Howard Bancorp, Inc. (“Howard Bancorp” or the “Company”)
(Nasdaq: HBMD), the parent company of Howard Bank (“Howard Bank” or
the “Bank”), today reported its financial results for the quarter
ended September 30, 2019. A summary of results and other
developments during the third quarter of 2019 is as follows:
- Net income was $4.6 million for the three months ended
September 30, 2019, compared to $2.1 million for the three month
period ended June 30, 2019, and $4.0 million for the third quarter
of 2018. This represented earnings of $0.24 per basic and diluted
common share for the three months ended September 30, 2019,
compared to $0.11 per share for the three months ended June 30,
2019 and $0.21 per share for the third quarter of 2018. Pretax
income for the third quarter of 2019 was reduced due to a pending
$700 thousand charge related to the confidential settlement of a
legal suit stemming from mortgages originated at First Mariner Bank
prior to its recapitalization in 2014. The second quarter of 2019
pretax income was reduced by $3.6 million with the execution of our
previously disclosed branch optimization initiative. The $700
thousand decrease in third quarter 2019 and the $3.6 million
decrease in second quarter pretax income, net of tax, reduced basic
and diluted earnings per share (“EPS”) by $0.03 and $0.14
respectively leading to operating EPS of $0.27 in the third quarter
of 2019 and $0.25 in the second quarter of 2019. The following
table summarizes our key performance metrics:
($ in thousands except per share
information)
SEPTEMBER 30, 2019
Nine Months Ended
Three Months Ended
Reported
Operating (3)
Reported
Operating (3)
Net interest Income
$ 52,043
$ 52,043
$ 17,215
$ 17,215
Provision
3,443
3,443
608
608
Noninterest Income(1)
15,410
14,752
5,033
5,033
Noninterest Expense(2)
49,717
44,724
15,405
14,705
Pretax Income
14,293
18,627
6,235
6,935
Net income
10,981
14,122
4,637
5,145
Basic EPS
$0.58
$0.74
$0.24
$0.27
ROA
0.66%
0.84%
0.82%
0.91%
ROE
4.85%
6.24%
6.00%
6.66%
Efficiency Ratio
73.70%
66.96%
69.24%
66.09%
NPA’s to Total Assets
1.04%
1.04%
1.04%
1.04%
(1)
Year to date operating noninterest income
is $658 thousand less than reported noninterest income to exclude a
gain on the sale of securities of $658 thousand recorded in the
second quarter of 2019.
(2)
Year to date operating noninterest expense
is $5.0 million less than the reported noninterest expense to
exclude (i) the $3.6 million of occupancy expenses associated
primarily from the remaining lease liability of closing branch
locations (ii) a $651,000 penalty from the FHLB for the early
repayment of advances associated with a realignment of the
securities portfolio incurred in the second quarter of 2019 iii)
the $700 thousand charge related to a pending confidential legal
settlement recorded in the third quarter of 2019.
(3)
Operating results exclude the impact of
revenues and/or expenses associated with second quarter initiatives
regarding branch delivery optimization, the sale of investment
securities and the restructuring of debt obligations, and the long
standing legal case and is a non-GAAP financial measure. For a
reconciliation of these non-GAAP financial measures to its
comparable GAAP measure, see “Reconciliation of Non-GAAP Financial
Measures” at the end of this release.
- Total assets at September 30, 2019 were $2.3 billion, unchanged
from total assets at June 30, 2019 as the Bank directed assets from
the lower yielding securities portfolio to a higher yielding loan
portfolio. During the third quarter of 2019, we reduced cash levels
by $50 million while increasing our investment portfolio by $15
million, our mortgage loans held for sale by $9 million, and our
loan portfolio by $29 million. The net portfolio loans growth of
$29 million or 1.7% during the third quarter of 2019, or just under
7% on an annualized basis, increased loans from $1.70 billion at
June 30, 2019 to just under $1.73 billion at September 30, 2019.
Our three core commercial loan categories, Construction, Commercial
Real Estate and C&I collectively increased by $31.3 million or
2.7% during the quarter (or nearly 11% annualized growth), while
residential and consumer loans declined by $2.5 million.
- Total deposit levels of $1.66 billion decreased by $62 million
during the third quarter of 2019, as we reduced institutional CD’s
by $63 million while increasing our FHLB borrowings by $57 million.
