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Frederick County Bancorp, Inc. Reports Results for the Second Quarter 2016

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FREDERICK, Md.--(BUSINESS WIRE)--

Frederick County Bancorp, Inc. (the "Company") (OTCPink Marketplace: FCBI), the parent company for Frederick County Bank ("FCB"), announced today that, for the quarter ended June 30, 2016, the Company recorded net income of $362 thousand and diluted earnings per share of $0.23, as compared to net income of $355 thousand and diluted earnings per share of $0.23 recorded for the second quarter of 2015. The Company earned $651 thousand with diluted earnings per share of $0.42 for the six months ended on June 30, 2016, as compared to $835 thousand in earnings and diluted earnings per share of $0.54 for the same period in 2015.

The slight increase in quarterly earnings was due primarily to an increase in total noninterest income to $297 thousand in the second quarter of 2016 as compared to $248 thousand in the second quarter of 2015, resulting from an 8 basis point increase in the net interest margin and increased loan volume, which was offset by increases in total noninterest expense to $2.68 million in the second quarter of 2016 from $2.67 million in the second quarter of 2015. The increase in total noninterest income was due primarily to increases in securities gains of $51 thousand and gain on sale of loans of $8 thousand. The increase in total noninterest expense was due primarily to increases in salaries and employee benefits of $83 thousand, an increase in occupancy and equipment expense of $51 thousand and an increase in provision expense of $200 thousand in the second quarter of 2016 as compared to the second quarter of 2015, respectively.

The decrease in year-to-date earnings was due primarily to an increase in total noninterest expense to $5.5 million in the first half of 2016 as compared to $5.3 million in the first half of 2015, which added to the overall decrease in total noninterest income of $250 thousand in the first half of 2016 as compared to the first half of 2015. The increase in total noninterest expense was due primarily to increases in salaries and employee benefits of $226 thousand and in occupancy and equipment expenses of $84 thousand, as compared to the first half of 2015. The decrease in total noninterest income was due primarily to a decrease in gain on sale of loans of $225 thousand as compared to the first half of 2015, reflecting lower SBA loan originations and subsequent sales in the first half of 2016.

The ratio of the allowance for loan losses to total loans stood at 1.04% and 1.16% as of June 30, 2016 and 2015, respectively. Total nonperforming assets stood at $7.7 million and $4.4 million at June 30, 2016 and 2015, respectively, and at $5.9 million at December 31, 2015. The $3.33 million increase in nonperforming assets from the second quarter of 2016 compared to the second quarter of June 2015 is due to two relationships totaling $5.1 million that were put on nonaccrual of which $2.3 million was a troubled debt restructuring at December 31, 2015. The corresponding nonperforming assets to total assets ratios were 2.08% and 1.24% as of June 30, 2016 and 2015, respectively, and 1.68% at December 31, 2015.

The Company also reported that, as of June 30, 2016, assets stood at $371.4 million, with total deposits of $315.5 million and gross loans of $294.9 million, representing increases of 4.2%, 4.1%, and 10.1%, respectively, compared to June 30, 2015. Total shareholders' equity at June 30, 2016 was $30.5 million, an increase of $984 thousand from December 31, 2015. The increase primarily resulted from an increase in additional paid-in capital of $192 thousand, which was from the exercise of stock options, an increase in retained earnings of $443 thousand and an increase in accumulated other comprehensive income of $349 thousand from December 31, 2015. On a per share basis, book value increased by 47 cents for 2016 to $20.50 per share at June 30, 2016 from $20.03 per share at December 31, 2015. The dividends declared per share remained constant at $0.14 per share for the six month periods ended June 30, 2016 and 2015.

Frederick County Bank is headquartered in Frederick, Maryland, and conducts full service commercial banking services through five bank centers located in Frederick County, Maryland.

