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
September 30, 2020.
Net Income (Loss) and Income (Loss) per
Share
The Company reported net income of $4.6 million, or $0.25 per
both basic and diluted common share, for the third quarter of 2020.
This compares to net income of $4.6 million, or $0.24 per both
basic and diluted common share, for the third quarter of 2019 and a
net loss of $29.4 million, or a $1.57 loss per both basic and
diluted common share, for the second quarter of 2020.
The increases in third quarter 2020 basic and diluted earnings
per common share of $0.01 when compared to the third quarter of
2019 and $1.82 when compared to the second quarter of 2020 were
primarily attributable to the following items:
- The second quarter of 2020 included a $34.5 million goodwill
impairment charge, included within noninterest expense. This item,
which had no tax impact, reduced second quarter 2020 earnings by
$1.84 per share.
- The third quarter 2020 provision for credit losses was $1.7
million, an increase of $1.1 million (-$0.04 after tax per share)
from the third quarter of 2019, and a decrease of $1.3 million
(+$0.05 after tax per share) from the second quarter of 2020.
- The Small Business Administration’s (“SBA”) Paycheck Protection
Program (“PPP”) resulted in significant loan originations under
this program in the second quarter of 2020. Third quarter 2020
pretax income of $1.1 million ($0.04 after tax per share) from this
program represented an increase of $66 thousand (under $0.01 after
tax per share) from the second quarter of 2020. The PPP program did
not exist prior to the second quarter of 2020.
- The third quarter of 2019 included $336 thousand ($0.01 per
share) in pretax income from the Company’s former mortgage banking
activities, which were concluded in the first quarter of 2020.
- The third quarter of 2019 included a $700 thousand ($0.03 per
share) litigation settlement charge stemming from certain mortgages
originated by First Mariner Bank before its merger with Howard
Bank.
- The second quarter of 2020 included a $1.0 million ($0.04 per
share) litigation accrual for potential litigation claims stemming
from certain mortgages originated by First Mariner Bank. This
accrual was not related to the $700 thousand litigation settlement
charge recorded in the third quarter of 2019.
- The second quarter of 2020 included securities gains of $3.0
million ($0.12 per share). We did not recognize any securities
gains in the third quarters of 2020 or 2019.
- The second quarter of 2020 included prepayment penalties on
Federal Home Loan Bank of Atlanta (“FHLB”) advances of $224
thousand ($0.01 per share). We did not recognize any prepayment
penalties in the third quarter of 2020 or 2019.
Core net income is a non-GAAP financial measure that excludes,
if applicable, 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 third quarter of
2020, which is unchanged from reported net income, was $4.6
million, or $0.25 per both basic and diluted common share. This
compares to core net income of $4.9 million, or $0.26 per both
basic and diluted common share for the third quarter of 2019. The
$0.01 per share decrease in core earnings per share was primarily
the result of a higher provision for credit losses, reflecting the
changing economic environment, which was up $1.1 million (-$0.04
after tax per share), offset by the pretax contribution from PPP
lending activities of $1.1 million (+$0.04 after tax per share).
This also compares to core net income of $3.7 million, or $0.20 per
both basic and diluted common share, for the second quarter of
2020. The $0.05 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 $1.3 million (+$0.05 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 certain other items, was $7.7 million for the third
quarter of 2020. The third quarter of 2020 core PPNR was up $446
thousand, or 6.2%, from $7.2 million for the third quarter of 2019,
and was down $278 thousand, or 3.5%, when compared to the second
quarter 2020 core PPNR of $7.9 million. *
The Company reported a net loss of $21.5 million, or a loss of
$1.14 per both basic and diluted share, for the nine months ended
September 30, 2020. This compared to net income of $11.0 million,
or $0.58 per both basic and diluted share, for the nine months
ended September 30, 2019. Core net income for the nine months ended
September 30, 2020 was $11.0 million, or $0.58 per both basic and
diluted share, compared to $13.0 million, or $0.68 per both basic
and diluted share, for the nine months ended September 30, 2019.
Core PPNR for the nine months ended September 30, 2020 was $22.6
million, a $2.0 million, or 9.8%, increase from $20.6 million for
the nine months ended September 30, 2019. *
Paycheck Protection Program
Loans
The Company actively participated in the SBA’s PPP program
during the second and third quarters of 2020. $201.0 million of
loans were originated under the program, with $2.0 million
originated during the third quarter. A total of 1,062 loans were
originated under the program with an average loan size of $189
thousand. The Company originated 525 loans, totaling $10.4 million,
which are eligible under the recently implemented simplified
forgiveness rules issued by the SBA. As of October 23, 2020, the
SBA had approved three loan forgiveness applications submitted by
the Company, with total forgiveness of $134 thousand. The Company
will continue to support its customers throughout the forgiveness
process.
The Company received and deferred total processing fees from the
SBA for originated PPP loans of $6.7 million. In addition, $782
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 2.52%. The PPP loans generated pretax income of
$1.1 million, or $0.04 after tax per share, in the third quarter of
2020, up $66 thousand from the second quarter of 2020. PPP loans,
net of unearned income, totaled $196.4 million at September 30,
2020.
Certain information in this earnings release is presented with
respect to “portfolio loans”, a non-GAAP measure defined as total
loans and leases, but 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 third
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 within the next
nine months. The Company commenced making loans under the PPP
program in the second quarter of 2020 and, with the expiration of
the program, is no longer making new PPP loans. *
COVID-19 Response
The Company continues to respond 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 $201 million of PPP loans, 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 six months. Deferrals continue to trend
favorably from their peak of $315 million (17.9% of portfolio
loans) on April 24, 2020, dropping to $228 million (13.4% of
portfolio loans) on July 24, 2020, then to $148 million (8.7% of
portfolio loans) at September 3, 2020, the most recent date when
the Company previously disclosed deferral data. As of October 23,
2020, deferrals have further declined to $73 million, or 4.3% of
portfolio loans. Customer requests for second deferrals have been
minimal and the Company expects substantially all loans with
existing deferrals to have ended deferral status by January 31,
2021. *
Asset Quality and Allowance for Loan and
Lease Losses
Nonperforming assets (“NPAs”) totaled $18.1 million at September
30, 2020, a decrease of $2.5 million from June 30, 2020 and a
decrease of $5.7 million from September 30, 2019. NPAs consisted of
$17.0 million of nonperforming loans (“NPLs”) and $1.1 million of
other real estate owned (“OREO”) at September 30, 2020. NPLs were
0.90% of total loans and 1.01% of portfolio loans at September 30,
2020. NPAs represented 0.71% of total assets, 0.96% of total loans
and OREO, and 1.07% of portfolio loans and OREO at September 30,
2020. *
- This compares to NPAs of $23.9 million at September 30, 2019
that consisted of $20.0 million in NPLs and $3.9 million of OREO.
NPLs were 1.15% of total loans at September 30, 2019 while
nonperforming assets represented 1.04% of total assets and 1.38% of
total loans and OREO at September 30, 2019.
- This compares to NPAs of $20.6 million at June 30, 2020 that
consisted of $18.5 million in NPLs and $2.1 million of OREO. NPLs
were 0.97% of total loans and 1.08% of portfolio loans at June 30,
2020 while NPAs represented 0.84% of total assets, 1.08% of total
loans and OREO, and 1.21% of portfolio loans and OREO at June 30,
2020.
Net charge-offs were $78 thousand in the third quarter of 2020
and represented 0.02% of average portfolio loans (annualized). This
compares to net charge-offs of $129 thousand, or 0.03% of average
loans (annualized) in the third quarter of 2019 and $28 thousand,
or 0.01% of average portfolio loans (annualized) in the second
quarter of 2020. For the first nine months of 2020, net charge-offs
were $569 thousand, or 0.04% of both average total loans and
average portfolio loans (annualized). The allowance for loan and
lease losses (the “allowance”) was $17.7 million on September 30,
2020. The provision for credit losses for the third quarter of 2020
of $1.7 million included a $320 thousand addition to the reserve
for unfunded commitments which is included in other liabilities.
*
Because the Company is a smaller reporting company under SEC
rules, the allowance was determined under the incurred loss model.
The allowance represented 0.94% of total loans, 1.05% of portfolio
loans, and 104.0% of NPLs at September 30, 2020. *
- This compares to an allowance of $9.6 million at September 30,
2019. The September 30, 2019 allowance represented 0.55% of total
loans and 48.1% of NPLs. The $8.1 million increase in the allowance
at September 30, 2020 was the result of aggregate provisions for
credit losses attributable to the allowance of $8.6 million
partially offset by aggregate net charge-offs of $513 thousand
during the four quarter period ending September 30, 2020. $7.9
million of the aggregate provisions for credit losses attributable
to the allowance were recorded in 2020.
- This compares to an allowance of $16.4 million at June 30,
2020. The June 30, 2020 allowance represented 0.86% of total loans,
0.96% of portfolio loans, and 88.6% of NPLs. The $1.3 million
increase in the allowance at September 30, 2020 was the result of a
provision for credit losses attributable to the allowance of $1.4
million partially offset by net charge-offs of $78 thousand during
the quarter ended September 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 their initial impact on the allowance. The
allowance for loan and lease 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 loan and lease losses. While the fair value marks, unlike the
allowance, are not available to absorb general losses but are only
available to absorb losses for the specific loan to which they
apply, this measure provides the Company with an additional
indicator of loss absorption capacity. This non-GAAP measure was
1.32% of total loans at September 30, 2020, an increase of 0.04%
from June 30, 2020 and an increase of 0.22% from September 30,
2019. This measure was 1.48% of portfolio loans at September 30,
2020, an increase of 0.05% from June 30, 2020 and an increase of
0.38% from September 30, 2019. *
The Company’s asset quality trends continue to 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, but to a lesser extent than in the first two quarters of
2020, 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 at least the next several quarters. The Company
increased the allowance at September 30, 2020 by $1.3 million over
the June 30, 2020 level. The allowance has now been increased by
$7.3 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 as well as factors driven
by the level of loans to potentially highly impacted industries and
risk rating downgrades.
While the Maryland economy has fully reopened with some
limitations and a substantial amount of economic activity has
returned, unemployment, while declining, still remains high, and
many businesses are still experiencing significant drops in
revenue. The recent rise in new COVID-19 cases and hospitalizations
since the end of September 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 Company’s loan
portfolio, management believes there is the potential for
additional risk rating downgrades and an increase in charge-offs in
future periods.