This shift between two non-customer sources of funding was
undertaken to reduce the overall cost of these funds. Excluding
this shift, our customer sources of total deposits were basically
unchanged when comparing September 30, 2019 to June 30, 2019.
However the composition of our customer deposits shifted during the
third quarter as transaction deposits increased by $11 million or
1.8% during the third quarter, while our more costly money market
and CD deposits declined by $9 million. As a result, our
transaction deposits of $617 million at September 30, 2019
represented 37.3% of our total deposits compared to 35.3% at June
30, 2019.
- Total common shareholders’ equity increased by $5.3 million or
2%, from $303.5 million at June 30, 2019 to $308.8 million at
September 30, 2019. Late in the second quarter of 2019, Howard
Bancorp announced a share buyback program that will allow the
Company to purchase up to $7 million in common shares if deemed
beneficial to the Company’s long-term value. Because of an increase
in the market value of the Company’s common shares, fewer than 5
thousand shares were repurchased during the third quarter of
2019.
For the Three Months Ended September 30, 2019
Interest income of $23.0 million for the third quarter of 2019
decreased by $190 thousand or under 1 percent from the $23.1
million recorded in the second quarter of 2019. Although the
quarterly average balance of our portfolio loans increased by $36.7
million or 2.2% for the third quarter of 2019 compared to the
second quarter, the yield on our loan portfolio declined by 15
basis points primarily due to two prime rate reductions during the
third quarter. Howard Bank’s fixed rate loans mitigated the impact
of the two prime rate changes totaling 50bps during the third
quarter. Higher yielding loans also continued to pay-down or payoff
in the present declining rate environment. Also impacting the third
quarter interest income was a $35.7 million reduction in the
quarterly average balance of our investment portfolio for the third
quarter given the sale of $35 million in securities executed late
in June of 2019. This transfer of assets as noted earlier mitigated
the margin impact of lower market rates, however, overall average
earning assets were only $1 million higher for the third quarter
compared to the second quarter, while the yield on our earning
assets declined from 4.71% for the second quarter to 4.62% for the
third quarter.
Interest expense was $5.8 million for both the third quarter of
2019 and the second quarter of 2019. Similarly, the cost of
interest bearing liabilities was unchanged at 1.54% for both the
second and third quarters of 2019.
Overall, driven by the declining rate environment, the net
interest income of $17.2 million for the third quarter of 2019 was
essentially flat compared to the $17.4 million in the second
quarter of 2019. The declining rate environment modestly impacted
the net interest margin (“NIM”) with a NIM of 3.46% for the third
quarter of 2019 compared to the second quarter NIM of 3.53%. Fair
market value adjustments on acquired loan portfolios continued to
have a modest and declining impact on the margin of 7 bps in the
third quarter.
The following table represents the NIM as reported each quarter,
and the more stable NIM excluding the impact of the additional
interest income due to the purchase accounting measures:
2019
2018
Third
Second
First
Fourth
Third
Second
First
Quarter
Quarter
Quarter
Quarter
Quarter
Quarter
Quarter
Excluding Fair
Value Loan Impact (1)
3.39%
3.44%
3.54%
3.64%
3.66%
3.74%
3.51%
As Reported
3.46%
3.53%
3.64%
3.74%
3.91%
3.83%
3.55%
(1)
The core NIM excludes the impact of
purchase accounting adjustments on net interest income and is a
non-GAAP financial measure. For a reconciliation of this non-GAAP
financial measure to its comparable GAAP measure, see
“Reconciliation of Non-GAAP Financial Measures” at the end of this
release.
Our provision for credit losses for the third quarter of 2019 of
$608 thousand returned to more historically normalized levels
compared to the second quarter provision of $1.1 million and the
$1.7 million provision recorded for the first quarter of 2019. The
provision for the third quarter was influenced by $130 thousand in
net charge-offs for the quarter and the growth in the loan
portfolio. The second quarter provision was increased by an
unexpected charge-off of nearly $300 thousand resulting from a
claim on the guaranteed portion of an SBA loan that was denied,
while the first quarter provision was the result of a large
charge-off of a loan that had been reserved during 2018. That loan
has subsequently been sold at no additional loss.
