1st Mariner Bancorp Reports Second Quarter 2013 Results (8/14/13)
BALTIMORE, Aug. 14, 2013 /PRNewswire/ -- 1st Mariner Bancorp (OTCBB: FMAR), parent company of 1st Mariner Bank, reported a net loss of $1.48 million for the second quarter of 2013, compared to net income of $5.67 million for the second quarter of 2012. For the six months ended June 30, 2013, the company reported a net loss of $3.75 million compared to net income of $7.49 million for the six months ended June 30, 2012.
Mark A. Keidel, 1st Mariner's Interim Chief Executive Officer, said, "Our results this quarter were dampened by rising long term interest rates, which slowed refinancings and overall revenue from our mortgage banking operations as compared to the second quarter of 2012. Additionally, we experienced higher operating expenses for professional services and expenses associated with efforts to raise capital."
Mr. Keidel continued, "We continued to see improvement in our asset quality during the recent quarter and our level of non-performing assets have declined 35% in the first half of 2013. As a result, our ratio of non-performing assets to total assets improved to 3.0% as of June 30, 2013, down from 4.1% as of December 31, 2012 and 4.6% as of June 30, 2012."
Mr. Keidel concluded, "As we move into the second half of 2013, we will continue our focus on improving our core banking profitability and meeting the capital levels required in our regulatory orders."
Net interest income for the second quarter of 2013 was $6.4 million compared to $7.3 million in the second quarter of 2012. The decrease was due to the lower average loan balances in 2013. Gross loan balances averaged $589.5 million for the second quarter of 2013 compared to $668.9 million for the second quarter of 2012. Although these balances decreased quarter over quarter, the average yield earned on these loans increased. The average yield on loans was 5.55% for the quarter ended June 30, 2013 compared to 5.27% for the same quarter in 2012. Additionally, average loans held for sale decreased to $186.0 million for the second quarter of 2013 compared to $205.1 million for the second quarter of 2012. Offsetting the decrease in loans and loans held for sale was an increase in available for sale investment securities. Average available for sale investment securities were $63.1 million for the second quarter of 2013 compared to $31.1 million. Also affecting net interest income was an increase in average interest bearing deposit liabilities. Total interest bearing deposits averaged $1.1 billion for the second quarter of 2013 compared to $905.9 million for the second quarter of 2012. Although the average interest bearing deposit balances increased, the average rate paid on those deposits decreased quarter over quarter. For the quarter ended June 30, 2013 the average rate paid was 1.05% and for the same quarter in 2012, the rate was 1.27%.
For the six months ended June 30, 2013, net interest income was $13.5 million compared to $14.9 million for the six months ended June 30, 2012. The decrease was attributable to lower average loan balances in 2013 versus 2012. For the six months ended June 30, 2013, average portfolio loan balances were $598.3 million and the average yield was 5.27%. For the same period in 2012, the average balances were $683.1 million and the average yield was 5.37%. The decrease was due to a combination of loan payoffs and lower commercial loan production. While there was a decrease in average portfolio loan balances in the six months ended June 30, 2013 there was in increase in average loans held for sale when compared to the six months ended June 30, 2012. This was the result of the high volume of mortgage loan originations in the latter half of 2012 and early 2013. The average balance of loans held for sale was $279.4 million and $191.4 million for the six months ended June 30, 2013 and 2012, respectively.
Total interest expense for the six months ended June 30, 2013 was $7.5 million, a 5% decrease from the $7.9 million recorded in the same period of 2012. Interest bearing deposit balances averaged $1.1 billion for the six months ended June 30, 2013 compared to $907.9 million for the six months ended June 30, 2012. The increase was due to the need for additional liquidity to fund the high volume of mortgage loan originations in late 2012 and early 2013. Although average deposit balances increased, the average rate paid on those deposits decreased. The average rate paid on interest bearing deposits was 1.07% for the six months ended June 30, 2013 while the average rate paid for the six months ended June 30, 2012 was 1.32%. Interest expense on borrowings averaged 3.05% during the six months ended June 30, 2013 versus 2.21% during quarter ended June 30, 2012. This increase in 2013 was due to the early payoff of $25.0 million in Federal Home Loan Bank borrowings during the six months ended June 30, 2013 which resulted in a prepayment penalty of $152 thousand. Average borrowings were $118.4 million and $174.1 million for the six months ended June 30, 2013 and 2012, respectively.
