79.5 million at September 30, 2015.
Chairman and CEO Mary Ann Scully stated, “The third quarter of
2016 clearly evidences the success and sustainability of our
organic loan origination engine, without the impact of newly
acquired growth. We are pleased to demonstrate the ability to
consistently expand not only our balance sheet but also improve our
return on assets, return on equity and efficiency measures. The
operating leverage achieved in the third quarter, with 19% revenue
growth versus 5% core expense growth, led to these improved
returns. In addition to seeing improved returns associated with
improved scale, the Company continues to take a long-term view and
invest in the some of the most attractive markets in the country
and in attracting experienced talent to our commercial and mortgage
loan origination and branch delivery activities. We expect to see
the fruits of these core strategic activities continue to grow our
tangible book value and position us for future growth in our market
valuation as well as potential acquisition opportunities. We also
believe that we will see continued organic loan growth funded by
low cost deposits and increased mortgage banking activities
generating non-interest income to help offset margin compressions
during the continuation of a long low interest rate environment. We
are, as always, grateful to all of our stakeholders for supporting
and enabling these successes and remain relentlessly committed to
serving those stakeholders as the ‘go to commercial bank’ in
Greater Baltimore.”
For the first nine months of 2016, the Company reported net
interest income of $25.7 million compared to $21.2 million for the
first nine months of 2015, an increase of approximately $4.4
million or 21%. This was driven primarily by a $5.6 million, or 24%
increase in total interest income for the first nine months of 2016
due to continued growth in our loan portfolio average balances.
Given the continued growth in deposits and borrowing levels, the
Company recorded an increase in total interest expense of $1.2
million or 54% for the first nine months of 2016 versus the same
period in 2015. The 54% increase in interest expense compared to
the 24% increase in interest income is partially attributable to
the redemption of the SBLF preferred stock. The preferred stock
included a quarterly dividend payment, thus it was not a component
of our interest expense. The redemption of the preferred stock was
funded by an increase in holding company borrowings. These
additional borrowings have interest payments and are a component of
our overall interest expense. As anticipated, this also had an
impact on our net interest margin, which experienced modest
declines for both the nine month period and the third quarter when
comparing 2016 to 2015.
In addition to the growth in net interest income, there was an
increase in noninterest income for the first nine months of 2016
compared to the same period in 2015. Total noninterest income for
the first nine months of 2016 was $11.8 million, which represents
an increase of $2.8 million, or 31%, from $9.0 million in the first
nine months of 2015. The largest increase in noninterest revenue
was from our mortgage banking activities, which generated revenue
from fees and gains on sales of mortgage loans totaling $9.4
million for the first nine months of 2016, compared to $7.5 million
for the same period in 2015, representing an increase $1.9 million,
or 26%. The first nine months of 2016 also benefitted from the sale
of an acquired impaired loan, which resulted in a gain of
approximately $675 thousand that was recorded in the second quarter
of 2016.
Provision for credit losses was $1.3 million for the nine months
ended September 30, 2016 compared to $1.0 million for the same
period in 2015. This increase is largely due to the continuing
growth in our loan portfolio, as well as some specific amounts
required from our ongoing monitoring of troubled credits.
Total noninterest expenses grew to $29.4 million for the first
nine months of 2016 compared to total noninterest expenses of $27.9
million for the first nine months of 2015, an increase of $1.5
million or 6%, and also compares to non-merger related noninterest
expenses of $24.6 million for the first nine months of 2015, an
increase of $4.8 million or 20%. Approximately $1.9 million of this
increase was in the compensation category, which grew 16% when
comparing the first nine months of 2016 versus the same period in
2015. The increased compensation costs resulted from the increase
in the number of locations we operate, the effects of successfully
attracting a sizable commercial loan origination team and the
larger infrastructure resulting from the Patapsco acquisition as
well as continuing organic growth in both portfolio and mortgage
originations. In addition to the increased compensation costs,
occupancy-related costs increased by $815 thousand or 29% for the
same reasons. These two categories accounted for $2.7 million or
57% of the 2016 versus 2015 increase. The remaining net $2.1
million increase in expenses in other expense categories are
generally also related to our overall growth and expansion.
While the ratio of total equity to total assets fell from 9.96%
at September 30, 2015 to 8.37% at September 30, 2016, largely
influenced by our redemption of the SBLF preferred stock, the ratio
of our common equity to total assets declined from 8.60% to 8.37%
given the growth in assets. All of our regulatory capital ratios
continue to be well in excess of the levels that categorize us as a
well-capitalized bank.
Our asset quality measures continue to remain a major focus of
attention for management and the Board of Directors. One of the
Company’s primary measures of asset quality is the ratio of
non-performing assets to total assets. This asset quality measure
decreased to 1.18% at September 30, 2016, from 1.35% at December
31, 2015 and was slightly above the June 30, 2016 ratio of 1.11%.