Asset quality management has resulted in a stabilization of the
ratio of non-performing loans to total loans which was 1.15% for
both June 30, 2019 and September 30, 2019, and the ratio of
non-performing assets to total assets declined slightly from 1.05%
to 1.04% at the same dates.
Third quarter 2019 noninterest revenues of $5.0 million were
$800 thousand or 13% lower than the $5.8 million recorded in the
second quarter of 2019. However excluding the $658 thousand gain on
the sale of securities recorded in the second quarter, the third
quarter noninterest revenues declined by only $150 thousand
compared to the second quarter. Service charges and other core
banking noninterest income for the third quarter were $95 thousand
higher than the second quarter, while mortgage related revenues for
the third quarter were $245 thousand lower.
Our total noninterest expenses of $15.4 million for the third
quarter of 2019 represent a $4.1 million decrease from the $19.5
million of expenses in the second quarter of 2019. As described
above, the third quarter of 2019 included $700 thousand in expenses
from charges related to the confidential settlement, while the
second quarter 2019 expenses included $3.6 million in expenses
related to the costs of our branch delivery optimization
initiatives as well as $651 thousand of expense related to the
early prepayment of a few higher rate FHLB advances. Excluding the
impact of these items, total expenses for the third quarter were
$14.7 million, which was $457 thousand or 3.0% lower than the $15.2
million for the second quarter of 2019. Third quarter compensation
expenses were $333 thousand lower than the second quarter primarily
from lower employment tax and benefit costs, occupancy costs were
approximately $100 thousand lower mostly due to the branch
reductions, while FDIC insurance expenses were $245 thousand lower
as we were able to utilize an assessment credit during the quarter
instead of having to make our normal quarterly assessment payment.
The full results of the branch optimization announced in the second
quarter will become more apparent in the fourth quarter as the
closed locations continued to operate for most of the third quarter
due to customer notification requirements.
Chairman and CEO Mary Ann Scully noted, "The third quarter of
2019 showed continued growth in our core commercial banking
activities with over 11% annualized growth in commercial loans,
funded to a larger extent by low cost transaction deposits
consistent with our strategy. The expense level of the Bank
reflected the ongoing emphasis on scale enabled efficiency. These
focused revenue and funding activities combined with structural
resource allocation help to sustain improved returns. Our
consistent profitability combined with very strong capital levels
led us to initiate a modest share buyback program late in the
second quarter of 2019 with repurchase activities expected to
accelerate in order to support improved market valuations.
"The Bank’s ability to cover all growth markets in our footprint
with 46% fewer branches than in March of 2018 will lead to
significant efficiency gains starting in the fourth quarter and
beyond while these improvements in our branch delivery network are
also strategically more consistent with customer behaviors. We have
recently renegotiated a core data processing contract resulting in
not only high six figure savings annually, but also improved access
to better reporting systems for the bank and its commercial
clients. In addition to increasing efficiencies, this allows for
the investment of certain financial resources into those higher
growth commercial activities in the areas of our market that are
currently experiencing significant disruption due to industry
consolidation, management turnover and numerous denovo banking
activities. The disruption that is occurring and is expected to
accelerate creates a helpful tailwind for us.
"The company is optimistic about our ability to not only
navigate but to differentiate ourselves in a very challenging
interest rate and competitive environment. We are confident in
successful execution of these multiple strategic activities that
are all designed to leverage our position as the largest locally
headquartered and only commercially focused bank in our
region."
This press release contains estimates, predictions, opinions,
projections and other "forward-looking statements" as that phrase
is defined in the Private Securities Litigation Reform Act of 1995.
