UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

ý Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended March 31, 2005.

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from

 

Commission file number:  0-21815

 

FIRST MARINER BANCORP

(Exact name of registrant as specified in its charter)

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such report, and (2) has been subject to such filing requirements for the past 90 days.

Yes  ý  No  o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

Yes  ý  No  o

 

The number of shares of common stock outstanding as of May 5, 2005 is 6,244,002 shares.

 

FIRST MARINER BANCORP
INDEX

 

PART I - FINANCIAL INFORMATION
Item 1 -			Financial Statements
			Consolidated Statements of Financial Condition at March 31, 2005 (unaudited) and at December 31, 2004
			Consolidated Statements of Operations for the Three Months Ended March 31, 2005 and 2004 (unaudited)
			Consolidated Statements of Cash Flow for the Three Months Ended March 31, 2005 and 2004 (unaudited)
			Notes to Consolidated Financial Statements (unaudited)
Item 2 -		Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3 -		Quantitative and Qualitative Disclosures About Market Risk
Item 4 -		Controls and Procedures
PART II - OTHER INFORMATION
Item 1 -		Legal proceedings
Item 2 -		Unregistered Sales of Equity Securities and Use of Proceeds
Item 3 -		Defaults upon senior securities
Item 4 -		Submission of matters to a vote of security holders
Item 5 -		Other information
Item 6 -		Exhibits
Signatures

 

2

 

First Mariner Bancorp and Subsidiaries

Consolidated Statements of Financial Condition

 

(Dollars in thousands, except per share data)		March 31, 2005			December 31, 2004
		(unaudited)
ASSETS
Cash and due from banks		$	29,502		$	29,765
Federal funds sold and interest-bearing deposits		7,253			5,682
Available-for-sale securities, at fair value		306,683			322,965
Loans held for sale		75,923			79,955
Loans receivable		768,258			746,146
Allowance for loan losses		(9,714		)	(9,580		)
Loans, net		758,544			736,566
Other real estate owned		931			65
Restricted stock investments		11,960			11,886
Property and equipment, net		37,535			17,445
Accrued interest receivable		6,660			6,417
Deferred income taxes		4,497			2,976
Bank owned life insurance		26,595			26,338
Prepaid expenses and other assets		12,321			10,471
Total assets		$	1,278,404		$	1,250,531
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Noninterest-bearing		$	172,129		$	160,538
Interest-bearing		680,827			664,879
Total deposits		852,956			825,417
Borrowings		282,779			271,661
Repurchase agreements		15,000			25,000
Junior subordinated deferrable interest debentures		58,249			58,249
Accrued expenses and other liabilities		6,171			5,890
Total liabilities		1,215,155			1,186,217
Stockholders’ equity:
Common stock, $.05 par value; 20,000,000 shares authorized; 5,832,760 and 5,826,011 shares issued and outstanding, respectively		292			291
Additional paid-in capital		51,769			51,792
Retained earnings		13,738			12,363
Accumulated other comprehensive loss		(2,550		)	(132		)
Total stockholders’ equity		63,249			64,314
Total liabilities and stockholders’ equity		$	1,278,404		$	1,250,531

 

See accompanying notes to the consolidated financial statements

 

3

 

First Mariner Bancorp and Subsidiaries

Consolidated Statements of Operations (Unaudited)

 

		Three Months Ended March 31,
		2005			2004
		(dollars in thousands except per share)
Interest income:
Loans		$	14,672		$	12,104
Investment securities and interest-bearing deposits		3,487			3,037
Total interest income		18,159			15,141
Interest expense:
Deposits		3,508			3,110
Borrowed funds and repurchase agreements		3,407			2,110
Total interest expense		6,915			5,220
Net interest income		11,244			9,921
Provision for loan losses		414			300
Net interest income after provision for loan losses		10,830			9,621
Noninterest income:
Gain on sale of loans		760			945
Other mortgage banking fees		358			315
ATM Fees		719			624
Service fees on deposits		1,671			1,548
Gain on sales of investment securities		-			340
Commissions on sales of nondeposit investment products		125			238
Income from bank owned life insurance		257			233
Commissions on sales of other insurance products		413			283
Other		223			164
Total noninterest income		4,526			4,690
Noninterest expenses:
Salaries and employee benefits		7,145			6,539
Net occupancy		1,645			1,535
Furniture, fixtures and equipment		756			719
Professional services		333			191
Advertising		450			356
Data processing		521			515
Other		2,638			2,643
Total noninterest expenses		13,488			12,498
Income before taxes		1,868			1,813
Provision for income taxes		493			506
Net income		$	1,375		$	1,307
Net income per common share:
Basic		$	0.24		$	0.23
Diluted		0.22			0.21

