1st Mariner Reports 1st Quarter 2010 Results Extinguishes $20 million in debt, boosts capital by $13 million and successfully closes rights offering

BALTIMORE, May 4 /PRNewswire-FirstCall/ -- 1st Mariner Bancorp (Nasdaq: FMAR), parent company of 1st Mariner Bank, reported a net loss from continuing operations of $3.2 million, or $(0.50) per basic share for the first quarter of 2010, which is a 9% improvement over the loss from continuing operations of $3.6 million, or $(0.55) per basic share, for the first quarter of 2009.

Edwin F. Hale, Sr., 1st Mariner's chairman and chief executive officer, said, "We are making large strides and executed a number of strategic initiatives in the quarter. Most notably, we extinguished $20 million in debt securities in exchange for $2 million in common stock. The exchange gave the Company an economic gain of $13 million after taxes and added a significant amount to the Company's consolidated capital levels. The exchange was recorded as a direct increase to equity rather than 1st quarter income as in accordance with the accounting guidance.

"In addition, we have recently completed a $10.9 million rights and public offering which will further boost our capital levels," Mr. Hale said.  "A large portion of the money came from local investors who are resolute in their belief that Baltimore needs a strong, hometown banking company. The offering closed on April 12, 2010, and therefore could not be included in the 1st quarter financial statements. The completion of this offering, the extinguishment of debt, and the sale of Mariner Finance completed in December of 2009, were key elements of our capital restoration plan.  These events have increased Bank and consolidated capital ratios significantly and have taken us a long way toward meeting our capital goals for June 30, 2010."  

Operating Summary

The net loss for the first quarter of 2010 was negatively impacted by a significant reduction in mortgage banking income which was partially due to the heavy snowstorms that affected the region during the quarter. Total mortgage banking income for the first quarter of 2010 was $2.5 million, which was a decrease of $2.3 million, or 48%, over the first quarter of 2009's $4.8 million.

Offsetting the decrease in mortgage banking revenue was an improvement in credit related costs. Credit related costs for the first quarter of 2010 were $3.9 million, which includes a $2.2 million provision for loan losses and $1.7 million in expenses related to foreclosed properties. This is a 29% improvement over the first quarter of 2009, when these costs totaled $5.5 million, with $3.4 million in the provision for loan losses and $2.1 million in expenses on foreclosed properties.

  • Total revenue for the 1st quarter 2010 was $12.7 million, a decrease of $600 thousand over the 1st quarter of 2009's revenue of $13.3 million. While net interest income increased by $1.0 million, total revenue was offset by the $2.3 million decrease in mortgage banking revenue.  

  • Net interest income increased $1.0 million in the 1st quarter of 2010 compared to the 1st quarter of 2009.  The net interest margin for the 1st quarter of 2010 was 2.70%, an increase of 57 basis points from 2.13 % in the 1st quarter of 2009. This was the result of a lower cost of funds and higher investment yields in 2010 when compared to 2009.  

  • Average earning assets decreased by $77 million, or 7%, compared with last year's 1st quarter, predominantly due to decreases in loans held for sale, investments, and interest bearing deposits.

  • The provision for loan losses totaled $2.2 million for the 1st quarter of 2010, a decrease of 36% over the provision of $3.4 million in the corresponding quarter last year.  Net charge-offs declined $3.8 million, or 68%, to $1.8 million for the 1st quarter of 2010 from $5.7 million in the 1st quarter of 2009. The allowance for loans losses at the end of the first quarter of 2010 was $12.0 million, a decrease of 23% over the prior year's figure of $15.5 million. The decrease was primarily attributable to the removal of the allowance for loan losses that was related to Mariner Finance's loan portfolio. The allowance for loan losses as a percentage of total loans was 1.38% as of March 31, 2010, compared to 1.58% as of March 31, 2009. When adjusting for the allowance attributable to Mariner Finance, the allowance as a percentage of loans as of March 31, 2009 was 1.25%.  Non-performing assets decreased 8% when compared to the first quarter of 2009, to $59.6 million in 2010 versus $65.1 million in 2009.  

  • Non-interest income for the first quarter of 2010 was $5.8 million, a decrease of $1.6 million over the $7.4 million that was recorded in the same quarter of 2009. This was primarily due a decrease in mortgage banking revenue of $2.3 million which was offset by lower write-downs of investment securities.

