Howard Bancorp, Inc. Announces Third Quarter 2015 Results with Asset Growth of 61% and Revenue Growth of 57%

ELLICOTT CITY, Md.--()--Howard Bancorp, Inc. (NASDAQ: HBMD), the parent company of Howard Bank, today announced its operating results through September 30, 2015 with the following highlights:

  • During the third quarter of 2015, Howard closed on its previously announced acquisition of Patapsco Bancorp, Inc.
  • Total assets grew to $924 million at September 30, 2015, representing growth of $350 million, or 61%, compared to total assets of $574 million at September 30, 2014, of which $177 million, or 31%, is attributable to the Patapsco transaction, $80 million, or 14%, is attributable to Howard Bank’s acquisition of certain assets, the deposits and certain other liabilities of NBRS Financial Bank in October 2014, and $93 million, or 16%, is attributable to organic growth.
  • Total loans increased by $294 million, or 64%, to $755 million when comparing September 30, 2015 to September 30, 2014, of which $157 million, or 34%, is attributable to the Patapsco transaction, $74 million, or 16%, is attributable to the NBRS transaction, and $63 million, or 14%, is attributable to organic growth.
  • Total deposits at September 30, 2015 increased to $743 million from $452 million at September 30, 2014, representing growth of $291 million, or 64%, of which $173 million, or 38%, is attributable to the Patapsco transaction, $113 million, or 25%, is attributable to the NBRS transaction, and $5 million, or 1%, is attributable to organic growth as legacy institutional sources of deposits were reduced given the acquired deposits. Noninterest bearing deposits grew by over $65 million or 62% during the twelve months ended September 30, 2015 and low cost retail NOW transaction accounts increased by $28 million, or 80%.
  • For the nine months ended September 30, 2015, GAAP net income available to common shareholders was $562 thousand, which compared to $1.1 million for the same nine month period in 2014, reflecting a decrease of nearly $583 thousand, or 51%. However, the 2015 year to date results were dramatically impacted by one-time non-recurring charges of $3.3 million, pre-tax, resulting from the conversion and integration of NBRS data systems into legacy Howard systems in the second quarter of 2015, as well as merger and restructuring costs resulting from the Patapsco acquisition, which included transaction costs and contract termination charges.
  • Pre-tax income was $1.4 million during the nine months ending September 30, 2015 compared to $1.9 million for the same period of 2014. For core operating comparison purposes, however, pre-tax income was $4.7 million excluding the above-referenced one-time non-recurring costs of $3.3 million for the first nine months of 2015 compared to pretax income of $2.0 million excluding non-recurring charges of $82 thousand for the same period of 2014, representing an increase of $2.7 million, or 135%.
  • Howard recorded a net loss available to common shareholders for the three months ended September 30, 2015, due exclusively to the non-recurring items noted above. Such net loss available to common shareholders was $816 thousand compared to net income available to shareholders of $204 thousand for the third quarter of 2014 and $760 thousand for the second quarter of 2015. The pretax non-recurring charges for the three months ended September 30, 2015 were nearly $2.2 million compared to $82 thousand in the same period of 2014.
  • We had a pre-tax loss of $892 thousand during the three months ended September 30, 2015 compared to pre-tax income of $310 thousand for the same period of 2014. For core operating purposes, however, pre-tax income was $1.3 million excluding the one-time non-recurring costs of $2.2 million for the third quarter of 2015 compared to pretax income of $392 thousand excluding non-recurring charges of $82 thousand for the same period of 2014, representing an increase of $0.9 million or 234%.
  • Howard’s primary sources of revenue continue to come from net interest income complemented by noninterest income, which includes the revenues generated from its mortgage banking operations as well as service charges and fees on deposits and loans.
    • Resulting primarily from our balance sheet growth, net interest income for the first nine months of 2015 was $21.2 million, representing an increase of $6.8 million, or 47%, compared to the $14.4 million recorded for the same period in 2014.
    • Noninterest income was $9.0 million for the first three quarters of 2015 compared to $4.9 million during the same period in 2014, representing growth of $4.1 million, or 84%. The majority of this growth came from our mortgage banking operation, which generated $7.5 million in noninterest income for the first three quarters of 2015 compared to $3.8 million for the same period of 2014, representing an increase of $3.7 million or 99%.
    • These revenue sources were only minimally influenced by the acquisition of Patapsco given that the merger closed on August 28, 2015.
  • Total noninterest expenses were $27.9 million for the first nine months of 2015 compared to $14.8 million for same period of 2014, an increase of $13.1 million or 88%. These included one-time non-recurring charges of $3.3 million during the nine months ended September 30, 2015 and $82 thousand during the same period of 2014, as discussed above. Other non-interest expenses were $24.6 million during the nine months ended September 30, 2015, compared to $14.7 million for the same period of 2014, an increase of $9.9 million or 67%. Most of the increase in the other noninterest expenses is directly attributable to the growth that we have experienced in the last twelve months. Compensation costs increased by $4.0 million as we increased our full time equivalent employees from 166 at September 30, 2014 to 265 at September 30, 2015, and similarly, our occupancy costs increased by $1.3 million as we have added branch and office locations. Also relating to our growth, our data processing fees and insurance costs increased by nearly $500 thousand given the increase in our customer base. Loan related expenses also increased by $800 thousand, primarily from the increased mortgage loan originations. Other growth-related increases occurred in other operating items such as telephone costs, supplies, software licensing costs, and other costs directly related to the growth of our support infrastructure. Noninterest expenses were also elevated due to a $735 thousand expense in the third quarter of 2015 due to decreases in the valuations of several of our Other Real Estate Owned (OREO) properties.
  • Provision for credit losses was $1.0 million for the nine months ended September 30, 2015 compared to $2.6 million for the same period in 2014. The third quarter of 2014 included a nearly $2.0 million provision due to a loan loss incurred on one commercial customer. The 2015 provisions to date have for the most part been reflective of the overall growth experienced in our loan portfolio.