 

See accompanying notes to the consolidated financial statements.

 

4

 

First Mariner Bancorp and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

For the three months ended March 31,

 

		2005			2004
		(dollars in thousands)
Cash flows from operating activities:
Net income		$	1,375		$	1,307
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation and amortization		856			805
Amortization of unearned loan fees and costs, net		(262		)	(266		)
Amortization of premiums and discounts on loans		(183		)	(185		)
Amortization of premiums and discounts on mortgage-backed securities, net		(93		)	42
Gain on available for sale securities		—			(340		)
Gain on other real estate owned		—			(27		)
Gain on sale of loans		(760		)	(945		)
Valuation allowance of other real estate owned		—			2
Increase in accrued interest receivable		(243		)	(368		)
Provision for loan losses		414			300
Proceeds from sales of mortgage loans held-for-sale		260,064			206,845
Origination of mortgage loans held-for-sale		(255,272		)	(197,886		)
Increase in cash surrender value of bank owned life insurance		(257		)	(232		)
Net increase (decrease) in accrued expenses and other liabilities		281			(53		)
Net (increase) decrease in prepaids and other assets		(1,851		)	4,579
Net cash provided by operating activities		4,069			13,578
Cash flows from investing activities:
Loan disbursements, net of principal repayments		(22,813		)	(20,541		)
Purchases of property and equipment		(20,946		)	(425		)
(Purchase) sale of restricted stock investments		(74		)	2,450
Activity in available for sale securities:
Sales		-			14,961
Maturities, prepayments and calls		14,541			110,276
Purchases		(2,103		)	(136,972		)
Proceeds from sales of other real estate owned		—			277
Purchase of bank owned life insurance		—			(10,000		)
Net cash used by investing activities		(31,395		)	(39,974		)
Cash flows from financing activities:
Net increase in deposits		27,539			63,102
Net increase (decrease) in borrowings		11,118			(29,942		)
Repayment of repurchase agreements		(10,000		)	—
Proceeds from stock issuance, net		158			361
Repurchase of common stock, net of costs		(181		)	—
Net cash provided by financing activities		28,634			33,521
Increase in cash and cash equivalents		1,308			7,125
Cash and cash equivalents at beginning of period		35,447			46,679
Cash and cash equivalents at end of period		$	36,755		$	53,804
Supplemental information:
Interest paid on deposits and borrowed funds		$	6,759		$	5,254
Income taxes paid		—			145

 

See accompanying notes to consolidated financial statements.

 

5

 

FIRST MARINER BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004

(UNAUDITED)

 

NOTE 1 — BASIS OF PRESENTATION

 

The foregoing consolidated financial statements of First Mariner Bancorp (the “Company”) are unaudited; however, in the opinion of management, all adjustments (comprising only normal recurring accruals) necessary for a fair presentation of the results of interim periods have been included.  The balances as of December 31, 2004 have been derived from audited financial statements.  There have been no significant changes to the Company’s accounting policies as disclosed in the 2004 annual report.  These statements should be read in conjunction with the financial statements and accompanying notes included in First Mariner Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2004.  The results shown in this interim report are not necessarily indicative of results to be expected for the full year.

 

Consolidation of financial information has resulted in the elimination of all significant intercompany accounts and transactions.  Certain reclassifications have been made to amounts previously reported to conform with the classifications made in 2005.  All figures for the periods ended March 31, 2005 and March 31, 2004 are unaudited amounts.

