Howard Bancorp, Inc. (NASDAQ: HBMD), the parent company of Howard Bank, today reported its financial results for the fiscal year ending December 31, 2016 with the following highlights:

  • During the third quarter of 2016, total assets surpassed the $1 billion threshold and grew to $1.027 billion at December 31, 2016, representing growth of $80 million, or 8%, from assets of $947 million at December 31, 2015. Total loans held in our portfolio increased $65 million, or 9%, from $757 million at December 31, 2015 to $822 million at year end 2016. This growth in both total assets and loans was derived solely from organic activities throughout 2016. Total deposits at December 31, 2016 increased to $809 million from $747 million at December 31, 2015, representing growth of $62 million or 8%, all of which is also attributable to organic growth activities.
  • Total common shareholders’ equity increased by $6 million or 7% from $80 million at December 31, 2015 to $86 million at December 31, 2016, primarily from the retention of 2016 earnings. Total stockholders’ equity, however, decreased $7 million from $93 million at December 31, 2015 to $86 million at December 31, 2016, due to the second quarter of 2016 redemption of $12.6 million of preferred stock issued under the U S Treasury Small Business Lending Fund program.
  • Net income available to common shareholders increased to $5.1 million for 2016 compared to $1.0 million for 2015, representing an increase of $4.1 million or over 400%. Basic earnings per common share (EPS) for 2016 were $0.74 compared to $0.16 for 2015, representing an increase of $.58 or 360%. The earnings for 2015 were impacted by pretax merger related expenses of $4.3 million relating to the acquisition of Patapsco Bancorp (“Patapsco”) in 2015.
  • Net interest income of $34.2 million for 2016 increased by $3.9 million or 13% compared to net interest income of $30.3 million during 2015. Net interest income for 2015 included approximately $1.6 million in income from fair value adjustments on acquired loans, while 2016 only benefited by $714 thousand from these adjustments. Supplementing the net interest income increase, noninterest income increased by $2.9 million or 24% when comparing 2016 to 2015 results. Thus, adding these two sources of our revenues together, 2016 revenues increased by $6.8 million compared to 2015. Total noninterest expenses were $38.7 million for 2016 compared to $38.3 million, or excluding the merger expenses incurred in 2015, $33.9 million in 2015. Excluding the merger-related expenses, this represents an increase of $4.8 million or 14%.
  • Primarily as a result of increased earnings, our book value per share increased by $0.73 or 6% from $11.54 at December 31, 2015 to $12.27 at December 31, 2016. Similarly, our tangible book value per share increased by $0.82 or 7% from $11.04 at December 31, 2015 to $11.86 at December 31, 2016.
  • For the three months ended December 31, 2016, net income available to common shareholders increased to $953 thousand from $456 thousand for the fourth quarter of 2015, an increase of $497 thousand or 109%. Basic EPS for the fourth quarter of 2016 was $0.14 compared to $0.07 for the same quarter in 2015, an increase $.07 or 100%. Similar to the full year earnings for 2015, the fourth quarter of 2015 earnings were also impacted by pretax merger related expenses of $1.0 million relating to the Patapsco acquisition.

As demonstrated by the above, during 2016 Howard Bancorp continued with its growth plan by organically growing assets, loans, and deposits by 8%, 9%, and 8% respectively. This balance sheet growth led to increases in both net interest income and noninterest income for 2016 compared to 2015. Supplementing these traditional banking revenue sources were increased revenue generated from our mortgage banking division, which recorded noninterest income of $11.9 million for 2016 compared to $9.7 million in 2015, an increase of $2.2 million or 23%. Excluding the $4.3 million in merger related expenses in 2015, our noninterest expenses increased by $4.8 million or 14%. Approximately $1.8 million of this increase was compensation related representing the full year operations of the business and locations acquired in the Patapsco acquisition, compared to four months in 2015. Similarly, occupancy costs represented $800 thousand of the expense increase for 2016 and were primarily attributable to the Patapsco acquisition. These two categories represent $2.6 million or 54% of the year over year increase, with the remainder attributable to higher business development and infrastructure, largely information system investments given our increased size, as well as a higher level of expenses associated with our mortgage banking activities throughout 2016.

