Delmarva Bancshares, Inc. Second Quarter 2017 Earnings

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Jul 24, 2017, 15:43 ET

CAMBRIDGE, Md., July 24, 2017 /PRNewswire/ -- Delmarva Bancshares, Inc. (the "Company" or "Delmarva"), parent company for 1880 Bank, today reported net income of $746 thousand or $0.13 per share for the quarter ended June 30, 2017, compared to $1.6 million or $0.27 per share for the quarter ended March 31, 2017 and net income of $4.9 million or $0.82 per share for the second quarter of 2016. First quarter 2017 and second quarter 2016 net income included the recapture of $991 thousand ($0.17 per share) and $4.1 million ($0.69 per share) in deferred tax assets (DTAs), respectively. Additionally, the Company did not incur tax expense for the entire second quarter of 2016. Excluding the DTA recapture impact and assuming a comparable effective tax rate for the entire June 2016 quarter, net income would have been approximately $605 thousand or $0.10 per share for the March 2017 quarter and $659 thousand or $0.11 per share for June 2016 quarter.

Delmarva's total assets were $324 million at June 30, 2017, compared to $326 million and $305 million at March 31, 2017 and June 30, 2016, respectively. Total loans increased by $13 million or 5.9% to $241 million from June 2016. Total deposits were $270 million at June 30, 2017, compared to $273 million at March 31, 2017 and $255 million at June 30, 2016. Non-interest bearing deposits represented 29% of total deposits at June 30, 2017. As of June 30, 2017, non-performing assets were 1.80% of total assets compared to 1.86% at March 31, 2017 and 2.57% at June 30, 2016. The remaining valuation allowance on DTAs at June 30, 2017 was $3.4 million, primarily relating to net operating loss carryforwards (NOLs) that may not be available to the Company until periods beyond five years due to certain tax code limitations.

Strong core earnings resulted in continued improvement in fully diluted tangible book value per share which increased to $6.47 at June 30, 2017 from $6.30 and $5.72 at March 31, 2017 and June 30, 2016, respectively.

Second Quarter Performance Highlights:

Net income was $746 thousand compared to net income of $659 thousand in the second quarter of 2016, adjusted to exclude the DTA recapture and to assume tax expense for the entire quarter.
Total loans increased by $13 million, or 5.9%, to $241 million compared to the second quarter of 2016.
Non-performing assets were 1.80% of total assets at June 30, 2017, compared to 1.86% and 2.57% of total assets at March 31, 2017 and June 30, 2016, respectively.
Total assets at June 30, 2017 were $324 million versus $326 million and $305 million at March 31, 2017 and June 30, 2016, respectively.
Cost of funds at the Bank was 0.23% for the quarter ended June 30, 2017 compared to 0.14% for the quarter ended June 30, 2016.
Net interest margin at the Bank was 4.10% and 4.16% for the quarters ended June 30, 2017 and 2016, respectively.
Return on average assets (ROA) was 0.92% and return on equity (ROE) was 7.33% for the three months ended June 30, 2017 versus 0.86% and 8.16%, respectively, for the three months ended June 30, 2016, adjusted to exclude the DTA recapture and to assume tax expense for the entire quarter.
The efficiency ratio improved to 65.59% for the three months ended June 30, 2017, compared to 70.08% and 69.81% for the March 2017 and June 2016 quarters, respectively.
Fully diluted tangible book value per share was $6.47 at June 30, 2017 compared to $6.30 and $5.72 at March 31, 2017 and June 30, 2016, respectively.
Liquidity remained strong and capital ratios exceeded all regulatory guidelines for a "well-capitalized" financial institution.

"Net income for the second quarter 2017 was strong, and reflects continued improvement in the Company's operating performance. Loan and deposit growth year over year were solid and consistent with our approach to prudent lending and relationship building. We continue to whittle away the legacy loans that make up the nonperforming assets. We believe 1880 Bank is well positioned for opportunistic growth in 2017," said Kim C. Liddell, Delmarva's Chairman and President.

Delmarva Bancshares, Inc. and Subsidiary
Consolidated Balance Sheets
June 30, 2017


	June 30, 2017	June 30, 2016	March 31, 2017
Assets

Cash and due from banks	$ 4,012,049	$ 2,227,440	$ 3,911,347
Interest-bearing deposits in other banks	16,736,817	7,028,177	18,429,991
Federal funds sold	7,000	5,476	66,666
Total cash and cash equivalents	20,755,866	9,261,093	22,408,004

Investment securities available-for-sale, at fair value	32,410,599	41,360,352	34,319,969
Restricted stock, at cost	1,689,400	1,800,052	1,640,000
Total investment securities	34,099,999	43,160,404	35,959,969

Loans receivable, gross	240,677,930	227,303,901	241,167,855
Allowance for loan losses	(1,616,207)	(1,461,363)	(1,603,537)
Loans receivable, net of allowance for loan losses	239,061,723	225,842,538	239,564,318
Bank premises and equipment, net	5,325,078	5,627,198	5,361,044
Other real estate owned, net of valuation allowance	289,421	1,145,321	467,037
Accrued interest receivable	702,445	582,309	546,513
Cash surrender value of life insurance	13,769,470	10,986,233	11,152,912
Goodwill	1,852,120	1,852,120	1,852,120
Core Deposit Intangible	750,505	1,110,164	833,841
Deferred tax asset	5,733,143	5,019,180	6,125,643
Other assets	1,316,274	715,896	1,467,143