Stockholders’ Equity and Regulatory
Capital Ratios
Stockholders’ equity at September 30, 2020 was $289.5 million,
an increase of $6.2 million from June 30, 2020. The increase was
primarily due to third quarter 2020 net income of $4.6 million and
a $1.2 million increase in accumulated other comprehensive income,
which represents the after tax impact of a $1.7 million increase in
the fair value of available-for-sale securities. Book value per
common share was $15.45 at September 30, 2020, a decrease of $0.73
per share since September 30, 2019 and an increase of $0.31 per
share since June 30, 2020.
Tangible stockholders’ equity, a non-GAAP financial measure that
deducts goodwill and other intangible assets, net of any applicable
deferred tax liabilities, was $253.2 million at September 30, 2020.
This compares to $246.5 million at June 30, 2020, with the $6.7
million increase primarily the result of growth in stockholders’
equity and the $489 thousand after tax effect of core deposit
intangible amortization. Tangible stockholders’ equity has
increased by $17.2 million since September 30, 2019. Tangible book
value per common share, a non-GAAP measure that divides tangible
stockholders’ equity by the number of shares outstanding, was
$13.51 per share at September 30, 2020, an increase of $1.15 per
share since September 30, 2019 and an increase of $0.34 per share
since June 30, 2020. *
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 14.25% while both the Common
Equity Tier 1 (“CET 1”) and Tier 1 capital ratios were 11.78% at
September 30, 2020. The Tier 1 to average assets (“leverage”) ratio
was 9.07%. A comparison of the Company’s September 30, 2020
regulatory capital ratios to September 30, 2019 and June 30, 2020
is as follows:
- Regulatory capital ratios at September 30, 2019 consisted of a
total capital ratio of 12.87% while both the CET 1 and Tier 1
capital ratios were 10.83%. The leverage ratio was 9.39%. All
September 30, 2020 regulatory capital ratios based on risk-weighted
assets were above the September 30, 2019 levels. The September 30,
2020 leverage ratio was lower due to PPP loans and their impact on
average total assets.
- Regulatory capital ratios at June 30, 2020 consisted of a total
capital ratio of 14.09% while both the CET 1 and Tier 1 capital
ratios were 11.66%. The leverage ratio was 8.73%. All September 30,
2020 regulatory capital ratios were above the June 30, 2020
levels.
- Since the Company utilized the Federal Reserve Bank of
Richmond’s (“FRB”) Paycheck Protection Program Lending Facility
(“PPPLF”) on a limited basis, only a small portion of PPP loans
could be deducted from average total assets for leverage ratio
purposes. Had the Company fully utilized the PPPLF, the leverage
ratios would have been 9.70% at September 30, 2020 and 9.23% at
June 30, 2020..
Mary Ann Scully, Chairman and CEO, commented, “We have all come
to expect that there are, right now, no consistently straight up or
straight down measures of health markers, macroeconomic indicators
or financial market performance but just a series of fundamental
improvements in most sectors broken by periods of setback. There
are only jagged lines on graphs post COVID. We, like all of our
stakeholders, do not expect certainty but we do seek clarity.
Clarity requires consistency. Howard Bank has great clarity right
now around the longstanding principles and priorities that will
continue to guide the choices we make day in and day out - not to
mention quarter to quarter. Those prioritized activities and their
linked metrics are the best predictors of not just our long term
stability but our long term success.
First and foremost, we focus on strong capital levels to support
and be supported by strong operating performance - both absolute
and relative - and both point in time and directional. Capital
ensures we withstand unexpected challenges and inherent volatility,
like that we are experiencing today. Capital also ensures support
for always sought-after growth opportunities, like those we are
seeing today as well. There is a mutual dependency, not a conflict
in our business model between growth and capital. Two key metrics
for evaluating our capital position are Tangible Book Value per
share (“TBV”) and Common Equity Tier 1 (“CET1”). Today, given the
need not only to preserve and grow Tier 1 capital but a concurrent
need to create larger levels of Tier 2 capital to adequately offset
credit volatility, we are using the pretax pre-provision revenue
(“PPNR”) metric as a material measure of success in operating
performance.
If those two metrics of capital growth and PPNR growth are the
priorities that give us clarity at a time of continued uncertainty,
we are both generally pleased with the metrics of success in those
priorities and also optimistic about the likelihood of continued
progress.
The bank’s absolute capital - TBV - has grown by 9% YOY;
relative capital is also strong by any regulatory or investor ratio
standard with the leverage ratio above 9%, and CET at 11.78%. This
capital is now available not only for future credit losses, if they
occur, but to support the higher loan growth expected in the fourth
quarter.
Since capital must be preserved as well as supplemented,
significant time and attention resources are allocated to asset
quality. All traditional lagging asset quality measures are showing
improvement. YTD six figure net charge offs are essentially flat to
2019 despite the unprecedented short term stress in the economy.
NPAs are down $5.7MM from September 30, 2019. The bank is also
closely examining leading indicators for signs of future stress as
well but we have seen loan deferrals fall from a high of 18% in the
second quarter to 4% as of this date with minimal requests for
extensions of deferrals past six months and have implemented
limited downgrades, most within Pass categories. Our loan portfolio
has both modest and dispersed levels of loans in highly impacted
industries. All of these metrics suggest that capital will be
largely preserved.
Equally focused on growing capital, PPNR will, for us, be driven
by revenue growth largely driven by loan growth. Unlike some in our
industry, we believe there are always loan growth opportunities. We
see and are executing on some higher yielding niche loan portfolio
opportunities. However, the thrust of our resource allocation is
around place based relationship building. In addition to seeing
opportunities always present in down cycles in markets dominated by
out of state competitors, we are seeing significant talent
acquisition opportunities and have commenced building our Greater
Washington team. Both of these activities are bearing fruit .This
quarter, a much lower traditional portfolio shrinkage is apparent
than in the last quarter. From a portfolio low point in July, both
commercial real estate (“CRE”) and C&I balances have started to
grow through all three development activities of customer
retention, customer expansion and customer acquisition. Our success
in gathering and retaining full relationships is evidenced by the
metric that our cost of funds is at an all-time low of 48 bps with
continued opportunity for further modest drops. The net interest
margin headwinds seen this quarter are more related to higher
pandemic driven liquidity levels as well as a full quarter of PPP
loans but continue to be mitigated by fixed rate loans in our CRE
portfolio and the lower funding costs. These factors have allowed
net interest income to grow, albeit modestly. Expense control also
continues to be a priority given the PPNR focus although unexpected
increases in both our FDIC assessment rate and our self-insured
health care costs, in addition to an accrual for an additional paid
time off benefit, with a carryover provision granted in light of
COVID-19, created what we believe to be a temporary headwind. Our
vision of the expense run rate in our core Baltimore market is
unchanged despite these three movements within the quarter
So as we look to quantitative fundamentals around strong capital
levels, organic capital growth, and underlying positive momentum in
PPNR, consistent with clear priorities, we believe in our ability
to successfully navigate continued uncertainty. We are always
grateful for our stakeholders who share a similar clear vision and
a similar focus on the long term. We also continue to acknowledge
our total reliance on an incredibly dedicated and resilient group
of colleagues who keep these principles front and center every
day.”
Liquidity
The Company’s liquidity position remains strong. The Company has
experienced a large increase in low-cost customer deposits since
the end of the first quarter. The Company continues to build stable
sources of contingency funding capacity, and management remains
confident that it will be able to access these funds in the event
that the markets again become restricted.
Borrowings under the PPPLF were $31.1 million at September 30,
2020. While the Company 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 of the PPPLF,
all during the second quarter. At this time, the Company has no
plans to further utilize the PPPLF.
Net Interest Income and Net Interest
Margin
Net interest income was $18.3 million for the quarter ended
September 30, 2020, an increase of $153 thousand from $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 3.15% for the third quarter of 2020, down 7 basis
points (“BP”) from 3.22% in the second quarter of 2020. Compared to
the second quarter of 2020, the third quarter of 2020 yield on
average loans was 4.04% (a decrease of 14 BP), the yield on average
portfolio loans was 4.22% (a decrease of 9 BP), and the yield on
average earning assets was 3.62% (a decrease of 19 BP), while the
cost of average interest-bearing deposits was 0.56% (a decrease of
21 BP) and the cost of average interest-bearing liabilities was
0.69% (a decrease of 18 BP). The cost of average deposits
(including noninterest-bearing deposits) for the third quarter of
2020 was 0.36%, down 15 BP from 0.51% for the second quarter of
2020, while the cost of average interest-bearing liabilities plus
noninterest-bearing deposits for the third quarter of 2020 was
0.48%, down 14 BP from 0.62% for the second quarter of 2020. *
Fair value adjustments on acquired loan portfolios increased the
loan yield by 14 BP in the third quarter of 2020 compared to 12 BP
in the second quarter of 2020, and increased the net interest
margin by 10 BP in the third quarter of 2020 compared to 9 BP in
the second quarter of 2020. The PPP loans reduced the yield on
average loans by 18 BP, the yield on average earning assets by 10
BP, and net interest margin by 9 BP in the third quarter of 2020,
and reduced the yield on average loans by 13 BP, the yield on
average earning assets by 9 BP, and net interest margin by 7 BP in
the second quarter of 2020.
Third quarter 2020 net interest income of $18.3 million was up
$1.1 million from $17.2 million for the quarter ended September 30,
2019. The net interest margin for the third quarter of 2020 was
down 31 BP from 3.46% in the third quarter of 2019. In the third
quarter of 2020, compared to the third quarter of 2019, the yield
on average loans was down 81 BP from 4.85%, the yield on average
portfolio loans was down 63 BP from 4.85%, and the yield on average
earning assets was down 100 BP from 4.62%. The lower yields reflect
the significant drop in market interest rates highlighted below.
The cost of average interest-bearing deposits for the third quarter
of 2020 was down 74 BP from 1.30% for the third quarter of 2019,
while the cost of average interest-bearing liabilities was down 85
BP from 1.54%. The cost of average deposits (including
noninterest-bearing deposits) for the third quarter of 2020 was
down 60 BP from 0.96%, while the cost of average interest-bearing
liabilities plus noninterest-bearing deposits was down 71 BP from
1.19%. *
Fair value adjustments on acquired loan portfolios increased the
loan yield by 14 BP in the third quarter of 2020, compared to 12 BP
in the third quarter of 2019, and increased the net interest margin
by 10 BP in the third quarter of 2020, compared to 9 BP in the
third quarter of 2019. The PPP loans reduced the yield on average
loans by 18 BP, the yield on average earning assets by 10 BP, and
net interest margin by 9 BP in the third quarter of 2020. The PPP
program did not exist in 2019.