Similar to the full year results for 2016, the fourth quarter of 2016 represented a continuation of our organic growth initiatives with balance sheet, revenue and as noted net income growth and progress on improving returns. The earnings for the fourth quarter were however, adversely impacted by the recent dramatic increase in mortgage interest rates. While the recent increase in interest rates did not impact our balance sheet growth, net interest income, or even level of mortgage originations, the increase did necessitate a non cash, fair market re-valuation of a small portion of our residential loan portfolio. Over the last two years, $8.8 million of mortgage loans, representing 0.8% of the over $1 billion in mortgage loans originated since inception were added to the portfolio after being originally intended for sale to secondary market investors, and, due to management’s fair value option election, are recorded at fair value. This year-end valuation adjustment reduced noninterest revenues by $701 thousand in the fourth quarter, although the overall adjustment amounted to $213 thousand for the full year of 2016. While the 90 basis point swing in mortgage rates in last three months of 2016 was unprecedented, Howard Bank has determined that this quarterly volatility should be avoided and had begun to reduce the principal level of these loans in the fourth quarter, and is continuing to sell them to remove any further market based earnings volatility.

Chairman and CEO Mary Ann Scully stated, “Howard Bank continues to demonstrate that balance sheet, revenue and net income growth leading to improved returns is achievable in years with and without acquisition activity. This has long been one of the strategic pillars of the company and is reflective of both the exceptionally strong footprint in which we operate as well as the internal engines for both commercial banking revenue and mortgage banking revenue that have been built over the years. While profitability was impacted in the fourth quarter due to non-recurring items as mentioned previously, as well as a lower net interest margin due in part to both lower accretion income as well as pre-funding loan growth which ultimately closed in January, we continue to position the Company for future growth. 2016 saw the addition of a very strong team of Baltimore based commercial banking managers to leverage the core customer base acquired in the 2015 Patapsco acquisition. This team lift out was complemented by our attraction of a number of experienced bankers joining us independently, the return of a highly experienced SBA expert and of course the retention of long time talented colleagues. Howard’s value proposition is as dependent on the retention, development and acquisition of talent as it is on customers. Additionally, a number of system enhancements are making an impact on both front office and back office productivity. We expect to see the continued fruits of the people as well as data infrastructure investments. The level of discipline reflected in activities that we chose as well as those not chosen this year bodes well for the sustainability of the improvement in both earnings per share and tangible book value.”

The statements in this press release regarding improvement in both earnings per share and tangible book value are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995 or the Securities and Exchange Commission in its rules, regulations, and releases. Howard Bancorp intends that such forward-looking statement be subject to the safe harbors created thereby. Such forward-looking statements are based on current expectations regarding important risks, including but not limited to real estate values, local and national economic conditions, and the impact of interest rates on financing, as well as other risks detailed from time to time in filings made by Howard Bancorp with the Securities and Exchange Commission. Accordingly, actual results may differ from those expressed in these 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.
 

Twelve months ended

Three months ended

(Dollars in thousands, except per share data.)

December 31,

Dec 31

Sept 30

 

Dec 31

Income Statement Data: 2016 2015 2016 2016 2015
Interest income $ 38,741 $ 33,349 $ 9,752 $ 9,824 $ 9,950
Interest expense   4,562     3,072     1,239     1,176     920  
Net interest income 34,179 30,277 8,513 8,648 9,030
Provision for credit losses 2,037 1,836 735 402 821
Noninterest income 14,782 11,927 2,976 4,384 2,883
Merger and Restructuring - 4,344 - - 1,041
Other noninterest expense   38,685     33,909     9,268     9,880     9,337  
Pre-tax income   8,239     2,115     1,486     2,750     714  
Federal and state income tax expense   2,936     973     533     1,002     226  
Net income   5,303     1,142     953     1,748     488  
Preferred stock dividends   166     126     -     -     32  
Net income available to common shareholders $ 5,137   $ 1,016   $ 953   $ 1,748   $ 456  
 
Per share data and shares outstanding:
Net income per common share, basic $ 0.74 $ 0.16 $ 0.14 $ 0.25 $ 0.07
Book value per common share at period end $ 12.27 $ 11.54 $ 12.27 $ 12.15 $ 11.54
Tangible book value per common share at period end $ 11.86 $ 11.04 $ 11.86 $ 11.72 $ 11.04
Average common shares outstanding 6,975,662 6,160,005 6,990,390 6,985,559 6,935,493
Shares outstanding at period end 6,991,072 6,962,139 6,991,072 6,988,180 6,962,139
 
Financial Condition data:
Total assets $ 1,026,957 $ 946,759 $ 1,026,957 $ 1,014,787 $ 946,759
Loans receivable (gross) 821,524 757,002 821,524 810,340 757,002
Allowance for credit losses (6,428 ) (4,869 ) (6,428 ) (5,634 ) (4,869 )
Other interest-earning assets 167,551 138,137 167,551 150,728 138,137
Total deposits 808,734 747,408 808,734 803,773 747,408
Borrowings 127,574 98,828 127,574 119,906 98,828
Total stockholders’ equity 85,790 92,899 85,790 84,891 92,899
Common equity 85,790 80,337 85,790 84,891 80,337
 
