First Quarter 2017 Earnings

Quality Start for 2017

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May 09, 2017, 14:29 ET

CAMBRIDGE, Md., May 9, 2017 /PRNewswire/ -- Delmarva Bancshares, Inc. (the "Company" or "Delmarva"), parent company for 1880 Bank, today reported net income of $1.6 million or $0.27 per share for the quarter ended March 31, 2017, compared to $827 thousand or $0.14 per share for the quarter ended December 31, 2016 and net income of $863 thousand or $0.15 per share for the first quarter of 2016. First quarter 2017 net income was impacted by the recapture of $991 thousand, $0.17 per share, in deferred tax assets (DTAs), representing an increase when compared to $333 thousand in DTA recapture during fourth quarter 2016.

Delmarva's total assets were $326 million at March 31, 2017, compared to $325 million and $314 million at December 31, 2016 and March 31, 2016, respectively. Total loans increased by $13 million or 5.6% to $241 million from March 2016. Total deposits were $273 million at March 31, 2017, compared to $273 million at December 31, 2016 and $268 million at March 31, 2016. Non-interest bearing deposits represented 30% of total deposits at March 31, 2017. As of March 31, 2017, non-performing assets were 1.86% of total assets compared to 2.06% at December 31, 2016 and 2.69% at March 31, 2016. Non-performing assets decreased by $2.4 million or 28% year over year.

During the first quarter 2017, management determined that continued improvement in the Company's financial condition and performance allowed for the recapture of additional reserves on the DTAs. Factors contributing to management's conclusion included 13 consecutive quarters of positive core earnings, a steady decline in non-performing assets, significant improvement in the bank's regulatory metrics such as capital levels and liquidity and management's belief that the Company will continue to realize positive earnings in the near term. The remaining valuation allowance on DTAs at March 31, 2017 was $3.4 million, primarily relating to net operating loss carryforwards (NOLs) that will not be available to the Company until periods beyond five years due to certain tax code limitations.

The additional realization of the DTAs and strong core earnings resulted in continued improvement in fully diluted tangible book value per share which increased to $6.35 at March 31, 2017 from $6.06 and $4.75 at December 31, 2016 and March 31, 2016, respectively.

First Quarter Performance Highlights:

Net income increased by $732 thousand to $1.6 million compared to net income of $863 thousand in the first quarter of 2016.
Total loans increased by $13 million, or 5.6%, to $241 million compared to the first quarter of 2016.
Non-performing assets were 1.86% of total assets at March 31, 2017, compared to 2.06% and 2.69% of total assets at December 31, 2016 and March 31, 2016, respectively.
Total assets at March 31, 2017 were $326 million versus $325 million and $314 million at December 31, 2016 and March 31, 2016, respectively.
Cost of funds at the Bank was 0.21% for the quarter ended March 31, 2017 compared to 0.13% for the quarter ended March 31, 2016.
Net interest margin at the Bank was 4.06% and 4.04% for the quarters ended March 31, 2017 and 2016, respectively.
Return on average assets (ROA) was 2.04% and return on equity (ROE) was 16.62% for the three months ended March 31, 2017 versus 1.11% and 11.11%, respectively, for the three months ended March 31, 2016.
The efficiency ratio improved to 64.96% for the three months ended March 31, 2017, compared to 67.52% and 69.50% for the December 2016 and March 2016 quarters, respectively.
Fully diluted tangible book value per share was $6.35 at March 31, 2017 compared to $6.06 and $4.75 at December 31, 2016 and March 31, 2016, respectively.
Liquidity remained strong and capital ratios exceeded all regulatory guidelines for a "well-capitalized" financial institution.

We are pleased to report first quarter results with net income of $1.6 million and loan growth of $13 million. Nonperforming assets to total assets decreased to the lowest level since 2010 to 1.86%. Our team works diligently to manage expenses and the liability side of the balance sheet. It requires considerable effort to build high quality loan and deposit relationships into long-term customers. If you do it right, the effort pays off. Delmarva's strategic objectives remain profitable and prudent growth with an eye on acquisition opportunities in Maryland and Delaware," said Kim C. Liddell, Delmarva's Chairman and President.