 

NOTE 2 — COMPREHENSIVE INCOME

 

		Three months ended March 31,
(Unaudited) (dollars in thousands)		2005			2004
Net income		$	1,375		$	1,307
Other comprehensive income items:
Unrealized holding (losses) gains arising during the period (net of tax expense of ($1,521) and $709, respectively)		(2,418		)	995
Less: reclassification adjustment for gains (net of taxes of $0 and $131, respectively) included in net income		—			(209		)
Total other comprehensive (loss) income		(2,418		)	1,204
Total comprehensive (loss) income		$	(1,043	)	$	2,511

 

NOTE 3 — PER SHARE DATA

 

Basic earnings per share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding.  Diluted earnings per share is computed after adjusting the denominator of the basic earnings per share computation for the effects of all dilutive potential common shares outstanding during the period.  The dilutive effects of options, warrants and their equivalents are computed using the “treasury stock” method.  For the period ended March 31, 2005 and 2004 there were 48,450 and 0 shares respectively which were antidilutive and excluded from the computation.

 

Information relating to the calculation of earnings per common share is summarized as follows:

 

(Unaudited)		Three Months Ended
(dollars in thousands)		March 31, 2005			March 31, 2004
Net income-basic and diluted		$	1,375		$	1,307
Weighted-average shares outstanding-basic		5,828,580			5,713,462
Dilutive securities-options and warrants		562,187			647,644
Adjusted weighted-average shares outstanding-dilutive		6,390,767			6,361,106

 

NOTE 4 - STOCK BASED COMPENSATION

 

We apply the intrinsic value method to account for stock-based employee compensation plans.  Under this method, compensation cost is recognized for awards of shares of common stock to employees only if the quoted market price of the stock at the grant date (or other measurement date, if later) is greater than the amount the employee must pay to acquire the stock.

 

6

 

The option price is equal to the market price of the common stock at the date of grant for all of our options granted in 2005 and 2004 and, accordingly, we do not record compensation expense related to options granted.  If we had applied the fair value-based method to recognize compensation cost for the options granted, our net income and net income per share would have been changed to the following pro forma amounts for the three months ended March 31:

 

(Unaudited)		For three months ended March 31,
(dollars in thousands except per share data)		2005			2004
Net earnings, as reported		$	1,375		$	1,307
Deduct: Total stock-based employee compensation expense determined using the fair value based method for all awards, net of related tax effects		(457		)	(436		)
Pro forma net earnings		$	918		$	871
Earnings per share:
Basic - as reported		$	0.24		$	0.23
Basic - pro forma		$	0.16		$	0.15
Diluted - as reported		$	0.22		$	0.21
Diluted - pro forma		$	0.14		$	0.14

 

 

NOTE 5 — SEGMENT INFORMATION

 

The Company is in the business of providing financial services, and operates in three business segments—commercial and consumer banking, consumer finance and mortgage banking.  Commercial and consumer banking is conducted through First Mariner Bank (the “Bank”) and involves delivering a broad range of financial services, including lending and deposit taking, to individuals and commercial enterprises.  This segment also includes the Company’s treasury and administrative functions.  Mortgage banking is conducted through First Mariner Mortgage, a division of the Bank, and involves originating residential single family mortgages for sale in the secondary market and to the Bank.  Consumer finance is conducted through Finance Maryland, and involves originating small direct consumer loans and the purchase of retail installment sales contracts.

 

7

 

                The following table presents certain information regarding the Company’s business segments:

 

For the quarter ended March 31, 2005 (unaudited):

 

(dollars in thousands)		Commercial and Consumer Banking			Consumer Finance			Mortgage Banking			Total
Interest income		$	15,046		$	2,351		$	762		$	18,159
Interest expense		6,149			376			390			6,915
Net interest income		8,897			1,975			372			11,244
Provision for loan losses		50			364			—			414
Net interest income after provision for loan losses		8,847			1,611			372			10,830
Noninterest income		3,041			430			1,055			4,526
Noninterest expense		9,572			1,801			2,115			13,488
Net intersegment income		(44		)	—			44			—
Income before income taxes		$	2,272		$	240		$	(644	)	$	1,868
Total assets		$	1,165,815		$	36,666		$	75,923		$	1,278,404