Such statements include, without limitation, references to Howard’s
predictions or expectations of future business or financial
performance as well as its goals and objectives for future
operations, financial and business trends, business prospects, and
management’s outlook or expectations for earnings, revenues,
expenses, capital levels, liquidity levels, asset quality or other
future financial or business performance, strategies or
expectations. Such forward-looking statements are based on various
assumptions (some of which may be beyond Howard’s control) and are
subject to risks and uncertainties (which change over time) and
other factors which could cause actual results to differ materially
from those currently anticipated. Such risks and uncertainties
include, but are not limited to, those related to difficult market
conditions and unfavorable economic trends in the United States
generally, and particularly in the markets in which Howard operates
and in which its loans are concentrated, including the effects of
declines in housing markets, an increase in unemployment levels and
slowdowns in economic growth; Howard’s level of nonperforming
assets and the costs associated with resolving problem loans
including litigation and other costs; changes in market interest
rates which may increase funding costs and reduce earning asset
yields and thus reduce margin; the impact of changes in interest
rates and the credit quality and strength of underlying collateral;
the credit risk associated with the substantial amount of
commercial real estate, construction and land development, and
commercial and industrial loans in our loan portfolio; the
extensive federal and state regulation, supervision and examination
governing almost every aspect of Howard’s operations including the
Dodd-Frank Wall Street Reform and Consumer Protection Act and the
rules and regulations issued in accordance with this statute and
potential expenses associated with complying with such regulations;
possible additional loan losses and impairment of the
collectability of loans; Howard’s ability to comply with applicable
capital and liquidity requirements (including the finalized Basel
III capital standards), including our ability to generate liquidity
internally or raise capital on favorable terms; any impairment of
Howard's goodwill or other intangible assets; system failure or
cybersecurity breaches of Howard's network security; Howard's
ability to recruit and retain key employees; the effects of weather
and natural disasters such as floods, droughts, wind, tornadoes and
hurricanes as well as effects from geopolitical instability and
man-made disasters including terrorist attacks; the effects of any
reputation, credit, interest rate, market, operational, legal,
liquidity, regulatory and compliance risk resulting from
developments related to any of the risks discussed above; and the
costs associated with resolving any problem loans, litigation and
other risks and uncertainties, including those discussed in the
Howard’s Form 10-K for the year ended December 31, 2018 and other
documents filed by Howard with the Securities and Exchange
Commission from time to time. Forward-looking statements are as of
the date they are made, and Howard does not undertake to update any
forward-looking statement, whether written or oral, that may be
made from time to time by or on behalf of Howard.
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:
2019
2018
2019
2019
2018
Interest income
$
68,884
$
57,961
$
22,955
$
23,145
$
22,436
Interest expense
16,841
9,286
5,740
5,791
3,789
Net interest income
52,043
48,675
17,215
17,354
18,647
Provision for credit losses
3,443
3,241
608
1,110
696
Noninterest income
15,410
14,177
5,033
5,841
3,856
Merger and restructuring expenses
15,461
-
-
(212
)
Other noninterest expense
49,717
49,227
15,405
19,454
16,608
Pre-tax income/(loss)
14,293
(5,077
)
6,235
2,631
5,411
