Howard Bancorp, Inc. (NASDAQ: HBMD) (“Howard Bancorp” or the
“Company”), the parent company of Howard Bank (“Howard Bank” or the
“Bank”), today reported its financial results for the quarter ended
June 30, 2020.
Net Loss and Loss per Share
The Company reported a net loss for the second quarter 2020 of
$29.4 million, or a $1.57 loss per both basic and diluted common
share due to the recording of a goodwill impairment charge of $34.5
million (or -$1.84 per basic and diluted common share). The
goodwill impairment charge is a non-cash charge that has no effect
on the Company’s liquidity, tangible common equity, regulatory
capital, and overall financial strength. The Company’s net income
excluding this charge, a non-GAAP financial measure, was $5.1
million, or $0.27 per basic and diluted common share. Second
quarter results also include the impact of an increase in the
allowance for credit losses (provision for credit losses in excess
of net charge-offs) of $3.0 million (or -$0.12 after tax per both
basic and diluted common share). *
Mary Ann Scully, Chairman and CEO, commented, “The unprecedented
speed and magnitude of the economic downturn facing the Bank, our
industry, our customers and our communities has fortunately been
matched by an unprecedented level of government support and
regulatory flexibility that has bought precious time as we
collectively evaluate conditions, prepare health care responses and
deal with alacrity to new customer behavior patterns. More
importantly it has been matched by consistent demonstrations of the
banking industry’s support for their colleagues, customers and
communities. This will serve us well as we look to recovery. While
there may be no templates for this type of economic instability, we
are, as always, able to be guided by the principles that we have
followed in this century of more rather than less volatility,
uncertainty, complexity and ambiguity.
Howard Bank, as a young bank, has always operated in fast
changing environments. Our primary goal has always been to maximize
long term shareholder value by both preserving and positioning for
growth the abundant capital – human and financial – that we
possess. The starting point is strong - CET of 11.66%. Prudence
suggests that we continue to bolster those financial capital levels
through an appropriate allocation of earnings to loan loss
provisions. Our asset quality metrics are holding up well with
limited migration and the reserves to deal with any specific
customer challenges have been reinforced greatly over the last two
quarters.
We are, however, not just preserving but are constantly
positioning so we are equally focused on appropriate strategies to
increase earnings. Howard Bank’s outsized participation in the PPP
program, while dilutive in the short term to asset yields, has been
not only accretive to earnings but accretive to our reputation as
the locally headquartered bank that met the needs of all of our
customers in the second quarter of 2020. These opportunities
present a very solid platform for a growing pipeline. Both the
program itself and already realized related business acquisition
has continued to lower our costs of funds and provided us with
greater access to the most stable form of funding – transaction
accounts. We believe that further opportunities to surgically grow
market share are abundant and that we will acquire not only
customers but talent in the region looking for a bank with a long
term perspective.
We remain proud of our talented and dedicated staff, grateful to
our loyal customers, and committed to a local economy that in most
respects - health and economic statistics – has performed better
than most. We are humble about what we don’t know, cautious about
estimating short term trajectories but extremely confident about
our ongoing ability to differentiate ourselves. While the
marketplace reaction to our industry combined with our history as a
transformational acquirer necessitated a significant accounting
adjustment this quarter, it does not change the strength of either
our capital or our positioning and it proves our resilience at a
time when that may be the most valued corporate virtue.”
The net loss for the second quarter 2020 of $29.4 million or a
$1.57 loss per both basic and diluted common share compares to net
income of $2.1 million, or $0.11 per both basic and diluted common
share for the second quarter of 2019, and to net income of $3.3
million, or $0.18 per both basic and diluted common share recorded
in the first quarter of 2020.
The decreases in second quarter 2020 basic and diluted earnings
per share of $1.68 when compared to the second quarter of 2019 and
$1.75 when compared to the first quarter of 2020 were primarily
attributable to the following items:
- The goodwill impairment charge of $34.5 million (-$1.84 per
share; there was no tax impact) when compared to both the second
quarter of 2019 and the first quarter of 2020
- Change in the provision for credit losses – an increase of $1.9
million (-$0.08 after tax per share) when compared to the second
quarter of 2019; a decrease of $445 thousand (+$0.02 after tax per
share) when compared to the first quarter of 2020
- An increase in securities gains - $2.4 million (+$0.10 after
tax per share) when compared to the second quarter of 2019; $3.0
million (+$0.12 after tax per share) when compared to the first
quarter of 2020
- Change in prepayment penalties on Federal Home Loan Bank of
Atlanta (“FHLB”) advances – decrease of $427 thousand (+$0.02 after
tax per share) when compared to the second quarter of 2019;
increase of $224 thousand (-$0.01 after tax per share) when
compared to the first quarter of 2020
- A $1.0 million litigation accrual (-$0.04 after tax per share)
when compared to both the second quarter of 2019 and the first
quarter of 2020 for potential litigation claims stemming from
certain mortgages originated by First Mariner Bank before its
merger with Howard Bank
- A decrease in the pretax income of the Company’s former
mortgage banking activities, which were substantially completed in
the first quarter of 2020 - $1.2 million (-$0.05 after tax per
share) when compared to the second quarter of 2019; $130 thousand
($0.01 after tax per share) when compared to the first quarter of
2020
- Pretax income from the Small Business Administration’s (“SBA”)
Paycheck Protection Program (“PPP”), established under the
Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”),
of $1.0 million (+$0.04 after tax per share), included in net
interest income and noninterest expenses, when compared to both the
second quarter of 2019 and the first quarter of 2020
- The second quarter of 2019 included a $3.6 million branch
optimization charge, included within noninterest expense. This item
reduced second quarter 2019 earnings per share and thus represents
a $0.14 after tax per share benefit to the second quarter of 2020
when compared to the second quarter of 2019.
- The first quarter of 2020 included a $1.2 million tax benefit
resulting from the CARES Act. This item increased first quarter
2020 earnings per share and thus represents a $0.06 per share
detriment to the second quarter of 2020 when compared to the second
quarter of 2019.
- In addition, the first quarter of 2020 included noninterest
expenses of $788 thousand attributable to the departure of the
Company’s former CFO. This item reduced first quarter 2020 earnings
per share and thus represents a $0.06 per share benefit to the
second quarter of 2020 when compared to the second quarter of
2019.
Core net income is a non-GAAP financial measure that excludes
the earnings contribution of the Company’s mortgage banking
activities, the goodwill impairment charge, and certain other items
to provide a picture of ongoing activities deemed core to the
Company’s strategy. Core net income for the second quarter of 2020
was $3.7 million, or $0.20 per basic and diluted common share. This
compares to core net income of $3.8 million, or $0.20 per both
basic and diluted common share for the second quarter of 2019. The
decrease included the higher provision for credit losses,
reflecting the changing economic environment, which was up $1.9
million (-$0.08 after tax per share). In addition, the Company’s
core noninterest expenses, a non-GAAP financial measure, decreased
by $1.2 million (+$0.05 after tax per share). This also compares to
core net income of $2.6 million, or $0.14 per both basic and
diluted common share for the first quarter of 2020. The $0.06 per
share increase in core earnings per share was primarily the result
of the after tax impact of the lower provision for credit losses,
which was down $445 thousand (+$0.02 per share) and the pretax
contribution from PPP lending activities of $1.0 million (+$0.04
after tax per share). *
Core pre-provision net revenue (“core PPNR”), a non-GAAP
financial measure that adds back the provision for credit losses to
GAAP pretax income and excludes the pretax earnings contribution of
the Company’s mortgage banking activities, the goodwill impairment
charge, and other infrequently occurring items, was $7.9 million
for the quarter ended June 30, 2020. The second quarter of 2020
core PPNR was up $1.8 million, or 29.1%, from $6.1 million for the
second quarter of 2019, and was up $942 thousand, or 13.5%, when
compared to the first quarter core PPNR of $7.0 million. *
The Company reported a net loss of $26.1 million, or a $1.39
loss per diluted share, for the six months ended June 30, 2020.
This compared to net income of $6.3 million, or $0.33 per diluted
share, for the six months ended June 30, 2019. Core net income for
the six months ended June 30, 2020 was $6.4 million ($0.34 per
diluted share), compared to $8.1 million ($0.43 per diluted share)
for the six months ended June 30, 2019. Core PPNR for the six
months ended June 30, 2020 was $14.9 million, a $1.5 million
(11.7%) increase from $13.4 million for the six months ended June
30, 2019. *
Paycheck Protection Program
Loans
The Company actively participated in the SBA’s PPP program
during the second quarter of 2020. At June 30, 2020, $199.0 million
of loans had been originated under the program. During the first
phase of the program, which commenced on April 3, the Company
funded 776 loans totaling $178.0 million. During phase 2, which
commenced on April 27, the Company funded an additional 258 loans
totaling $21.0 million through June 30. The average loan size under
phase 1 and phase 2 of the PPP program was $230 thousand and $82
thousand, respectively. The Company will continue to support its
customers throughout the duration of this program.
Total processing fees from the SBA for the PPP loans originated
through June 30 were $6.6 million and are deferred. In addition,
$770 thousand of origination costs were deferred. The net deferred
fees are being accreted as a yield adjustment over the contractual
term of the underlying PPP loans. The effective yield of the
Company’s PPP portfolio is 2.53%. The PPP loans generated pretax
income of $1.0 million, or $0.04 after tax per share, in the second
quarter of 2020. PPP loans, net of unearned income, totaled $193.7
million at June 30, 2020.
COVID-19 Response
The Company has responded to the COVID-19 pandemic in a number
of ways, with a focus on protecting our employees, strengthening
our communities, and serving our customers. In addition to the
funding of $199.0 million of PPP loans as of June 30, 2020, the
Company has provided loan modifications to both commercial and
retail customers, on a case by case basis, in the form of payment
deferrals for periods up to 6 months. As of July 24, 2020, a total
of $228 million of loans (or 13.4% of the loan portfolio) were
performing under some form of deferral or other payment relief, an
$89 million decrease from the $315 million (or 17.9% of the loan
portfolio) reported as of April 24, 2020. The Bank expects that
some requests for payment deferral extensions will continue during
the third quarter while other borrowers currently on payment
deferral will resume payments.
Asset Quality and Allowance for Credit
Losses
Certain information in this earnings release is presented with
respect to “portfolio loans”, a non-GAAP measure defined as total
loans (which term includes leases) excluding the PPP loans. The
Company believes that portfolio loan related measures provide
additional useful information for purposes of evaluating the
Company’s results of operations and financial condition with
respect to the second quarter of 2020 and comparing it to other
periods, since the PPP loans are 100% guaranteed, were not subject
to traditional loan underwriting standards, and a substantial
portion of these loans are expected to be forgiven and repaid by
the SBA in the next six to nine months. The Company commenced
making loans under the PPP program in the second quarter of 2020.
*
Nonperforming assets (“NPAs”) totaled $20.6 million at June 30,
2020, an increase of $1.1 million from March 31, 2020 but a
decrease of $3.4 million from June 30, 2019. NPAs consisted of
$18.5 million of nonperforming loans (“NPLs”) and $2.1 million of
other real estate owned (“OREO”). NPLs were 0.97% of total loans
and 1.08% of portfolio loans, each at June 30, 2020. NPAs
represented 0.84% of total assets, 1.08% of total loans and OREO,
and 1.21% of portfolio loans and OREO, each at June 30, 2020.