                   
June 30, June 30, December 31,
2016     2015 2015
(dollars in thousands) (unaudited) (unaudited) (audited)
Total assets $371,372 $356,542 $350,542
Loans 294,939 267,767 278,950
Deposits 315,457 302,923 295,632
Shareholders' equity 30,540 28,426 29,556
 
Nonperforming assets:
Nonaccrual loans $6,671 $1,863 $2,160
Accruing troubled debt restructurings 363 1,113 3,031
Loans 90 days or more past due and still accruing -- -- --
Foreclosed properties 706     1,435 706
Total nonperforming assets $7,740     $4,411 $5,897
 
For the Three Months Ended For the Six Months Ended
June 30, June 30, June 30, June 30,
2016     2015 2016     2015
(dollars in thousands, except for per share data) (unaudited) (unaudited) (unaudited) (unaudited)
SUMMARY OF OPERATING RESULTS:
Net income $362 $355 $651 $835
Total comprehensive income 594 181 1,000 705
 
Charge-offs $206 $111 $236 $283
(Recoveries) (34)     (25) (44)     (27)
Net charge-offs $172     $ 86 $192     $256
 
PER COMMON SHARE DATA:
Basic earnings per share $0.24 $0.24 $0.44 $0.57
Diluted earnings per share $0.23 $0.23 $0.42 $0.54
Basic weighted average number of shares outstanding 1,488,890 1,475,356 1,482,972 1,475,257
Diluted weighted average number of shares outstanding 1,542,374 1,537,678 1,541,291 1,536,198
Common shares outstanding 1,489,604 1,475,379 1,489,604 1,475,379 1,475,929
Dividends declared $0.07 $0.07 $0.14 $0.14
Book value per share $20.50 $19.27 $20.50 $19.27 $20.03
 
SELECTED UNAUDITED FINANCIAL RATIOS:
Return on average assets 0.40% 0.41% 0.36% 0.48%
Return on average equity 4.75% 4.96% 4.31% 5.86%
Allowance for loan losses to total loans 1.04% 1.16% 1.04% 1.16% 1.10%
Nonperforming assets to total assets 2.08% 1.24% 2.08% 1.24% 1.68%
Ratio of net (recoveries) charge-offs to average loans 0.06% 0.03% 0.07% 0.10%
Common Equity Tier 1 to risk-weighted assets 9.17% 9.77% 9.17% 9.77% 9.63%
Tier 1 capital to risk-weighted assets 10.99% 11.82% 10.99% 11.82% 11.58%
Total capital to risk-weighted assets 11.92% 12.88% 11.92% 12.88% 12.57%
Tier 1 capital to average assets 10.05% 9.97% 10.05% 9.97% 9.99%
Average equity to average assets 8.44% 8.25% 8.46% 8.27%
Net interest margin 3.69% 3.63% 3.67% 3.60%
 
           
Frederick County Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
 
June 30, June 30, December 31,
      2016     2015     2015
      (unaudited)     (unaudited)     (audited)
(dollars in thousands)                  
ASSETS
Cash and due from banks $ 2,453 $ 2,394 $ 2,683
Federal funds sold 1,057 26 1,083
Interest-bearing deposits in other banks       34,392       44,335       26,482
Cash and cash equivalents       37,902       46,755       30,248
Investment securities available-for-sale at fair value 20,514 24,471 24,363
Restricted stock 1,636 1,629 1,629
Loans 294,939 267,767 278,950
Less: Allowance for loan losses       (3,072)       (3,106)       (3,064)
Net loans       291,867       264,661       275,886
Bank premises and equipment 7,463 6,303 6,445
Bank owned life insurance 8,623 8,396 8,511
Foreclosed properties 706 1,435 706
Other assets       2,661       2,892       2,754
Total assets     $ 371,372     $ 356,542     $ 350,542
 
LIABILITIES AND SHAREHOLDERS' EQUITY                  
                   
Liabilities
Deposits
Noninterest-bearing deposits $ 78,739 $ 68,049 $ 67,816
Interest-bearing deposits       236,718       234,874       227,816
Total deposits 315,457 302,923 295,632
Short-term borrowings 3,300 3,300 3,300
FHLB advances 15,000 15,000 15,000
Junior subordinated debentures 6,186 6,186 6,186
Accrued interest and other liabilities       889       707       868
Total liabilities       340,832       328,116       320,986
 
Shareholders' Equity

Common stock, per share par value $0.01; 10,000,000 shares authorized; 1,489,604; 1,475,379 and 1,475,929 shares issued and outstanding, respectively

 

15

 

15

 

15

Additional paid-in capital 15,376 15,172 15,184
Retained earnings 14,892 13,386 14,449
Accumulated other comprehensive income (loss)       257       (147)       (92)
Total shareholders' equity       30,540       28,426       29,556
Total liabilities and shareholders' equity     $ 371,372     $ 356,542     $ 350,542
 