Federal and state income tax expense/(benefit)
3,312
(1,103
)
1,598
543
1,432
Net income/(loss)
10,981
(3,974
)
4,637
2,088
3,979
Per share data and shares outstanding: Net
income/(loss) per common share-basic
$
0.58
$
(0.23
)
$
0.24
$
0.11
$
0.21
Book value per common share at period end
$
16.18
$
15.42
$
16.18
$
15.92
$
15.42
Tangible book value per common share at period end
$
12.24
$
11.00
$
12.24
$
11.94
$
11.00
Average common shares outstanding
19,064,235
17,058,217
19,078,561
19,061,164
19,025,855
Shares outstanding at period end
19,081,777
19,033,864
19,081,777
19,063,080
19,033,864
Financial Condition data: Total assets
$
2,293,475
$
2,153,419
$
2,293,475
$
2,295,634
$
2,153,419
Loans receivable (gross)
1,729,880
1,624,484
1,729,880
1,701,020
$
1,624,484
Allowance for credit losses
(9,598
)
(7,224
)
(9,598
)
(9,120
)
$
(7,224
)
Other interest-earning assets
295,677
274,978
295,677
319,023
$
274,978
Transaction deposits
617,194
618,299
617,194
606,178
$
618,299
Total deposits
1,655,623
1,624,629
1,655,623
1,717,216
$
1,624,629
Borrowings
302,353
227,953
302,353
248,811
$
227,953
Total shareholders' equity
308,752
293,550
308,752
303,527
$
293,550
Common equity
308,752
293,550
308,752
303,527
$
293,550
Average assets
$
2,236,168
$
1,940,469
$
2,244,259
$
2,246,800
$
2,157,797
Average shareholders' equity
302,616
256,050
306,636
303,599
291,005
Average common shareholders' equity
302,616
256,050
306,636
303,599
291,005
Selected performance ratios:
Return on average assets
0.66
%
(0.27
)
%
0.82
%
0.37
%
0.73
%
Return on average common equity
4.85
%
(2.07
)
%
6.00
%
2.76
%
5.43
%
Net interest margin(1)
3.54
%
3.79
%
3.46
%
3.53
%
3.91
%
Efficiency ratio(2)
73.71
%
102.92
%
69.24
%
83.87
%
72.86
%
Asset quality ratios:
Nonperforming loans to gross loans
1.15
%
1.69
%
1.15
%
1.13
%
1.69
%
Allowance for credit losses to loans
0.55
%
0.44
%
0.55
%
0.54
%
0.44
%
Allowance for credit losses to nonperforming loans
48.09
%
26.33
%
48.09
%
47.24
%
26.33
%
Nonperforming assets to loans and other real estate
1.38
%
1.94
%
1.38
%
1.41
%
1.94
%
Nonperforming assets to total assets
1.04
%
1.46
%
1.04
%
1.05
%
1.46
%
Capital ratios:
Leverage ratio
9.39
%
8.86
%
9.39
%
9.06
%
8.86
%
Tier I risk-based capital ratio
10.83
%
10.39
%
10.83
%
10.52
%
10.39
%
Total risk-based capital ratio
12.87
%
11.01
%
12.87
%
12.55
%
11.01
%
Average equity to average assets
13.53
%
13.20
%
13.66
%
13.51
%
13.49
%
(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,
2019
2019
2019
2018
2018
ASSETS: Cash and cash equivalents: Cash and due from banks
$
74,655
$
124,868
$
97,054
$
100,976
$
101,292
Federal funds sold
354
193
408
522
366
Total cash and cash equivalents
75,009
125,061
97,462
101,498
101,658
Interest bearing deposits with banks
-
-
-
-
-
Investment Securities: Available-for-sale
164,026
151,685
191,860
223,858
125,673
Held-to-maturity
9,750
9,750
9,250
9,250
9,250
Federal Home Loan Bank stock, at cost
13,642
11,220
11,050
11,786
10,511
Total investment securities
187,418
172,655
212,160
244,894
145,434
Loans held-for-sale
46,713
37,680
26,815
21,261
28,253
Loans
1,729,880
1,701,020
1,647,178
1,649,751
1,624,484
Allowance for credit losses
(9,598
)
(9,120
)
(8,754
)
(9,873
)
(7,224
)
Net loans
1,720,282
1,691,900
1,638,424
1,639,878
1,617,260
Accrued interest receivable
6,749
7,155
7,244
6,941
6,488
Bank premises and equipment, net
42,743
42,876
44,721
45,137
49,765
Other assets: Goodwill
65,949
65,949
65,949
70,697
71,824
Bank owned life insurance
75,364
75,060
74,601
74,153
73,699
Other intangibles
9,186
9,932
10,698
11,482
12,282
Other assets
64,061
67,366
72,485
50,573
46,756
Total other assets
214,561
218,307
223,733
206,905
204,561
Total assets
$
2,293,475
$
2,295,634
$
2,250,559
$
2,266,514
$
2,153,419
LIABILITIES AND SHAREHOLDERS' EQUITY: Deposits: Total
transaction deposits
$
617,194
$
606,178
$
654,346
$
656,522
$
618,299
Interest bearing non-transaction deposits
1,038,429
1,111,038
1,019,122
1,029,284