Average assets $ 970,710 $ 782,441 $ 1,003,100 $ 966,783 $ 919,798
Average stockholders' equity 86,221 76,143 84,616 82,199

91,843

Average common stockholders' equity 86,221 63,581 84,616 82,199

79,281

 
Selected performance ratios:
Return on average assets 0.55 % 0.15 % 0.38 % 0.72 % 0.21 %
Return on average common equity 6.15 % 1.80 % 4.48 % 8.50 % 2.46 %
Net interest margin(1) 3.73 % 4.08 % 3.56 % 3.76 % 4.13 %
Efficiency ratio(2) 79.01 % 90.64 % 80.67 % 75.81 % 87.12 %
 
Asset quality ratios:
Nonperforming loans to gross loans 1.25 % 1.37 % 1.25 % 1.16 % 1.37 %
Allowance for credit losses to loans 0.78 % 0.64 % 0.78 % 0.69 % 0.64 %
Allowance for credit losses to nonperforming loans 62.41 % 46.95 % 62.41 % 60.04 % 46.95 %
Nonperforming assets to loans and other real estate 1.54 % 1.68 % 1.54 % 1.47 % 1.68 %
Nonperforming assets to total assets 1.23 % 1.35 % 1.23 % 1.18 % 1.35 %
 
Capital ratios:
Leverage ratio 8.36 % 9.90 % 8.36 % 8.55 % 9.90 %
Tier I risk-based capital ratio 9.71 % 11.47 % 9.71 % 9.65 % 11.47 %
Total risk-based capital ratio 10.83 % 12.09 % 10.83 % 10.71 % 12.09 %
Average equity to average assets 8.88 % 9.73 % 8.44 % 8.50 % 9.98 %
 
(1) Net interest margin is net interest income divided by average earning assets.
(2) Efficiency ratio is noninterest expense divided by the sum of net interest income and noninterest income.
         
Unaudited Consolidated Statements of Financial Condition PERIOD ENDED
(Dollars in thousands, except per share amounts)
December 31, Sept 30, June 30, March 31, December 31,
2016   2016 2016 2016 2015
ASSETS:
Cash and Cash Equivalents:
Cash and due from banks $ 29,674 $ 33,553 $ 24,618 $ 50,725 $ 31,818
Federal Funds Sold   9,691     10,325     8,190     4,246     6,522  
Total cash and cash equivalents   39,366     43,878     32,808     54,971     38,340  
 
Interest Bearing Deposits with Banks 19,513 19,513 - - -
 
Investment Securities:
Available-for-sale 38,728 37,718 57,693 70,150 49,573
Held-to-maturity 6,250 6,250 3,250 3,000 3,000
Federal Home Loan Bank stock, at cost   5,103     4,741     3,934     3,849     4,163  
Total investment securities   50,080     48,709     64,877     76,999     56,736  
 
Loans held-for-sale 51,054 46,342 51,010 40,027 49,677
 
Loans: 821,524 810,340 793,896 771,229 757,002
Allowance for credit losses   (6,428 )   (5,634 )   (5,744 )   (5,256 )   (4,869 )
Net loans   815,096     804,706     788,152     765,973     752,133  
 
Accrued interest receivable 2,793 2,398 2,484 2,360 2,144
 
Bank premises and equipment, net 19,984 20,287 20,481 20,758 20,765
 
Other assets:
Goodwill 603 603 603 603 603
Bank owned life insurance 21,371 21,208 21,053 20,899 18,548
Other intangibles 2,248 2,384 2,550 2,726 2,903
Other assets   4,849     4,759     4,800     5,122     4,910  
Total other assets   29,072     28,954     29,006     29,350     26,964  
Total assets $ 1,026,957   $ 1,014,787   $ 988,818   $ 990,438   $ 946,759  
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Deposits:
Non-interest bearing deposits $ 182,880 $ 183,118 $ 179,699 $ 177,621 $ 173,689
Interest bearing deposits   625,854     620,655     618,419     625,555     573,719  
Total deposits   808,734     803,773     798,118     803,176     747,408  
Borrowed funds 127,574 119,906 101,373 86,334 98,828
Other liabilities   4,858     6,217     6,259     6,982     7,624  
Total liabilities   941,167     929,896     905,750     896,492     853,860  
Commitments and contingencies Stockholders' equity:
Preferred stock -- $.01 par value - - - 12,562 12,562
Common stock – $.01 par value 70 70 70 70 70
Additional paid-in capital 71,021 70,897 70,824 70,698 70,587
Retained earnings 14,849 13,895 12,147 10,615 9,712
Accumulated other comprehensive income/(loss), net   (150 )   29     27     1     (32 )
Total stockholders' equity   85,790     84,891     83,068     93,946     92,899  
Total liabilities and stockholders' equity $ 1,026,957   $ 1,014,787   $ 988,818   $ 990,438   $ 946,759  
 

Capital Ratios - Howard Bancorp, Inc.