 
Frederick County Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
 
     

For the Three Months Ended

   

For the Six Months Ended

(dollars in thousands, except per share amounts)     June 30,

2016

    June 30,

2015

    June 30,

2016

    June 30,

2015

Interest income                
Interest and fees on loans $3,298 $3,133 $6,485 $6,155
Interest and dividends on investment securities:
Interest – taxable 66 79 138 167
Interest – tax exempt 40 51 85 101
Dividends 24 33 49 56
Interest on federal funds sold 3 -- 3 --
Other interest income     30     20     67     41
Total interest income     3,461     3,316     6,827     6,520
Interest expense
Interest on deposits 263 261 542 520
Interest on short-term borrowings 29 26 56 50
Interest on FHLB advances 29 84 56 170
Interest on junior subordinated debentures     36     30     69     59
Total interest expense     357     401     723     799
Net interest income 3,104 2,915 6,104 5,721
Provision for loan losses     200     --     200     --
Net interest income after provision for loan losses     2,904     2,915     5,904     5,721
Noninterest income
Securities gains 51 -- 51 69
Gain on sale of loans 13 5 18 243
Bank owned life insurance income 56 58 112 116
Service fees 91 89 173 169
Other operating income     86     96     172     179
Total noninterest income     297     248     526     776
Noninterest expense
Salaries and employee benefits 1,577 1,494 3,258 3,032
Occupancy and equipment expenses 497 446 950 866
Other operating expenses     609     726     1,298     1,401
Total noninterest expense     2,683     2,666     5,506     5,299
Income before provision for income taxes 518 497 924 1,198
Provision for income taxes     156     142     273     363
Net income     $ 362     $ 355     $ 651     $ 835
Basic earnings per share     $0.24     $0.24     $0.44     $0.57
Diluted earnings per share     $0.23     $0.23     $0.42     $0.54
Basic weighted average number of shares outstanding     1,488,890     1,475,356     1,482,972     1,475,257
Diluted weighted average number of shares outstanding     1,542,374     1,537,678     1,541,291     1,536,198
Dividends declared per share     $0.07     $0.07     $0.14     $0.14
 
       
Frederick County Bancorp, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
      For the Three Months Ended
(dollars in thousands)     June 30,

2016

    June 30,

2015

Net income $362 $355
Changes in net unrealized gains (losses) on securities available for sale, net of income taxes of $171 in 2016 and income tax benefits of $113 in 2015 263 (174)
Reclassification adjustment for (gains) realized, net of income taxes of $20 in 2016 and $0 in 2015     (31)     --
Total comprehensive income     $594     $181
 
 
      For the Six Months Ended
(dollars in thousands)     June 30,

2016

    June 30,

2015

Net income $ 651 $835
Changes in net unrealized gains (losses) on securities available for sale, net of income taxes of $248 in 2016 and income tax benefits of $57 in 2015 380 (88)
Reclassification adjustment for (gains) realized, net of income taxes of $20 in 2016 and $27 in 2015     (31)     (42)
Total comprehensive income     $1,000     $705
 
 
Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Statement of Changes in Shareholders' Equity (Unaudited)

 
(dollars in thousands)     Shares

Outstanding

    Common

Stock

   

Additional

Paid-in

Capital

   

Retained

Earnings

    Accumulated

Other

Comprehensive

Income

(Loss)

    Total

Shareholders'

Equity

                       
Balance, January 1, 2015 1,475,154 $15 $15,158 $12,758 $ (17) $27,914
Comprehensive income 835 (130) 705
Dividends declared on common stock, $0.14 per share (207) (207)
Shares issued under stock option transactions 225 2 2
Compensation expense from stock option transactions                 12                 12
Balance, June 30, 2015     1,475,379     $15     $15,172     $13,386     $(147)     $28,426
Balance January 1, 2016 1,475,929 $15 $15,184 $14,449 $(92) $29,556
Comprehensive income 651 349 1,000
Dividends declared on common stock, $0.14 per share (208) (208)
Shares issued under stock option transactions 13,675 154 154
Compensation expense from stock option transactions 10 10
Excess tax benefit from equity-base awards                 28                 28
Balance, June 30, 2016     1,489,604     $15     $15,376     $14,892     $257     $30,540
 