Delmarva Bancshares, Inc. and Subsidiary Consolidated Balance Sheets March 31, 2017

	Current Year Versus Prior Year		Prior Quarter

	March 2017	March 2016	December 2016
Assets

Cash and due from banks	$ 3,911,347	$ 3,544,657	$ 4,531,309
Interest-bearing deposits in other banks	18,429,991	10,671,871	14,740,230
Federal funds sold	66,666	3,778	116,690
Total cash and cash equivalents	22,408,004	14,220,306	19,388,229

Investment securities available-for-sale, at fair value	34,319,969	48,433,623	36,068,361
Restricted stock, at cost	1,640,000	1,759,152	1,618,450
Total investment securities	35,959,969	50,192,775	37,686,811

Loans receivable, gross	241,167,855	228,429,429	241,412,915
Allowance for loan losses	(1,603,537)	(1,540,744)	(1,625,759)
Loans receivable, net of allowance for loan losses	239,564,318	226,888,685	239,787,156
Bank premises and equipment, net	5,361,044	5,717,142	5,443,228
Other real estate owned, net of valuation allowance	467,037	969,821	819,037
Accrued interest receivable	546,513	627,636	670,135
Cash surrender value of life insurance	11,152,912	10,882,622	11,103,157
Goodwill	1,852,120	2,539,260	1,852,120
Core Deposit Intangible	833,841	1,211,044	921,562
Deferred tax asset	6,125,643	-	5,543,126
Other assets	1,467,143	799,388	1,579,577

Total Assets	$ 325,738,544	$ 314,048,679	$ 324,794,138

Liabilities and Stockholders' Equity

Liabilities:
Deposits:
Non-interest-bearing	$ 81,106,667	$ 82,914,065	$ 81,050,026
Interest-bearing	192,111,463	185,396,226	192,097,274
Total deposits	273,218,130	268,310,291	273,147,300

Accrued interest payable	77,118	528,163	626,257
Accrued benefit obligations	4,679,537	4,772,890	4,660,596
Noncumulative subordinated notes	4,100,000	4,100,000	4,100,000
Trust preferred	2,478,270	2,439,666	2,468,546
Other liabilities	816,357	1,945,235	1,106,353
Total Liabilities	285,369,412	282,096,245	286,109,052

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, 3,872,168 issued and outstanding	38,721	38,721	38,721
Additional paid-in capital	43,563,036	43,454,469	43,508,713
Retained earnings (deficit)	(3,161,216)	(11,742,015)	(4,741,775)
Accumulated other comprehensive income	(92,006)	180,662	(141,170)
Total Stockholders' Equity	40,369,132	31,952,434	38,685,086

Total Liabilities and Stockholders' Equity	$ 325,738,544	$ 314,048,679	$ 324,794,138

Delmarva Bancshares, Inc. and Subsidiary Consolidated Statements of Operations March 31, 2017

	Three Months Ended
	March 31, 2017	March 31, 2016
Interest and Dividend Income
Loans, including fees	$ 2,883,590	$ 2,758,701
Investment securities	154,981	214,653
Dividends on restricted stock	5,473	3,408
Interest on deposits in other banks	19,000	14,785
Interest on federal funds sold/due from banks	187	9
Total interest income	3,063,231	2,991,556

Interest Expense
Deposits	140,189	90,573
Junior subordinated debt	41,472	39,289
Senior subordinated debt	71,750	72,547
Borrowed funds	2	2
Total interest expense	253,413	202,411

Net interest income	2,809,818	2,789,145

Provision for Loan Losses	-	-

Net interest income (loss) after provision
for loan losses	2,809,818	2,789,145

Noninterest Income
Service charges on deposit accounts	177,116	163,328
Other fees and commissions	145,184	176,229
Net gains on sale of securities	-	1,817
Income on bank owned life insurance	49,754	17,649
Other income	22,081	23,975
Total noninterest income	394,135	382,998

Noninterest Expense
Salaries and employee benefits	966,375	996,589
Premises and equipment	274,099	322,720
Data processing	346,029	255,843
OREO write-downs, net losses on sales and operating expenses	82,488	28,765
Professional fees	177,016	261,303
Director fees	54,249	47,249
Core deposit amortization	87,722	105,266
FDIC assessments	24,514	68,175
Regulatory examination assessments	10,287	10,287
Other insurance expense	27,623	27,868
Other expense	195,079	184,605
Total noninterest expense	2,245,481	2,308,670

Net Income (loss) before income taxes	958,472	863,473

Provision for Income Taxes	(637,057)	-

Net Income (loss)	$ 1,595,529	$ 863,473

Net Income Per Common Share: Basic and Diluted	$ 0.27	$ 0.15

Average Common Shares Outstanding: Basic and Diluted	5,931,881	5,931,881