There was no provision for loan losses for the quarter ended June 30, 2013 and for the same quarter in 2012 there was a negative provision (or recovery) of $428 thousand. Net charge-offs were $1.3 million for the quarter ended June 30, 2013 compared to a net recovery of $429 thousand for the quarter ended June 30, 2012. For the six months ended June 30, 2013, the provision for loan losses was $1.3 million compared to $572 thousand for the six months ended June 30, 2012. Net charge offs were $2.9 million and $851 thousand for the six months ended June 30, 2013 and 2012, respectively. Costs related to foreclosed properties, including write-downs due to declining appraised values, amounted to $1.0 million and $3.7 million for the quarter and six months ended June 30, 2013, respectively. By comparison, these costs were $940 thousand and $2.2 million for the quarter and six months ended June 30, 2102, respectively. Combined credit related costs (provision for loan losses and costs related to foreclosed properties) amounted to $1.0 million and $5.0 million for the quarter and six months ended June 30, 2013, respectively. In the prior year, the combined credit related costs were $512 thousand and $2.8 million for the quarter and six months ended June 30, 2012, respectively. The increase in credit related costs was due to the aggressive disposal of non-performing assets in 2013. Total non-performing assets were $36.9 million as of June 30, 2013, which is a decrease of 34% from the $55.7 million reported as of June 30, 2012. The percentage of non-performing assets to total assets decreased to 3.0% as of June 30, 2013, down from 4.6% as of June 30, 2012.
Non-interest income was $10.3 million and $21.9 million for the quarter and six months ended June 30, 2013. In 2012, non-interest income was $12.8 million and $23.2 million for the quarter and six months ended June 30, 2012. Mortgage banking revenue decreased during the quarter ended June 30, 2013 due to increases in long term interest rates which resulted in tightening profit margins on loans sold. Gross mortgage banking revenue was $5.4 million and $15.2 million for the quarter and six months ended June 30, 2013, respectively. By comparison, gross mortgage banking revenue was $11.1 million and $20.0 million for the quarter and six months ended June 30, 2012, respectively. Offsetting this decrease was a gain on the sale of the remaining interest in the former Mariner Finance subsidiary of $2.9 million which was recorded during the quarter ended June 30, 2013.
Non-interest expenses were $18.2 million and $37.9 million for the quarter and six months ended June 30, 2013, respectively. By comparison, non-interest expenses were $14.9 million and $30.3 million for the quarter and six months ended June 30, 2012, respectively. The increase in expenses was primarily due to the following: aggressive sale and disposal of foreclosed assets; increased marketing and postage expenses related large direct mailing campaigns for the residential mortgage origination activities; professional fees related to regulatory compliance and efforts related to increasing capital levels; increases in salaries and benefits due to added mortgage staffing; higher corporate insurance premiums; and higher deposit insurance premiums paid to the FDIC. Costs related to foreclosed properties, including losses due to aggressive sales and disposals, amounted to $1.0 million and $3.7 million for the quarter and six months ended June 30, 2013, respectively. For 2012, costs related to foreclosed properties were $940 thousand and $2.2 million for the quarter and six months ended June 30, 2012, respectively. Direct mailings that solicit refinancing and new purchase mortgages caused the increase in marketing and postage expenses. Marketing and postage expenses were $591 thousand and $943 thousand, respectively, in the quarter ended June 30, 2013 and $1.0 million and $2.0 million, respectively, for the six months ended June 30, 2013. By comparison, the marketing and postage expenses were $790 thousand and $422 thousand, respectively, in the quarter ended June 30, 2012 and $978 thousand and $681 thousand, respectively, for the six months ended June 30, 2012. Professional fees were $1.9 million and $2.7 million for quarter and six months ended June 30, 2013, respectively. In contrast, these fees were $739 thousand and $1.1 million for the quarter and six months ended June 30, 2012. The increase was due to regulatory compliance and capital raising efforts. Salaries and benefits were $6.4 million and $13.3 million for the quarter and six months ended June 30, 2013, respectively, versus $5.6 million and $11.3 million for the quarter and six months ended June 30, 2012, respectively. The increase was due to staffing added during 2012 to meet the increasing mortgage origination volume. Steps are now being taken to adjust the mortgage division staffing in light of the current slowing trend. Amounts paid for FDIC deposit insurance premiums remained high with $1.1 million and $2.3 million incurred in the quarter and six months ended June 30, 2013, respectively. For 2012, these premiums were $1.1 million and $2.1 million for the quarter and six months ended June 30, 2012, respectively. Additionally, corporate insurance expense increased as the renewal rates increased beginning in the third quarter of 2012. For the three and six months ended June 30, 2013, corporate insurance expenses were $786 thousand and $1.6 million, respectively. For 2012, these expenses were $402 thousand and $876 thousand for the three and six months ended June 30, 2012, respectively.