 

For the quarter ended March 31, 2004 (unaudited):

 

(dollars in thousands)		Commercial and Consumer Banking			Consumer Finance			Mortgage Banking			Total
Interest income		$	13,026		$	1,629		$	486		$	15,141
Interest expense		4,754			234			232			5,220
Net interest income		8,272			1,395			254			9,921
Provision for loan losses		50			250			—			300
Net interest income after provision for loan losses		8,222			1,145			254			9,621
Noninterest income		3,201			292			1,197			4,690
Noninterest expense		8,996			1,314			2,188			12,498
Net intersegment income		96			—			(96		)	—
Income before income taxes		$	2,523		$	123		$	(833	)	$	1,813
Total assets		$	1,018,319		$	24,742		$	51,041		$	1,093,832

 

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read and reviewed in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

 

Portions of this 10-Q may contain forward-looking language within the meaning of The Private Securities Litigation Reform Act of 1995.  Statements may include expressions about the Company’s confidence, policies, and strategies, provisions and allowance for loan losses, adequacy of capital levels, and liquidity.  Such forward looking statements involve certain risks and uncertainties, including general economic conditions, competition in the geographic and business areas in which the Company operates, inflation, fluctuations in interest rates, legislation and government regulation.  For a more complete discussion of risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements, see “Risk Factors” filed as Exhibit 99 to the Company’s Form 10-K for the year ended December 31, 2004.  The Company assumes no obligation to update forward-looking statements at any time.

 

The Company

 

The Company is a financial holding company incorporated under the laws of Maryland and registered under the Federal Bank Holding Company Act of 1956, as amended.  The Company was organized in 1994 and changed its name to First Mariner Bancorp in May 1995. Since 1995, the Company’s strategy has involved building a network of banking branches, ATMs and other financial services outlets to capture market share and build a community franchise for stockholders, customers and employees.  The Company is currently focused on growing assets and earnings by capitalizing on the broad network of bank branches, mortgage offices, consumer finance offices, and ATMs established during its infrastructure expansion phase.

 

8

 

The Company’s business is conducted primarily through its wholly-owned subsidiaries, First Mariner Bank (the “Bank”), Finance Maryland LLC (“Finance Maryland”), and FM Appraisals, LLC (“FM Appraisals”).  First Mariner Bank is the largest operating subsidiary of the Company with assets exceeding $1.204 billion as of March 31, 2005. The Bank was formed in 1995 through the merger of several small financial institutions. The Bank’s primary market area for its core banking operations, which consist of traditional commercial and consumer lending, as well as retail and commercial deposit operations, is central Maryland as well as portions of Maryland’s eastern shore. The Bank’s mortgage division, First Mariner Mortgage, primarily serves the same core market area as the Bank, while several sourcing units of First Mariner Mortgage operate on a regional and even national basis. In 2004, approximately 70% of First Mariner Mortgage’s loan production came from the core Bank’s market area. First Mariner Bank is an independent community bank, and its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”). The Bank is engaged in the general commercial banking business, with particular attention and emphasis on the needs of individuals and small to mid-sized businesses, and delivers a wide range of financial products and services that are offered by many larger competitors. Products and services include traditional deposit products, a variety of consumer and commercial loans, residential and commercial mortgage and construction loans, wire transfer services, non-deposit investment products, and Internet banking and similar services. Most importantly, the Bank provides customers with access to local Bank officers who are empowered to act with flexibility to meet customers’ needs in an effort to foster and develop long-term loan and deposit relationships.

 

Finance Maryland was formed in July 2002, and engages in traditional consumer finance activities, making small direct cash loans to individuals, the purchase of installment loan sales contracts from local merchants and retail dealers of consumer goods, and loans to individuals via direct mail solicitations. Finance Maryland currently operates 13 branches in the State of Maryland and four branches in the state of Delaware, which operate under the trade name “Finance Delaware”. Finance Maryland had total assets of $36.7 million as of March 31, 2005.