- This compares to NPAs of $24.0 million at June 30, 2019 that
consisted of $19.3 million in NPLs and $4.7 million of OREO. NPLs
were 1.13% of total loans at June 30, 2019 while nonperforming
assets represented 1.05% of total assets and 1.41% of total loans
and OREO at June 30, 2019.
- This compares to NPAs of $19.5 million at March 31, 2020 that
consisted of $17.2 million in NPLs and $2.3 million of OREO. NPLs
were 0.98% of total loans at March 31, 2020 while NPAs represented
0.78% of total assets and 1.11% of total loans and OREO at March
31, 2020.
Net charge-offs decreased to $28 thousand in the second quarter
of 2020 and represented 0.01% of average portfolio loans
(annualized). This compares to net charge-offs of $746 thousand, or
0.18% of average loans (annualized) in the second quarter of 2019
and $462 thousand, or 0.11% of average portfolio loans (annualized)
in the first quarter of 2020. The allowance for credit losses (the
“allowance”) was $16.4 million on June 30, 2020. Because the
Company is a smaller reporting company under SEC rules, the
allowance was determined under the incurred loss model. The
allowance represented 0.86% of total loans, 0.96% of portfolio
loans, and 88.6% of NPLs at June 30, 2020.
- This compares to an allowance of $9.1 million at June 30, 2019.
The June 30, 2019 allowance represented 0.54% of total loans and
47.2% of NPLs. The $7.2 million increase in the allowance was the
result of aggregate provisions for credit losses of $7.8 million
partially offset by aggregate net charge-offs of $564 thousand
during the four quarter period since June 30, 2019. $6.4 million of
the aggregate provisions for credit losses were recorded in
2020.
- This compares to an allowance of $13.4 million at March 31,
2020. The March 31, 2020 allowance represented 0.76% of total loans
and 77.8% of NPLs. The $3.0 million increase in the allowance was
the result of a provision for credit losses of $3.0 million
partially offset by net charge-offs of $28 thousand during the
quarter ended June 30, 2020.
The Company’s allowance as a percentage of total loans has
historically been lower than peers due to the accounting for
acquired loans and the initial impact on the allowance. The
allowance for credit losses and unamortized fair value marks as a
percentage of portfolio loans, a non-GAAP measure that management
uses to assess credit coverage, adds the unamortized fair value
marks to total loans, portfolio loans, and the allowance for credit
losses. This measure was 1.28% of total loans at June 30, 2020, an
increase of 0.03% from March 31, 2020 and an increase of 0.17% from
June 30, 2019. This measure was 1.43% of portfolio loans at June
30, 2020, an increase of 0.18% from March 31, 2020 and an increase
of 0.32% from June 30, 2019.
The Company’s asset quality trends indicate minimal additional
stress in the loan portfolio, with the COVID-19 related loan
modifications and PPP loans likely reducing the short-term risk in
the portfolio. However, management believes it remains prudent to
proactively increase the allowance given the significant stress
experienced in the economy due to the COVID-19 pandemic, coupled
with the Company’s expectation that these stresses will continue
for the next several quarters. The Company increased the allowance
for credit losses at June 30, 2020 by $3.0 million over the March
31, 2020 level. The allowance has been increased by $6.0 million
since December 31, 2019. This increase was based on management’s
evaluation of certain qualitative factors included in the
determination of the allowance, primarily economic factors driven
by the unemployment rate and GDP.
While the Maryland economy has reopened and a substantial amount
of economic activity has returned, unemployment remains high, and
many businesses are still experiencing significant drops in
revenue. The recent rise in new COVID-19 cases and hospitalizations
may lead to ongoing limitations on economic activity in the future.
Management will continue to closely monitor portfolio conditions
and reevaluate the adequacy of the allowance. While the level of
payment deferrals and PPP loan assistance will reduce the
short-term risk in the Bank’s loan portfolio, management believes
there is the potential for additional risk rating downgrades and an
increase in charge-offs in future periods.
Goodwill
Goodwill at June 30, 2020 totaled $31.4 million, a $34.5 million
decrease from $65.9 million at both June 30, 2019 and March 31,
2020. Due to the COVID-19 pandemic and the related economic
fallout, including most specifically, declining stock prices at
both the Company and peer banks, the Federal Reserve’s significant
reduction in interest rates, and other business and market
considerations, the Company performed an interim goodwill
impairment analysis as of June 30, 2020. Based on this analysis,
the estimated fair value of the Company was less than book value,
resulting in a $34.5 million impairment charge recorded in the
second quarter of 2020. Goodwill is not included in tangible
capital, a non-GAAP financial measure, or regulatory capital; the
impairment charge does not affect cash, liquidity, or the Company’s
overall financial strength. *
Stockholders’ Equity and Regulatory
Capital Ratios
Stockholders’ equity at June 30, 2020 was $283.3 million, a
decrease of $32.1 million from March 31, 2020. The decrease was
primarily due to the goodwill impairment charge, that resulted in a
net loss of $26.1 million, and a decrease in accumulated other
comprehensive income, which represents the after tax impact of a
$2.8 million decrease in the fair value of available-for-sale
securities. $2.2 million of the decrease in accumulated other
comprehensive income was attributable to the sale of securities
during the second quarter that resulted in $3.0 million of pretax
securities gains.
Tangible stockholders’ equity, a non-GAAP financial measure that
deducts goodwill and other intangible assets, net of any applicable
deferred tax liabilities, was $246.5 million at June 30, 2020. This
compares to $243.6 million at March 31, 2020, with the $2.9 million
increase primarily the result of the net loss for the second
quarter of $29.4 million, the addback of the goodwill impairment
charge of $34.5 million, and the decrease in accumulated other
comprehensive income. Tangible stockholders’ equity has increased
by $16.3 million since June 30, 2019. *
The Company’s regulatory capital ratios are all well in excess
of regulatory “well-capitalized” and internal target minimum
levels. The total capital ratio was 14.09% while both the Common
Equity Tier 1 (“CET 1”) and Tier 1 capital ratios were 11.66% at
June 30, 2020. The Tier 1 to average assets (leverage) ratio was
9.18%. A comparison of the Company’s regulatory capital ratios to
June 30, 2019 and March 31, 2020 is as follows:
- Regulatory capital ratios at June 30, 2019 consisted of a total
capital ratio of 12.55% while both the CET 1 and Tier 1 capital
ratios were 10.52%. The Tier 1 to average assets (“leverage”) ratio
was 9.06%. All June 30, 2020 regulatory capital ratios were above
the June 30, 2019 levels.
- Regulatory capital ratios at March 31, 2020 consisted of a
total capital ratio of 13.16% while both the CET 1 and Tier 1
capital ratios were 10.95%. The Tier 1 to average assets
(“leverage”) ratio was 9.10%. All June 30, 2020 regulatory capital
ratios were above the March 31, 2020 levels
Liquidity
The Company’s liquidity position remains strong. After building
on-balance sheet liquidity in the first quarter in response to
market disruptions, the Company reduced cash and cash equivalents
in the second quarter to better balance liquidity with the cost of
unused funds. Further, the Company has experienced a large increase
in low cost customer deposits, which has enabled additional
paydowns of higher cost wholesale funding during the quarter. The
Company continues to build stable sources of contingency funding
capacity, and management is confident that it will be able to
access these funds in the event that the markets again become
restricted.
Borrowings under the Federal Reserve Bank of Richmond’s (“FRB”)
Paycheck Protection Program Lending Facility (“PPPLF”) were $31.1
million at June 30, 2020. While the Bank had originally planned to
use the PPPLF as the funding source for all PPP loans, strong
customer deposit growth and the availability of alternative
short-term funding sources at a lower cost resulted in the limited
usage during the quarter.
Update on Exit of Mortgage Banking
Activities
The Company completed its previously announced exit of mortgage
banking activities during the second quarter of 2020. As of March
31, 2020, these activities had been substantially completed, with
the entire mortgage loan pipeline processed. The remaining loans
held for sale were either sold or transferred to the Company’s loan
portfolio, at fair value, during the second quarter. The mortgage
banking activities had no impact on second quarter pretax income.
There were no loans held for sale at June 30, 2020, compared to
$3.8 million at March 31, 2020 and $37.7 million at June 30, 2019.
The contribution of mortgage banking activities, by quarter, which
are excluded from the Company’s core results, are as follows:
- First quarter of 2020 – total revenues of $1.5 million ($0.1
million of net interest income and $1.4 million of noninterest
income), noninterest expenses of $1.4 million, and a contribution
before taxes of $130 thousand.
- Second quarter of 2019 – total revenues of $3.3 million ($0.2
million of net interest income and $3.1 million of noninterest
income), noninterest expenses of $2.1 million, and a contribution
before taxes of $1.2 million.
Net Interest Income and Net Interest
Margin
Net interest income was $18.1 million for the quarter ended June
30, 2020. The net interest margin (net interest income (annualized)
as a percentage of average earning assets) was 3.22%. The yield on
average loans was 4.18% and the yield on average earning assets was
3.81%, while the cost of average interest-bearing deposits was
0.77% and the cost of average interest-bearing liabilities was
0.87%. The cost of average deposits (including noninterest-bearing
deposits) and the cost of average interest-bearing liabilities plus
noninterest-bearing deposits for the second quarter of 2020 were
0.51% and 0.62%, respectively. Fair value adjustments on acquired
loan portfolios increased the loan yield by 12 basis points (“BP”)
and net interest margin by 9 BP in the second quarter of 2020. The
PPP loans reduced the yield on average loans by 13 BP, the yield on
average earnings assets by 9 BP, and net interest margin by 7
BP.
Second quarter 2020 net interest income of $18.1 million was up
$595 thousand from net interest income of $17.5 million for the
quarter ended March 31, 2020. The net interest margin for the
second quarter of 2020 is down 12 BP from 3.34% in the first
quarter of 2020. The yield on average loans was down 40 BP from
4.58% and the yield on average earning assets was down 43 BP from
4.24%, largely attributable to declines in variable rate loan
yields. The cost of average interest-bearing deposits was down 30
BP from 1.07% and the cost of average interest-bearing liabilities
was down 34 BP from 1.21%. The cost of average interest-bearing
liabilities plus noninterest-bearing deposits was down 31 BP from
0.93% in the first quarter of 2020. Compared to the first quarter
of 2020, when fair value adjustments on acquired loan portfolios
increased the loan yield by 7 BP and net interest margin by 5 BP,
the fair value adjustments on acquired loan portfolios for the
second quarter of 2020 have increased the loan yield and net
interest margin by 5 BP and 4 BP, respectively.
Second quarter 2020 net interest income of $18.1 million is up
$766 thousand from $17.4 million for the quarter ended June 30,
2019. The net interest margin for the second quarter of 2020 is
down 31 BP from 3.53% in the second quarter of 2019. The yield on
average loans was down 82 BP from 5.00% and the yield on average
earning assets was down 90 BP from 4.71%, while the cost of average
interest-bearing deposits was down 50 BP from 1.27% and the cost of
average interest-bearing liabilities was down 67 BP from 1.54%. The
cost of average interest-bearing liabilities plus
noninterest-bearing deposits was down 59 BP from 1.21% in the
second quarter of 2019. Compared to the second quarter of 2019,
when fair value adjustments on acquired loan portfolios increased
the loan yield by 14 BP and net interest margin by 12 BP, the fair
value adjustments on acquired loan portfolios for the second
quarter of 2020 decreased the loan yield and net interest margin by
2 BP and 3 BP, respectively.
The decreases in the net interest margin are a continuing trend
as market interest rates have fallen to historically low levels.