 
Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

 
      For The Six Months Ended
      June 30,     June 30,
(dollars in thousands)     2016     2015
Cash flows from operating activities:        
Net income $ 651 $ 835

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 200 205
Deferred income taxes 20 20
Provision for loan losses 200 --
Securities gains (51) (69)
Gain on sale of loans (18) (243)
Loans originated for sale (1,108) (2,574)
Proceeds from loans sold 1,126 2,817
Net premium amortization on investment securities 79 80
Bank owned life insurance income (112) (116)
Stock-based compensation expense 10 12
Excess tax benefit from equity-based awards (28) --
Decrease (increase) in accrued interest and other assets 41 (39)
Decrease in accrued interest and other liabilities     (146)     (24)
Net cash provided by operating activities     864     904
Cash flows from investing activities:
Purchases of investment securities available for sale -- (3,284)
Proceeds from sales of investment securities available for sale 1,790 575

Proceeds from maturities, prepayments and calls investment securities available for sale

2,607 2,202
(Purchase) redemption of restricted stock (7) 176
Net increase in loans (16,181) (6,204)
Purchases of bank premises and equipment     (1,218)     (135)
Net cash used in investing activities     (13,009)     (6,670)
Cash flows from financing activities:

Net increase in NOW, money market accounts, savings accounts and noninterest-bearing deposits

12,378 24,710
Net increase (decrease) in time deposits 7,447 (6,772)
Repayment of FHLB advances -- (5,000)
Proceeds from issuance of common stock 154 2
Dividends paid on common stock (208) (207)
Excess tax benefit from equity-based awards     28     --
Net cash provided by financing activities     19,799     12,733
Net increase in cash and cash equivalents 7,654 6,967
Cash and cash equivalents – beginning of period     30,248     39,788
Cash and cash equivalents – end of period     $37,902     $46,755
Supplemental cash flow disclosures:
Interest paid     $704     $807
Income taxes paid     $479     $407
Transfer of loans to foreclosed properties     $--     $706
 
 

Distribution of Assets, Liabilities and Shareholders' Equity; Interest Rates and Interest Differential

 

The following tables show average balances of asset and liability categories, interest income and interest expense, and average yields and rates for the periods indicated.

                       
For the Three Months Ended June 30,     2016     2015

 

(dollars in thousands)

    Average

daily

balance

    Interest

Income/

Expense

    Average

Yield/

Rate(%)

    Average

daily

balance

    Interest

Income/

Expense

    Average

Yield/

Rate(%)

Assets
Interest-earning assets:
Federal funds sold $ 1,056 $ 3 1.14 $ 21 $ -- --
Interest bearing deposits in other banks 28,162 30 0.43 35,758 20 0.22
Investment securities (1):
Taxable 19,019 90 1.90 20,791 112 2.16
Tax-exempt (2) 5,431 61 4.51 6,373 76 4.78
Loans (3)       288,667       3,326     4.62       265,627       3,163     4.78
Total interest-earning assets       342,335       3,510     4.11       328,570       3,377     4.12
Noninterest-earning assets       18,708   18,125
Total assets     $ 361,043 $ 346,695
 
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
NOW accounts $ 29,096 $ 11 0.15 $ 25,511 10 0.16
Savings accounts 11,133 2 0.07 9,522 1 0.04
Money market accounts 93,750 67 0.28 105,487 81 0.31
Certificates of deposit 95,470 183 0.77 87,355 169 0.69
Short-term borrowings 3,300 29 3.52 3,300 26 3.16
FHLB advances 15,000 29 0.78 15,000 84 2.25
Junior subordinated debentures       6,186       36     2.33       6,186       30     1.95
Total interest-bearing liabilities       253,935       357     0.56       252,361       401     0.64
Noninterest-bearing deposits 75,959 65,018
Noninterest-bearing liabilities   661   703
Total liabilities       330,555   318,082
Total shareholders' equity       30,488   28,613

Total liabilities and shareholders' equity

    $ 361,043         $ 346,695        
Net interest income             $ 3,153           2,970
Net interest spread 3.55% 3.48%
Net interest margin 3.69% 3.63%
 
   

(1)

Yields on securities available-for-sale have been calculated on the basis of historical cost and do not give effect to changes in the fair value of those securities, which is reflected as a component of shareholders' equity.