FM Appraisals, which commenced operations in the fourth quarter of 2003, is an appraisal management company that is headquartered in Baltimore City. FM Appraisals offers appraisal management services for residential real estate lenders, including the compliance oversight of sub-contracted appraisers, appraisal ordering and administration, and appraisal review services. FM Appraisals currently provides these services to First Mariner Mortgage, but will begin to market appraisal management services to outside lenders in 2005.

 

Financial Condition

 

The Company’s total assets were $1.278 billion at March 31, 2005, compared to $1.251 billion at December 31, 2004, increasing $27.873 million or 2.2% for the first three months of 2005.  Earning assets increased $3.000 million or 0.3% to $1.170 billion from $1.167 billion.  The growth in assets was primarily due to growth in loans outstanding (+$22.112 million), and was offset by a decrease in the Company’s investment portfolio (-$16.282 million), and higher short-term investments (+$1.571 million).  Loans held for sale decreased by $4.032 million.  Property and equipment increased $20.090 million during the quarter due to the purchase of the Company’s headquarters building.  Growth in total assets was funded by an increased level of customer deposits of $27.539 million and borrowed funds and repurchase agreements increased by $1.118 million.

 

Total investment securities declined $16.282 million due to normal principal payments on mortgage-backed securities, scheduled maturities of other investments, and a decline in market values.  At March 31, 2005, the Company’s unrealized loss on securities classified as available for sale totaled $4.155 million, compared to $219 thousand at December 31, 2004.  Management considers the decline in market values to be temporary and does not expect to realize losses on any of the securities currently in the investment portfolio.  There were no securities sold during the quarter ended March 31, 2005, and purchase activity was minimal. The investment portfolio composition is as follows:

 

		March 31, 2005			December 31, 2004
		(dollars in thousands)
Investment securities-available for sale:
Mortgage-backed securities		$	190,576		$	200,708
Trust preferred securities		31,241			31,507
US Government agency notes		73,239			78,949
US Treasury securities		989			1,000
Obligations of state and municipal subdivisions		2,948			2,973
Equity securities		1,381			1,531
Foreign Government Bonds		1,400			1,400
Other investment securities		4,909			4,897
Total investment securities-available-for-sale		$	306,683		$	322,965

 

9

 

Total loans increased $22.112 million during the first three months of 2005.  Significant growth was realized in the Company’s commercial construction loan portfolio (+$19.967 million) and second mortgages on real estate (+$5.285 million).  The total loan portfolio was comprised of the following:

 

		March 31, 2005				December 31, 2004
		(dollars in thousands)
Loans secured by first mortgages on real estate:
Residential		$		42,289		$	41,558
Commercial		315,827				316,363
Consumer residential construction		130,898				135,820
Construction, net of undisbursed principal		84,509				64,542
		573,523				558,283
Commercial		60,489				60,854
Loans secured by second mortgages on real estate		85,056				79,771
Consumer loans		49,198				47,389
Loan secured by deposits and other		1,197				1,068
Total loans		769,463				747,365
Unamortized loan premiums		(229			)	(273			)
Unearned loan fees, net		(976			)	(946			)
		$	768,258			$		746,146

 

Credit Risk Management

 

The Company attempts to manage the risk characteristics of its loan portfolio through various control processes, such as credit evaluation of borrowers, establishment of lending limits and application of lending procedures, including the holding of adequate collateral and the maintenance of compensating balances.  However, the Company seeks to rely primarily on the cash flow of its borrowers as the principal source of repayment.  Although credit policies are designed to minimize risk, management recognizes that loan losses will occur and the amount of these losses will fluctuate depending on the risk characteristics of the loan portfolio as well as general and regional economic conditions.

 

The provision for loan losses for the three months ended March 31, 2005 was $414 thousand compared to $300 thousand for the same period ended March 31, 2004.  The higher provision for the three months of 2005 reflects higher levels of chargeoffs and higher loan growth compared to the same period last year.  The allowance for loan losses totaled $9.714 million at March 31, 2005 compared to $9.580 million at December 31, 2004.  As of March 31, 2005 the allowance for loan losses is 1.26% of outstanding loans as compared to 1.28% at December 31, 2004.  The decrease in the allowance coverage reflects an improvement in nonaccrual loans.