For example:
- Average Prime rate was 3.25% for the second quarter of 2020,
down 115 BP from 4.40% for the first quarter of 2020 and down 225
BP from 5.50% in the second quarter of 2019.
- Average effective fed funds rate was 0.06% for the second
quarter of 2020, down 1.19% from 1.25% for the first quarter of
2020 and down 234 BP from 2.40% in the second quarter of 2019.
- Average 10 year Treasury rate was 0.69% for the second quarter
of 2020, down 69 BP from 1.38% for the first quarter of 2020 and
down 165 BP from 2.34% in the second quarter of 2019.
- Average 30 day LIBOR rate was 0.36% for the second quarter of
2020, down 105 BP from 1.41% for the first quarter of 2020 and down
208 BP from 2.44% in the second quarter of 2019.
Noninterest Income
Noninterest income was $4.8 million for the second quarter of
2020, a decrease of $1.0 million from the $5.8 million reported in
the second quarter of 2019, and an increase of $1.4 million from
the $3.4 million reported in the first quarter of 2020. Securities
gains of $3.0 million were reported in the second quarter of 2020
compared to $658 thousand in the second quarter of 2019. The
Company had no securities gains in the first quarter of 2020.
Core noninterest income, a non-GAAP financial measure that
excludes noninterest income attributable to the Company’s mortgage
banking activities and securities gains in each quarter, was $1.7
million for the second quarter of 2020, a $355 thousand decrease
from the second quarter of 2019, and a $226 thousand decrease from
the first quarter of 2020. *
- The $355 thousand decrease when compared to the second quarter
of 2019 primarily consisted of the following: lower levels of
nonsufficient funds (“NSF”) and overdraft charges, included in
service charges on deposit accounts (-$273 thousand) partially due
to accommodations to COVID-19 impacted customers in the current
economic environment; and a decrease in interchange fees, primarily
due to lower card activity volumes, included in loan related fees
and service charges (-$171 thousand).
- The $226 thousand decrease when compared to the first quarter
of 2020 primarily consisted of a decrease in service charges on
deposit accounts due to a lower volume of NSF and overdraft charges
(-$199 thousand). A portion of the reduction in NSF fees
represented accommodations to COVID-19 impacted customers.
Noninterest Expenses
Noninterest expenses totaled $47.6 million for the second
quarter of 2020, an increase of $28.2 million from the $19.5
million reported in the second quarter of 2019, and an increase of
$33.1 million from the $14.6 million reported in the first quarter
of 2020. The goodwill impairment charge of $34.5 million is
included in the second quarter 2020 noninterest expenses.
Core noninterest expenses is a non-GAAP financial measure that
excludes noninterest expenses attributable to the Company’s
mortgage banking activities in each quarter, the $34.5 million
goodwill impairment charge in the second quarter of 2020, $788
thousand of expenses related to the departure of the Company’s
former CFO in the first quarter of 2020, $3.6 million of branch
optimization expense in the second quarter of 2019, a $1.0 million
accrual in the second quarter of 2020 for potential litigation
claims stemming from certain mortgages originated by First Mariner
Bank before its merger with Howard Bank, and prepayment penalties
on FHLB advances recorded in both the second quarter of 2020 and
2019 of $224 thousand and $651 thousand, respectively. Core
noninterest expenses were $11.9 million for the second quarter of
2020, a $1.2 million decrease from $13.1 million in the second
quarter of 2019, and a $431 thousand decrease from $12.3 million in
the first quarter of 2020. *
- The $1.2 million decrease when compared to the second quarter
of 2019 consisted of the following: lower compensation and benefits
expenses (-$556 thousand) with $242 thousand of the decrease a
result of the deferral of origination costs attributable to PPP
lending activities, lower occupancy and equipment expenses as a
result of branch optimization initiatives implemented by the
Company (-$260 thousand); and lower data processing fees due to
savings generated from a renegotiated core processing contract
(-$298 thousand).
- The $431 thousand decrease when compared to the first quarter
of 2020 consisted of the following: lower compensation and benefits
expenses (-$555 thousand) with $242 thousand of the decrease a
result of the deferral of origination costs attributable to PPP
lending activities, and lower data processing fees (-$77 thousand);
partially offset by an increase in other real estate owned-related
expenses of $191 thousand.
Income Taxes
The Company reported an income tax expense of $1.7 million for
the quarter ended June 30, 2020. The effective tax rate for the
second quarter of 2020 was -6.0%, and excluding the non-taxable
goodwill impairment charge from pretax income, was 24.6%. As a
result of a provision in the CARES Act, an income tax benefit of
$1.2 million was recorded in the first quarter of 2020. The
effective tax rate for the first quarter of 2020 was -15.8%, and
excluding this $1.2 million tax benefit, the effective tax rate for
the first quarter of 2020 was 25.0%. The effective tax rate for the
second quarter of 2019 was 20.6%.
Loans
Loans totaled $1.90 billion at June 30, 2020, an increase of
$137.2 million, or 31.3% annualized, of total loans at March 31,
2020. Compared to June 30, 2019, the loan portfolio grew by $197.6
million, or 11.6%. During the second quarter, the Company
originated $199.0 million of loans under the SBA PPP program. Net
of deferred processing fees and origination costs, the net balance
of PPP loans at June 30, 2020 was $193.7 million. While the Company
supported its customers through participation in this program, the
Company anticipates that a substantial portion of these loans will
be forgiven and repaid by the SBA within the next six to nine
months.
Portfolio loans totaled $1.70 billion at June 30, 2020, a
decrease of $56.5 million, or 12.9% annualized, from total loans at
March 31, 2020. Compared to June 30, 2019, portfolio loans grew by
$3.9 million, or 0.2%. Changes in portfolio loans were as follows:
*
- Compared to June 30, 2019, the $3.9 million in portfolio loan
growth was primarily driven by construction and land loans, up
$12.8 million, or 11.1%, and commercial real estate loans, up $24.6
million, or 3.6%, while residential real estate loans decreased by
$14.7 million, or 3.0% and commercial loans decreased by $14.9
million, or 4.0%.
- Compared to March 31, 2020, the $56.5 million decrease in
portfolio loans was primarily driven by commercial loans, down
$36.1 million, or 37.3% annualized, and residential real estate,
down $23.0 million, or 18.5% annualized.
- The decrease in commercial loans was primarily the result of
lower line utilization during the quarter. While the Company
experienced a negligible increase in commercial line of credit
usage during the first quarter, with line utilization of 48.7% at
March 31, 2020, line utilization dropped to 41.6% at June 30, 2020.
The lower level of commercial loans reflects higher liquidity
levels at many borrowers.
- The decrease in residential real estate loans was a result of a
substantially higher level of prepayments due to lower interest
rates that led to another strong mortgage refinance quarter. As a
result of the exit of the Company’s mortgage banking activities,
the mortgage runoff was not offset by new loan originations. In
order to manage loan run-off within its residential mortgage loan
portfolio, the Bank plans to commence buying first lien residential
mortgage loans on a servicing released basis during the third
quarter of 2020.
Average loans were $1.88 billion for the second quarter of 2020,
an increase of $127.5 million, or 29.2% annualized, over average
loans for the first quarter of 2020, and an increase of $212.3
million, or 12.7%, over average loans for the second quarter of
2019. Average PPP loans for the second quarter of 2020 were $142.7
million. Average portfolio loans were $1.74 billion for the second
quarter of 2020, a decrease of $15.2 million, or 3.4% annualized,
from average loans for the first quarter of 2020. The decline was
primarily in residential real estate loans. Compared to the second
quarter of 2019, average portfolio loans grew by $69.6 million, or
4.2%, with the growth primarily in construction and land,
commercial real estate, and commercial loans. *
Deposits
Total deposits were $1.83 billion at June 30, 2020, an increase
of $41.8 million, or 9.4% annualized, over the March 31, 2020
balance of $1.79 billion. Compared to June 30, 2019, total deposits
grew by $113.5 million, or 6.6%. Changes in deposits were as
follows:
- Customer deposits, which exclude brokered and other
non-customer deposits, were $1.67 billion at June 30, 2020,
compared to $1.44 billion at March 31, 2020, an increase of $227.0
million or 63.0% annualized.
- The increase in customer deposits was primarily the result of
strong growth in low-cost, non-maturity deposits, which increased
by $239.8 million, or 83.6% annualized, during the second quarter
of 2020. $201.1 million of the growth was in transaction accounts,
and $188.1 million of the transaction account growth was in
noninterest-bearing deposits.
- The strong non-maturity deposit growth was the result of good
organic growth, the impact of delays in tax remittances to the
federal government, the impact of government stimulus checks, the
impact of lower consumer and business spending, and PPP funds that
have not yet been used by the recipients.
- The strong non-maturity deposit growth was partially offset by
a continued decline in customer CD balances, down $12.7 million, or
17.3% annualized, due to the Company managing lower retention rates
on CDs maturing at substantially higher rates than current market
rates. Management made a conscious decision to not offer
above-market renewal rates.
- Compared to June 30, 2019, customer deposits increased by
$222.4 million, or 15.4%.
- The increase in customer deposits was primarily the result of
strong growth in low-cost, non-maturity deposits, which increased
by $286.2 million, or 26.0%. $252.2 million of the growth was in
transaction accounts, and $249.5 million of the transaction account
growth was in noninterest-bearing deposits.
- Customer CD balances declined by $63.8 million, or 18.5%.
- Brokered and other non-customer deposits were $161.8 million at
June 30, 2020, compared to $347.1 million at March 31, 2020 and
$270.7 million at June 30, 2019. The March 31, 2020 balances were
the result of the Company increasing its on-balance sheet liquidity
in response to the early stages of the COVID-19 pandemic and
expectation of liquidity challenges that did not materialize. The
$185.3 million decline in balances since March 31, 2020 is a result
of reducing on-balance sheet liquidity levels.
Average customer deposits for the second quarter of 2020 were
$1.61 billion, an increase of $150.8 million, or 41.2% annualized,
from the first quarter 2020 average balance. Excluding customer
CDs, customer non-maturity deposit balances increased by $175.1
million, or 60.9% annualized, with transaction accounts up $170.9
million; $167.4 million of the transaction account growth was in
noninterest-bearing deposits.
Compared to the second quarter of 2019, average customer
deposits were up by $148.9 million, or 10.2%. Excluding customer
CDs, customer non-maturity deposit balances increased by $209.3
million, or 18.8%, with transaction accounts up $197.2 million;
$217.6 million of the transaction account growth was in
noninterest-bearing deposits.
Other Balance Sheet Comments
During the quarter ended June 30, 2020, the Company embarked on
a strategy to monetize certain unrealized gains in its
mortgage-backed securities (“MBS”) portfolio. $105 million of MBS
with high prepayment speeds were identified and sold, resulting in
net gains of $3.0 million. $125 million of lower coupon MBS were
then purchased. The total available for sale securities portfolio
of $276.9 million increased by $1.6 million from March 31,
2020.
Interest bearing deposits with banks (primarily balances held at
the FRB) were $46.4 million at June 30, 2020, a $133.6 million
decrease from March 31, 2020. This decline is a result of reducing
the Company’s on-balance sheet liquidity levels.