  • Non-interest expenses remained relatively flat overall, with $16.3 million in the first quarter of 2010 compared to $16.2 million in the first quarter of 2009. The costs related to foreclosed properties decreased $0.4 million, or 20%, in the first quarter of 2010 when compared to 2009. This decrease was offset by a significant increase in FDIC Insurance premiums of $0.67 million.  

Comparing balance sheet data as of March 31, 2010 and 2009, total assets increased to $1.40 billion, 2% over the prior year's $1.38 billion.

  • Total loans outstanding decreased $108.1 million, or 11%, to $872.4 million as of March 31, 2010. The decrease is predominantly attributable to the sale of the assets of Mariner Finance in 2009, which represents $102.2 million of the decrease.

  • Total deposits grew to $1.18 billion as of March 31, 2010, an increase of $161.0 million, or 16%, over March 31, 2009's deposits of $1.02 billion. An increase in Certificates of Deposit was the primary reason for the overall increase in deposits. Total Certificates of Deposit were $865.2 million as of March 31, 2010, an increase of $183.2 million, or 27%, over March 31 2009's balance of $682.0 million. Non-interest bearing checking accounts decreased $11.9 million and savings accounts increased $391 thousand.  

  • Stockholders' Equity was $36.7 million as of March 31, 2010, resulting in a basic book value per share of $4.55, a decrease of $2.26 compared to the book value of $6.81 at March 31, 2009. As a result of the extinguishment of $20 million in debt securities in exchange for $2 million in common stock, the Company recorded a post- tax gain to stockholders' equity of $13 million. Capital Ratios in the 1st quarter of 2010 for First Mariner Bank were as follows: Leverage Ratio = 5.7%; Tier 1 risk-based ratio = 7.9% Total Capital Ratio = 9.2%. As noted above, these ratios do not include the impact of the $10.9 million in proceeds received on the equity offering concluded on April 12, 2010.  The March 31, 2010 capital ratios on a pro forma basis, including the capital raise, would have been 6.5%, 9.1% and 10.3%.

1st Mariner Bancorp is a bank holding company with total assets of $1.405 billion.  Its wholly owned banking subsidiary, 1st Mariner Bank, with total assets of $1.403 billion, operates 24 full service bank branches in Baltimore, Anne Arundel, Harford, Howard, Talbot, and Carroll counties in Maryland, the City of Baltimore, and Shrewsbury, Pennsylvania. The Bank has previously announced that it will close the Shrewsbury office in June of 2010. 1st Mariner Mortgage, a division of 1st Mariner Bank, operates retail offices in Central Maryland and the Eastern Shore of Maryland.  1st Mariner Mortgage also operates direct marketing mortgage operations in Baltimore County.  1st Mariner Bancorp's common stock is traded on the NASDAQ Global Market under the symbol "FMAR".  1st Mariner's Website address is www.1stMarinerBancorp.com, which includes comprehensive level investor information.

In addition to historical information, this press release contains forward-looking statements that involve risks and uncertainties, such as statements of the Company's plans and expectations regarding efficiencies resulting from new programs and expansion activities, revenue growth, anticipated expenses, profitability of mortgage banking operations, and other unknown outcomes.  The Company's actual results could differ materially from management's expectations.  Factors that could contribute to those differences include, but are not limited to, changes in regulations applicable to the Company's business, successful implementation of the Company's branch expansion strategy, its concentration in real estate lending, increased competition, changes in technology, particularly Internet banking, impact of interest rates, possibility of economic recession or slowdown (which could impact credit quality, adequacy of loan loss reserve and loan growth), control by and dependency on key personnel, particularly Edwin F. Hale, Sr., Chairman of the Board of Directors and CEO of the Company, and the Risk Factors set forth in Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2009.

FINANCIAL HIGHLIGHTS (UNAUDITED)





First Mariner Bancorp





(Dollars in thousands, except per share data)







For the three months ended March 31,



2010

2009

$ Change

% Change

Summary of Earnings:






Net interest income

$      6,901

$      5,881

1,020

17%


Provision for loan losses

2,190

3,400

(1,210)

-36%


Noninterest income

5,842

7,413

(1,571)

-21%


Noninterest expense

16,289

16,179

110

1%


Net loss before income taxes

(5,736)

(6,285)

549

-9%


Income tax benefit

(2,497)

(2,733)

236

-9%


Net loss from continuing operations

(3,239)

(3,552)

313

-9%


Income from discontinued operations

(200)

451

651

100%


Net loss

(3,439)

(3,101)

(338)

-11%







Profitability and Productivity:






Return on average assets

-1.01%

-0.91%

-

-12%


Return on average equity

-51.18%

-25.92%

-

-97%


Net interest margin

2.70%

2.13%

-

27%


Net overhead ratio

3.04%

2.06%

-

47%


Efficiency ratio

126.61%

107.79%

-

17%


Mortgage loan production

195,846

512,575

(316,729)

-62%


Average deposits per branch

51,427

42,575

8,852

21%







Per Share Data:






Basic earnings per share - continuing operations

$       (0.50)

$       (0.55)

0.05

9%


Diluted earnings per share - continuing operations

$       (0.50)

$       (0.55)

0.05

9%


Basic earnings per share - discontinued operations

$       (0.03)

$        0.07




Diluted earnings per share - discontinued operations

$       (0.03)

$        0.07




Book value per share

$        4.55

$        6.81

(2.26)

-33%


Number of shares outstanding

8,078,647

6,452,775

1,625,872

25%


Average basic number of shares

6,470,698

6,452,631

18,067

0%


Average diluted number of shares

6,470,698

6,453,631

17,067

0%







Summary of Financial Condition:






At Period End:






Assets

$1,404,847

$1,379,691

25,156

2%


Investment Securities

37,605

52,650

(15,045)

-29%


Loans

872,385

980,470

(108,085)

-11%


Deposits

1,182,818

1,021,807

161,011

16%


Borrowings and repurchase agreements

119,672

225,007

(105,335)

-47%


Stockholders' equity

36,732

43,921

(7,189)

-16%








Average for the period:






Assets

$1,376,185

$1,370,466

5,719

0%


Investment Securities

38,530

51,466

(12,936)

-25%


Loans

885,719

882,398

3,321

0%


Deposits

1,143,310

991,836

151,474

15%


Borrowings and repurchase agreements

193,981

220,232

(26,251)

-12%


Stockholders' equity

27,249

47,982

(20,733)

-43%







Capital Ratios: First Mariner Bank






Leverage

5.7%

6.2%

-

-8%


Tier 1 Capital to risk weighted assets

7.9%

7.9%

-

0%


Total Capital to risk weighted assets

9.2%

9.1%

-

1%







Asset Quality Statistics and Ratios:






Net Chargeoffs

1,826

5,658

(3,832)

-68%


Non-performing assets

59,613

65,137

(5,524)

-8%


90 Days or more delinquent loans

5,038

10,742

(5,704)

-53%


Annualized net chargeoffs to average loans

0.84%

2.60%

-

-68%


Non-performing assets to total assets

4.24%

4.72%

-

-10%


90 Days or more delinquent loans to total loans

0.58%

1.10%

-

-48%


Allowance for loan losses to total loans

1.38%

1.58%

-

-13%









CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


First Mariner Bancorp



(Dollars in thousands)

For the three months



ended March 31,



2010

2009

Interest Income:




Loans

$  13,444

$  13,701


Investments and interest-bearing deposits

761

799

Total Interest Income

14,205

14,500





Interest Expense:




Deposits

5,610

6,418


Borrowings

1,694

2,201

Total Interest Expense

7,304

8,619





Net Interest Income Before Provision for Loan Losses

6,901

5,881





Provision for Loan Losses

2,190

3,400





Net Interest Income After Provision for Loan Losses

4,711

2,481





Noninterest Income:




Service fees on deposits

1,060

1,324


ATM Fees

735

714


Gains on sales of mortgage loans

2,050

3,614


Other mortgage banking revenue

457

1,183


(Loss)/gain on sales of investment securities, net

(123)

(1,716)


Commissions on sales of nondeposit investment products

145

136


Income from bank owned life insurance

353

336


Income (loss) on trading assets and liabilities

847

768


Other

318

1,054

Total Noninterest Income

5,842

7,413





Noninterest Expense:




Salaries and employee benefits

6,596

6,449


Occupancy

2,371

2,320


Furniture, fixtures and equipment

612

835


Advertising

178

258


Data Processing

402

513


Professional services

720

795


Costs of other real estate owned

1,685

2,114


Valuation and secondary marketing reserves

-

-


FDIC Insurance

934

272


Other

2,791

2,623

Total Noninterest Expense

16,289

16,179





Net Loss Before Discontinued Operations and Income Taxes

(5,736)

(6,285)

Income Tax Benefit - Continuing Operations

(2,497)

(2,733)

Net Loss from Continuing Operations

(3,239)

(3,552)