Total Assets	$ 323,656,044	$ 305,302,456	$ 325,738,544

Liabilities and Stockholders' Equity

Liabilities:
Deposits:
Non-interest-bearing	$ 79,561,193	$ 77,730,542	$ 81,106,667
Interest-bearing	190,630,973	177,040,870	192,111,463
Total deposits	270,192,166	254,771,412	273,218,130

Accrued interest payable	150,904	564,934	77,118
Accrued benefit obligations	4,697,361	4,779,468	4,679,537
FRB/FHLB Borrowings	-	-	4,679,537
Noncumulative subordinated notes	4,100,000	4,100,000	4,100,000
Trust preferred	2,487,574	2,445,959	2,478,270
Other liabilities	770,947	1,750,396	(3,863,180)
Total Liabilities	282,398,952	268,412,169	285,369,412

Commitments and Contingent Liabilities	-	-	-

Stockholders' Equity:
Preferred stock, $.01 par value per share -
2,059,713 shares authorized, issued and outstanding	20,597	20,597	20,597
Common stock, $.01 par value per share -
10,000,000 shares authorized, 3,883,593, 3,872,168 and
3,883,593 issued and outstanding, respectively	38,836	38,721	38,836
Additional paid-in capital	43,603,597	43,473,178	43,562,921
Retained earnings (deficit)	(2,415,459)	(6,864,121)	(3,161,216)
Accumulated other comprehensive income	9,521	221,912	(92,006)
Total Stockholders' Equity	41,257,092	36,890,287	40,369,132

Total Liabilities and Stockholders' Equity	$ 323,656,044	$ 305,302,456	$ 325,738,544

Delmarva Bancshares, Inc. and Subsidiary
Consolidated Statements of Operations
June 30, 2017


	Three Months Ended		Year to Date
	June 30, 2017	June 30, 2016	June 30, 2017	June 30, 2016
Interest and Dividend Income
Loans, including fees	$ 2,906,481	$ 2,773,352	$ 5,790,071	$ 5,529,678
Investment securities	152,832	199,667	307,813	413,760
Dividends on restricted stock	45,414	37,530	50,887	41,498
Interest on deposits in other banks	45,595	8,606	64,595	23,392
Interest on federal funds sold/due from banks	96	9	283	18
Total interest income	3,150,418	3,019,164	6,213,649	6,008,346

Interest Expense
Deposits	152,884	88,801	293,073	179,374
Junior subordinated debt	40,288	40,922	81,760	80,211
Senior subordinated debt	72,547	72,547	144,297	145,094
Borrowed funds	-	31	2	33
Total interest expense	265,719	202,301	519,132	404,712

Net interest income	2,884,699	2,816,863	5,694,517	5,603,634

Provision for Loan Losses	12,952	-	12,952	-

Net interest income after provision
for loan losses	2,871,747	2,816,863	5,681,565	5,603,634

Noninterest Income
Service charges on deposit accounts	192,170	164,559	369,286	327,887
Other fees and commissions	155,693	183,846	300,877	293,675
Net gains on sale of securities	-	148,216	-	150,033
Income on bank owned life insurance	116,559	70,929	166,313	154,978
Other income	22,065	27,793	44,146	84,244
Total noninterest income	486,487	595,343	880,622	1,010,817

Noninterest Expense
Salaries and employee benefits	1,018,755	992,379	1,985,130	1,988,969
Premises and equipment	273,725	371,702	547,824	698,990
Data processing	376,723	269,653	722,752	524,096
OREO write-downs, net losses on sales and operating expenses	(66,925)	(11,688)	15,563	47,176
Professional fees	204,661	311,664	381,677	570,879
Director fees	70,000	54,249	124,249	101,498
Core deposit amortization	83,335	100,266	171,057	206,146
FDIC assessments	30,000	65,492	54,514	133,667
Regulatory examination assessments	10,287	10,287	20,574	20,574
Other insurance expense	27,630	27,750	55,253	55,618
Other expense	182,823	190,420	377,902	373,332
Total noninterest expense	2,211,014	2,382,174	4,456,495	4,720,945

Net Income before income taxes	1,147,220	1,030,032	2,105,692	1,893,506

Provision for Income Taxes	401,462	(3,847,864)	(235,595)	(3,847,864)

Net Income	$ 745,758	$ 4,877,896	$ 2,341,287	$ 5,741,370

Net Income Per Common Share: Basic	$ 0.13	$ 0.82	$ 0.39	$ 0.97

Net Income Per Common Share: Diluted	$ 0.13	$ 0.82	$ 0.39	$ 0.97

Average Common Shares Outstanding: Basic	5,943,306	5,931,881	5,936,458	5,931,881
Average Common Shares Outstanding: Diluted	5,951,589	5,931,881	5,945,382	5,931,881