Borrowings from the FHLB were $246.0 million at June 30, 2020, a
$98.0 million decrease from March 31, 2020. During the second
quarter, the Company repaid a long-term, $5.0 million advance,
resulting in a prepayment penalty (recorded in noninterest
expenses) of $224 thousand.
* Please refer to the section entitled “Reconciliation of
Non-GAAP Financial Measures” in this press release and to the
financial tables entitled “GAAP to Non-GAAP reconciliation” for a
reconciliation to the most directly comparable GAAP financial
measures.
Earnings Conference Call
The Company will host a conference call on Tuesday, July 28,
2020, at 10:00 a.m. (EDT) to discuss the results and presentation
slides and to answer questions. Those who wish to participate may
do so by calling 1-877-269-7756 and asking for the Howard Bancorp
conference call. We encourage participants to call at least ten
minutes prior to the scheduled start time so that you can be sure
to be entered into the conference before it begins. You may also
connect to the live conference and ask questions via an instant
call-back from the automated conference host to the phone number
you specify.
The Call-Back link will be available on our website at
https://www.howardbank.com/InvestorCall until the call has
ended.
A presentation will be used during the earnings call and will be
available on the Investor Relations section of our website at
www.howardbank.com.
An internet-based audio replay of the call will be available on
the Investor Relations page of our website at www.howardbank.com
shortly following the conclusion of the call and will be available
until August 27, 2020.
Company management will not be available to discuss the second
quarter 2020 results prior to the earnings conference call.
About the Company
Howard Bancorp, Inc. is the parent company of Howard Bank, a
Maryland-chartered trust company operating as a commercial bank.
Headquartered in Baltimore City, Maryland, Howard Bank operates a
general commercial banking business through its 15 branches located
throughout the Greater Baltimore Metropolitan Area. Additional
information about Howard Bancorp, Inc. and Howard Bank are
available on its website at www.howardbank.com.
Cautionary Note Regarding Forward-Looking
Statements
This press release and statements by the Company’s management
contains “forward-looking statements” as that phrase is defined in
the Private Securities Litigation Reform Act of 1995. Forward
looking statements can be identified by words such as
“anticipated,” “expects,” “intends,” “believes,” “may,” “likely,”
“will” or other statements that indicate future periods. Such
statements include, without limitation, statements regarding
management’s predictions or expectations about future economic
conditions, statements about the Company’s business or financial
performance, as well as 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 the
Company’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. These risks
and uncertainties include, but are not limited to: the impact of
the recent outbreak of COVID-19 on our business, including the
impact of the actions taken by governmental authorities to try and
contain the virus or address the impact of the virus on the United
States economy (including, without limitation, the CARES Act), and
the resulting effect of these items on our operations, liquidity
and capital position, and on the financial condition of the
Company’s borrowers and other customers; conditions in the
financial markets and economic conditions generally and in the bank
and non-bank financial services industries, nationally and within
our local market areas, including the effects of declines in
housing markets, an increase in unemployment levels and slowdowns
in economic growth; the Company’s level of nonperforming assets and
the costs associated with resolving problem loans including
litigation and other costs; the impact of changes in interest
rates; 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 the Company’s loan portfolio; the extensive
federal and state regulation, supervision and examination governing
almost every aspect of the Company’s operations and potential
expenses associated with complying with such regulations; possible
additional loan losses and impairment of the collectability of
loans; the Company’s ability to comply with applicable capital and
liquidity requirements; any further impairment of the Company’s
goodwill or other intangible assets; losses resulting from pending
or potential litigation claims may exceed amounts accrued with
respect to such matters; system failure or cybersecurity breaches
of the Company’s network security; the Company’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;
litigation and other risks and uncertainties. Additional risks and
uncertainties are contained in the “Risk Factors” and
forward-looking statements disclosure in the Company’s most recent
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The
inclusion of this forward-looking information should not be
construed as a representation by us or any person that future
events, plans, or expectations contemplated by us will be achieved.
Forward-looking statements are as of the date they are made, and
the Company does not undertake to update any forward-looking
statement, whether written or oral, whether as a result of new
information, future events, or otherwise, except as required by
law.
Additional information is available at www.howardbank.com.
HOWARD BANCORP, INC. AND SUBSIDIARY Selected Financial
Data (in thousands except per share data)
SIX MONTHS
ENDED THREE MONTHS ENDED June 30, June 30,
June 30, March 31, June 30,
2020
2019
2020
2020
2019
Income Statement Data: Interest income
$
43,700
$
45,929
$
21,473
$
22,226
$
23,145
Interest expense
8,055
11,101
3,354
4,701
5,791
Net interest income
35,645
34,828
18,119
17,525
17,354
Provision for credit losses
6,445
2,835
3,000
3,445
1,110
Net interest income after provision for credit losses
29,200
31,993
15,119
14,080
16,244
Noninterest income
8,125
10,376
4,759
3,366
5,841
Noninterest expense
62,187
34,311
47,627
14,560
19,454
(Loss) income before income taxes
(24,862
)
8,058
(27,749
)
2,886
2,631
Income tax expense (benefit)
1,203
1,714
1,660
(457
)
543
Net (loss) income
$
(26,065
)
$
6,344
$
(29,409
)
$
3,343
$
2,088
Per Share Data and Shares Outstanding: Net (loss)
income per common share - basic
$
(1.39
)
$
0.33
$
(1.57
)
$
0.18
$
0.11
Net (loss) income per common share - diluted
$
(1.39
)
$
0.33
$
(1.57
)
$
0.18
$
0.11
Book value per common share, at period end
$
15.14
$
15.92
$
15.14
$
16.85
$
15.92
Tangible book value per common share, at period end (1)
$
13.08
$
11.94
$
13.08
$
12.91
$
11.94
Average common shares outstanding
18,791
19,057
18,716
18,867
19,061
Diluted average common shares outstanding
18,791
19,071
18,716
18,915
19,068
Shares outstanding, at period end
18,716
19,063
18,716
18,715
19,063
Balance Sheet Data: Total assets
$
2,463,450
$
2,295,634
$
2,463,450
$
2,507,894
$
2,295,634
Portfolio loans, net of unearned income (1) Paycheck
Protection Program loans,
1,704,911
1,701,020
1,704,911
1,761,419
1,701,020
net of unearned income (1)
193,719
-
193,719
-
-
Total loans and leases, net of unearned income
1,898,630
1,701,020
1,898,630
1,761,419
1,701,020
Allowance for credit losses
16,356
9,120
16,356
13,384
9,120
Other interest-earning assets
343,149
319,739
343,149
483,553
319,739
Total deposits
1,830,674
1,717,216
1,830,674
1,788,899
1,717,216
Total borrowings
312,173
248,811
312,173
377,611
248,811
Common and total stockholders' equity
283,281
303,527
283,281
315,358
303,527
Average total assets
2,449,822
2,232,055
2,529,797
2,369,847
2,246,800
Average common and total stockholders' equity
316,980
300,572
319,152
314,805
303,599
Selected Performance Ratios: Return on average assets
(2)
(2.14
)
%
0.57
%
(4.68
)
%
0.57
%
0.37
%
Return on average common equity (2)
(16.54
)
%
4.26
%
(37.06
)
%
4.27
%
2.76
%
Net interest margin (2),(3)
3.28
%
3.58
%
3.22
%
3.34
%
3.53
%
Efficiency ratio (4)
142.08
%
75.90
%
208.18
%
69.70
%
83.87
%
Efficiency ratio (ex goodwill impairment)(1)
63.26
%
75.90
%
57.38
%
69.70
%
83.87
%
Asset Quality Ratios: Nonperforming loans to
portfolio loans (1)
1.08
%
1.13
%
1.08
%
0.98
%
1.13
%
Nonperforming assets to portfolio loans and OREO (1)
1.21
%
1.41
%
1.21
%
1.11
%
1.41
%
Nonperforming assets to total assets
0.84
%
1.05
%
0.84
%
0.78
%
1.05
%
Allowance for credit losses to portfolio loans (1)
0.96
%
0.54
%
0.96
%
0.76
%
0.54
%
Allowance for credit losses to nonperforming loans
88.56
%
47.24
%
88.56
%
77.80
%
47.24
%
Net chargeoffs to average total loans and leases (2)
0.06
%
0.44
%
0.01
%
0.11
%
0.18
%
Capital Ratios (Bancorp): Tier 1 capital to average
assets (leverage ratio)
9.18
%
9.06
%
9.18
%
9.10
%
9.06
%
Common equity tier 1 capital to risk-weighted assets
11.66
%
10.52
%
11.66
%
10.95
%
10.52
%
Tier 1 capital to risk-weighted assets
11.66
%
10.52
%
11.66
%
10.95
%
10.52
%
Total capital to risk-weighted assets
14.09
%
12.55
%
14.09
%
13.16
%
12.55
%
Average equity to average assets
12.62
%
13.51
%
12.62
%
13.28
%
13.51
%
(1) This is a non-GAAP measure. See the GAAP to Non-GAAP
Reconciliation at the end of the financial statements. (2)
Annualized (3) Net interest income divided by average earning
assets (4) Noninterest expense divided by the sum of net interest
income and noninterest income
HOWARD BANCORP, INC. AND
SUBSIDIARY Unaudited Consolidated Statements of (Loss)
Income (in thousands except per share data)
FOR THE THREE
MONTHS ENDED June 30, March 31, December
31, September 30, June 30,
2020
2020
2019
2019
2019
Interest income
$
21,473
$
22,226
$
22,550
$
22,955
$
23,145
Interest expense
3,354
4,701
5,283
5,740
5,791
Net interest income
18,119
17,525
17,267
17,215
17,354
Provision for credit losses
3,000
3,445
750
608
1,110
Net interest income after provision for credit losses
15,119
14,080
16,517
16,607
16,244
Noninterest income: Service charges on deposit accounts
433
642
710
726
684
Mortgage banking income
-
1,036
1,951
2,054
2,308
Gain (loss) on sale of securities
3,044
-
-
-
658
Gain (loss) on the disposal of premises and equipment
6
-
-
-
(83
)
Income from bank owned life insurance
441
445
466
485
460
Loan related fees and service charges
175
581
912
984
995
Other income and gains / losses
660
662
1,586
784
819
Total noninterest income
4,759
3,366
5,625
5,033
5,841
Noninterest expense: Compensation and benefits
6,259
8,441
7,811
7,939
8,272
Occupancy and equipment
1,242
1,033
880
1,442
5,183
Marketing and business development
453
450
853
545
484
Professional fees
633
727
704
747
718
Data processing fees
850
926
1,217
1,172
1,147
FDIC assessment
287
212
63
36
281
Other real estate owned
269
77
321
393
104
Loan production expense
192
468
719
761
700
Amortization of core deposit intangible
680
699
717
745
767
Goodwill impairment charge
34,500
-
-
-
-
Other operating expense
2,262
1,527
1,077
1,625
1,798
Total noninterest expense
47,627
14,560
14,362
15,405
19,454
(Loss) income before income taxes
(27,749
)
2,886
7,780
6,235
2,631
Income tax expense (benefit)
1,660
(457
)
1,880
1,598
543
Net (loss) income
$
(29,409
)
$
3,343
$
5,900
$
4,637
$
2,088
Net (loss) income per common share: Basic
$
(1.57
)
$
0.18
$
0.31
$
0.24
$
0.11
Diluted
$
(1.57
)
$
0.18
$
0.31
$
0.24
$
0.11
Average common shares outstanding: Basic
18,716
18,867
19,080
19,079
19,061
Diluted
18,716
18,915
19,083
19,082
19,068
Performance Ratios Return on average assets
-4.68
%
0.57
%
1.02
%
0.82
%
0.37
%
Return on average common equity
-37.06
%
4.27
%
7.51
%
6.00
%
2.76
%
Net interest margin
3.22
%
3.34
%
3.38
%
3.46
%
3.53
%
Efficiency ratio
208.18
%
69.70
%
62.74
%
69.24
%
83.87
%
Efficiency ratio (ex goodwill impairment)(1)
57.38
%
69.70
%
62.74
%
69.24
%
83.87
%
(1) This is a non-GAAP measure. See the GAAP to Non-GAAP
Reconciliation at the end of the financial statements.
