Howard Bancorp, Inc. Announces Results for the First Quarter of 2016
Howard Bancorp, Inc. (Nasdaq: HBMD) (the "Company"), the parent company of Howard Bank (the "Bank"), today reported its financial results for the quarter ended March 31, 2016 with the following highlights:
- Total assets grew to $990 million at March 31, 2016, representing growth of $280 million or 39% over assets of $710 million at March 31, 2015, of which approximately $157 million or 22% is attributable to our acquisition of Patapsco Bancorp, Inc. and its subsidiary The Patapsco Bank, in the third quarter of 2015.
- Total loans held for investment increased by nearly $204 million from a year ago, or 36%, to $774 million, of which approximately $151 million or 26%, is attributable to the Patapsco transaction.
- Deposits at March 31, 2016 increased to $803 million from $581 million on March 31, 2015, representing growth of over $222 million or 38%, of which approximately $138 million, or 24%, is attributable to the Patapsco transaction.
- Primarily as a result of the above-noted balance sheet growth, net interest income increased by $1.8 million, or 28%, from $6.8 million for the first three months of 2015 to $8.6 million in the first quarter of 2016.
- Noninterest income also increased to $2.9 million for the first quarter of 2016 from $2.4 million for the first quarter of 2015, an increase of $500 thousand or 21%, primarily as a result of our mortgage banking operations.
- Total noninterest expenses increased $1.9 million to $9.7 million from $7.8 million, or 23%, compared to the first quarter of 2015, partially offsetting the continuing increases in our traditional banking and mortgage-related revenues. Included in the first quarter of 2015 expenses were $406 thousand in merger-related costs, and included in the first quarter of 2016 were $430 thousand in occupancy costs relating to our decision to close three of our less active branch locations.
- The large increase in first quarter revenue exceeded increases in noninterest expense resulting in an improvement in the efficiency ratio year over year and quarter over quarter. Net income available to common shareholders increased to $903 thousand for the first three months of 2016 from $618 thousand for the first quarter of 2015, representing an increase of $285 thousand or 46%.
Howard Bancorp, Inc. reported net income available to common shareholders of $903 thousand, or $0.13 per share, for the quarter ended March 31, 2016, compared to $618 thousand, or $0.15 per share, for the quarter ended March 31, 2015. As noted above, the increase in net income was driven by sizable increases in both of our core sources of revenue, net interest income and noninterest income, resulting in an increase in return on assets. Earnings per share and return on equity, however, were negatively impacted by the issuance of $25 million of new common equity in the second quarter of 2015.
Chairman and CEO Mary Ann Scully stated, "The Company continues to make progress on each of our strategic goals - continued growth in commercially-driven loans (with commercial and industrial growth up 3% during the quarter or 12% on an annualized basis) funded by inexpensive core transaction deposits (with DDA, NOW and money market balances showing solid growth), balanced growth in less capital-dependent sources of noninterest income (with mortgage gain on sale income up over 20% from the first quarter of last year and essentially flat with the fourth quarter of 2015), and the achievement of scale and efficiencies associated with growth acquired through whole company transactions, team lift outs and selective asset purchases. We are continuing to evaluate different process initiatives that ensure that we are as effective as possible in acquiring, growing and retaining both loan and deposit customers and in conjunction with one of those initiatives decided to close three branches."
As highlighted above, the Company's total assets increased by $280 million, or 39%, when comparing March 31, 2016 assets of $990 million to $710 million at the same point in 2015. Total loans outstanding of $774 million at the end of March 2016 showed an increase of nearly 36% compared to total loans of $570 million at March 31, 2015. Total deposits grew by $222 million, or 38%, quarter over quarter. Thus, funding for the increases in the portfolio loan growth came solely from our deposit growth.
Net interest income for the quarter ended March 31, 2016 was $8.6 million versus $6.8 million for the first three months of 2015, an increase of approximately $1.8 million, or 28%. The growth in loans generated an increase in total interest income for the first quarter of 2016 of $2.2 million, or 29%, over the same period in 2015. Total interest expense increased only $310 thousand for the first quarter of 2016 versus the same period in 2015 despite overall growth in deposits and an increase in borrowing levels. The ability to contain interest expense was principally driven by the continuing ability to attract and maintain lower-cost funding sources.
The provision for credit losses for the first quarter of 2016 was $385 thousand compared to $250 thousand for the same period in 2015. The ratio of the allowance for credit losses as a percentage of total loans outstanding remained stable - 0.67% at March 31, 2015 and 0.68% at March 31, 2016. With the continuing growth in our loan portfolio, both from acquisition and organic origination activities, maintaining sound asset quality has been a consistent area of focus. One of the Bank's primary measures of asset quality is the ratio of non-performing assets as a percentage of total assets. This asset quality measure improved for the 2016 period with a ratio of 1.04% at March 31, 2016 compared to 1.24% at the end of the first quarter of 2015, even with the $204 million or 36% growth in our loan portfolio during the same period.