Howard’s Chairman and CEO Mary Ann Scully stated, “Howard Bank has continued to consistently execute on both a balance sheet and off-balance sheet growth strategy designed to drive higher revenues that will lead to more efficient net income generation. While underway, the full impact of this strategy will not be evident until the revenue recognition period from the Patapsco merger more closely matches the period end balance sheet and must also await the full conversion and integration. The systems conversion is expected in mid-November while locational restructurings will not be completed until the first quarter of 2016. We remain confident that after we are past the recording of all related non-recurring charges and past the elimination of temporary redundancies of workforce, the improved returns and efficiencies will be evident. A 57% revenue increase and 135% increase in pre-tax income exclusive of non-recurring items, bodes well for those improved future returns. The slowly improving economy as well as the momentum towards more industry consolidation and collaboration all bode well for a very well positioned Howard Bank.”

Howard Bancorp has experienced significant growth in assets, loans and deposits over the last twelve months. Howard has also recorded significant increases in its revenues through September 30, 2015, compared to September 30, 2014. However, its overall performance as measured by net income, earnings per share, and returns on both assets and equity have been, as anticipated, temporarily impacted by non-recurring charges. The majority of these non-recurring costs were recorded in the third quarter but Howard anticipates that as systems conversions are scheduled for the fourth quarter of 2015, the remainder of the non-recurring charges attributable to the Patapsco Merger will impact fourth quarter earnings. Excluding these non-recurring items from core operating performance, net income, EPS and returns compare favorably to the prior year. The financial tables attached to this release provide additional information.

At September 30, 2015, Howard Bancorp, Inc. had total capital of $92.1 million, and common equity of $79.5 million, representing a book value per share of $11.49 compared to $9.13 at September 30, 2014, and tangible book value per share of $10.88 compared to $11.14 at June 30, 2015, and $8.94 at September 30, 2014. Howard’s per share calculations have been impacted by the increase in shares outstanding related to the capital raise completed in June of this year and shares issued in connection with the Patapsco transaction. At September 30, 2015, Total Common Equity to Tangible Assets was 8.60% and regulatory capital ratios at Howard Bank substantially exceed all regulatory capital measures.