HOWARD
BANCORP, INC. AND SUBSIDIARY Unaudited Consolidated
Statements of (Loss) Income (in thousands except per share
data)
FOR THE SIX MONTHS ENDED June 30, June
30,
2020
2019
Interest income
$
43,700
$
45,929
Interest expense
8,055
11,101
Net interest income
35,645
34,828
Provision for credit losses
6,445
2,835
Net interest income after provision for credit losses
29,200
31,993
Noninterest income: Service charges on deposit accounts
1,075
1,311
Mortgage banking income
1,036
3,793
Gain (loss) on sale of securities
3,044
658
Gain (loss) on the disposal of premises and equipment
6
(83
)
Income from bank owned life insurance
886
907
Loan related fees and service charges
756
2,038
Other income and gains / losses
1,322
1,752
Total noninterest income
8,125
10,376
Noninterest expense: Compensation and benefits
14,700
16,306
Occupancy and equipment
2,275
6,754
Marketing and business development
903
941
Professional fees
1,360
1,503
Data processing fees
1,776
2,525
FDIC assessment
499
568
Other real estate owned
346
131
Loan production expense
660
1,220
Amortization of core deposit intangible
1,379
1,551
Goodwill impairment charge
34,500
-
Other operating expense
3,789
2,812
Total noninterest expense
62,187
34,311
(Loss) income before income taxes
(24,862
)
8,058
Income tax expense
1,203
1,714
Net (loss) income
$
(26,065
)
$
6,344
Net (loss) income per common share: Basic
$
(1.39
)
$
0.33
Diluted
$
(1.39
)
$
0.33
Average common shares outstanding: Basic
18,791
19,057
Diluted
18,791
19,071
Performance Ratios Return on average assets
-2.14
%
0.57
%
Return on average common equity
-16.54
%
4.26
%
Net interest margin
3.28
%
3.58
%
Efficiency ratio
142.08
%
75.90
%
Efficiency ratio (ex goodwill impairment)(1)
63.26
%
75.90
%
(1) This is a non-GAAP measure. See the GAAP to Non-GAAP
Reconciliation at the end of the financial statements.
HOWARD
BANCORP, INC. AND SUBSIDIARY Unaudited Consolidated Balance
Sheets (in thousands except per share data)
PERIOD ENDED
June 30, March 31, December 31, September
30, June 30,
2020
2020
2019
2019
2019
ASSETS Cash and due from banks
$
12,652
$
15,951
$
12,992
$
12,563
$
15,657
Interest bearing deposits with banks
46,418
179,999
96,985
62,446
109,404
Total cash and cash equivalents
59,070
195,950
109,977
75,009
125,061
Securities available for sale, at fair value
276,889
275,252
215,505
164,026
151,685
Securities held to maturity, at amortized cost
7,250
7,750
7,750
9,750
9,750
Federal Home Loan Bank of Atlanta stock, at cost
12,592
16,757
14,152
13,642
11,220
Loans held for sale, at fair value
-
3,795
30,710
46,713
37,680
Portfolio loans, net of unearned income (1)
1,704,911
1,761,419
1,745,513
1,729,880
1,701,020
Paycheck Protection Program loans, net of unearned inc (1)
193,719
-
-
-
-
Total loans and leases, net of unearned income
1,898,630
1,761,419
1,745,513
1,729,880
1,701,020
Allowance for credit losses
(16,356
)
(13,384
)
(10,401
)
(9,598
)
(9,120
)
Net loans and leases
1,882,274
1,748,035
1,735,112
1,720,282
1,691,900
Bank premises and equipment, net
42,434
42,543
42,724
42,693
42,876
Goodwill
31,449
65,949
65,949
65,949
65,949
Core deposit intangible
7,090
7,770
8,469
9,186
9,932
Bank owned life insurance
76,716
76,275
75,830
75,364
75,060
Other real estate owned
2,137
2,322
3,098
3,926
4,702
Deferred tax assets, net
35,034
33,529
36,010
36,049
37,803
Interest receivable and other assets
30,515
31,967
29,333
30,886
32,016
Total assets
$
2,463,450
$
2,507,894
$
2,374,619
$
2,293,475
$
2,295,634
LIABILITIES Noninterest-bearing deposits
$
671,598
$
483,499
$
468,975
$
442,549
$
422,117
Interest-bearing deposits
1,159,076
1,305,400
1,245,390
1,213,074
1,295,099
Total deposits
1,830,674
1,788,899
1,714,365
1,655,623
1,717,216
FHLB advances
246,000
344,000
285,000
273,000
216,000
Fed funds and repos
37,834
5,321
6,127
1,161
4,669
Subordinated debt
28,339
28,290
28,241
28,191
28,142
Total borrowings
312,173
377,611
319,368
302,352
248,811
Accrued expenses and other liabilities
37,322
26,026
26,738
26,748
26,080
Total liabilities
2,180,169
2,192,536
2,060,471
1,984,723
1,992,107
STOCKHOLDERS' EQUITY Common stock - $0.01 par value
187
187
191
191
191
Additional paid in capital
270,057
269,918
276,156
276,431
276,218
Retained earnings
9,090
38,501
35,158
29,258
24,621
Accumulated other comprehensive income
3,947
6,752
2,643
2,872
2,497
Total stockholders' equity
283,281
315,358
314,148
308,752
303,527
Total liabilities and stockholders' equity
$
2,463,450
$
2,507,894
$
2,374,619
$
2,293,475
$
2,295,634
Capital Ratios (Bancorp) Tier 1 capital to average
assets (leverage ratio)
9.18
%
9.10
%
9.55
%
9.39
%
9.06
%
Common equity tier 1 capital to risk-weighted assets
11.66
%
10.95
%
11.09
%
10.83
%
10.52
%
Tier 1 capital to risk-weighted assets
11.66
%
10.95
%
11.09
%
10.83
%
10.52
%
Total capital to risk-weighted assets
14.09
%
13.16
%
13.14
%
12.87
%
12.55
%
Asset Quality Measures Nonperforming loans
$
18,469
$
17,203
$
19,143
$
19,960
$
19,305
Other real estate owned (OREO)
2,137
2,322
3,098
3,926
4,702
Total nonperforming assets
$
20,606
$
19,525
$
22,241
$
23,886
$
24,007
Nonperforming loans to portfolio loans (1)
1.08
%
0.98
%
1.10
%
1.15
%
1.13
%
Nonperforming assets to portfolio loans and OREO (1)
1.21
%
1.11
%
1.27
%
1.38
%
1.41
%
Nonperforming assets to total assets
0.84
%
0.78
%
0.94
%
1.04
%
1.05
%
Allowance for credit losses to portfolio loans (1)
0.96
%
0.76
%
0.60
%
0.55
%
0.54
%
Allowance for credit losses to nonperforming loans
88.56
%
77.80
%
54.33
%
48.09
%
47.24
%
Net chargeoffs to average total loans and leases (2)
0.01
%
0.11
%
-0.01
%
0.03
%
0.18
%
Provision for credit losses to average portfolio loans (1), (2)
0.69
%
0.79
%
0.17
%
0.14
%
0.27
%
(1) This is a non-GAAP measure. See the GAAP to Non-GAAP
Reconciliation at the end of the financial statements. (2)
Annualized
HOWARD BANCORP, INC. AND SUBSIDIARY Average
Balances, Yields, and Rates (in thousands) Three Months Ended
June 30, 2020 Three Months Ended March 31, 2020 Three Months Ended
June 30, 2019 AverageBalance Income /Expense Yield /Rate
AverageBalance Income /Expense Yield /Rate AverageBalance Income
/Expense Yield /Rate Earning assets Loans and leases: Commercial
loans and leases
$
371,518
$
4,260
4.61
%
$
377,198
$
4,304
4.59
%
$
345,180
$
4,478
5.20
%
Commercial real estate
698,930
7,613
4.38
690,930
8,446
4.92
664,079
8,407
5.08
Construction and land
132,899
1,287
3.89
131,489
1,463
4.47
116,057
1,686
5.83
Residential real estate
490,110
4,948
4.06
509,034
5,244
4.14
493,003
5,598
4.55
Consumer
45,619
536
4.73
45,664
520
4.58
51,174
641
5.02
Total portfolio loans
1,739,076
18,644
4.31
1,754,315
19,978
4.58
1,669,493
20,810
5.00
Paycheck Protection Program loans
142,715
896
2.53
-
-
-
-
-
-
Total loans and leases
1,881,791
19,540
4.18
1,754,315
19,978
4.58
1,669,493
20,810
5.00
Securities available for sale: U.S Gov agencies
80,217
532
2.67
70,831
492
2.79
97,128
669
2.76
Mortgage-backed
189,419
945
2.01
151,399
978
2.60
87,954
699
3.19
Corporate debentures
5,507
92
6.72
5,523
92
6.73
2,979
62
8.35
Total available for sale securities
275,143
1,569
2.29
227,752
1,562
2.76
188,061
1,430
3.05
Securities held to maturity
7,745
112
5.82
7,750
112
5.83
9,278
143
6.18
FHLB Atlanta stock, at cost
13,015
220
6.80
15,708
174
4.46
10,615
167
6.31
Interest bearning deposits in banks
86,181
20
0.09
84,860
234
1.11
62,629
274
1.75
Loans held for sale
1,365
13
3.83
18,424
166
3.63
30,432
321
4.23
Total earning assets
2,265,240
21,474
3.81
%
2,108,809
22,226
4.24
%
1,970,508
23,145
4.71
%
Cash and due from banks
16,056
13,610
13,853
Bank premises and equipment, net
42,431
42,689
44,567
Goodwill and other intangible assets
73,093
74,169
76,374
Other assets
146,394
141,290
150,478
Less: allowance for credit losses
(13,417
)
(10,719
)
(8,980
)
Total assets
$
2,529,797
$
2,369,848
$
2,246,800
Interest-bearing liabilities Deposits: Interest-bearing
demand accounts
$
186,781
$
57
0.12
%
$
183,305
$
157
0.34
%
$
207,159
$
248
0.48
%
Money market
365,658
342
0.38
368,779
706
0.77
354,808
670
0.76
Savings
140,904
25
0.07
133,577
45
0.13
139,673
66
0.19
Time deposits
557,401
1,959
1.41
523,980
2,302
1.77
566,284
3,020
2.14
Total interest-bearing deposits
1,250,744
2,383
0.77
1,209,641
3,210
1.07
1,267,924
4,004
1.27
Borrowings: FHLB advances
255,945
506
0.80
320,868
1,025
1.29
200,186