While OREO levels have been relatively unchanged, September 30,
2016 non-performing loans of $9.4 million decreased by $987
thousand compared to December 31, 2015, and were modestly higher
than the $8.7 million in non-performing loans at June 30, 2016.
Statements included in this press release include non-GAAP
financial measures and should be read along with the accompanying
tables, which provide a reconciliation of non-GAAP financial
measures to GAAP financial measures. Such non-GAAP financial
measures include income before taxes excluding merger expense
(“core earnings”) and non-merger related noninterest expenses, both
of which exclude the $3.3 million in merger related expenses
incurred during the nine months ended September 30, 2015.
Management believes that these non-GAAP financial measures provide
useful information that allows readers to evaluate the Company’s
ongoing performance by comparing results of its business
operations, and that these measures provide meaningful comparison
to the operations of the Company’s peers. Non-GAAP financial
measures should not be considered as an alternative to any measure
of performance or financial condition as promulgated under GAAP,
and investors should consider the Company’s performance and
financial condition as reported under GAAP and all other relevant
information when assessing the performance or financial condition
of the Company. Non-GAAP financial measures have limitations as
analytical tools, and investors should not consider them in
isolation or as a substitute for analysis of the results or
financial condition as reported under GAAP.
The statements in this press release regarding continued growth
in tangible book value, future growth in market valuation and
potential acquisition opportunities, continued organic loan growth
funded by low cost deposits and increased mortgage banking
activities, constitute forward-looking statements, as that term is
defined by the Private Securities Litigation Reform Act of 1995 or
the Securities and Exchange Commission in its rules, regulations,
and releases. The Company intends that such forward-looking
statements be subject to the safe harbors created thereby. Such
forward-looking statements are based on current beliefs and
expectations and are subject to risks and uncertainties that could
cause actual results to differ materially from future results
expressed or implied by such forward-looking statements. Such risks
and uncertainties include, but are not limited to, future declines
in real estate values, deterioration in general economic
conditions, either nationally or in our market area (including as a
result of the pending exit of the United Kingdom from the European
Union), or a return to recessionary conditions, changes in the
interest rate environment that reduce our margins, the fair value
of our financial instruments or the demand for loans, and changes
in laws or government regulations or policies affecting financial
institutions, as well as other risks and uncertainties, as
described in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2015 as filed with the Securities and Exchange
Commission and in other filings the Company may make. Accordingly,
actual results may differ from those expressed in the
forward-looking statements, and the making of such statements
should not be regarded as a representation by the Company or any
other person that results expressed therein will be achieved. The
Company does not undertake, and specifically disclaims any
obligation, to publicly release the result of any revisions that
may be made to any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.
Additional information is available at www.howardbank.com.
HOWARD BANCORP, INC.
Nine months ended Three months ended (Dollars
in thousands, except per share data.)
September 30, Sept
30 Jun 30 Sept 30
Income Statement Data: 2016
2015
2016
2016
2015 Interest income
$ 28,989 $ 23,399
$
9,824
$
9,553
$ 8,489 Interest expense
3,323 2,151
1,176
1,178
807 Net interest income
25,666 21,248
8,648
8,375
7,682 Provision for credit losses
1,302 1,015
402
515
230 Noninterest income
11,806 9,043
4,384
4,570
3,256 Merger and Restructuring
- 3,303
-
-
2,166 Other noninterest expense
29,417
24,571
9,880
9,861
9,434 Pre-tax income/(loss)
6,753 1,402
2,750
2,569
(892 ) Federal and state income tax expense/(benefit)
2,404 746
1,002
927
(107 ) Net income/(loss)
4,349
656
1,748
1,642
(785 ) Preferred stock dividends
166
94
0
110