The decreases in the net interest margin are a continuing trend
as market interest rates, after falling to historically low levels
through the second quarter of 2020, have stabilized. For
example:
- Average Prime rate was 3.25% for the third quarter of 2020,
unchanged from the second quarter of 2020 and down 205 BP from
5.30% in the third quarter of 2019.
- Average effective fed funds rate was 0.09% for the third
quarter of 2020, up 3 BP from 0.06% for the second quarter of 2020
and down 210 BP from 2.19% in the third quarter of 2019.
- Average 10 year Treasury rate was 0.65% for the third quarter
of 2020, down 4 BP from 0.69% for the second quarter of 2020 and
down 115 BP from 1.80% in the third quarter of 2019.
- Average 30 day LIBOR rate was 0.16% for the third quarter of
2020, down 20 BP from 0.36% for the second quarter of 2020 and down
201 BP from 2.17% in the third quarter of 2019.
Noninterest Income
Noninterest income was $2.1 million for the third quarter of
2020, a decrease of $2.9 million from the $5.0 million reported in
the third quarter of 2019, and a decrease of $2.7 million from the
$4.8 million reported in the second quarter of 2020. There were no
securities gains in the third quarter of 2020 or 2019 compared to
$3.0 million in the second quarter of 2020. There was no
noninterest income attributable to the Company’s former mortgage
banking activities in either the second or third quarter of 2020
compared to $2.9 million in the third quarter of 2019.
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 $2.1
million for the third quarter of 2020, an $87 thousand decrease
from the third quarter of 2019, and a $374 thousand increase from
the second quarter of 2020. *
- The $87 thousand decrease when compared to the third quarter of
2019 primarily consisted of the following: lower levels of
nonsufficient funds (“NSF”) and overdraft charges, included in
service charges on deposit accounts (-$251 thousand) partially due
to accommodations to COVID-19 impacted customers in the current
economic environment and higher liquidity maintained by other
customers; this item was partially offset by an increase in swap
fee income, included in loan related fees and service charges
(+$197 thousand).
- The $374 thousand increase when compared to the second quarter
of 2020 primarily consisted of the following: an increase in
service charges on deposit accounts due primarily to a growing
volume of NSF and overdraft charges (+$73 thousand); an increase in
interchange fees, as card activity volumes gradually continue to
improve, included in other income (+$56 thousand); and the increase
in swap fee income, included in loan related fees and service
charges (+$197 thousand).
Noninterest Expenses
Noninterest expenses totaled $12.7 million for the third quarter
of 2020, a decrease of $2.7 million from the $15.4 million reported
in the third quarter of 2019, and a decrease of $34.9 million from
the $47.6 million reported in the second quarter of 2020. A
goodwill impairment charge of $34.5 million was included in
noninterest expenses in the second quarter of 2020. There were no
noninterest expenses attributable to the Company’s former mortgage
banking activities in either the second or third quarter of 2020
compared to $2.7 million in the third quarter of 2019.
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, 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, prepayment
penalties on FHLB advances recorded in the second quarter of 2020
of $224 thousand, and a $700 thousand litigation settlement charge
in the third quarter of 2019 stemming from certain mortgages
originated by First Mariner Bank before its merger with Howard
Bank. This settlement was not related to the $1.0 million
litigation accrual that we recorded in the second quarter of 2020.
Core noninterest expenses were $12.7 million for the third quarter
of 2020, a $715 thousand increase from $12.0 million in the third
quarter of 2019, and an $805 thousand increase from $11.9 million
in the second quarter of 2020. *
- The $715 thousand increase when compared to the third quarter
of 2019 consisted of the following: higher FDIC insurance expense
(+$379 thousand) as the second and third quarter 2020 assessment
rate increased due to the impact of the goodwill impairment charge
in the second quarter of 2020 and the benefit of the FDIC’s small
bank assessment credits in the third quarter of 2019 that did not
recur in 2020; higher compensation and benefits expenses (+$1.2
million), with $549 thousand of the increase attributable to higher
claims experience in the Company’s self-insured healthcare plan,
$221 thousand of the increase a result of a lower level of loan
origination cost deferrals driven by a decline in non-PPP lending
activities, $195 thousand attributable to an accrual for an
additional paid time off benefit, with a carryover provision
granted in light of COVID-19, and $201 thousand attributable to
increased staff costs.
The above items were partially offset by the
following: lower data processing fees due to savings generated from
a core processing contract renegotiated in late 2019 (-$275
thousand); lower other real estate owned expenses (-$278 thousand),
as the third quarter of 2019 included increases in valuation
allowances of $302 thousand; and lower marketing and business
development expenses, driven primarily by the impact of COVID-19
(-$306 thousand).
- The $805 thousand increase when compared to the second quarter
of 2020 consisted of the following: higher FDIC insurance expense
(+$129 thousand) due to the second and third quarter 2020
assessment rate increase; higher compensation and benefits expenses
(+$877 thousand), with $200 thousand of the increase attributable
to higher healthcare costs, $230 thousand of the increase a result
of a lower level of origination cost deferrals attributable to PPP
loans, $170 thousand attributable to increased staff costs, and
$195 thousand attributable to the accrual for additional paid time
off.
Income Taxes
The Company reported an income tax expense of $1.3 million for
the quarter ended September 30, 2020. The effective tax rate for
the third quarter of 2020 was 22.6%. The effective tax rate for the
second quarter of 2020 was -6.0%; excluding the non-taxable
goodwill impairment charge from pretax income, the effective tax
rate would have been 24.6%. The effective tax rate for the third
quarter of 2019 was 25.6%.
Loans
Loans totaled $1.88 billion at September 30, 2020, a decrease of
$14.2 million, or 3.0% annualized, from total loans at June 30,
2020. Compared to September 30, 2019, the loan portfolio grew by
$154.5 million, or 8.9%. During the third quarter, the Company
originated $2.0 million of loans under the SBA PPP program. Net of
deferred processing fees and origination costs, the balance of PPP
loans at September 30, 2020 was $196.1 million, a $2.4 million
increase from June 30, 2020. 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 nine months.
Portfolio loans totaled $1.69 billion at September 30, 2020, a
decrease of $16.6 million, or 3.9% annualized, from total loans at
June 30, 2020. Compared to September 30, 2019, portfolio loans
decreased by $41.6 million, or 2.4%. Changes in portfolio loans
were as follows: *
- Compared to September 30, 2019, the $41.6 million decrease in
portfolio loans was primarily driven by residential real estate
loans down $38.2 million, or 7.8%, commercial loans down $29.7
million, or 7.7%, primarily due to lower line utilization, and
construction and land loans down $20.0 million, or 16.1%. These
portfolio decreases were partially offset by commercial real estate
loans up $40.0 million, or 5.9%.
- Compared to June 30, 2020, the $16.6 million decrease in
portfolio loans was primarily driven by residential real estate
loans down $23.0 million, or 19.3% annualized, and construction and
land loans down $24.2 million, or 75.3% annualized. These portfolio
decreases were partially offset by commercial real estate loans up
$22.4 million, or 12.8%.
- The decrease in construction and land loans as well as the
increase in commercial real estate loans was the result of the
transfer of $25.1 million of construction and land loans to
commercial real estate loans upon the completion of the
construction phase and commencement of amortization.
- Despite $12.1 million of secondary market loan purchases during
the third quarter, the net decrease in residential real estate
loans was a result of a continued 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 that concluded in the first
quarter of 2020 and the desire to manage loan run-off within its
residential mortgage loan portfolio, the Company commenced 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 third quarter of 2020,
a decrease of $924 thousand, or 0.20% annualized, over average
loans for the second quarter of 2020, and an increase of $174.7
million, or 10.2%, over average loans for the third quarter of
2019. Average PPP loans for the third quarter of 2020 were $195.6
million, an increase of $52.9 million from $142.7 million in the
second quarter of 2020. Average portfolio loans were $1.69 billion
for the third quarter of 2020, a decrease of $53.8 million, or
12.4% annualized, from average loans for the second quarter of
2020. The decline was primarily in residential real estate and
commercial loans. Compared to the third quarter of 2019, average
portfolio loans declined by $20.9 million, or 1.2%, with the
decline primarily in residential real estate and commercial loans
partially offset by commercial real estate growth. *
Deposits
Total deposits were $1.97 billion at September 30, 2020, an
increase of $142.1 million, or 31.0% annualized, over the June 30,
2020 balance of $1.83 billion. Compared to September 30, 2019,
total deposits grew by $317.1 million, or 19.2%. Changes in
deposits were as follows:
- Customer deposits, which exclude brokered and other
non-customer deposits, were $1.64 billion at September 30, 2020,
compared to $1.67 billion at June 30, 2020, a decrease of $30.1
million or 7.2% annualized.
- The decrease in customer deposits was primarily the result of
the continued managed decline in customer CD balances, down $25.3
million, or 36.0% annualized, due to the Company experiencing 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.
- Low-cost, non-maturity deposits, which increased by $239.8
million during the second quarter of 2020, dropped by only $4.8
million during the third quarter. The Company expected the lack of
additional government stimulus, the utilization of PPP funds, and
an improvement in consumer and business spending to erode these
balances at a faster pace than experienced during the quarter.
- Compared to September 30, 2019, customer deposits increased by
$190.3 million, or 13.1%.
- The increase in customer deposits was primarily the result of
strong growth in low-cost, non-maturity deposits, which increased
by $274.3 million, or 24.7%. $225.4 million of the growth was in
transaction accounts, and $214.5 million of the transaction account
growth was in noninterest-bearing deposits.
- Customer CD balances declined by $84.1 million, or 24.7%.
- Brokered and other non-customer deposits were $333.9 million at
September 30, 2020, compared to $161.8 million at June 30, 2020 and
$207.1 million at September 30, 2019. The increase during the third
quarter of 2020 was used to fund balance sheet growth, primarily in
the investment securities portfolio, and to replace short-term
borrowings from the Federal Home Loan Bank of Atlanta. Non-customer
deposits are currently the Company’s lowest-cost incremental
funding source.