Asset quality measures continue to remain a major focus of attention for management and the Board of Directors. One of Howard Bancorp’s primary measures of asset quality is the ratio of non-performing loans and OREO to total assets. This asset quality measure was 1.07% at September 30, 2015, compared to 1.27% at June 30, 2015 and 0.85% at the end of September 2014. While OREO has decreased due to recently updated valuations, nonperforming loans increased by $1.1 million during the third quarter of 2015, primarily from the Patapsco acquisition. When comparing September 30, 2015 to September 30, 2014, the increase also includes loans acquired in the FDIC-assisted NBRS acquisition. The allowance for credit losses as a percentage of total loans was 0.57% for the period ended September 30, 2015. This ratio is dramatically impacted by the approximately $231 million in loan balances as of September 30, 2015, that have been acquired over the last twelve months, which are recorded at fair market value at time of acquisition, and are not initially included in allowance measurements. If you exclude the $231 million from the $755 million in total loans at September 30, 2015, the ratio of the allowance for credit losses to non-acquired loans would have been approximately 0.82%

This press release contains statements that are forward-looking, 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. Such forward-looking statements include statements of goals, intentions, and expectations, including the expectation of our growth strategy leading to higher revenues and more efficient net income generation, improved future returns and efficiencies, the impact of non-recurring charges going forward, and that current conditions “bode well for a very well positioned Howard Bank.” Howard Bancorp intends that such forward-looking statements be subject to the safe harbors created thereby. Such forward-looking statements are based on current expectations regarding important risk factors, including but not limited to real estate values, local and national economic conditions, the impact of interest rates on financing, unanticipated changes in economic and competitive conditions, the impact of future legislation or regulatory developments, potential delays in systems conversion related to the Patapsco transaction, and other risks detailed from time to time in filings made by Howard Bancorp with the U.S. Securities and Exchange Commission. 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 Howard Bancorp or any other person that results expressed therein will be achieved. Howard Bancorp 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

(in thousands, except per share data.) Sept 30, Sept 30   June 30   Sept 30
Operation Statement Data: 2015   2014 2015   2015   2014
Interest income $ 23,399 $ 16,154 $ 8,489 $ 7,484 $ 5,813
Interest expense   2,151       1,731       807       685       648    
Net interest income 21,248 14,423 7,682 6,799 5,165
Provision for credit losses 1,015 2,570 230 535 2,068
Noninterest income 9,043 4,857 3,256 3,438 2,175
Non-recurring charges 3,303 82 2,166 731 82
Noninterest expense   24,571       14,722       9,434       7,709       4,880    
Pre-tax income/(loss)   1,402       1,907       (892 )     1,263       310    
Federal and state income tax expense   746       668       (107 )     471       75    
Net income/(loss)   656       1,239       (785 )     791       235    
Preferred stock dividends   94       94       31       31       31    
Net income/(loss) available to common shareholders $ 562     $ 1,145     $ (816 )   $ 760     $ 204    
 
Per share data and shares outstanding:
Net income/(loss) per common share, basic $ 0.09 $ 0.28 $ (0.13 ) $ 0.16 $ 0.05
Book value per common share at period end $ 11.49 $ 9.13 $ 11.49 $ 11.33 $ 9.13
Tangible book value per common share at period end $ 10.87 $ 8.94 $ 10.87 $ 11.14 $ 8.94
Average common shares outstanding 5,919,866 4,061,598 6,493,987 4,841,538 4,081,685
Shares outstanding at period end 6,921,378 4,140,189 6,921,378 6,358,788 4,140,189
 
Financial Condition data:
Total assets $ 924,493 $ 574,368 $ 924,493 $ 746,881 $ 574,368
Loans receivable (gross) 755,500 461,232 755,500 582,702 461,232
Allowance for credit losses (4,317 ) (3,018 ) (4,317 ) (4,199 ) (3,018 )
Other interest-earning assets 115,890 78,298 115,890 126,288 78,298
Total deposits 742,766 451,910 742,766 575,716 451,910
Borrowings 80,558 70,956 80,558 79,525 70,956
Total stockholders’ equity 92,080 50,379 92,080 84,627 50,379
Common equity 79,518 37,817 79,518 72,065 37,817
 