31 Net income/(loss) available to common
shareholders
$ 4,183 $ 562
$
1,748
$
1,532
$ (816 )
Per share data and shares
outstanding: Net income/(loss) per common share, basic
$
0.60 $ 0.09
$ 0.25
$
0.22
$ (0.13 ) Book value per common share at period end
$
12.15 $ 11.49
$ 12.15
$
11.90
$ 11.49 Tangible book value per common share at period end
$
11.72 $ 10.87
$ 11.72
$
11.45
$ 10.87 Average common shares outstanding
6,970,714
5,897,325
6,985,559
6,970,876
6,493,987 Shares outstanding at period end
6,988,180
6,921,378
6,988,180
6,978,217
6,921,378
Financial Condition data: Total assets
$ 1,014,787 $ 924,493
$ 1,014,787
$
988,818
$ 924,493 Loans receivable (gross)
816,590 755,500
816,590
797,146
755,500 Allowance for credit losses
(5,634 ) (4,317 )
(5,634 )
(5,744
)
(4,317 ) Other interest-earning assets
144,478 115,890
144,478
137,785
115,890 Total deposits
803,773 742,766
803,773
798,118
742,766 Borrowings
119,906 80,559
119,906
101,373
80,559 Total stockholders’ equity
84,892 92,080
84,892
83,068
92,080 Common equity
84,892 79,518
84,892
83,068
79,518 Average assets
$ 959,835 $ 735,919
$ 966,783
$
974,355
$ 808,324 Average stockholders' equity
86,760 70,618
82,199
85,922
85,611 Average common stockholders' equity
80,983 58,056
82,199
81,091
73,049
Selected performance ratios: Return on average
assets
0.61 % 0.12 %
0.72 %
0.68
%
(0.39 )% Return on average common equity
7.17 % 1.24 %
8.46 %
8.12
%
(3.64 )% Net interest margin(1)
3.78 % 4.06 %
3.76 %
3.66
%
3.94 % Efficiency ratio(2)
78.50 % 92.02 %
75.81 %
76.18
%
106.05
%
Asset quality ratios: Nonperforming loans to gross
loans
1.15 % 1.07 %
1.15 %
1.09
% 1.07 % Allowance for credit losses to loans
0.69 % 0.57 %
0.69 %
0.72
% 0.57 % Allowance for credit losses to nonperforming loans
60.04 % 53.30 %
60.04 %
65.90
% 53.30 % Nonperforming assets to loans and other real estate
1.46 % 1.30 %
1.46 %
1.38
% 1.30 % Nonperforming assets to total assets
1.18 % 1.07 %
1.18 %
1.11
% 1.07 %
Capital ratios: Leverage ratio
8.55 %
11.16 %
8.55 %
8.36
%
11.16 % Tier I risk-based capital ratio
9.65 % 11.56 %
9.65 %
9.70
% 11.56 % Total risk-based capital ratio
10.71 % 12.12 %
10.71 %
10.80
% 12.12 % Average equity to average assets
9.04 % 9.60 %
8.50 %
8.82
% 10.59 %
(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 PERIOD ENDED (Dollars
in thousands, except per share amounts)
Sept 30, June
30, March 31, December 31, September 30,
2016 2016 2016 2015 2015 ASSETS:
Cash and Cash Equivalents: Cash and due from banks $ 33,553 $
24,618 $ 50,725 $ 31,071 $ 16,517 Interest-bearing deposits
29,838 8,190 4,246 7,269
1,830 Total cash and cash equivalents
63,391 32,808 54,971
38,340 18,347 Investment Securities:
Available-for-sale 37,718 57,693 70,150 49,573 39,178 Federal Home
Loan Bank stock, at cost 4,741 3,934
3,849 4,163 3,185 Total
investment securities 42,459 61,627
73,999 53,736 42,363
Loans held-for-sale 46,342 51,010 40,027 49,677 64,427
Loans: 816,590 797,146 774,229 760,002 755,500 Allowance for
credit losses (5,634 ) (5,744 ) (5,256 )
(4,869 ) (4,317 ) Net loans 810,956
791,402 768,973 755,133
751,183 Accrued interest receivable 2,398
2,484 2,360 2,144 2,221 Bank premises and equipment, net
20,287 20,481 20,758 20,765 20,427 Other assets: Goodwill
603 603 603 603 1,132 Bank owned life insurance 21,208 21,053
20,899 18,548 16,618 Other intangibles 2,384 2,550 2,726 2,903
3,117 Other assets 4,759 4,800
5,122 4,910 4,658 Total other
assets 28,954 29,006 29,350
26,964 25,525 Total assets $
1,014,787 $ 988,818 $ 990,438 $ 946,759
$ 924,493 LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities: Deposits: Non-interest bearing deposits $ 183,118 $
179,699 $ 177,621 $ 173,689 $ 171,349 Interest bearing deposits
620,655 618,419 625,555
573,719 571,417 Total deposits
803,773 798,118 803,176
747,408 742,766 Borrowed funds 119,906 101,373
86,334 98,828 80,559 Other liabilities 6,216
6,259 6,982 7,624 9,088
Total liabilities 929,896 905,750
896,492 853,860 832,413
Commitments and contingencies Stockholders' equity:
Preferred stock -- $.01 par value - - 12,562 12,562 12,562 Common
stock – $.01 par value 70 70 70 70 69 Additional paid-in capital
70,897 70,824 70,698 70,587 70,173 Retained earnings 13,896 12,147
10,615 9,712 9,257 Accumulated other comprehensive income/(loss),
net 29 27 1 (32 )
19 Total stockholders' equity 84,892
83,068 93,946 92,899
92,080 Total liabilities and stockholders' equity $
1,014,787 $ 988,818 $ 990,438 $ 946,759
$ 924,493
Capital Ratios -
Howard Bancorp, Inc.