Average customer deposits for the third quarter of 2020 were
$1.64 billion, an increase of $25.7 million, or 6.4% annualized,
from the second quarter 2020 average balance. Excluding customer
CDs, customer non-maturity deposit balances increased by $47.9
million, or 14.4% annualized, with transaction accounts up $20.9
million; $17.4 million of the transaction account growth was in
noninterest-bearing deposits.
Compared to the third quarter of 2019, average customer deposits
were up by $188.7 million, or 13.0%. Excluding customer CDs,
customer non-maturity deposit balances increased by $266.0 million,
or 24.0%, with transaction accounts up $226.1 million; $214.8
million of the transaction account growth was in
noninterest-bearing deposits.
Investment Securities
During the quarter ended September 30, 2020, the Company
completed a leveraging strategy that resulted in a $102.4 million
increase in the mortgage-backed securities (“MBS”) portfolio from
the June 30, 2020 level. The leveraging strategy was designed to
replace the decline in the MBS portfolio’s net interest income that
resulted from the Company’s decision in the second quarter 2020 to
monetize certain unrealized gains in the Company’s MBS portfolio.
During the second quarter of 2020, $105 million of MBS with high
prepayment speeds were identified and sold, resulting in net gains
of $3.0 million. These securities were then replaced with current
coupon MBS with lower yields during the second quarter of 2020.
Exit of Mortgage Banking
Activities
The Company completed its previously announced exit of mortgage
banking activities during the second quarter of 2020, with no
pretax income contribution in either the second or third quarter of
2020. The contribution of mortgage banking activities for the third
quarter of 2019, which are excluded from the Company’s core
results, are as follows:
- Total revenues of $3.0 million ($177 thousand of net interest
income and $2.9 million of noninterest income),
- Noninterest expenses of $2.7 million, and
- Pretax income of $336 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 Thursday, October 29,
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
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/InvestorCall.
An internet-based audio replay of the call will be available on
the Investor Relations page of our website at
www.howardbank.com/InvestorCall shortly following the conclusion of
the call and will be available until November 27, 2020.
Company management will not be available to discuss the third
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 Unaudited
Financial Data (in thousands except per share data)
NINE MONTHS ENDED
THREE MONTHS ENDED
September 30,
September 30,
September 30,
June 30,
September 30,
2020
2019
2020
2020
2019
Income Statement Data: Interest income
$
64,651
$
68,884
$
20,951
$
21,473
$
22,955
Interest expense
10,734
16,841
2,679
3,354
5,740
Net interest income
53,917
52,043
18,272
18,119
17,215
Provision for credit losses
8,145
3,443
1,700
3,000
608
Net interest income after provision for credit losses
45,772
48,600
16,572
15,119
16,607
Noninterest income
10,214
15,410
2,089
4,759
5,033
Noninterest expense
74,896
49,717
12,709
47,627
15,405
(Loss) income before income taxes
(18,910
)
14,293
5,952
(27,749
)
6,235
Income tax expense (benefit)
2,552
3,312
1,348
1,660
1,598
Net (loss) income
$
(21,462
)
$
10,981
$
4,604
$
(29,409
)
$
4,637
Per Share Data and Shares Outstanding: Net (loss)
income per common share - basic
$
(1.14
)
$
0.58
$
0.25
$
(1.57
)
$
0.24
Net (loss) income per common share - diluted
$
(1.14
)
$
0.58
$
0.25
$
(1.57
)
$
0.24
Book value per common share, at period end
$
15.45
$
16.18
$
15.45
$
15.14
$
16.18
Tangible book value per common share, at period end (1)
$
13.51
$
12.36
$
13.51
$
13.17
$
12.36
Average common shares outstanding
18,773
19,064
18,737
18,716
19,079
Diluted average common shares outstanding
18,773
19,072
18,737
18,716
19,082
Shares outstanding, at period end
18,742
19,082
18,742
18,716
19,082
Balance Sheet Data: Total assets
$
2,559,184
$
2,293,475
$
2,559,184
$
2,463,450
$
2,293,475
Portfolio loans, net of unearned income (1)
1,688,030
1,729,880
1,688,030
1,704,911
1,729,880
Paycheck Protection Program loans, net of unearned inc.
196,375
-
196,375
193,719
-
Total loans and leases, net of unearned income
1,884,405
1,729,880
1,884,405
1,898,630
1,729,880
Allowance for loan losses
17,657
9,598
17,657
16,356
9,598
Other interest-earning assets
454,897
296,577
454,897
343,149
296,577
Total deposits
1,972,738
1,655,623
1,972,738
1,830,674
1,655,623
Total borrowings
269,861
302,352
269,861
312,173
302,352
Common and total stockholders' equity
289,500
308,752
289,500
283,281
308,752
Average total assets
2,474,988
2,236,168
2,524,773
2,529,797
2,244,259
Average common and total stockholders' equity
307,493
302,616
288,727
319,152
306,636
Selected Performance Metrics: Return on average
assets (2)
(1.16
)%
0.66
%
0.73
%
(4.68
)%
0.82
%
Return on average common equity (2)
(9.32
)%
4.85
%
6.34
%
(37.06
)%
6.00
%
Pre-provision net revenue ("PPNR") (1)
$
22,572
$
20,562
$
7,652
$
7,931
$
7,207
PPNR to average assets (1)
1.22
%
1.23
%
1.21
%
1.26
%
1.27
%
Net interest margin (2),(3)
3.23
%
3.54
%
3.15
%
3.22
%
3.46
%
Efficiency ratio (4)
116.79
%
73.71
%
62.42
%
208.18
%
69.24
%
Core efficiency ratio (1)
62.07
%
64.76
%
62.42
%
60.01
%
62.46
%
Asset Quality Ratios: Nonperforming loans to
portfolio loans (1)
1.01
%
1.15
%
1.01
%
1.08
%
1.15
%
Nonperforming assets to portfolio loans and OREO (1)
1.07
%
1.38
%
1.07
%
1.21
%
1.38
%
Nonperforming assets to total assets
0.71
%
1.04
%
0.71
%
0.84
%
1.04
%
Allowance for loan losses to total loans
0.94
%
0.55
%
0.94
%
0.86
%
0.55
%
Allowance for loan losses to portfolio loans (1)
1.05
%
0.55
%
1.05
%
0.96
%
0.55
%
Allowance for loan losses to nonperforming loans
103.96
%
48.09
%
103.96
%
88.56
%
48.09
%
Net chargeoffs to average total loans and leases (2)
0.04
%
0.30
%
0.02
%
0.01
%
0.03
%
Capital Ratios (Bancorp): Tier 1 capital to average
assets (leverage ratio)
9.07
%
9.39
%
9.07
%
8.73
%
9.39
%
Common equity tier 1 capital to risk-weighted assets
11.78
%
10.83
%
11.78
%
11.66
%
10.83
%
Tier 1 capital to risk-weighted assets
11.78
%
10.83
%
11.78
%
11.66
%
10.83
%
Total capital to risk-weighted assets
14.25
%
12.87
%
14.25
%
14.09
%
12.87
%
Average equity to average assets
12.42
%
13.53
%
11.44
%
12.62
%
13.66
%
(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 Income
(Loss) (in thousands except per share data)
FOR THE THREE MONTHS
ENDED
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2020
2020
2019
2019
Interest income
$
20,951
$
21,473
$
22,226
$
22,550
$
22,955
Interest expense
2,679
3,354
4,701
5,283
5,740
Net interest income
18,272
18,119
17,525
17,267
17,215
Provision for credit losses
1,700
3,000
3,445
750
608
Net interest income after provision for credit losses
16,572
15,119
14,080
16,517
16,607
Noninterest income: Service charges on deposit accounts
506
433
642
710
726
Mortgage banking income
-
-
1,036
1,951
2,054
Gain (loss) on sale of securities
-
3,044
-
-
-
Gain (loss) on the disposal of premises and equipment
-
6
-
-
-
Income from bank owned life insurance
441
441
445
466
485
Loan related fees and service charges
365
175
581
912
984
Other income
777
660
662
1,586
784
Total noninterest income
2,089
4,759
3,366
5,625
5,033
Noninterest expense: Compensation and benefits
7,136
6,259
8,441
7,811
7,939
Occupancy and equipment
1,301
1,242
1,033
880
1,442
Marketing and business development
189
453
450
853
545
Professional fees
823
633
727
704
747
Data processing fees
897
850
926
1,217
1,172
FDIC assessment
416
287
212
63
36
Other real estate owned
115
269
77
321
393
Loan production expense
247
192
468
719
761
Amortization of core deposit intangible
659
680
699
717
745
Goodwill impairment charge
-
34,500
-
-
-
Other operating expense
926
2,262
1,527
1,077
1,625
Total noninterest expense
12,709
47,627
14,560
14,362
15,405
Income (loss) before income taxes
5,952
(27,749
)
2,886
7,780
6,235
Income tax expense (benefit)
1,348
1,660
(457
)
1,880
1,598
Net income (loss)
$
4,604
$
(29,409
)