1,006,330
Total deposits
1,655,623
1,717,216
1,673,468
1,685,806
1,624,629
Borrowed funds
302,353
248,811
250,363
276,653
227,953
Other liabilities
26,748
26,080
26,199
9,372
7,287
Total liabilities
1,984,723
1,992,107
1,950,030
1,971,831
1,859,869
Shareholders' equity: Common stock – $.01 par value
191
191
191
190
190
Additional paid-in capital
276,431
276,218
276,128
275,843
275,770
Retained earnings
29,258
24,621
22,533
18,277
18,131
Accumulated other comprehensive income/(loss), net
2,872
2,497
1,677
373
(541
)
Total shareholders' equity
308,752
303,527
300,529
294,683
293,550
Total liabilities and shareholders' equity
$
2,293,475
$
2,295,634
$
2,250,559
$
2,266,514
$
2,153,419
Capital Ratios - Howard Bancorp,
Inc. Tangible Capital
$
233,616
$
227,646
$
223,881
$
212,504
$
209,444
Tier 1 Leverage (to average assets)
9.39
%
9.06
%
9.04
%
8.91
%
8.86
%
Common Equity Tier 1 Capital (to risk weighted assets)
10.83
%
10.52
%
10.58
%
10.16
%
10.39
%
Tier 1 Capital (to risk weighted assets)
10.83
%
10.52
%
10.58
%
10.16
%
10.39
%
Total Capital Ratio (to risk weighted assets)
12.87
%
12.55
%
12.62
%
12.31
%
11.01
%
ASSET QUALITY INDICATORS Non-performing assets: Total
non-performing loans
$
19,960
$
19,305
$
20,936
$
24,722
$
27,437
Real estate owned
3,926
4,702
4,392
4,392
4,097
Total non-performing assets
$
23,886
$
24,007
$
25,328
$
29,114
$
31,534
Non-performing loans to total loans
1.15
%
1.13
%
1.27
%
1.50
%
1.69
%
Non-performing assets to total assets
1.04
%
1.05
%
1.13
%
1.28
%
1.46
%
ALLL to total loans
0.55
%
0.54
%
0.53
%
0.60
%
0.44
%
ALLL to non-performing loans
48.09
%
47.24
%
41.81
%
39.94
%
26.33
%
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,
2019
2019
2019
2018
2018
Total interest income
$
22,955
$
23,145
$
22,784
$
22,428
$
22,436
Total interest expense
5,740
5,791
5,310
4,485
3,789
Net interest income
17,215
17,354
17,474
17,943
18,647
Provision for credit losses
(608
)
(1,110
)
(1,725
)
(2,850
)
(696
)
Net interest income after provision for credit losses
16,607
16,244
15,749
15,093
17,951
NON-INTEREST INCOME: Service charges and other income
2,124
2,687
2,550
2,205
2,198
Mortgage banking income
2,909
3,154
1,985
1,478
1,658
Total non-interest income
5,033
5,841
4,535
3,683
3,856
NON-INTEREST EXPENSE: Salaries and employee benefits
7,939
8,272
8,034
7,503
8,691
Occupancy expense
1,442
5,183
1,571
4,493
1,990
Marketing expense
545
484
457
689
540
FDIC insurance
36
281
287
424
430
Professional fees
747
718
785
705
743
Other real estate owned related expense
393
104
27
399
83
Merger and restructuring
-
-
-
88
(212
)
Other
4,303
4,412
3,696
4,122
4,131
Total non-interest expense
15,405
19,454
14,857
18,423
16,396
Income before income taxes
6,235
2,631
5,427
353
5,411
Income tax expense
1,598
543
1,171
207
1,432
NET INCOME
$
4,637
$
2,088
$
4,256
$
146
$
3,979
PRETAX INCOME EXCLUDING MERGER ITEMS
6,235
2,631
5,427
441
5,199
EARNINGS PER SHARE – Basic
$
0.24
$
0.11
$
0.22
$
0.01
$
0.21
EARNINGS PER SHARE – Diluted
$
0.24
$
0.11
$
0.22
$
0.01
$
0.21
Average common shares outstanding – Basic
19,078,561
19,061,164
19,052,694
19,035,316
19,025,855
Average common shares outstanding – Diluted
19,081,963
19,067,624
19,066,791
19,041,880
19,035,192
PERFORMANCE RATIOS: (annualized) Return on average assets
0.82
%
0.37
%
0.78
%
0.03
%
0.73
%
Return on average common equity
6.00
%
2.76
%
5.80
%
0.20
%
5.43
%
Net interest margin
3.46
%
3.53
%
3.64
%
3.74
%
3.91
%
Efficiency ratio
69.24
%
83.87
%
67.50
%
85.19
%
72.86
%
Tangible common equity
10.53
%
10.26
%
10.30
%
9.73
%
10.12
%
Average Balance and Yields
Three months ended September
30,
Three months ended June 30,
2019
2019
Average
Income
Yield
Average
Income
Yield
(dollars in thousands)
Balance
/ Expense
/ Rate
Balance
/ Expense
/ Rate
Earning assets Loans and leases: Commercial loans and leases
$
371,745
$
4,646
4.96
%
$
345,180
$
4,478
5.20
%
Commercial real estate
676,046
8,481
4.98
664,079
8,407
5.08