Comparing balance sheet data as of June 30, 2013 and 2012, total assets remained the same at $1.2 billion.
•Average earning assets were $875.1 million for quarter ended June 30, 2013, which was an 8% decrease over the second quarter 2012 balance of $946.8 million. The decrease was due to lower average loans and loans held for sale.
•Total cash and due from banks was $244.5 million as of June 30, 2012, compared to $122.2 million as of June 30, 2012. The increase was due to the added liquidity needed to fund the mortgage banking operations.
•Available for sale investment securities increased to $82.0 million as of June 30, 2013 from $40.5 million as of June 30, 2012. Excess liquidity was deployed into earning assets.
•Total loans outstanding were $582.1 million as of June 30, 2013, down 12% from the $660.8 million reported in the prior year. This was due to loan maturities, loan sales, and reduced portfolio loan production.
•Total loans held for sale were $177.5 million as of June 30, 2013, a decrease of 28% over the $247.1 million held for sale as of June 30, 2012. The decrease was due to a spike in interest rates during the quarter which slowed application volume.
•The allowance for loan losses as of June 30, 2013 was $9.9 million, a decrease of 27% over the prior year's $13.5 million. The decrease was due to lower loan balances as of June 30, 2013, lower charge off history, and decreasing levels of non-performing loans. The allowance for loan losses as a percentage of total loans was 1.70% as of June 30, 2013, compared to 2.05% as of June 30, 2012. The allowance for loan losses as a percentage of non-performing assets improved to 26.7% as of June 30, 2013, up from 24.3% as of June 30, 2012.
•Total deposits increased 7.6% from $1.05 billion as of June 30, 2012 to $1.13 billion as of June 30, 2013. Money market and NOW accounts increased $18.6 million, from $150.2 million as of June 30, 2012 to $168.8 million as of June 30, 2013. Savings accounts increased $5.1 million from $59.5 million as of June 30, 2012 to $64.6 million as of June 30, 2013. Certificates of deposit were $791.2 million as of June 30, 2013, representing an increase of $53.7 million, or 7.3%, from the $737.5 million as of June 30, 2012. Demand deposits decreased 2.0% from $99.6 million as of June 30, 2012 to $101.5 million as of June 30, 2013.
•As of June 30, 2013, 1st Mariner Bank's capital ratios were as follows: Total Risk Based Capital 7.8%; Tier 1 Risk Based Capital 6.6%; and Leverage 3.8%.
1st Mariner Bancorp is a bank holding company with total assets of $1.2 billion. Its wholly owned banking subsidiary, 1st Mariner Bank, operates 19 full service bank branches in Baltimore, Anne Arundel, Harford, Howard, Talbot, and Carroll counties in Maryland, and the City of Baltimore. 1st Mariner Mortgage, a division of 1st Mariner Bank, operates retail offices in Central Maryland, the Eastern Shore of Maryland, and portions of Northern Virginia. 1st Mariner also operates direct marketing mortgage operations in Baltimore. 1st Mariner Bancorp's common stock is quoted on the OTC Bulletin Board under the symbol "FMAR". 1st Mariner's Website address is www.1stMarinerBancorp.com, which includes comprehensive level investor information.
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