Average assets $ 735,919 $ 516,944 $ 808,324 $ 707,289 $ 543,905
Average stockholders' equity 70,618 49,257 85,611 67,270 49,803
Average common stockholders' equity 58,056 36,695 73,049 54,708 37,241
 
Selected performance ratios:
Return on average assets 0.12 % 0.32 % (0.39 ) % 0.45 % 0.17 %
Return on average equity 1.24 % 4.51 % (3.64 ) % 4.72 % 1.87 %
Net interest margin(1) 4.06 % 3.97 % 3.94 % 4.06 % 4.01 %
Efficiency ratio(2) 92.02 % 76.78 % 106.04 % 82.44 % 67.60 %
 
Asset quality ratios:
Nonperforming loans to gross loans 1.07 % 0.53 % 1.07 % 1.20 % 0.53 %
Allowance for credit losses to loans 0.57 % 0.65 % 0.57 % 0.72 % 0.65 %
Allowance for credit losses to nonperforming loans 53.21 % 124.52 % 53.21 % 59.52 % 124.52 %
Nonperforming assets to loans and other real estate 1.30 % 1.06 % 1.30 % 1.63 % 1.06 %
Nonperforming assets to total assets 1.07 % 0.85 % 1.07 % 1.27 % 0.85 %
 
Capital ratios:
Leverage ratio 11.16 % 9.09 % 11.16 % 11.90 % 9.09 %
Tier I risk-based capital ratio 11.56 % 10.08 % 11.56 % 13.16 % 10.08 %
Total risk-based capital ratio 12.12 % 10.69 % 12.12 % 13.82 % 10.69 %
Average equity to average assets 9.60 % 9.53 % 10.59 % 9.51 % 9.16 %
 

(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)        
September 30, June 30, March 31, December 31, September 30,
2015 2015 2015 2014 2014
ASSETS:
Cash and Cash Equivalents:
Cash and due from banks $ 16,517 $ 27,360 $ 25,090 $ 21,256 $ 17,361
Interest-bearing deposits   1,830     1,646     3,456     3,260     310  
Total cash and cash equivalents   18,347     29,006     28,546     24,517     17,671  
 
Investment Securities:
Available-for-sale 39,178 34,581 30,611 41,081 27,112
Federal Home Loan Bank stock, at cost   3,185     3,385     2,535     2,571     2,700  
Total investment securities   42,363     37,966     33,146     43,652     29,812  
 
Loans held-for-sale 64,427 65,759 49,159 42,881 38,669
 
Loans: 755,500 582,702 570,437 552,917 461,232
Allowance for credit losses   (4,317 )   (4,199 )   (3,839 )   (3,602 )   (3,018 )
Net loans   751,183     578,503     566,598     549,315     458,213  
 
Accrued interest receivable 2,221 1,636 1,754 1,789 1,395
 
Bank premises and equipment, net 20,427 16,108 12,098 12,122 11,487
 
Other assets:
Goodwill 1,132 - - - -
Bank owned life insurance 16,618 11,834 11,745 11,659 11,563
Other intangibles 3,117 1,224 1,308 1,391 798
Other assets   4,657     4,845     6,126     4,091     4,759  
Total other assets   25,525     17,903     19,179     17,141     17,120  
Total assets $ 924,493   $ 746,881   $ 710,480   $ 691,416   $ 574,368  
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Deposits:
Non-interest bearing deposits $ 171,349 $ 148,928 $ 137,287 $ 142,727 $ 106,237
Interest bearing deposits   571,418     426,788     443,368     411,312     345,673  
Total deposits   742,766     575,716     580,655     554,039     451,910  
Borrowed funds 80,558 79,525 60,532 67,628 70,956
Other liabilities   9,088     7,013     8,910     10,107     1,123  
Total liabilities   832,413     662,254     650,097     631,773     523,989  
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 69 64 41 41 41
Additional paid-in capital 70,173 61,919 38,454 38,360 38,217
Retained earnings 9,257 10,073 9,313 8,696 (446 )
Accumulated other comprehensive income/(loss), net   19     9     13     (16 )   4  
Total stockholders' equity   92,080     84,627     60,383     59,643     50,379  
Total liabilities and stockholders' equity $ 924,493   $ 746,881   $ 710,480   $ 691,416   $ 574,368  
 

Capital Ratios - Howard Bancorp, Inc.