Construction and land
121,296
1,701
5.57
116,057
1,686
5.83
Residential real estate
488,053
5,405
4.39
493,003
5,598
4.55
Consumer
49,068
606
4.90
51,174
641
5.02
Total loans and leases
1,706,208
20,839
4.85
1,669,493
20,810
5.00
Loans held for sale
36,326
344
3.76
30,432
321
4.23
Other earning assets
56,732
273
1.91
62,629
274
1.76
Securities: U.S Gov agencies
62,154
450
2.87
97,128
669
2.76
Mortgage-backed
86,539
665
3.05
87,954
699
3.19
Corporate debentures
9,750
149
6.06
9,277
143
6.18
Other investments
13,830
235
6.74
13,595
229
6.75
Total securities
172,273
1,499
3.45
207,954
1,740
3.36
Total earning assets
1,971,539
22,955
4.62
1,970,508
23,145
4.71
Cash and due from banks
16,442
13,853
Bank premises and equipment, net
42,929
44,567
Other assets
222,668
226,852
Less: allowance for credit losses
(9,319
)
(8,980
)
Total assets
$
2,244,259
$
2,246,800
Interest-bearing liabilities Deposits: Interest-bearing demand
accounts
$
179,038
$
181
0.40
%
$
207,159
$
248
0.48
%
Money market
359,295
761
0.84
354,808
670
0.76
Savings
134,312
63
0.19
139,673
66
0.19
Time deposits
565,568
3,057
2.14
566,284
3,020
2.14
Total interest-bearing deposits
1,238,213
4,062
1.30
1,267,924
4,004
1.27
Short-term borrowings
211,315
1,204
2.26
125,292
754
2.41
Long-term borrowings
28,161
474
6.68
110,474
1,033
3.75
Total interest-bearing funds
1,477,689
5,740
1.54
1,503,690
5,791
1.54
Noninterest-bearing deposits
434,701
414,502
Other liabilities
25,233
25,009
Total liabilities
1,937,623
1,943,201
Shareholders' equity
306,636
303,599
Total liabilities & equity
$
2,244,259
$
2,246,800
Net interest rate spread
$
17,215
3.08
%
$
17,354
3.17
%
Effect of noninterest-bearing funds
0.39
0.37
Net interest margin on earning assets
3.46
%
3.53
%
Reconciliation of Non-GAAP Financial Measures
Certain financial measures we use to evaluate our performance
and discuss in this release and the accompanying tables are
identified as being “non-GAAP financial measures.” 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. In accordance with the rules of the Securities
and Exchange Commission, or the SEC, we classify a financial
measure as being a non-GAAP (generally accepted accounting
principles) financial measure if that financial measure excludes or
includes amounts, or is subject to adjustments that have the effect
of excluding or including amounts, that are included or excluded,
as the case may be, in the most directly comparable measure
calculated and presented in accordance with GAAP as in effect from
time to time in the United States in our statements of operations,
balance sheets or statements of cash flows.
The non-GAAP financial measures that we discuss in this release
should not be considered in isolation or as a substitute for the
most directly comparable or other financial measures calculated in
accordance with GAAP. Moreover, the manner in which we calculate
the non-GAAP financial measures that we discuss in this release may
differ from that of other companies reporting measures with similar
names. You should understand how such other banking organizations
calculate their financial measures similar or with names similar to
the non-GAAP financial measures we have discussed in this release
when comparing such non-GAAP financial measures.
The Company's management uses non-GAAP financial measures as
management believes that non-GAAP financial measures provide
additional useful information that allows readers to evaluate the
ongoing performance of the Company and provide meaningful
comparison to its 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.
Net Interest Margin
The Company recognizes interest income and interest expense from
the amortization and/or accretion of purchase accounting fair value
measures incurred in connection with recent acquisitions that are
based upon customer activities, such as prepayments of loans and
can create volatility in the reported NIM when measuring comparable
periods.