(Loss) Income from discontinued operations

(200)

451





Net Loss

$  (3,439)

$  (3,101)







CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)



First Mariner Bancorp





(Dollars in thousands)







As of March 31,



2010

2009

$ Change

% Change

Assets:






Cash and due from banks

$287,711

$100,905

186,806

185%


Interest-bearing deposits

8,154

7,068

1,086

15%


Available-for-sale investment securities, at fair value

27,382

40,272

(12,890)

-32%


Trading Securities

10,223

12,378

(2,155)

-17%


Loans held for sale

55,360

85,298

(29,938)

-35%


Loans receivable

872,385

980,470

(108,085)

-11%


Allowance for loan losses

(12,003)

(15,515)

3,512

-23%


Loans, net

860,382

964,955

(104,573)

-11%


Other real estate owned

19,915

22,403

(2,488)

-11%


Restricted stock investments, at cost

7,934

7,619

315

4%


Property and equipment

43,556

48,750

(5,194)

-11%


Accrued interest receivable

4,734

6,400

(1,666)

-26%


Income Taxes Receivable

1,461

4,304

(2,843)

-66%


Deferred income taxes

22,586

24,554

(1,968)

-8%


Bank owned life insurance

35,126

35,252

(126)

0%


Prepaid expenses and other assets

20,323

19,533

790

4%

Total Assets

$1,404,847

$1,379,691

25,156

2%







Liabilities and Stockholders' Equity:





Liabilities:






Deposits

$1,182,818

$1,021,807

161,011

16%


Borrowings

119,672

225,007

(105,335)

-47%


Junior subordinated deferrable interest debentures

53,100

73,724

(20,624)

-28%


Accrued expenses and other liabilities

12,525

15,232

(2,707)

-18%

Total Liabilities

1,368,115

1,335,770

32,345

2%







Stockholders' Equity






Common Stock

404

323

81

25%


Additional paid-in-capital

69,313

56,753

12,560

22%


Retained earnings

(30,060)

(7,438)

(22,622)

304%


Accumulated other comprehensive loss

(2,925)

(5,717)

2,792

-49%

Total Stockholders Equity

36,732

43,921

(7,189)

-16%

Total Liabilities and Stockholders' Equity

$1,404,847

$1,379,691

25,156

2%









CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES (UNAUDITED)



First Mariner Bancorp





(Dollars in thousands)







For the three months ended March 31,



2010

2009



Average

Yield/

Average

Yield/



Balance

Rate

Balance

Rate

Assets:






Loans






Commercial Loans and LOC

$     78,854

5.24%

$     92,429

5.00%


Comm/Res Construction

98,345

5.43%

105,008

5.31%


Commercial Mortgages

338,198

6.27%

325,014

6.80%


Residential Constr - Cons

47,323

6.78%

67,175

4.85%


Residential Mortgages

169,068

5.56%

140,820

5.82%


Consumer

153,931

4.64%

151,952

4.27%


Total Loans

885,719

5.70%

882,398

5.69%








Loans held for sale

68,593

4.96%

84,868

5.19%


Trading and available for sale securities, at fair value

38,530

6.84%

51,466

6.02%


Interest bearing deposits

9,170

4.46%

60,567

0.16%


Restricted stock investments, at cost

7,934

0.01%

7,373

0.00%








Total earning assets

1,009,946

5.63%

1,086,672

5.32%








Allowance for loan losses

(11,994)


(12,651)



Cash and other non earning assets

378,233


296,445








Total Assets

$1,376,185


$1,370,466








Liabilities and Stockholders' Equity:






Interest bearing deposits






NOW deposits

7,604

0.76%

6,453

0.70%


Savings deposits

53,689

0.29%

52,896

0.34%


Money market deposits

150,074

0.67%

160,088

0.88%


Time deposits

823,684

2.61%

659,426

3.70%


Total interest bearing deposits

1,035,051

2.20%

878,863

2.96%








Borrowings

193,981

3.54%

220,232

3.93%








Total interest bearing liabilities

1,229,032

2.41%

1,099,095

3.16%








Noninterest bearing demand deposits

108,259


112,973



Other liabilities

11,645


110,416



Stockholders' Equity

27,249


47,982








Total Liabilities and Stockholders' Equity

$1,376,185


$1,370,466








Net Interest Spread


3.22%


2.16%







Net Interest Margin


2.70%


2.13%









SOURCE 1st Mariner Bancorp



RELATED LINKS
http://www.1stMarinerBank.com

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