Even with the sizable growth in assets, and with the additional capital raised in 2015, all of our regulatory capital ratios continue to substantially exceed "well-capitalized" levels. For the quarter ending March 31, 2016, the ratio of our average equity to total average assets was 9.83%.
Compared to December 31, 2015, total assets increased $44 million, or 5%, loans held for investment increased $14 million, or 2%, and total deposits increased by $56 million, or 7%, at March 31, 2016. First quarter net interest income declined by $400 thousand or 4% compared to the fourth quarter of 2015 as the fourth quarter included over $800 thousand in interest income resulting from the recognition of fair value acquisition adjustments due to early loan payoffs, while the first quarter of 2016 benefitted from less than $200 thousand in loan fair value adjustments. This approximately $600 thousand swing in acquisition adjustments drove the quarter over quarter decline and impacted the net interest margin by nearly 29 basis points. Total noninterest income was relatively stable, with both quarters reflecting income of $2.9 million. Noninterest expenses of $9.7 million during the first quarter of 2016, included $430 thousand in upfront branch closure-related expenses. Excluding this $430 thousand, the first quarter of 2016 expenses were relatively flat when comparing noninterest expenses, excluding merger-related expenses, to the fourth quarter of 2015.
Mary Ann Scully concluded, "We continue to focus on positioning ourselves as the go to bank in the Greater Baltimore area, proactively serving the small and medium-sized enterprise commercial market in a differentiated fashion and extending our mortgage market share especially in the targeted purchase money arena. The resulting revenue growth combined with numerous process enhancements will continue to drive shareholder value."
The statements in this press release regarding our goals and that "The resulting revenue growth combined with numerous process enhancements will continue to drive shareholder value" constitute a 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, or a return to recessionary conditions, changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments, 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.|
|Three months ended|
|(in thousands, except per share data.)||March 31||Dec 31||March 31|
|Operation Statement Data:||2016||2015||2015|
|Net interest income||8,643||9,030||6,767|
|Provision for credit losses||385||821||250|
|Other noninterest income||2,852||2,883||2,350|
|Merger and restructuring||-||1,041||406|
|Other noninterest expense||9,676||9,337||7,429|
|Federal and state income tax expense||474||226||382|
|Preferred stock dividends||57||32||31|
|Net income available to common shareholders||$||903||$||455||$||618|
|Per share data and shares outstanding:|
|Net income per common share, basic||$||0.13||$||0.07||$||0.15|
|Book value per common share at period end||$||11.68||$||11.54||$||11.53|
|Tangible book value per common share at period end||$||11.21||$||10.96||$||11.21|
|Average common shares outstanding||6,955,462||6,935,493||4,112,379|
|Shares outstanding at period end||6,964,918||6,962,139||4,147,633|
|Financial Condition data:|
|Loans receivable (gross)||774,229||760,002||$||570,437|
|Allowance for credit losses||(5,256||)||(4,869||)||$||(3,839||)|
|Other interest-earning assets||161,302||135,137||$||100,298|
|Total stockholders' equity||93,946||92,899||$||60,383|
|Average stockholders' equity||92,207||91,841||58,678|
|Average common stockholders' equity||79,645||79,279||46,116|
|Selected performance ratios:|
|Return on average assets||0.41||%||0.21||%||0.38||%|
|Return on average common equity||4.83||%||2.44||%||5.71||%|
|Net interest margin(1)||3.93||%||4.13||%||4.19||%|
|Asset quality ratios:|
|Nonperforming loans to gross loans||1.02||%||1.36||%||1.11||%|
|Allowance for credit losses to loans||0.68||%||0.64||%||0.67||%|
|Allowance for credit losses to nonperforming loans||66.31||%||46.96||%||60.73||%|
|Nonperforming assets to loans and other real estate||1.33||%||1.69||%||1.53||%|
|Nonperforming assets to total assets||1.04||%||1.35||%||1.24||%|
|Tier I risk-based capital ratio||11.47||%||11.47||%||9.86||%|
|Total risk-based capital ratio||12.13||%||12.09||%||10.49||%|
|Average equity to average assets||9.83||%||9.98||%||8.49||%|
|(1) Net interest margin is net interest income divided by average earning assets.|
|(2) Efficiency ratio is noninterest expense divided by the sum of net interest income and noninterest income.|
|Unaudited Consolidated Statements of Financial Condition||PERIOD ENDED|
|(Dollars in thousands, except share amounts)|
|March 31,||December 31,||September 30,||June 30,||March 31,|
|Cash and Cash Equivalents:|
|Cash and due from banks||$||50,725||$||31,071||$||16,517||$||27,360||$||25,090|
|Total cash and cash equivalents||54,971||38,340||18,347||29,006||28,546|
|Federal Home Loan Bank stock, at cost||3,849||4,163||3,185||3,385||2,535|
|Total investment securities||73,999||53,736||42,363||37,966||33,146|
|Allowance for credit losses||(5,256||)||(4,869||)||(4,317||)||(4,199||)||(3,839||)|
|Accrued interest receivable||2,360||2,144||2,221||1,636||1,754|
|Bank premises and equipment, net||20,758||20,765||20,427||16,108||12,098|
|Bank owned life insurance||20,899||18,548||16,618||11,834||11,745|
|Total other assets||29,350||26,964||25,525||17,903||19,179|
|LIABILITIES AND STOCKHOLDERS' EQUITY:|
|Non-interest bearing deposits||$||177,621||$||173,689||$||171,349||$||148,928||$||137,287|
|Interest bearing deposits||625,555||573,719||571,418||426,788||443,368|
|Commitments and contingencies Stockholders' equity:|
|Preferred stock -- $.01 par value||12,562||12,562||12,562||12,562||12,562|
|Common stock – $.01 par value||70||70||69||64||41|
|Additional paid-in capital||70,698||70,587||70,173||61,919||38,454|
|Accumulated other comprehensive income/(loss), net||1||(32||)||19||9||13|
|Total stockholders' equity||93,946||92,898||92,080||84,627||60,383|
|Total liabilities and stockholders' equity||$||990,438||$||946,759||$||924,493||$||746,881||$||710,480|
Capital Ratios - Howard Bancorp, Inc.