Following is a reconciliation of the core NIM results excluding
the impact of net interest income recognized from purchase
accounting adjustments and the GAAP basis information presented in
this release:
(in thousands)
2019
2018
Third
Second
First
Fourth
Third
Second
First
Quarter
Quarter
Quarter
Quarter
Quarter
Quarter
Quarter
Net Interest Income As reported (1)
17,216
17,354
17,474
17,943
18,647
17,880
12,148
Purchase accounting adjustments on loans
included in interest income
384
461
464
488
1,196
481
147
Net Interest Income excluding purchase
accounting adjustments (2)
16,831
16,893
17,010
17,455
17,451
17,399
12,001
Average earning assets
1,971,539
1,970,508
1,947,944
1,901,967
1,890,093
1,868,241
1,387,967
NIM using net
interest income
As Reported (1)
3.46%
3.53%
3.64%
3.74%
3.91%
3.83%
3.55%
Excluding purchase accounting adjustments
(2)
3.39%
3.44%
3.54%
3.64%
3.66%
3.74%
3.51%
Noninterest Income and Noninterest
Expenses
In the second quarter of 2019, the Company recognized expenses
in connection with the continued execution of its branch delivery
optimization initiative under which it will close several branch
locations as well as other revenue and expense items that are
considered to be infrequent in nature.
Following is a reconciliation of the operating results excluding
infrequent revenues and expenses and other infrequent items and the
GAAP basis information presented in this release:
Nine Month Period Ending September 30, 2019
HOWARD BANCORP, INC.
Nine months ended
(Dollars in thousands, except per share data.)
September 30, 2019
Income Statement Data:
Reported
Infrequent
Operating
Interest income
$
68,884
$
68,884
Interest expense
16,841
16,841
Net interest income
52,043
-
52,043
Provision for credit losses
3,443
3,443
Noninterest income
15,410
(658
)
14,752
Merger and restructuring expenses
-
Other noninterest expense
49,717
(4,992
)
44,724
Pre-tax income
14,293
4,334
18,627
Federal and state income tax expense
3,312
1,193
4,504
Net income
10,981
3,141
14,122
Per share data and shares outstanding: Net income per
common share-basic
$
0.58
$
0.16
$
0.74
Average common shares outstanding
19,064,235
19,064,235
19,064,235
Shares outstanding at period end
19,081,777
19,063,080
19,081,777
Selected performance ratios: Return on average assets
0.66
%
0.84
%
Return on average common equity
4.85
%
6.24
%
Efficiency ratio
73.71
%
66.96
%
Three month Period Ending September 30, 2019
HOWARD BANCORP, INC. Three months ended (Dollars in
thousands, except per share data.)
September 30, 2019
Income Statement Data: Reported Infrequent
Operating Interest income
$
22,955
$
22,955
Interest expense
5,740
5,740
Net interest income
17,215
-
17,215
Provision for credit losses
608
608
Noninterest income
5,033
5,033
Merger and restructuring expenses
-
-
Other noninterest expense
15,405
(700
)
14,705
Pre-tax income
6,235
700
6,935
Federal and state income tax expense
1,598
193
1,790
Net income
4,637
507
5,145
Per share data and shares outstanding: Net income per
common share-basic
$
0.24
$
0.03
$
0.27
Average common shares outstanding
19,078,561
19,078,561
19,078,561
Shares outstanding at period end
19,081,777
19,063,080
19,081,777
Selected performance ratios: Return on average assets
0.82
%
0.91
%
Return on average common equity
6.00
%
6.66
%
Efficiency ratio
69.24
%
66.09
%
Year to date operating noninterest income is $658 thousand less
than reported noninterest income to exclude a gain on the sale of
securities of $658 thousand recorded in the second quarter of
2019.
Year to date operating noninterest expense is $5.0 million less
than the reported noninterest expense to exclude (i) the $3.6
million of occupancy expenses associated primarily from the
remaining lease liability of closing branch locations (ii) a
$651,000 penalty from the FHLB for the early repayment of advances
associated with a realignment of the securities portfolio incurred
in the second quarter of 2019 iii) and the $700 thousand charge
related to a pending confidential legal settlement recorded in the
third quarter of 2019.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191023005938/en/
Howard Bancorp, Inc. George C. Coffman, Chief Financial Officer,
410-750-0020
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