Tangible Capital $ 81,905 $ 79,915 $ 78,055 $ 76,830 $ 75,268 Tier
1 Leverage (to average assets) 8.55 % 8.36 % 9.87 % 9.90 % 11.16 %
Common Equity Tier 1 Capital (to risk weighted assets) 9.65 % 9.70
% 11.49 % 11.47 % 11.56 % Tier 1 Capital (to risk weighted assets)
9.65 % 9.70 % 11.49 % 11.47 % 11.56 % Total Capital Ratio (to risk
weighted assets) 10.71 % 10.80 % 12.13 % 12.09 % 12.12 %
ASSET QUALITY INDICATORS (Dollars in thousands)
Non-performing assets: Total non-performing loans $ 9,383 $ 8,717 $
9,562 $ 10,370 $ 8,100 Real estate owned 2,543
2,286 2,369 2,369 1,764
Total non-performing assets $ 11,926 $ 11,003
$ 11,931 $ 12,739 $ 9,864
Non-performing loans to total loans 1.15 % 1.09 % 1.24 % 1.36 %
1.07 % Non-performing assets to total assets 1.18 % 1.11 % 1.20 %
1.35 % 1.07 % ALLL to total loans 0.69 % 0.72 % 0.68 % 0.64 % 0.57
% ALLL to non-performing loans 60.04 % 65.90 % 54.97 % 46.96 %
53.30 %
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,
September 30, 2016 2016 2016
2015 2015 Total interest income $ 9,824 $
9,553 $ 9,612 $ 9,950 $ 8,489 Total interest expense 1,176
1,178 969 920
807 Net interest income 8,648
8,375 8,643 9,030 7,682
Provision for credit losses (402 ) (515 )
(385 ) (821 ) (230 ) Net interest income after
provision for credit losses 8,246 7,860
8,258 8,209 7,451
NON-INTEREST INCOME: Service charges and other income 724 1,097 554
433 515 Mortgage banking income 3,660 3,473 2,298 2,450 2,741
Total non-interest income
4,384 4,570 2,852 2,883
3,256 NON-INTEREST EXPENSE: Salaries
and employee benefits 4,927 4,870 4,584 4,817 4,652 Occupancy
expense 1,062 949 1,614 1,001 928 Marketing expense 864 888 723 769
786 FDIC insurance 199 198 208 138 106 Professional fees 669 665
358 543 386 Other real estate owned related expense 43 109 14 (13 )
776 Merger and restructuring - - - 1,041 2,166 Other 2,116
2,182 2,175 2,083
1,800 Total non-interest expense 9,880
9,861 9,676 10,379
11,600 Income/(loss) before income taxes 2,750 2,569
1,434 713 (892 ) Income tax expense/(benefit) 1,002 928 474
226 (107 ) NET INCOME /(LOSS)
1,748 1,641 960
487 (785 ) PREFERRED DIVIDENDS - (109 ) (57 )
(32 ) (31 )
NET INCOME/(LOSS) AVAILABLE TO COMMON
SHAREHOLDERS
$ 1,748 $ 1,532 $ 903 $ 455 $ (816 )
EARNINGS/(LOSS) PER SHARE – Basic $ 0.25 $ 0.22 $ 0.13 $
0.07 $ (0.13 ) EARNINGS/(LOSS) PER SHARE – Diluted $ 0.25 $ 0.22 $
0.13 $ 0.06 $ (0.13 ) Average common shares outstanding –
Basic 6,985,559 6,970,876 6,955,462 6,935,493 6,493,987 Average
common shares outstanding – Diluted 7,077,420 7,061,867 7,047,987
7,051,660 6,493,987 PERFORMANCE RATIOS: (annualized) Return
on average assets 0.72 % 0.68 % 0.41 % 0.21 % -0.39 % Return on
average common equity 8.46 % 8.12 % 4.83 % 2.44 % -3.64 % Net
interest margin 3.76 % 3.66 % 3.93 % 4.13 % 3.94 % Efficiency ratio
75.81 % 76.18 % 84.18 % 87.12 % 106.05 % Tangible common equity
8.37 % 8.40 % 8.22 % 8.48 % 8.60 %
Below is a reconciliation of the GAAP to non-GAAP figures
presented in this release for the nine months ended September 30,
2015:
(in thousands)
Pre-Tax Income Noninterest
Expenses GAAP measure $1,402
$27,874 Merger expenses $3,303 $3,303
Non-GAAP financial measure $4,705
$24,571
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161018006592/en/
Howard Bancorp, Inc.George C. Coffman, Chief Financial Officer,
410-750-0020
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