$
3,343
$
5,900
$
4,637
Net income (loss) per common share: Basic
$
0.25
$
(1.57
)
$
0.18
$
0.31
$
0.24
Diluted
$
0.25
$
(1.57
)
$
0.18
$
0.31
$
0.24
Average common shares outstanding: Basic
18,737
18,716
18,867
19,080
19,079
Diluted
18,737
18,716
18,915
19,083
19,082
Selected Performance Metrics: Return on average
assets
0.73
%
-4.68
%
0.57
%
1.02
%
0.82
%
Return on average common equity
6.34
%
-37.06
%
4.27
%
7.51
%
6.00
%
Core Pre-provision net revenue ("PPNR") (1)
$
7,652
$
7,931
$
6,989
$
6,635
$
7,207
Core PPNR to average assets (1)
1.21
%
1.26
%
1.19
%
1.15
%
1.27
%
Net interest margin
3.15
%
3.22
%
3.34
%
3.38
%
3.46
%
Efficiency ratio
62.42
%
208.18
%
69.70
%
62.74
%
69.24
%
Core efficiency ratio (1)
62.42
%
60.01
%
63.83
%
65.58
%
62.46
%
(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 NINE MONTHS
ENDED
September 30,
September 30,
2020
2019
Interest income
$
64,651
$
68,884
Interest expense
10,734
16,841
Net interest income
53,917
52,043
Provision for credit losses
8,145
3,443
Net interest income after provision for credit losses
45,772
48,600
Noninterest income: Service charges on deposit accounts
1,581
2,037
Mortgage banking income
1,036
5,847
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
1,327
1,392
Loan related fees and service charges
1,121
3,022
Other income
2,099
2,537
Total noninterest income
10,214
15,410
Noninterest expense: Compensation and benefits
21,836
24,245
Occupancy and equipment
3,576
8,196
Marketing and business development
1,092
1,486
Professional fees
2,183
2,250
Data processing fees
2,673
3,697
FDIC assessment
915
604
Other real estate owned
461
524
Loan production expense
907
1,981
Amortization of core deposit intangible
2,038
2,296
Goodwill impairment charge
34,500
-
Other operating expense
4,715
4,438
Total noninterest expense
74,896
49,717
(Loss) income before income taxes
(18,910
)
14,293
Income tax expense
2,552
3,312
Net (loss) income
$
(21,462
)
$
10,981
Net (loss) income per common share: Basic
$
(1.14
)
$
0.58
Diluted
$
(1.14
)
$
0.58
Average common shares outstanding: Basic
18,773
19,064
Diluted
18,773
19,072
Selected Performance Metrics: Return on average
assets
-1.16
%
0.66
%
Return on average common equity
-9.32
%
4.85
%
Core pre-provision net revenue ("PPNR") (1)
$
22,572
$
20,562
Core PPNR to average assets (1)
1.22
%
1.23
%
Net interest margin
3.23
%
3.54
%
Efficiency ratio
116.79
%
73.71
%
Core efficiency ratio (1)
62.07
%
64.76
%
(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
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2020
2020
2019
2019
ASSETS Cash and due from banks
$
11,043
$
12,652
$
15,951
$
12,992
$
12,563
Interest bearing deposits with banks
59,539
46,418
179,999
96,985
62,446
Total cash and cash equivalents
70,582
59,070
195,950
109,977
75,009
Securities available for sale, at fair value
377,471
276,889
275,252
215,505
164,026
Securities held to maturity, at amortized cost
7,250
7,250
7,750
7,750
9,750
Federal Home Loan Bank of Atlanta stock, at cost
10,637
12,592
16,757
14,152
13,642
Loans held for sale, at fair value
-
-
3,795
30,710
46,713
Portfolio loans, net of unearned income (1)
1,688,030
1,704,911
1,761,419
1,745,513
1,729,880
Paycheck Protection Program loans, net of unearned inc (1)
196,375
193,719
-
-
-
Total loans and leases, net of unearned income
1,884,405
1,898,630
1,761,419
1,745,513
1,729,880
Allowance for loan losses
(17,657
)
(16,356
)
(13,384
)
(10,401
)
(9,598
)
Net loans and leases
1,866,748
1,882,274
1,748,035
1,735,112
1,720,282
Bank premises and equipment, net
42,147
42,434
42,543
42,724
42,693
Goodwill
31,449
31,449
65,949
65,949
65,949
Core deposit intangible
6,431
7,090
7,770
8,469
9,186
Bank owned life insurance
77,157
76,716
76,275
75,830
75,364
Other real estate owned
1,155
2,137
2,322
3,098
3,926
Deferred tax assets, net
34,687
35,034
33,529
36,010
36,049
Interest receivable and other assets
33,470
30,515
31,967
29,333
30,886
Total assets
$
2,559,184
$
2,463,450
$
2,507,894
$
2,374,619
$
2,293,475
LIABILITIES Noninterest-bearing deposits
$
657,028
$
671,598
$
483,499
$
468,975
$
442,549
Interest-bearing deposits
1,315,710
1,159,076
1,305,400
1,245,390
1,213,074
Total deposits
1,972,738
1,830,674
1,788,899
1,714,365
1,655,623
FHLB advances
200,000
246,000
344,000
285,000
273,000
Fed funds and repos
41,473
37,834
5,321
6,127
1,161
Subordinated debt
28,388
28,339
28,290
28,241
28,191
Total borrowings
269,861
312,173
377,611
319,368
302,352
Accrued expenses and other liabilities
27,085
37,322
26,026
26,738
26,748
Total liabilities
2,269,684
2,180,169
2,192,536
2,060,471
1,984,723
STOCKHOLDERS' EQUITY Common stock - $0.01 par value
187
187
187
191
191
Additional paid in capital
270,445
270,057
269,918
276,156
276,431
Retained earnings
13,696
9,090
38,501
35,158
29,258
Accumulated other comprehensive income
5,172
3,947
6,752
2,643
2,872
Total stockholders' equity
289,500
283,281
315,358
314,148
308,752
Total liabilities and stockholders' equity
$
2,559,184
$
2,463,450
$
2,507,894
$
2,374,619
$
2,293,475
Capital Ratios (Bancorp) Tier 1 capital to average
assets (leverage ratio)
9.07
%
8.73
%
9.10
%
9.55
%
9.39
%
Common equity tier 1 capital to risk-weighted assets
11.78
%
11.66
%
10.95
%
11.09
%
10.83
%
Tier 1 capital to risk-weighted assets
11.78
%
11.66
%
10.95
%
11.09
%
10.83
%
Total capital to risk-weighted assets
14.25
%
14.09
%
13.16
%
13.14
%
12.87
%
Asset Quality Measures Nonperforming loans
$
16,984
$
18,469
$
17,203
$
19,143
$
19,960
Other real estate owned (OREO)
1,155
2,137
2,322
3,098
3,926
Total nonperforming assets
$
18,139
$
20,606
$
19,525
$
22,241
$
23,886
Nonperforming loans to portfolio loans (1)
1.01
%
1.08
%
0.98
%
1.10
%
1.15
%
Nonperforming assets to portfolio loans and OREO (1)
1.07
%
1.21
%
1.11
%
1.27
%
1.38
%
Nonperforming assets to total assets
0.71
%
0.84
%
0.78
%
0.94
%
1.04
%
Allowance for loan losses to total loans
0.94
%
0.86
%
0.76
%
0.60
%
0.55
%
Allowance for loan losses to portfolio loans (1)
1.05
%
0.96
%
0.76
%
0.60
%
0.55
%
Allowance for loan losses to nonperforming loans
103.96
%
88.56
%
77.80
%
54.33
%
48.09
%
Net chargeoffs to average total loans and leases (2)
0.02
%
0.01
%
0.11
%
-0.01
%
0.03
%
Provision for credit losses to average portfolio loans (1), (2)
0.40
%
0.69
%
0.79
%
0.17
%
0.14
%
(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 September 30,
2020
Three Months Ended June 30,
2020
Three Months Ended September 30,
2019
Average Balance
Income / Expense
Yield / Rate
Average Balance
Income / Expense
Yield / Rate
Average Balance
Income / Expense
Yield / Rate
Earning assets Loans and leases: Commercial loans and leases
$
343,991
$
3,981
4.60
%
$
371,518
$
4,260
4.61
%
$
371,745
$
4,646
4.96
%
Commercial real estate
702,633
7,768
4.40
698,930
7,613
4.38
676,046
8,481
4.98
Construction and land
125,059
1,188
3.78
132,899
1,287
3.89
121,296
1,701
5.56
Residential real estate
463,874
4,382
3.76
490,110
4,948
4.06
488,053
5,405
4.39
Consumer
49,722
565
4.52
45,619
536
4.73
49,068
606
4.90
Total portfolio loans
1,685,279
17,884
4.22
1,739,076
18,644
4.31
1,706,208
20,839
4.85
Paycheck Protection Program loans
195,588
1,240
2.52
142,715
896
2.53
-
-
-
Total loans and leases
1,880,867
19,124
4.04
1,881,791
19,540
4.18
1,706,208
20,839
4.85
Securities available for sale: U.S Gov agencies
79,391
531
2.66
80,217
532
2.67
62,154
450
2.87
Mortgage-backed
272,495
942
1.38
189,419
945
2.01
86,539
665
3.05
Corporate debentures
5,932
100
6.71
5,507
92
6.72
2,990
62
8.23
Total available for sale securities
357,818
1,573
1.75
275,143
1,569
2.29
151,683
1,177
3.08
Securities held to maturity
7,250
106
5.83
7,745
112
5.82
9,750
149
6.06
FHLB Atlanta stock, at cost
13,221
140
4.21
13,015
220
6.80
10,840
173
6.33
Interest bearing deposits in banks
46,049
8
0.07
86,181
20
0.09
57,604
273
1.88
Loans held for sale
-
-
-
1,365
13
3.83
36,326
344
3.76
Total earning assets
2,305,205
20,951
3.62
%
2,265,240
21,474
3.81
%
1,972,411
22,955
4.62
%
Cash and due from banks
11,772
16,056
15,570
Bank premises and equipment, net
42,376
42,431
42,929
Goodwill and other intangible assets
38,290
73,093
75,619
Other assets
143,565
146,394
147,049