1,294
2.59
Fed funds and repos
16,747
13
0.31
6,665
4
0.27
7,468
13
0.70
Subordinated debt
28,307
452
6.42
28,258
461
6.56
28,112
480
6.85
Total borrowings
300,999
971
1.30
355,791
1,491
1.69
235,766
1,787
3.04
Total interest-bearing funds
1,551,743
3,354
0.87
%
1,565,432
4,701
1.21
%
1,503,690
5,791
1.54
%
Noninterest-bearing deposits
632,080
464,701
414,502
Other liabilities
26,822
24,909
25,009
Total liabilities
2,210,645
2,055,042
1,943,201
Stockholders' equity
319,152
314,805
303,599
Total liabilities & equity
$
2,529,797
$
2,369,848
$
2,246,800
Net interest rate spread (1)
$
18,120
2.94
%
$
17,525
3.03
%
$
17,354
3.17
%
Effect of noninterest-bearing funds
0.27
0.31
0.37
Net interest margin on earning assets (2)
3.22
%
3.34
%
3.53
%
(1) The difference between the annualized yield on average
total earning assets and the annualized cost of average total
interest-bearing liabilities (2) Annualized net interest income
divided by average total earning assets
HOWARD BANCORP, INC. AND
SUBSIDIARY Average Balances, Yields, and Rates (in
thousands) Six Months Ended June 30, 2020 Six Months Ended June 30,
2019 AverageBalance Income /Expense Yield /Rate AverageBalance
Income /Expense Yield /Rate Earning assets Loans and leases:
Commercial loans and leases
$
374,358
$
8,564
4.60
%
$
337,331
$
8,703
5.20
%
Commercial real estate
694,931
16,060
4.65
657,035
16,517
5.07
Construction and land
132,194
2,750
4.18
121,358
3,507
5.83
Residential real estate
499,572
10,193
4.10
486,882
11,170
4.63
Consumer
45,641
1,056
4.65
52,424
1,288
4.95
Total portfolio loans
1,746,696
38,623
4.45
1,655,030
41,185
5.02
Paycheck Potection Program loans
71,358
896
2.52
-
-
-
Total loans and leases
1,818,053
39,518
4.37
1,655,030
41,185
5.02
Securities available for sale: U.S Gov agencies
75,523
1,024
2.73
104,233
1,431
2.77
Mortgage-backed
170,409
1,923
2.27
88,764
1,426
3.24
Corporate debentures
5,515
184
6.72
2,990
124
8.36
Total available for sale securities
251,447
3,131
2.50
195,987
2,981
3.07
Securities held to maturity
7,747
225
5.83
9,264
286
6.23
FHLB Atlanta stock, at cost
14,361
393
5.51
10,446
329
6.35
Interest bearning deposits in banks
85,521
254
0.60
65,555
636
1.96
Loans held for sale
9,894
179
3.64
23,530
512
4.39
Total earning assets
2,187,024
43,700
4.02
%
1,959,812
45,929
4.73
%
Cash and due from banks
14,833
13,724
Bank premises and equipment, net
42,560
44,791
Goodwill and other intangible assets
73,631
79,062
Other assets
143,843
144,136
Less: allowance for credit losses
(12,068
)
(9,470
)
Total assets
$
2,449,822
$
2,232,055
Interest-bearing liabilities Deposits: Interest-bearing
demand accounts
$
185,043
$
214
0.23
%
$
216,305
$
542
0.51
%
Money market
367,218
1,047
0.57
355,429
1,282
0.73
Savings
137,240
70
0.10
138,703
124
0.18
Time deposits
540,691
4,262
1.59
547,256
5,620
2.07
Total interest-bearing deposits
1,230,192
5,594
0.91
1,257,693
7,568
1.21
Borrowings: FHLB advances
288,407
1,532
1.07
197,763
2,548
2.60
Fed funds and repos
11,707
17
0.29
10,950
26
0.48
Subordinated debt
28,282
913
6.49
28,094
959
6.88
Total borrowings
328,396
2,461
1.51
236,807
3,533
3.01
Total interest-bearing funds
1,558,588
8,055
1.04
%
1,494,500
11,101
1.50
%
Noninterest-bearing deposits
548,390
416,647
Other liabilities
25,864
20,336
Total liabilities
2,132,842
1,931,483
Stockholders' equity
316,980
300,572
Total liabilities & equity
$
2,449,822
$
2,232,055
Net interest rate spread (1)
$
35,645
2.98
%
$
34,828
3.23
%
Effect of noninterest-bearing funds
0.30
0.36
Net interest margin on earning assets (2)
3.28
%
3.58
%
(1) The difference between the annualized yield on average
total earning assets and the annualized cost of average total
interest-bearing liabilities (2) Annualized net interest income
divided by average total earning assets
Reconciliation of Non-GAAP Financial Measures
This press release contains references to financial measures
that are not defined in generally accepted accounting principles
(“GAAP”). Such non-GAAP financial measures 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 press 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 with names similar to the non-GAAP
financial measures we have discussed in this press 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.
The Company has excluded the after tax impact of its recently
exited mortgage banking activities, the goodwill impairment charge,
and items determined to be infrequently occurring, as well as a
one-time income tax benefit as a result of the CARES Act. The
reconciliation is presented on the following pages.
HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP
RECONCILIATION - CORE NET INCOME AND EPS (in thousands except
per share data)
FOR THE SIX MONTHS ENDED FOR THE THREE
MONTHS ENDED June 30, June 30, June 30,
March 31, December 31, September 30, June
30,
2020
2019
2020
2020
2019
2019
2019
Net (loss) income (GAAP)
$
(26,065
)
$
6,344
$
(29,409
)
$
3,343
$
5,900
$
4,637
$
2,088
Adjustments: Mortgage banking activities: Net interest income
(143
)
(340
)
-
(143
)
(164
)
(177
)
(193
)
Noninterest income
(1,425
)
(5,058
)
-
(1,425
)
(2,699
)
(2,871
)
(3,113
)
Noninterest expenses
1,438
4,267
-
1,438
2,056
2,712
2,113
Total pretax - mortgage banking activities
(130
)
(1,131
)
-
(130
)
(807
)
(336
)
(1,193
)
Certain other items: Securities gains
(3,044
)
(658
)
(3,044
)
-
-
-
(658
)
Proceeds from agreement to exit mortgage banking activities
-
-
-
-
(750
)
-
-
Prepayment penalty - FHLB advances
224
651
224
-
-
-
651
Branch optimization charge
-
3,600
-
-
(338
)
-
3,600
Litigation expense
1,000
-
1,000
-
-
700
-
CFO departure
788
-
-
788
-
-
-
Goodwill impairment charge
34,500
-
34,500
-
-
-
-
Total pretax - certain other items
33,468
3,593
32,680
788
(1,088
)
700
3,593
Total core pretax income adjustments
33,338
2,462
32,680
658
(1,895
)
364
2,400
Income tax expense (benefit) of adjustments
(276
)
665
(454
)
178
(512
)
98
648
Total core pretax income adjustments, net of tax
33,614
1,797
33,134
480
(1,383
)
266
1,752
Less: One-time benefit of NOL carryback (CARES Act)
(1,177
)
-
-
(1,177
)
-
-
-
Total core adjustments to net income
32,437
1,797
33,134
(697
)
(1,383
)
266
1,752
Core net income (Non-GAAP)
$
6,372
$
8,141
$
3,725
$
2,646
$
4,517
$
4,903
$
3,840
Diluted average common shares
18,791
19,071
18,716
18,915
19,083
19,082
19,068
Diluted EPS (GAAP)
$
(1.39
)
$
0.33
$
(1.57
)
$
0.18
$
0.31
$
0.24
$
0.11
Total core adjustments to net income
1.73
0.09
1.77
(0.04
)
(0.07
)
0.01
0.09
Core diluted EPS (Non-GAAP)
$
0.34
$
0.43
$
0.20
$
0.14
$
0.24
$
0.26
$
0.20
GAAP TO NON-GAAP RECONCILIATION - PRE-PROVISION NET
REVENUE ("PPNR") (in thousands)
FOR THE SIX MONTHS ENDED
FOR THE THREE MONTHS ENDED June 30, June 30,
June 30, March 31, December 31, September
30, June 30,
2020
2019
2020
2020
2019
2019
2019
Net (loss) income (GAAP)
$
(26,065
)
$
6,344
$
(29,409
)
$
3,343
$
5,900
$
4,637
$
2,088
Plus: provision for credit losses
6,445
2,835
3,000
3,445
750
608
1,110
Plus: income tax expense
1,203
1,714
1,660
(457
)
1,880
1,598
543
Pre-provision net revenue (Non-GAAP)
$
(18,417
)
$
10,893
$
(24,749
)
$
6,331
$
8,530
$
6,843
$
3,741
Adjustments to net revenue: Mortgage banking activities
(130
)
(1,131
)
-
(130
)
(807
)
(336
)
(1,193
)
Securities gains
(3,044
)
(658
)
(3,044
)
-
-
-
(658
)
Proceeds from agreement to exit mortgage banking activities
-
-
-
-
(750
)
-
-
Prepayment penalty - FHLB advances
224
651
224
-
-
-
651
Branch optimization charge
-
3,600
-
-
(338
)
-
3,600
Litigation accrual
1,000
-
1,000
-
-
700
-
CFO departure
788
-
-
788
-
-
-
Goodwill impairment charge
34,500
-
34,500
-
-
-
-
Total core pretax net revenue adjustments
33,338
2,462
32,680
658
(1,895
)
364
2,400
Core pre-provision net revenue (PPNR)
$
14,921
$
13,355
$
7,931
$
6,989
$
6,635
$
7,207
$
6,141
GAAP TO NON-GAAP RECONCILIATION - PPNR / AVERAGE TANGIBLE
COMMON EQUITY (in thousands)
FOR THE SIX MONTHS ENDED
FOR THE THREE MONTHS ENDED June 30, June 30,
June 30, March 31, December 31, September
30, June 30,
2020
2019
2020
2020
2019
2019
2019
Core PPNR (Non-GAAP)
$
14,921
$
13,355
$
7,931
$
6,989
$
6,635
$
7,207
$
6,141
Average common equity (GAAP)
$
316,980
$
300,572
$
319,152
$
314,805
$
311,777
$
306,635
$
303,599
Less average goodwill
(65,760
)
(68,254
)
(65,570
)
(65,950
)
(65,949
)
(65,949
)
(65,949
)
Less average core deposit intangible, net