Tangible Capital $ 82,939 $ 81,904 $ 79,915 $ 78,055 $ 76,831
Tier 1 Leverage (to average assets) 8.36 % 8.55 % 8.36 % 9.87 % 9.90 %
Common Equity Tier 1 Capital (to risk weighted assets) 9.71 % 9.65 % 9.70 % 11.49 % 11.47 %
Tier 1 Capital (to risk weighted assets) 9.71 % 9.65 % 9.70 % 11.49 % 11.47 %
Total Capital Ratio (to risk weighted assets) 10.83 % 10.71 % 10.80 % 12.14 % 12.09 %
 
ASSET QUALITY INDICATORS
(Dollars in thousands)
 
Non-performing assets:
Total non-performing loans

$

10,300

$ 9,383 $ 8,717 $ 9,562 $ 10,370
Real estate owned  

2,350

    2,543     2,286     2,369     2,369  
Total non-performing assets

$

12,651

  $ 11,926   $ 11,003   $ 11,931   $ 12,739  
 
Non-performing loans to total loans

1.25

%

1.16 % 1.10 % 1.24 % 1.37 %
Non-performing assets to total assets

1.23

%

1.18 % 1.11 % 1.20 % 1.35 %
ALLL to total loans 0.78 % 0.70 % 0.72 % 0.68 % 0.64 %
ALLL to non-performing loans

62.41

%

60.04 % 65.90 % 54.97 % 46.95 %
 
 
Unaudited Consolidated Statements of Income FOR THE THREE MONTHS ENDED
(Dollars in thousands, except per share amounts)

December 31,

Sept 30, June 30, March 31, December 31,
2016 2016 2016 2016 2015
 
Total interest income $ 9,752 $ 9,824 $ 9,553 $ 9,612 $ 9,950
Total interest expense   1,239     1,176     1,178     969     920  
Net interest income   8,513     8,648     8,375     8,643     9,030  
Provision for credit losses   (735 )   (402 )   (515 )   (385 )   (821 )
Net interest income after provision for credit losses   7,778     8,246     7,860     8,258     8,209  
 
NON-INTEREST INCOME:
Service charges and other income 535 555 1,198 554 537
Mortgage banking income 2,441 3,829 3,372 2,298 2,346
           
Total non-interest income   2,976     4,384     4,570     2,852     2,883  
 
NON-INTEREST EXPENSE:
Salaries and employee benefits 4,653 4,927 4,870 4,584 4,755
Occupancy expense 997 1,062 949 1,614 1,006
Marketing expense 900 864 888 723 768
FDIC insurance 178 199 198 208 138
Professional fees 419 669 665 358 398
Other real estate owned related expense 12 43 109 14 (13 )
Merger and restructuring - - - - 1,041
Other   2,111     2,116     2,182     2,175     2,285  
Total non-interest expense   9,268     9,880     9,861     9,676     10,378  
 
Income before income taxes 1,486 2,750 2,570 1,434 714
 
Income tax expense 533 1,002 928 474 226
           
NET INCOME   953     1,748     1,641     960     488  
 
PREFERRED DIVIDENDS - - (109 ) (57 ) (32 )
 

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS

$ 953   $ 1,748   $ 1,532   $ 903   $ 456  
 
EARNINGS PER SHARE – Basic $ 0.14 $ 0.25 $ 0.22 $ 0.13 $ 0.07
EARNINGS PER SHARE – Diluted $ 0.13 $ 0.25 $ 0.22 $ 0.13 $ 0.06
 
Average common shares outstanding – Basic 6,990,390 6,985,559 6,970,876 6,955,462 6,935,493
Average common shares outstanding – Diluted 7,078,286 7,077,420 7,061,867 7,047,987 7,051,660
 
PERFORMANCE RATIOS:
(annualized)
Return on average assets 0.38 % 0.72 % 0.68 % 0.41 % 0.21 %
Return on average common equity 4.48 % 8.50 % 8.12 % 4.83 % 2.46 %
Net interest margin 3.56 % 3.76 % 3.66 % 3.93 % 4.13 %
Efficiency ratio 80.67 % 75.82 % 76.17 % 84.18 % 87.12 %
Tangible common equity 8.10 % 8.09 % 8.11 % 7.91 % 8.15 %