Less: allowance for loan losses
(16,435
)
(13,417
)
(9,319
)
Total assets
$
2,524,773
$
2,529,797
$
2,244,259
Interest-bearing liabilities Deposits: Interest-bearing
demand accounts
$
190,272
$
36
0.08
%
$
186,781
$
57
0.12
%
$
179,038
$
181
0.40
%
Money market
386,189
261
0.27
365,658
342
0.38
359,295
761
0.84
Savings
149,973
27
0.07
140,904
25
0.07
134,312
63
0.19
Time deposits
493,827
1,390
1.12
557,401
1,959
1.41
565,568
3,057
2.14
Total interest-bearing deposits
1,220,261
1,714
0.56
1,250,744
2,383
0.77
1,238,213
4,062
1.30
Borrowings: FHLB advances
260,807
483
0.74
255,945
506
0.80
207,033
1,202
2.30
Fed funds and repos
40,492
35
0.34
16,747
13
0.31
4,282
2
0.19
Subordinated debt
28,356
447
6.27
28,307
452
6.42
28,161
474
6.68
Total borrowings
329,655
965
1.17
300,999
971
1.30
239,476
1,678
2.78
Total interest-bearing funds
1,549,916
2,679
0.69
%
1,551,743
3,354
0.87
%
1,477,689
5,740
1.54
%
Noninterest-bearing deposits
649,525
632,080
434,701
Other liabilities
36,605
26,822
25,233
Total liabilities
2,236,046
2,210,645
1,937,623
Stockholders' equity
288,727
319,152
306,636
Total liabilities & equity
$
2,524,773
$
2,529,797
$
2,244,259
Net interest rate spread (1)
$
18,272
2.93
%
$
18,120
2.94
%
$
17,215
3.08
%
Effect of noninterest-bearing funds
0.22
0.28
0.38
Net interest margin on earning assets (2)
3.15
%
3.22
%
3.46
%
(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) Nine Months Ended September 30, 2020 Nine Months Ended
September 30, 2019 AverageBalance Income /Expense Yield /Rate
AverageBalance Income /Expense Yield /Rate Earning assets Loans and
leases: Commercial loans and leases
$
365,596
$
12,545
4.58
%
$
348,928
$
13,350
5.12
%
Commercial real estate
696,083
23,827
4.57
663,442
24,998
5.04
Construction and land
129,798
3,938
4.05
121,337
5,208
5.74
Residential real estate
487,586
14,575
3.99
487,277
16,575
4.55
Consumer
47,011
1,621
4.60
51,293
1,893
4.93
Total portfolio loans
1,726,074
56,506
4.37
1,672,277
62,024
4.96
Paycheck Protection Program loans
113,070
2,136
2.52
-
-
-
Total loans and leases
1,839,144
58,642
4.26
1,672,277
62,024
4.96
Securities available for sale: U.S Gov agencies
76,822
1,555
2.70
90,053
1,881
2.79
Mortgage-backed
204,686
2,865
1.87
88,014
2,092
3.18
Corporate debentures
5,655
284
6.71
2,990
186
8.32
Total available for sale securities
287,163
4,704
2.19
181,057
4,159
3.07
Securities held to maturity
7,580
331
5.84
9,428
434
6.15
FHLB Atlanta stock, at cost
13,979
533
5.09
10,579
502
6.34
Interest bearing deposits in banks
72,267
262
0.48
63,043
909
1.93
Loans held for sale
6,572
179
3.64
27,842
856
4.11
Total earning assets
2,226,705
64,651
3.88
%
1,964,226
68,884
4.69
%
Cash and due from banks
13,806
14,178
Bank premises and equipment, net
42,498
44,163
Goodwill and other intangible assets
61,764
77,902
Other assets
143,750
145,118
Less: allowance for loan losses
(13,535
)
(9,419
)
Total assets
$
2,474,988
$
2,236,168
Interest-bearing liabilities Deposits: Interest-bearing
demand accounts
$
186,799
$
250
0.18
%
$
203,746
$
722
0.47
%
Money market
373,588
1,308
0.47
356,732
2,043
0.77
Savings
141,516
97
0.09
137,223
187
0.18
Time deposits
524,955
5,652
1.44
553,427
8,678
2.10
Total interest-bearing deposits
1,226,858
7,307
0.80
1,251,128
11,630
1.24
Borrowings: FHLB advances
279,140
2,015
0.96
200,886
3,751
2.50
Fed funds and repos
21,372
52
0.32
8,703
28
0.43
Subordinated debt
28,307
1,360
6.42
28,117
1,432
6.81
Total borrowings
328,819
3,427
1.39
237,706
5,211
2.93
Total interest-bearing funds
1,555,676
10,734
0.92
%
1,488,834
16,841
1.51
%
Noninterest-bearing deposits
582,348
422,731
Other liabilities
29,470
21,987
Total liabilities
2,167,494
1,933,552
Stockholders' equity
307,493
302,616
Total liabilities & equity
$
2,474,988
$
2,236,168
Net interest rate spread (1)
$
53,917
2.96
%
$
52,043
3.18
%
Effect of noninterest-bearing funds
0.27
0.36
Net interest margin on earning assets (2)
3.23
%
3.54
%
(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 NINE MONTHS
ENDED
FOR THE THREE MONTHS
ENDED
September 30,
September 30,
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2019
2020
2020
2020
2019
2019
Net (loss) income (GAAP)
$
(21,462
)
$
10,981
$
4,604
$
(29,409
)
$
3,343
$
5,900
$
4,637
Adjustments: Mortgage banking activities: Net interest income
(143
)
(517
)
-
-
(143
)
(164
)
(177
)
Noninterest income
(1,425
)
(7,929
)
-
-
(1,425
)
(2,699
)
(2,871
)
Noninterest expenses
1,438
6,979
-
-
1,438
2,056
2,712
Total pretax - mortgage banking activities
(130
)
(1,467
)
-
-
(130
)
(807
)
(336
)
Certain other items: Securities gains
(3,044
)
(658
)
-
(3,044
)
-
-
-
Proceeds from agreement to exit mortgage banking activities
-
-
-
-
-
(750
)
-
Prepayment penalty - FHLB advances
224
651
-
224
-
-
-
Branch optimization charge
-
3,600
-
-
-
(338
)
-
Litigation expense
1,000
700
-
1,000
-
-
700
CFO departure
788
-
-
-
788
-
-
Goodwill impairment charge
34,500
-
-
34,500
-
-
-
Total pretax - certain other items
33,468
4,293
-
32,680
788
(1,088
)
700
Total core pretax income adjustments
33,338
2,826
-
32,680
658
(1,895
)
364
Income tax expense (benefit) of adjustments
(276
)
763
-
(454
)
178
(512
)
98
Total core pretax income adjustments, net of tax
33,614
2,063
-
33,134
480
(1,383
)
266
Less: One-time benefit of NOL carryback (CARES Act)
(1,177
)
-
-
-
(1,177
)
-
-
Total core adjustments to net income
32,437
2,063
-
33,134
(697
)
(1,383
)
266
Core net income (Non-GAAP)
$
10,975
$
13,044
$
4,604
$
3,725
$
2,646
$
4,517
$
4,903
Diluted average common shares
18,773
19,072
18,737
18,716
18,915
19,083
19,082
Diluted EPS (GAAP)
$
(1.14
)
$
0.58
$
0.25
$
(1.57
)
$
0.18
$
0.31
$
0.24
Total core adjustments to net income
1.73
0.11
-
1.77
(0.04
)
(0.07
)
0.01
Core diluted EPS (Non-GAAP)
$
0.58
$
0.68
$
0.25
$
0.20
$
0.14
$
0.24
$
0.26
GAAP TO NON-GAAP RECONCILIATION - PRE-PROVISION
NET REVENUE ("PPNR") (in thousands)
FOR THE NINE MONTHS
ENDED
FOR THE THREE MONTHS
ENDED
September 30,
September 30,
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2019
2020
2020
2020
2019
2019
Net (loss) income (GAAP)
$
(21,462
)
$
10,981
$
4,604
$
(29,409
)
$
3,343
$
5,900
$
4,637
Plus: provision for credit losses
8,145
3,443
1,700
3,000
3,445
750
608
Plus: income tax expense
2,551
3,312
1,348
1,660
(457
)
1,880
1,598
Pre-provision net revenue (Non-GAAP)
$
(10,766
)
$
17,736
$
7,652
$
(24,749
)
$
6,331
$
8,530
$
6,843
Adjustments to net revenue: Mortgage banking activities
(130
)
(1,467
)
-
-
(130
)
(807
)
(336
)
Securities gains
(3,044
)
(658
)
-
(3,044
)
-
-
-
Proceeds from agreement to exit mortgage banking activities
-
-
-
-
-
(750
)
-
Prepayment penalty - FHLB advances
224
651
-
224
-
-
-
Branch optimization charge
-
3,600
-
-
-
(338
)
-
Litigation accrual
1,000
700
-
1,000
-
-
700
CFO departure
788
-
-
-
788
-
-
Goodwill impairment charge
34,500
-
-
34,500
-
-
-
Total core pretax net revenue adjustments
33,338
2,826
-
32,680
658
(1,895
)
364
Core pre-provision net revenue (PPNR)
$
22,572
$
20,562
$
7,652
$
7,931
$
6,989
$
6,635
$
7,207
GAAP TO NON-GAAP RECONCILIATION - PPNR / AVERAGE
TANGIBLE COMMON EQUITY (in thousands)
FOR THE NINE MONTHS
ENDED
FOR THE THREE MONTHS
ENDED
September 30,
September 30,
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2019
2020
2020
2020
2019
2019
Core PPNR (Non-GAAP)
$
22,572
$
20,562
$
7,652
$
7,931
$
6,989
$
6,635
$
7,207
Average common equity (GAAP)
$
307,493
$
302,616
$
288,727
$
319,152
$
314,805
$
311,777
$
306,636
Less average goodwill
(54,239
)
(67,477
)
(31,450
)
(65,570
)
(65,950
)
(65,949
)
(65,949
)
Less average core deposit intangible, net
(5,639
)
(7,809
)
(5,075
)
(5,672
)
(6,170
)
(6,702
)
(7,251
)
Average tangible common equity (non-GAAP)
$
247,615
$
227,329
$
252,202
$
247,910
$
242,685
$
239,125
$
233,436
Core PPNR / average tangible common equity (Non-GAAP)
12.18
%
12.09
%
12.07
%
12.87
%
11.58
%
11.01
%
12.25
%
Annualized ratio based on days in quarter divided by days in
year
HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP
RECONCILIATION - PPNR / AVERAGE TOTAL ASSETS (in thousands)
FOR THE NINE MONTHS
ENDED
FOR THE THREE MONTHS
ENDED
September 30,
September 30,
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2019