(2)

Presented on a taxable-equivalent basis using the statutory federal income tax rate of 34%. Taxable-equivalent adjustments of $21 thousand in 2016 and $25 thousand in 2015 are included in the calculation of the tax-exempt investment interest income.

(3)

Presented on a taxable-equivalent basis using the statutory federal income tax rate of 34%. Taxable-equivalent adjustments of $28 thousand in 2016 and $30 thousand in 2015 are included in the calculation of the loan interest income. Net loan origination income (expense) in interest income totaled $(3) thousand in 2016 and $17 in 2015.
 
       
For the Six Months Ended June 30,     2016     2015

 

(dollars in thousands)

    Average

daily

balance

    Interest

Income/

Expense

    Average

Yield/

Rate(%)

    Average

daily

balance

    Interest

Income/

Expense

    Average

Yield/

Rate(%)

Assets                
Interest-earning assets:
Federal funds sold $ 1,070 $ 3 0.56 $ 20 $ -- --
Interest bearing deposits in other banks 29,144 67 0.46 35,973 41 0.23
Investment securities (1):
Taxable 19,427 187 1.93 20,650 223 2.18
Tax-exempt (2) 5,677 129 4.56 6,454 153 4.78
Loans (3)       283,766       6,543     4.62       263,776       6,216     4.75
Total interest-earning assets       339,084       6,929     4.10       326,873       6,633     4.09
Noninterest-earning assets       18,338   17,735
Total assets     $ 357,422 $ 344,608
 
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
NOW accounts $ 28,839 $ 23 0.16 $ 25,120 19 0.15
Savings accounts 10,649 2 0.04 9,355 1 0.02
Money market accounts 96,481 137 0.28 102,730 153 0.30
Certificates of deposit 93,519 380 0.81 87,862 347 0.81
Short-term borrowings 3,300 56 3.40 3,300 50 3.06
FHLB advances 15,000 56 0.75 17,486 170 1.96
Junior subordinated debentures       6,186       69     2.24       6,186       59     1.92
Total interest-bearing liabilities       253,974       723     0.57       252,039       799     0.64
Noninterest-bearing deposits 72,449 63,379
Noninterest-bearing liabilities   769   695
Total liabilities       327,192   316,113
Total shareholders' equity       30,230   28,495

Total liabilities and shareholders' equity

    $ 357,422       $ 344,608      
Net interest income           $ 6,206       $ 5,834
Net interest spread 3.53% 3.45%
Net interest margin 3.67% 3.60%
 
   

(1)

Yields on securities available-for-sale have been calculated on the basis of historical cost and do not give effect to changes in the fair value of those securities, which is reflected as a component of shareholders' equity.

(2)

Presented on a taxable-equivalent basis using the statutory federal income tax rate of 34%. Taxable-equivalent adjustments of $44 thousand in 2016 and $52 thousand in 2015 are included in the calculation of the tax-exempt investment interest income.

(3)

Presented on a taxable-equivalent basis using the statutory federal income tax rate of 34%. Taxable-equivalent adjustments of $58 thousand in 2016 and $61 thousand in 2015 are included in the calculation of the loan interest income. Net loan origination income (expense) in interest income totaled $(1) thousand in 2016 and $17 in 2015.
 

The statements in this press release that are not historical facts constitute "forward-looking statements" as defined by Federal securities laws. Forward-looking statements can generally be identified by the use of forward- looking terminology such as "believes," "expects," "intends," "may," "will," "should," "anticipates" or similar terminology. Such statements, specifically regarding the Company's intentions regarding growth and market expansion, 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. Potential risks and uncertainties include, but are not limited to, changes in interest rates, deposit flows, loan demand and real estate values, as well as changes in economic, competitive, governmental, regulatory, technological and other factors which may affect the Company specifically, its existing and target market areas or the banking industry generally. Forward-looking statements speak only as of the date they are made. The Company will not update forward-looking statements to reflect factual assumptions, circumstances or events that have changed after a forward-looking statement was made.

Frederick County Bancorp, Inc.
William R. Talley, Jr., 240-529-1507
Executive Vice President, Chief Financial Officer and Chief Operating Officer

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