(5,921
)
(8,087
)
(5,672
)
(6,170
)
(6,702
)
(7,251
)
(7,805
)
Average tangible common equity (non-GAAP)
$
245,299
$
224,232
$
247,910
$
242,685
$
239,125
$
233,435
$
229,844
Core PPNR / average tangible common equity (Non-GAAP)
12.23
%
12.01
%
12.87
%
11.58
%
11.01
%
12.25
%
10.72
%
Annualized ratio based on days in quarter divided by days in
year
HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP
RECONCILIATION - EFFICIENCY RATIO (in thousands)
FOR THE SIX
MONTHS ENDED FOR THE THREE MONTHS ENDED June 30,
June 30, June 30, March 31, December
31, September 30, June 30,
2020
2019
2020
2020
2019
2019
2019
Net interest income (GAAP)
$
35,645
$
34,828
$
18,119
$
17,525
$
17,267
$
17,215
$
17,354
Adjustments: Mortgage banking activities
(143
)
(340
)
-
(143
)
(164
)
(177
)
(193
)
Total core net interest income adjustments
(143
)
(340
)
-
(143
)
(164
)
(177
)
(193
)
Core net interest income (Non-GAAP)
$
35,502
$
34,488
$
18,119
$
17,382
$
17,103
$
17,038
$
17,161
Noninterest income (GAAP)
$
8,125
$
10,376
$
4,759
$
3,366
$
5,625
$
5,033
$
5,841
Adjustments: Mortgage banking activities
(1,425
)
(5,058
)
-
(1,425
)
(2,699
)
(2,871
)
(3,113
)
Securities gains
(3,044
)
(658
)
(3,044
)
-
-
-
(658
)
Proceeds from agreement to exit mortgage banking activities
-
-
-
-
(750
)
-
-
Total core noninterest income adjustments
(4,469
)
(5,716
)
(3,044
)
(1,425
)
(3,449
)
(2,871
)
(3,771
)
Core noninterest income (Non-GAAP)
$
3,656
$
4,660
$
1,715
$
1,941
$
2,176
$
2,162
$
2,070
Total net interest income and noninterest income
(GAAP)
$
43,770
$
45,204
$
22,878
$
20,891
$
22,892
$
22,248
$
23,195
Adjustments: Total core net interest income adjustments
(143
)
(340
)
-
(143
)
(164
)
(177
)
(193
)
Total core noninterest income adjustments
(4,469
)
(5,716
)
(3,044
)
(1,425
)
(3,449
)
(2,871
)
(3,771
)
Total core net interest income and noninterest income adjustments
(4,612
)
(6,056
)
(3,044
)
(1,568
)
(3,613
)
(3,048
)
(3,964
)
Core net interest income + noninterest income (Non-GAAP)
$
39,158
$
39,148
$
19,834
$
19,323
$
19,279
$
19,200
$
19,231
Noninterest expense (GAAP)
$
62,187
$
34,311
$
47,627
$
14,560
$
14,362
$
15,405
$
19,454
Adjustments: Mortgage banking activities
(1,438
)
(4,267
)
-
(1,438
)
(2,056
)
(2,712
)
(2,113
)
Prepayment penalty - FHLB advances
(224
)
(651
)
(224
)
-
-
-
(651
)
Branch optimization charge
-
(3,600
)
-
-
338
-
(3,600
)
Litigation accrual
(1,000
)
-
(1,000
)
-
-
(700
)
-
CFO departure
(788
)
-
-
(788
)
-
-
-
Goodwill impairment charge
(34,500
)
-
(34,500
)
-
-
-
-
Total core noninterest expense adjustments
(37,950
)
(8,518
)
(35,724
)
(2,226
)
(1,718
)
(3,412
)
(6,364
)
Core noninterest expense (Non-GAAP)
$
24,237
$
25,793
$
11,903
$
12,334
$
12,644
$
11,993
$
13,090
Efficiency ratio (GAAP)
142.08
%
75.90
%
208.18
%
69.70
%
62.74
%
69.24
%
83.87
%
Core efficiency ratio (Non-GAAP)
61.90
%
65.89
%
60.01
%
63.83
%
65.58
%
62.46
%
68.07
%
GAAP TO NON-GAAP RECONCILIATION - TANGIBLE BOOK VALUE PER COMMON
SHARE (in thousands except per share data)
FOR THE
SIX MONTHS ENDED FOR THE THREE MONTHS ENDED June
30, June 30, June 30, March 31,
December 31, September 30, June 30,
2020
2019
2020
2020
2019
2019
2019
Common and total stockholder's equity (GAAP)
$
283,281
$
303,527
$
283,281
$
315,358
$
314,148
$
308,752
$
303,527
Total shares outstanding at period end
18,716
19,063
18,716
18,715
19,067
19,082
19,063
Book value per common share at period end (GAAP)
$
15.14
$
15.92
$
15.14
$
16.85
$
16.48
$
16.18
$
15.92
Common and total stockholder's equity (GAAP)
$
283,281
$
303,527
$
283,281
$
315,358
$
314,148
$
308,752
$
303,527
Less goodwill
(31,449
)
(65,949
)
(31,449
)
(65,949
)
(65,949
)
(65,949
)
(65,949
)
Less deposit intangible, net of deferred tax liability
(5,358
)
(7,414
)
(5,358
)
(5,802
)
(6,339
)
(6,866
)
(7,414
)
Tangible common equity (non-GAAP)
$
246,474
$
230,164
$
246,474
$
243,607
$
241,860
$
235,937
$
230,164
Total shares outstanding at period end
18,716
19,063
18,716
18,715
19,067
19,082
19,063
Tangible book value per common share (Non GAAP)
$
13.17
$
12.07
$
13.17
$
13.02
$
12.68
$
12.36
$
12.07
HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP
RECONCILIATION - TANGIBLE COMMON EQUITY / TANGIBLE ASSETS (in
thousands except per share data)
FOR THE SIX MONTHS
ENDED FOR THE THREE MONTHS ENDED June 30, June
30, June 30, March 31, December 31,
September 30, June 30,
2020
2019
2020
2020
2019
2019
2019
Common (and total) stockholder's equity (GAAP)
$
283,281
$
303,527
$
283,281
$
315,358
$
314,148
$
308,752
$
303,527
Less goodwill
(31,449
)
(65,949
)
(31,449
)
(65,949
)
(65,949
)
(65,949
)
(65,949
)
Less deposit intangible, net of deferred tax liability
(5,358
)
(7,414
)
(5,358
)
(5,802
)
(6,339
)
(6,866
)
(7,414
)
Tangible common equity (non-GAAP)
$
246,474
$
230,164
$
246,474
$
243,607
$
241,860
$
235,937
$
230,164
Total assets (GAAP)
$
2,463,450
$
2,295,634
$
2,463,450
$
2,507,894
$
2,374,619
$
2,293,475
$
2,295,634
Less goodwill
(31,449
)
(65,949
)
(31,449
)
(65,949
)
(65,949
)
(65,949
)
(65,949
)
Less deposit intangible, net of deferred tax liability
(5,358
)
(7,414
)
(5,358
)
(5,802
)
(6,339
)
(6,866
)
(7,414
)
Tangible assets (non-GAAP)
$
2,426,643
$
2,222,271
$
2,426,643
$
2,436,143
$
2,302,331
$
2,220,660
$
2,222,271
Tangible common equity / tangible assets (period end)
10.16
%
10.36
%
10.16
%
10.00
%
10.51
%
10.62
%
10.36
%
GAAP TO NON-GAAP RECONCILIATION - RETURN ON AVERAGE
COMMON EQUITY (in thousands)
FOR THE SIX MONTHS ENDED
FOR THE THREE MONTHS ENDED June 30, June 30,
June 30, March 31, December 31, September
30, June 30,
2020
2019
2020
2020
2019
2019
2019
Net (loss) income (GAAP)
$
(26,065
)
$
6,344
$
(29,409
)
$
3,343
$
5,900
$
4,637
$
2,088
Average common (and total) equity (GAAP)
316,980
300,572
319,152
314,805
311,777
306,635
303,599
Return on average common equity (GAAP)
-16.54
%
4.26
%
-37.06
%
4.27
%
7.51
%
6.00
%
2.76
%
Net (loss) income (GAAP)
$
(26,065
)
$
6,344
$
(29,409
)
$
3,343
$
5,900
$
4,637
$
2,088
Total core adjustments to net income
32,437
1,797
33,134
(697
)
(1,383
)
266
1,752
Core net income (Non-GAAP)
$
6,372
$
8,141
$
3,725
$
2,646
$
4,517
$
4,903
$
3,840
Average common equity
316,980
300,572
319,152
314,805
311,777
306,635
303,599
Core return on average common equity (Non-GAAP)
4.04
%
5.46
%
4.69
%
3.38
%
5.75
%
6.34
%
5.07
%
Annualized ratio based on days in quarter divided by days in
year
GAAP TO NON-GAAP RECONCILIATION - TANGIBLE RETURN ON
AVERAGE TANGIBLE COMMON EQUITY (in thousands)
FOR THE SIX
MONTHS ENDED FOR THE THREE MONTHS ENDED June 30,
June 30, June 30, March 31, December
31, September 30, June 30,
2020
2019
2020
2020
2019
2019
2019
Net (loss) income (GAAP)
$
(26,065
)
$
6,344
$
(29,409
)
$
3,343
$
5,900
$
4,637
$
2,088
Goodwill impairment charge
34,500
-
34,500
-
-
-
-
CDI amortization
1,379
1,551
680
699
717
745
767
Income tax expense on pretax total
(372
)
(419
)
(184
)
(189
)
(194
)
(201
)
(207
)
CDI amortization, net of tax
1,007
1,132
496
510
523
544
560
Total adjustments to net income
35,507
1,132
34,996
510
523
544
560
Tangible net income (Non-GAAP)
$
9,441
$
7,476
$
5,587
$
3,853
$
6,423
$
5,181
$
2,648
Average common equity (GAAP)
$
316,980
$
300,572
$
319,152
$
314,805
$
311,777
$
306,635
$
303,599
Less average goodwill
(65,760
)
(68,254
)
(65,570
)
(65,950
)
(65,949
)
(65,949
)
(65,949
)
Less average core deposit intangible, net
(5,921
)
(8,087
)
(5,672
)
(6,170
)
(6,702
)
(7,251
)
(7,805
)
Average tangible common equity (non-GAAP)
$
245,299
$
224,232
$
247,910
$
242,685
$
239,125
$
233,435
$
229,844
Tangible return on average tangible common equity
(Non-GAAP)
7.74
%
6.72
%
9.06
%
6.39
%
10.66
%
8.81
%
4.62
%
Tangible net income (Non-GAAP)
$
9,441
$
7,476
$
5,587
$
3,853
$
6,423
$
5,181
$
2,648
Total core adjustments to net (loss) income (ex goodwill
impairment)
(2,063
)
1,797
(1,366
)
(697
)
(1,383
)
266
1,752
Core tangible net income (Non-GAAP)
$
7,379
$
9,273
$
4,221
$
3,157
$
5,040
$
5,447
$
4,400
Average tangible common equity (non-GAAP)
$
245,299
$
224,232
$
247,910
$
242,685
$
239,125
$
233,435
$
229,844
Core tangible return on average tangible common
equity (Non-GAAP)
6.05
%
8.34
%
6.85
%
5.23
%
8.36
%
9.26
%
7.68
%
Annualized ratio based on days in quarter divided by days in
year
HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP
RECONCILIATION - RETURN ON AVERAGE ASSETS (in thousands)
FOR
THE SIX MONTHS ENDED FOR THE THREE MONTHS ENDED June
30, June 30, June 30, March 31,
December 31, September 30, June 30,
2020
2019
2020
2020
2019
2019
2019
Net (loss) income (GAAP)
$
(26,065
)
$
6,344
$
(29,409
)
$
3,343
$
5,900
$
4,637
$
2,088
Average total assets (GAAP)
2,449,822
2,232,055
2,529,797
2,369,847
2,292,369
2,244,258
2,246,800
Return on average assets (GAAP)
-2.14
%
0.57
%
-4.68
%
0.57
%
1.02
%
0.82
%
0.37
%
Net (loss) income (GAAP)
(26,065
)
6,344
(29,409
)
3,343
5,900
4,637
2,088
Total core adjustments to net (loss) income
32,437
1,797
33,134
(697
)
(1,383
)
266
1,752
Core net income (Non-GAAP)
$
6,372
$
8,141
$
3,725
$
2,646
$
4,517
$
4,903
$
3,840
Average total assets (GAAP)
2,449,822
2,232,055
2,529,797
2,369,847
2,292,369
2,244,258
2,246,800
Core return on average assets (Non-GAAP)
0.52
%
0.74
%
0.59
%
0.45
%
0.78
%
0.87
%
0.69
%
Annualized ratio based on days in quarter divided by days in
year
GAAP TO NON-GAAP RECONCILIATION - TANGIBLE RETURN ON
AVERAGE TANGIBLE ASSETS (in thousands)
FOR THE SIX MONTHS
ENDED FOR THE THREE MONTHS ENDED June 30, June
30, June 30, March 31, December 31,
September 30, June 30,
2020
2019
2020
2020
2019
2019
2019
Net (loss) income (GAAP)
$
(26,065
)
$
6,344
$
(29,409
)
$
3,343
$
5,900
$
4,637
$
2,088
Goodwill impairment charge
34,500
-
34,500
-
-
-
-
CDI amortization
1,379
1,551
680
699
717
745
767
Income tax expense on pretax total
(372
)
(419
)
(184
)
(189
)
(194
)
(201
)
(207
)
CDI amortization, net of tax
1,007
1,132
496
510
523
544
560
Total adjustments to net income
35,507
1,132
34,996
510
523
544
560
Tangible net income (Non-GAAP)
$
9,441
$
7,476
$
5,587
$
3,853
$
6,423
$
5,181
$
2,648
Average total assets (GAAP)
2,449,822
2,232,055
2,529,797
2,369,847
2,292,369
2,244,258
2,246,800
Less average goodwill
(65,760
)
(68,254
)
(65,570
)
(65,950
)
(65,949
)
(65,949
)
(65,949
)
Less average core deposit intangible, net
(5,921
)
(8,087
)
(5,672
)
(6,170
)
(6,702
)
(7,251
)
(7,805
)
Average tangible assets (non-GAAP)
$
2,378,141
$
2,155,715
$
2,458,555
$
2,297,727
$
2,219,717
$
2,171,058
$
2,173,045
Tangible return on average tangible assets (Non-GAAP)
0.80
%
0.70
%
0.91
%
0.67
%
1.15
%
0.95
%
0.49
%
Tangible net income (Non-GAAP)
$
9,441
$
7,476
$
5,587
$
3,853
$
6,423
$
5,181
$
2,648
Total core adjustments to net (loss) income (ex goodwill
impairment)
(2,063
)
1,797
(1,366
)
(697
)
(1,383
)
266
1,752
Core tangible net income (Non-GAAP)
$
7,379
$
9,273
$
4,221
$
3,157
$
5,040
$
5,447
$
4,400
Average tangible assets (non-GAAP)
$
2,378,141
$
2,155,715
$
2,458,555
$
2,297,727
$
2,219,717
$
2,171,058
$
2,173,045
Core tangible return on average tangible assets
(Non-GAAP)
0.62
%
0.87
%
0.69
%
0.55
%
0.90
%
1.00
%
0.81
%
Annualized ratio based on days in quarter divided by days in
year
GAAP TO NON-GAAP RECONCILIATION - ALLOWANCE FOR CREDIT
LOSSES AS A % OF PORTFOLIO LOANS (in thousands)
FOR THE SIX
MONTHS ENDED FOR THE THREE MONTHS ENDED June 30,
June 30, June 30, March 31, December
31, September 30, June 30,
2020
2019
2020
2020
2019
2019
2019
Allowance for credit losses (GAAP)
$
16,356
$
9,120
$
16,356
$
13,384
$
10,401
$
9,598
$
9,120
Total loans and leases (GAAP)
1,898,630
1,701,020
1,898,630
1,761,419
1,745,513
1,729,880
1,701,020
Allowance as a % of total loans and leases (GAAP)
0.86
%
0.54
%
0.86
%
0.76
%
0.60
%
0.55
%
0.54
%
Allowance for credit losses (GAAP)
$
16,356
$
9,120
$
16,356
$
13,384
$
10,401
$
9,598
$
9,120
Total loans and leases (GAAP)
1,898,630
1,701,020
1,898,630
1,761,419
1,745,513
1,729,880
1,701,020
Less PPP loans outstanding
(193,719
)
-
(193,719
)
-
-
-
-
Portfolio loans (non-GAAP)
1,704,911
1,701,020
1,704,911
1,761,419
1,745,513
1,729,880
1,701,020
Allowance as a % of portfolio loans (non-GAAP)
0.96
%
0.54
%
0.96
%
0.76
%
0.60
%
0.55
%
0.54
%
HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP
RECONCILIATION - NONPERFORMING LOANS AS A % OF PORTFOLIO LOANS
(in thousands)
FOR THE SIX MONTHS ENDED FOR THE THREE
MONTHS ENDED June 30, June 30, June 30,
March 31, December 31, September 30, June
30,
2020
2019
2020
2020
2019
2019
2019
Nonperforming loans
$
18,469
$
19,305
$
18,469
$
17,203
$
19,143
$
19,960
$
19,305
Total loans and leases (GAAP)
1,898,630
1,701,020
1,898,630
1,761,419
1,745,513
1,729,880
1,701,020
Nonperforming loans as a % of total loans and leases
(GAAP)
0.97
%
1.13
%
0.97
%
0.98
%
1.10
%
1.15
%
1.13
%
Nonperforming loans
$
18,469
$
19,305
$
18,469
$
17,203
$
19,143
$
19,960
$
19,305
Total loans and leases (GAAP)
1,898,630
1,701,020
1,898,630
1,761,419
1,745,513
1,729,880
1,701,020
Less PPP loans outstanding
(193,719
)
-
(193,719
)
-
-
-
-
Portfolio loans (non-GAAP)
1,704,911
1,701,020
1,704,911
1,761,419
1,745,513
1,729,880
1,701,020
Nonperforming loans as a % of portfolio loans
(non-GAAP)
1.08
%
1.13
%
1.08
%
0.98
%
1.10
%
1.15
%
1.13
%
GAAP TO NON-GAAP RECONCILIATION - NONPERFORMING ASSETS AS A % OF
PORTFOLIO LOANS + OREO (in thousands)
FOR THE SIX MONTHS
ENDED FOR THE THREE MONTHS ENDED June 30, June
30, June 30, March 31, December 31,
September 30, June 30,
2020
2019
2020
2020
2019
2019
2019
Nonperforming assets
$
20,606
$
24,007
$
20,606
$
19,525
$
22,241
$
23,886
$
24,007
Total loans and leases (GAAP)
1,898,630
1,701,020
1,898,630
1,761,419
1,745,513
1,729,880
1,701,020
OREO
2,137
4,702
2,137
2,322
3,098
3,926
4,702
Total loans and leases + OREO
1,900,767
1,705,722
1,900,767
1,763,741
1,748,611
1,733,806
1,705,722
Nonperforming assets as a % of total loans and
leases + OREO (GAAP)
1.08
%
1.41
%
1.08
%
1.11
%
1.27
%
1.38
%
1.41
%
Nonperforming assets
$
20,606
$
24,007
$
20,606
$
19,525
$
22,241
$
23,886
$
24,007
Total loans and leases (GAAP)
1,898,630
1,701,020
1,898,630
1,761,419
1,745,513
1,729,880
1,701,020
OREO
2,137
4,702
2,137
2,322
3,098
3,926
4,702
Total loans and leases + OREO
1,900,767
1,705,722
1,900,767
1,763,741
1,748,611
1,733,806
1,705,722
Less PPP loans outstanding
(193,719
)
-
(193,719
)
-
-
-
-
Portfolio loans + OREO
$
1,707,048
$
1,705,722
$
1,707,048
$
1,763,741
$
1,748,611
$
1,733,806
$
1,705,722
Nonperforming assets as a % of portfolio loans +
OREO (non-GAAP)
1.21
%
1.41
%
1.21
%
1.11
%
1.27
%
1.38
%
1.41
%
GAAP TO NON-GAAP RECONCILIATION - ALLOWANCE FOR CREDIT
LOSSES + FV MARKS AS A % OF PORTFOLIO LOANS + FV MARKS (in
thousands)
FOR THE SIX MONTHS ENDED FOR THE THREE MONTHS
ENDED June 30, June 30, June 30, March
31, December 31, September 30, June 30,
2020
2019
2020
2020
2019
2019
2019
Allowance for credit losses (GAAP)
$
16,356
$
9,120
$
16,356
$
13,384
$
10,401
$
9,598
$
9,120
Add: Fair value marks
8,105
9,957
8,105
8,737
9,078
9,460
9,957
Allowance + fair value marks (non-GAAP)
$
24,460
$
19,077
$
24,460
$
22,121
$
19,479
$
19,058
$
19,077
Total loans and leases (GAAP)
$
1,898,630
$
1,701,020
$
1,898,630
$
1,761,419
$
1,745,513
$
1,729,880
$
1,701,020
Add: fair value marks
8,105
9,957
8,105
8,737
9,078
9,460
9,957
Total loans and leases + fair value marks (non-GAAP)
$
1,906,734
$
1,710,977
$
1,906,734
$
1,770,156
$
1,754,591
$
1,739,340
$
1,710,977
Allowance + fair value marks as a % of total loans
and leases + fair value marks (non-GAAP)
1.28
%
1.11
%
1.28
%
1.25
%
1.11
%
1.10
%
1.11
%
Allowance for credit losses (GAAP)
$
16,356
$
9,120
$
16,356
$
13,384
$
10,401
$
9,598
$
9,120
Add: Fair value marks
8,105
9,957
8,105
8,737
9,078
9,460
9,957
Allowance + fair value marks (non-GAAP)
$
24,460
$
19,077
$
24,460
$
22,121
$
19,479
$
19,058
$
19,077
Total loans and leases (GAAP)
$
1,898,630
$
1,701,020
$
1,898,630
$
1,761,419
$
1,745,513
$
1,729,880
$
1,701,020
Less PPP loans outstanding
(193,719
)
-
(193,719
)
-
-
-
-
Portfolio loans (non-GAAP)
$
1,704,911
$
1,701,020
$
1,704,911
$
1,761,419
$
1,745,513
$
1,729,880
$
1,701,020
Add: fair value marks
8,105
9,957
8,105
8,737
9,078
9,460
9,957
Portfolio loans + fair value marks (non-GAAP)
$
1,713,015
$
1,710,977
$
1,713,015
$
1,770,156
$
1,754,591
$
1,739,340
$
1,710,977
Allowance + fair value marks as a % of total loans
and leases + fair value marks (non-GAAP)
1.43
%
1.11
%
1.43
%
1.25
%
1.11
%
1.10
%
1.11
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200727005739/en/
Howard Bancorp, Inc. Robert L. Carpenter, Jr., Executive Vice
President and Chief Financial Officer, 410-750-0020
Howard Bancorp (NASDAQ:HBMD)
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