2020
2020
2020
2019
2019
Core PPNR (Non-GAAP)
$
22,572
$
20,562
$
7,652
$
7,931
$
6,989
$
6,635
$
7,207
Average total assets (GAAP)
2,474,988
2,236,168
2,524,773
2,529,797
2,369,847
2,292,369
2,244,259
Core PPNR / average total assets (Non-GAAP)
1.22
%
1.23
%
1.21
%
1.26
%
1.19
%
1.15
%
1.27
%
Annualized ratio based on days in quarter divided by days in
year
GAAP TO NON-GAAP RECONCILIATION - EFFICIENCY
RATIO (in thousands)
FOR THE NINE MONTHS
ENDED
FOR THE THREE MONTHS
ENDED
September 30,
September 30,
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2019
2020
2020
2020
2019
2019
Net interest income (GAAP)
$
53,917
$
52,043
$
18,272
$
18,119
$
17,525
$
17,267
$
17,215
Adjustments: Mortgage banking activities
(143
)
(517
)
-
-
(143
)
(164
)
(177
)
Total core net interest income adjustments
(143
)
(517
)
-
-
(143
)
(164
)
(177
)
Core net interest income (Non-GAAP)
$
53,774
$
51,526
$
18,272
$
18,119
$
17,382
$
17,103
$
17,038
Noninterest income (GAAP)
$
10,214
$
15,410
$
2,089
$
4,759
$
3,366
$
5,625
$
5,033
Adjustments: Mortgage banking activities
(1,425
)
(7,929
)
-
-
(1,425
)
(2,699
)
(2,871
)
Securities gains
(3,044
)
(658
)
-
(3,044
)
-
-
-
Proceeds from agreement to exit mortgage banking activities
-
-
-
-
-
(750
)
-
Total core noninterest income adjustments
(4,469
)
(8,587
)
-
(3,044
)
(1,425
)
(3,449
)
(2,871
)
Core noninterest income (Non-GAAP)
$
5,745
$
6,823
$
2,089
$
1,715
$
1,941
$
2,176
$
2,162
Total net interest income and noninterest income
(GAAP)
$
64,131
$
67,453
$
20,361
$
22,878
$
20,891
$
22,892
$
22,248
Adjustments: Total core net interest income adjustments
(143
)
(517
)
-
-
(143
)
(164
)
(177
)
Total core noninterest income adjustments
(4,469
)
(8,587
)
-
(3,044
)
(1,425
)
(3,449
)
(2,871
)
Total core net interest income and noninterest income adjustments
(4,612
)
(9,104
)
-
(3,044
)
(1,568
)
(3,613
)
(3,048
)
Core net interest income + noninterest income (Non-GAAP)
$
59,519
$
58,349
$
20,361
$
19,834
$
19,323
$
19,279
$
19,200
Noninterest expense (GAAP)
$
74,896
$
49,717
$
12,709
$
47,627
$
14,560
$
14,362
$
15,405
Adjustments: Mortgage banking activities
(1,438
)
(6,979
)
-
-
(1,438
)
(2,056
)
(2,712
)
Prepayment penalty - FHLB advances
(224
)
(651
)
-
(224
)
-
-
-
Branch optimization charge
-
(3,600
)
-
-
-
338
-
Litigation accrual
(1,000
)
(700
)
-
(1,000
)
-
-
(700
)
CFO departure
(788
)
-
-
-
(788
)
-
-
Goodwill impairment charge
(34,500
)
-
-
(34,500
)
-
-
-
Total core noninterest expense adjustments
(37,950
)
(11,930
)
-
(35,724
)
(2,226
)
(1,718
)
(3,412
)
Core noninterest expense (Non-GAAP)
$
36,946
$
37,787
$
12,709
$
11,903
$
12,334
$
12,644
$
11,993
Efficiency ratio (GAAP)
116.79
%
73.71
%
62.42
%
208.18
%
69.70
%
62.74
%
69.24
%
Core efficiency ratio (Non-GAAP)
62.07
%
64.76
%
62.42
%
60.01
%
63.83
%
65.58
%
62.46
%
GAAP TO NON-GAAP RECONCILIATION - TANGIBLE BOOK
VALUE PER COMMON SHARE (in thousands except per share data)
FOR THE NINE MONTHS
ENDED
FOR THE THREE MONTHS
ENDED
September 30,
September 30,
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2019
2020
2020
2020
2019
2019
Common and total stockholder's equity (GAAP)
$
289,500
$
308,752
$
289,500
$
283,281
$
315,358
$
314,148
$
308,752
Total shares outstanding at period end
18,742
19,082
18,742
18,716
18,715
19,067
19,082
Book value per common share at period end (GAAP)
$
15.45
$
16.18
$
15.45
$
15.14
$
16.85
$
16.48
$
16.18
Common and total stockholder's equity (GAAP)
$
289,500
$
308,752
$
289,500
$
283,281
$
315,358
$
314,148
$
308,752
Less goodwill
(31,449
)
(65,949
)
(31,449
)
(31,449
)
(65,949
)
(65,949
)
(65,949
)
Less deposit intangible, net of deferred tax liability
(4,869
)
(6,866
)
(4,869
)
(5,358
)
(5,802
)
(6,339
)
(6,866
)
Tangible common equity (non-GAAP)
$
253,182
$
235,937
$
253,182
$
246,474
$
243,607
$
241,860
$
235,937
Total shares outstanding at period end
18,742
19,082
18,742
18,716
18,715
19,067
19,082
Tangible book value per common share (Non GAAP)
$
13.51
$
12.36
$
13.51
$
13.17
$
13.02
$
12.68
$
12.36
HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP
RECONCILIATION - TANGIBLE COMMON EQUITY / TANGIBLE ASSETS (in
thousands except per share data)
FOR THE NINE MONTHS
ENDED
FOR THE THREE MONTHS
ENDED
September 30,
September 30,
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2019
2020
2020
2020
2019
2019
Common (and total) stockholder's equity (GAAP)
$
289,500
$
308,752
$
289,500
$
283,281
$
315,358
$
314,148
$
308,752
Less goodwill
(31,449
)
(65,949
)
(31,449
)
(31,449
)
(65,949
)
(65,949
)
(65,949
)
Less deposit intangible, net of deferred tax liability
(4,869
)
(6,866
)
(4,869
)
(5,358
)
(5,802
)
(6,339
)
(6,866
)
Tangible common equity (non-GAAP)
$
253,182
$
235,937
$
253,182
$
246,474
$
243,607
$
241,860
$
235,937
Total assets (GAAP)
$
2,559,184
$
2,293,475
$
2,559,184
$
2,463,450
$
2,507,894
##
$
2,374,619
##
$
2,293,475
Less goodwill
(31,449
)
(65,949
)
(31,449
)
(31,449
)
(65,949
)
##
(65,949
)
##
(65,949
)
Less deposit intangible, net of deferred tax liability
(4,869
)
(6,866
)
(4,869
)
(5,358
)
(5,802
)
##
(6,339
)
##
(6,866
)
Tangible assets (non-GAAP)
$
2,522,866
$
2,220,660
$
2,522,866
$
2,426,643
$
2,436,143
$
2,302,331
$
2,220,660
Tangible common equity / tangible assets (period end)
10.04
%
10.62
%
10.04
%
10.16
%
10.00
%
10.51
%
10.62
%
HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO
NON-GAAP RECONCILIATION - RETURN ON AVERAGE COMMON EQUITY (in
thousands)
FOR THE NINE MONTHS
ENDED
FOR THE THREE MONTHS
ENDED
September 30,
September 30,
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2019
2020
2020
2020
2019
2019
Net (loss) income (GAAP)
$
(21,462
)
$
10,981
$
4,604
$
(29,409
)
$
3,343
$
5,900
$
4,637
Average common (and total) equity (GAAP)
307,493
302,616
288,727
319,152
314,805
311,777
306,636
Return on average common equity (GAAP)
-9.32
%
4.85
%
6.34
%
-37.06
%
4.27
%
7.51
%
6.00
%
Net (loss) income (GAAP)
$
(21,462
)
$
10,981
$
4,604
$
(29,409
)
$
3,343
$
5,900
$
4,637
Total core adjustments to net income
32,437
2,063
-
33,134
(697
)
(1,383
)
266
Core net income (Non-GAAP)
$
10,975
$
13,044
$
4,604
$
3,725
$
2,646
$
4,517
$
4,903
Average common equity
307,493
302,616
288,727
319,152
314,805
311,777
306,636
Core return on average common equity (Non-GAAP)
4.77
%
5.76
%
6.34
%
4.69
%
3.38
%
5.75
%
6.34
%
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 NINE MONTHS
ENDED
FOR THE THREE MONTHS
ENDED
September 30,
September 30,
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2019
2020
2020
2020
2019
2019
Net (loss) income (GAAP)
$
(21,462
)
$
10,981
$
4,604
$
(29,409
)
$
3,343
$
5,900
$
4,637
Goodwill impairment charge
34,500
-
-
34,500
-
-
-
CDI amortization
2,038
2,296
659
680
699
717
745
Income tax expense on pretax total
(550
)
(620
)
(178
)
(184
)
(189
)
(194
)
(201
)
CDI amortization, net of tax
1,488
1,676
481
496
510
523
544
Total adjustments to net income
35,988
1,676
481
34,996
510
523
544
Tangible net income (Non-GAAP)
$
14,525
$
12,657
$
5,085
$
5,587
$
3,853
$
6,423
$
5,181
Average common equity (GAAP)
$
307,493
$
302,616
$
288,727
$
319,152
$
314,805
$
311,777
$
306,636
Less average goodwill
(54,239
)
(67,477
)
(31,450
)
(65,570
)
(65,950
)
(65,949
)
(65,949
)
Less average core deposit intangible, net
(5,639
)
(7,809
)
(5,075
)
(5,672
)
(6,170
)
(6,702
)
(7,251
)
Average tangible common equity (non-GAAP)
$
247,615
$
227,329
$
252,202
$
247,910
$
242,685
$
239,125
$
233,436
Tangible return on average tangible common equity
(Non-GAAP)
7.84
%
7.44
%
8.02
%
9.06
%
6.39
%
10.66
%
8.81
%
Tangible net income (Non-GAAP)
$
14,525
$
12,657
$
5,085
$
5,587
$
3,853
$
6,423
$
5,181
Total core adjustments to net (loss) income (ex goodwill
impairment)
(2,063
)
2,063
-
(1,366
)
(697
)
(1,383
)
266
Core tangible net income (Non-GAAP)
$
12,463
$
14,720
$
5,085
$
4,221
$
3,157
$
5,040
$
5,447
Average tangible common equity (non-GAAP)
$
247,615
$
227,329
$
252,202
$
247,910
$
242,685
$
239,125
$
233,436
Core tangible return on average tangible common
equity (Non-GAAP)
6.72
%
8.66
%
8.02
%
6.85
%
5.23
%
8.36
%
9.26
%
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 NINE MONTHS
ENDED
FOR THE THREE MONTHS
ENDED
September 30,