|Tier 1 Leverage (to average assets)||9.83||%||9.90||%||11.17||%||11.90||%||8.66||%|
|Common Equity Tier 1 Capital (to risk weighted assets)||11.47||%||11.47||%||11.57||%||13.16||%||9.86||%|
|Tier 1 Capital (to risk weighted assets)||11.47||%||11.47||%||11.57||%||13.16||%||9.86||%|
|Total Capital Ratio (to risk weighted assets)||12.13||%||12.09||%||12.14||%||13.82||%||10.49||%|
|ASSET QUALITY INDICATORS|
|(Dollars in thousands)|
|Total non-performing loans||$||7,927||$||10,370||$||8,113||$||7,005||$||6,321|
|Real estate owned||2,369||2,369||1,764||2,480||2,472|
|Total non-performing assets||$||10,296||$||12,739||$||9,877||$||9,485||$||8,793|
|Non-performing loans to total loans||1.02||%||1.36||%||1.07||%||1.20||%||1.11||%|
|Non-performing assets to total assets||1.04||%||1.35||%||1.07||%||1.27||%||1.24||%|
|ALLL to total loans||0.68||%||0.64||%||0.57||%||0.72||%||0.67||%|
|ALLL to non-performing loans||66.31||%||46.96||%||53.21||%||59.94||%||60.73||%|
|Unaudited Consolidated Statements of Income||FOR THE THREE MONTHS ENDED|
|(Dollars in thousands, except per share amounts)|
|March 31,||December 31,||September 30,||June 30,||March 31,|
|Total interest income||$ 9,612||$ 9,950||$ 8,489||$ 7,484||$ 7,426|
|Total interest expense||969||920||807||686||659|
|Net interest income||8,643||9,030||7,682||6,799||6,767|
|Provision for loan losses||(385)||(821)||(230)||(535)||(250)|
|Net interest income after provision for loan losses||8,258||8,209||7,452||6,264||6,517|
|Service charges and other income||554||433||516||513||522|
|Mortgage banking income||2,298||2,450||2,740||2,924||1,828|
|Total non-interest income||2,852||2,883||3,256||3,438||2,350|
|Salaries and employee benefits||4,584||4,817||4,652||3,939||3,850|
|Other real estate owned related expense||14||(13)||776||36||12|
|Merger and restructuring||-||1,041||2,166||731||406|
|Total non-interest expense||9,676||10,379||11,600||8,439||7,835|
|Income/(loss) before income taxes||1,434||713||(892)||1,262||1,031|
|Income tax expense/(benefit)||474||226||(107)||471||382|
|NET INCOME /(LOSS)||960||487||(785)||791||649|
|NET INCOME/(LOSS) AVAILABLE|
|TO COMMON SHAREHOLDERS||$ 903||$ 455||$ (816)||$ 760||$ 618|
|EARNINGS/(LOSS) PER SHARE – Basic||$ 0.13||$ 0.07||$ (0.13)||$ 0.16||$ 0.15|
|EARNINGS/(LOSS) PER SHARE – Diluted||$ 0.13||$ 0.06||$ (0.12)||$ 0.15||$ 0.15|
|Average common shares outstanding – Basic||6,955,462||6,935,493||6,493,987||4,841,538||4,112,379|
|Average common shares outstanding – Diluted||7,047,987||7,051,660||6,648,107||4,960,457||4,228,393|
|Return on average assets||0.41%||0.21%||-0.39%||0.45%||0.38%|
|Return on average common equity||4.83%||2.44%||-3.64%||4.72%||5.71%|
|Net interest margin||3.93%||4.13%||3.94%||4.06%||4.19%|
|Tangible common equity||8.22%||8.48%||8.60%||9.65%||6.73%|
Howard Bancorp, Inc.
George C. Coffman, Chief Financial Officer, 410-750-0020