Tangible Capital $ 75,268 $ 70,841 $ 46,513 $ 45,689 $ 37,019
Tier 1 Leverage (to average assets) 11.16 % 11.90 % 8.66 % 8.60 % 9.09 %
Common Equity Tier 1 Capital (to risk weighted assets) 11.56 % 13.16 % 9.86 % 10.11 % 10.08 %
Tier 1 Capital (to risk weighted assets) 11.56 % 13.16 % 9.86 % 10.11 % 10.08 %
Total Capital Ratio (to risk weighted assets) 12.12 % 13.82 % 10.49 % 10.73 % 10.69 %

 

 

 
 
Unaudited Consolidated Statements of Income FOR THE THREE MONTHS ENDED
(Dollars in thousands, except per share amounts)
September 30, June 30, March 31, December 31, September 30,
2015 2015 2015 2014 2014
 
Total interest income $ 8,489 $ 7,484 $ 7,426 $ 7,207 $ 5,813
Total interest expense   807     686     659     671     648  
Net interest income   7,682     6,799     6,767     6,537     5,165  
Provision for loan losses   (230 )   (535 )   (250 )   (685 )   (2,068 )
Net interest income after provision for loan losses   7,452     6,264     6,517     5,852     3,096  
 
NON-INTEREST INCOME:
Service charges and other income 516 513 522 502 332
Mortgage banking income 2,740 2,924 1,828 2,034 1,843
Non-recurring gains - - - 16,090 -
Net loss on sale of investment securities - - - (228 ) -
         
Total non-interest income   3,256     3,438     2,350     18,398     2,175  
 
NON-INTEREST EXPENSE:
Salaries and employee benefits 4,652 3,939 3,850 4,977 2,790
Occupancy expense 928 900 971 914 488
Marketing expense 786 679 628 554 400
FDIC insurance 106 120 90 140 101
Professional fees 386 348 345 258 217
Other real estate owned related expense 776 36 12 17 17
Non-recurring charges 2,166 731 406 373 82
Other   1,800     1,687     1,533     1,659     867  
Total non-interest expense   11,600     8,439     7,835     8,892     4,961  
 
(Loss)/income before income taxes (892 ) 1,262 1,031 15,358 310
 
Income tax expense (107 ) 471 382 6,185 75
         
NET (LOSS)/INCOME   (785 )   791     649     9,173     235  
 
PREFERRED DIVIDENDS (31 ) (31 ) (31 ) (31 ) (31 )
 
NET (LOSS)/INCOME AVAILABLE          
TO COMMON SHAREHOLDERS $ (816 ) $ 760   $ 618   $ 9,142   $ 204  
 
EARNINGS PER SHARE – Basic $ (0.13 ) $ 0.16 $ 0.15 $ 2.23 $ 0.05
EARNINGS PER SHARE – Diluted $ (0.12 ) $ 0.15 $ 0.15 $ 2.18 $ 0.05
 
Average common shares outstanding – Basic 6,493,987 4,841,538 4,112,379 4,107,142 4,081,685
Average common shares outstanding – Diluted 6,648,107 4,960,457 4,228,393 4,200,350 4,173,601
 
PERFORMANCE RATIOS:
(annualized)
Return on average assets -0.39 % 0.45 % 0.38 % 5.37 % 0.17 %
Return on average equity -3.64 % 4.72 % 4.49 % 68.67 % 1.87 %
Net interest margin 3.97 % 4.06 % 4.19 % 3.96 % 4.01 %
Efficiency ratio 106.0 % 82.4 % 85.9 % 35.7 % 67.6 %
Tangible common equity 8.60 % 9.65 % 6.73 % 6.81 % 6.58 %

 

Contacts

Howard Bancorp, Inc.
George C. Coffman
Chief Financial Officer
410-750-0020

Contacts

Howard Bancorp, Inc.
George C. Coffman
Chief Financial Officer
410-750-0020