September 30,
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2019
2020
2020
2020
2019
2019
Net (loss) income (GAAP)
$
(21,462
)
$
10,981
$
4,604
$
(29,409
)
$
3,343
$
5,900
$
4,637
Average total assets (GAAP)
2,474,988
2,236,168
2,524,773
2,529,797
2,369,847
2,292,369
2,244,259
Return on average assets (GAAP)
-1.16
%
0.66
%
0.73
%
-4.68
%
0.57
%
1.02
%
0.82
%
Net (loss) income (GAAP)
(21,462
)
10,981
4,604
(29,409
)
3,343
5,900
4,637
Total core adjustments to net (loss) income
32,437
2,063
-
33,134
(697
)
(1,383
)
266
Core net income (Non-GAAP)
$
10,975
$
13,044
$
4,604
$
3,725
$
2,646
$
4,517
$
4,903
Average total assets (GAAP)
2,474,988
2,236,168
2,524,773
2,529,797
2,369,847
2,292,369
2,244,259
Core return on average assets (Non-GAAP)
0.59
%
0.78
%
0.73
%
0.59
%
0.45
%
0.78
%
0.87
%
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 NINE MONTHS
ENDED
FOR THE THREE MONTHS
ENDED
September 30,
September 30,
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2019
2020
2020
2020
2019
2019
Net (loss) income (GAAP)
$
(21,462
)
$
10,981
$
4,604
$
(29,409
)
$
3,343
$
5,900
$
4,637
Goodwill impairment charge
34,500
-
-
34,500
-
-
-
CDI amortization
2,038
2,296
659
680
699
717
745
Income tax expense on pretax total
(550
)
(620
)
(178
)
(184
)
(189
)
(194
)
(201
)
CDI amortization, net of tax
1,488
1,676
481
496
510
523
544
Total adjustments to net income
35,988
1,676
481
34,996
510
523
544
Tangible net income (Non-GAAP)
$
14,525
$
12,657
$
5,085
$
5,587
$
3,853
$
6,423
$
5,181
Average total assets (GAAP)
2,474,988
2,236,168
2,524,773
2,529,797
2,369,847
2,292,369
2,244,259
Less average goodwill
(54,239
)
(67,477
)
(31,450
)
(65,570
)
(65,950
)
(65,949
)
(65,949
)
Less average core deposit intangible, net
(5,639
)
(7,809
)
(5,075
)
(5,672
)
(6,170
)
(6,702
)
(7,251
)
Average tangible assets (non-GAAP)
$
2,415,110
$
2,160,881
$
2,488,247
$
2,458,555
$
2,297,727
$
2,219,717
$
2,171,059
Tangible return on average tangible assets (Non-GAAP)
0.80
%
0.78
%
0.81
%
0.91
%
0.67
%
1.15
%
0.95
%
Tangible net income (Non-GAAP)
$
14,525
$
12,657
$
5,085
$
5,587
$
3,853
$
6,423
$
5,181
Total core adjustments to net (loss) income (ex goodwill
impairment)
(2,063
)
2,063
-
(1,366
)
(697
)
(1,383
)
266
Core tangible net income (Non-GAAP)
$
12,463
$
14,720
$
5,085
$
4,221
$
3,157
$
5,040
$
5,447
Average tangible assets (non-GAAP)
$
2,415,110
$
2,160,881
$
2,488,247
$
2,458,555
$
2,297,727
$
2,219,717
$
2,171,059
Core tangible return on average tangible assets
(Non-GAAP)
0.69
%
0.91
%
0.81
%
0.69
%
0.55
%
0.90
%
1.00
%
Annualized ratio based on days in quarter divided by days in
year
GAAP TO NON-GAAP RECONCILIATION - ALLOWANCE
FOR LOAN LOSSES AS A % OF PORTFOLIO LOANS (in thousands)
FOR THE NINE MONTHS
ENDED
FOR THE THREE MONTHS
ENDED
September 30,
September 30,
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2019
2020
2020
2020
2019
2019
Allowance for loan losses (GAAP)
$
17,657
$
9,598
$
17,657
$
16,356
$
13,384
$
10,401
$
9,598
Total loans and leases (GAAP)
1,884,405
1,729,880
1,884,405
1,898,630
1,761,419
1,745,513
1,729,880
Allowance as a % of total loans and leases (GAAP)
0.94
%
0.55
%
0.94
%
0.86
%
0.76
%
0.60
%
0.55
%
Allowance for loan losses (GAAP)
$
17,657
$
9,598
$
17,657
$
16,356
$
13,384
$
10,401
$
9,598
Total loans and leases (GAAP)
1,884,405
1,729,880
1,884,405
1,898,630
1,761,419
1,745,513
1,729,880
Less PPP loans outstanding
(196,375
)
-
(196,375
)
(193,719
)
-
-
-
Portfolio loans (non-GAAP)
1,688,030
1,729,880
1,688,030
1,704,911
1,761,419
1,745,513
1,729,880
Allowance as a % of portfolio loans (non-GAAP)
1.05
%
0.55
%
1.05
%
0.96
%
0.76
%
0.60
%
0.55
%
HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP
RECONCILIATION - NONPERFORMING LOANS AS A % OF PORTFOLIO LOANS
(in thousands)
FOR THE NINE MONTHS
ENDED
FOR THE THREE MONTHS
ENDED
September 30,
September 30,
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2019
2020
2020
2020
2019
2019
Nonperforming loans
$
16,984
$
19,960
$
16,984
$
18,469
$
17,203
$
19,143
$
19,960
Total loans and leases (GAAP)
1,884,405
1,729,880
1,884,405
1,898,630
1,761,419
1,745,513
1,729,880
Nonperforming loans as a % of total loans and leases
(GAAP)
0.90
%
1.15
%
0.90
%
0.97
%
0.98
%
1.10
%
1.15
%
Nonperforming loans
$
16,984
$
19,960
$
16,984
$
18,469
$
17,203
$
19,143
$
19,960
Total loans and leases (GAAP)
1,884,405
1,729,880
1,884,405
1,898,630
1,761,419
1,745,513
1,729,880
Less PPP loans outstanding
(196,375
)
-
(196,375
)
(193,719
)
-
-
-
Portfolio loans (non-GAAP)
1,688,030
1,729,880
1,688,030
1,704,911
1,761,419
1,745,513
1,729,880
Nonperforming loans as a % of portfolio loans
(non-GAAP)
1.01
%
1.15
%
1.01
%
1.08
%
0.98
%
1.10
%
1.15
%
GAAP TO NON-GAAP RECONCILIATION - NONPERFORMING
ASSETS AS A % OF PORTFOLIO LOANS + OREO (in thousands)
FOR THE NINE MONTHS
ENDED
FOR THE THREE MONTHS
ENDED
September 30,
September 30,
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2019
2020
2020
2020
2019
2019
Nonperforming assets
$
18,139
$
23,886
$
18,139
$
20,606
$
19,525
$
22,241
$
23,886
Total loans and leases (GAAP)
1,884,405
1,729,880
1,884,405
1,898,630
1,761,419
1,745,513
1,729,880
OREO
1,155
3,926
1,155
2,137
2,322
3,098
3,926
Total loans and leases + OREO
1,885,560
1,733,806
1,885,560
1,900,767
1,763,741
1,748,611
1,733,806
Nonperforming assets as a % of total loans and
leases + OREO (GAAP)
0.96
%
1.38
%
0.96
%
1.08
%
1.11
%
1.27
%
1.38
%
Nonperforming assets
$
18,139
$
23,886
$
18,139
$
20,606
$
19,525
$
22,241
$
23,886
Total loans and leases (GAAP)
1,884,405
1,729,880
1,884,405
1,898,630
1,761,419
1,745,513
1,729,880
OREO
1,155
3,926
1,155
2,137
2,322
3,098
3,926
Total loans and leases + OREO
1,885,560
1,733,806
1,885,560
1,900,767
1,763,741
1,748,611
1,733,806
Less PPP loans outstanding
(196,375
)
-
(196,375
)
(193,719
)
-
-
-
Portfolio loans + OREO
$
1,689,185
$
1,733,806
$
1,689,185
$
1,707,048
$
1,763,741
$
1,748,611
$
1,733,806
Nonperforming assets as a % of portfolio loans +
OREO (non-GAAP)
1.07
%
1.38
%
1.07
%
1.21
%
1.11
%
1.27
%
1.38
%
GAAP TO NON-GAAP RECONCILIATION - ALLOWANCE FOR
LOAN LOSSES + FV MARKS AS A % OF PORTFOLIO LOANS + FV MARKS (in
thousands)
FOR THE NINE MONTHS
ENDED
FOR THE THREE MONTHS
ENDED
September 30,
September 30,
September 30,
June 30,
March 31,
December 31,
September 30,
2020
2019
2020
2020
2020
2019
2019
Allowance for loan losses (GAAP)
$
17,657
$
9,598
$
17,657
$
16,356
$
13,384
$
10,401
$
9,598
Add: Fair value marks
7,365
9,460
7,365
8,105
8,737
9,078
9,460
Allowance + fair value marks (non-GAAP)
$
25,022
$
19,058
$
25,022
$
24,460
$
22,121
$
19,479
$
19,058
Total loans and leases (GAAP)
$
1,884,405
$
1,701,020
$
1,884,405
$
1,898,630
$
1,761,419
$
1,745,513
$
1,729,880
Add: fair value marks
7,365
9,460
7,365
8,105
8,737
9,078
9,460
Total loans and leases + fair value marks (non-GAAP)
$
1,891,770
$
1,710,480
$
1,891,770
$
1,906,734
$
1,770,156
$
1,754,591
$
1,739,340
Allowance + fair value marks as a % of total loans
and leases + fair value marks (non-GAAP)
1.32
%
1.11
%
1.32
%
1.28
%
1.25
%
1.11
%
1.10
%
Allowance for loan losses (GAAP)
$
17,657
$
9,598
$
17,657
$
16,356
$
13,384
$
10,401
$
9,598
Add: Fair value marks
7,365
9,460
7,365
8,105
8,737
9,078
9,460
Allowance + fair value marks (non-GAAP)
$
25,022
$
19,058
$
25,022
$
24,460
$
22,121
$
19,479
$
19,058
Total loans and leases (GAAP)
$
1,884,405
$
1,729,880
$
1,884,405
$
1,898,630
$
1,761,419
$
1,745,513
$
1,729,880
Less PPP loans outstanding
(196,375
)
-
(196,375
)
(193,719
)
-
-
-
Portfolio loans (non-GAAP)
$
1,688,030
$
1,701,020
$
1,688,030
$
1,704,911
$
1,761,419
$
1,745,513
$
1,729,880
Add: fair value marks
7,365
9,460
7,365
8,105
8,737
9,078
9,460
Portfolio loans + fair value marks (non-GAAP)
$
1,695,395
$
1,710,480
$
1,695,395
$
1,713,015
$
1,770,156
$
1,754,591
$
1,739,340
Allowance + fair value marks as a % of total loans
and leases + fair value marks (non-GAAP)
1.48
%
1.11
%
1.48
%
1.43
%
1.25
%
1.11
%
1.10
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201028006159/en/
Howard Bancorp, Inc. Robert L. Carpenter, Jr., Executive Vice
President and Chief Financial Officer 410-750-0020
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