 

10

 

Activity in the allowance for loan losses is as follows:

 

		Three Months Ended March 31,
		2005			2004
		(dollars in thousands)
Allowance for loan losses, beginning of year		$	9,580		$	8,692
Loans charged off:
Commercial		(15		)	—
Commercial/Residential Construction		—			—
Commercial Mortgages		—			—
Residential Construction-Consumer		—			—
Residential Mortgages		—			—
Consumer		(361		)	(254		)
Total loans charged off		(376		)	(254		)
Recoveries
Commercial		—			—
Commercial/Residential Construction		—			—
Commercial Mortgages		—			—
Residential Construction-Consumer		—			—
Residential Mortgages		—			—
Consumer		96			46
Total recoveries		96			46
Net chargeoffs		(280		)	(208		)
Provision for loan losses		414			300
Allowance for loan losses, end of period		$	9,714		$	8,784
Loans (net of premiums and discounts)
Period-end balance		768,258			630,631
Average balance during period		749,003			616,313
Allowance as percentage of period-end loan balance		1.26		%	1.39		%
Percent of average loans:
Provision for loan losses (annualized)		0.22		%	0.20		%
Net chargeoffs (annualized)		0.15		%	0.14		%

 

During the first three months of 2005 net chargeoffs increased slightly as compared to average loans outstanding to 0.15%, as compared to 0.14% during the same period of 2004.  Non-performing assets, expressed as a percentage of total assets, totaled 0.33% at March 31, 2005, down from 0.38% at December 31, 2004, but higher than 0.24% at March 31, 2004.  The decrease as compared to December 31, 2004 reflects a decrease in nonperforming assets of $535 thousand.  Loans past due 90 days or more and still accruing totaled $2.801 million compared to $1.658 million at December 31, 2004 and $3.861 million as of March 31, 2004.

 

Nonperforming Assets		March 31, 2005			December 31, 2004			March 31, 2004
(Dollars in thousands)
Nonaccruing loans		$	3,227		$	4,628		$	2,584
Real estate acquired by foreclosure		931			65			44
Total non-performing assets		$	4,158		$	4,693		$	2,628
Loans past-due 90 days or more and accruing		$	2,801		$	1,658		$	3,861

 

At March 31, 2005, the allowance for loan losses represented 233.6% of nonperforming assets compared to 204.1% at December 31, 2004.  Management believes the allowance for loan losses at March 31, 2005 is adequate.

 

11

 

Deposits

 

Deposits totaled $852.956 million as of March 31, 2005, increasing $27.539 million or 3.3% from the December 31, 2004 balance of $825.417 million.  The increase in deposits is attributable to management’s growth strategy, which includes significant marketing, promotion and cross selling of existing customers into additional products.  The mix of deposits has not significantly changed during 2005 compared to December 31, 2004.  Continued successful marketing campaigns have maintained a strong mix of noninterest checking accounts, NOW and money market accounts.

 

		March 31, 2005					December 31, 2004
(Dollars in thousands)		Balance			Percent of Total		Balance			Percent of Total
NOW & money market savings deposits		$	220,079		25.8	%	$	222,570		27.0	%
Regular savings deposits		72,752			8.5	%	68,642			8.3	%
Time deposits		387,996			45.5	%	373,667			45.3	%
Total interest-bearing deposits		680,827			79.8	%	664,879			80.6	%
Noninterest-bearing demand deposits		172,129			20.2	%	160,538			19.4	%
Total deposits		$	852,956		100.0	%	$	825,417		100.0	%

 

 

Results of Operations

 

Net Income.  For the three months ended March 31, 2005, net income totaled $1.375 million compared to $1.307 million for the three month period ended March 31, 2004.  Basic earnings per share for the first three months of 2005 totaled $0.24 compared to $0.23 per share for the same period of 2004, while diluted earnings per share totaled $0.22 for the first three months of 2005 compared to $0.21 for the first three months of 2004.  Earnings for the three months ended March 31, 2005 were driven by higher net interest income; offset somewhat by a higher provision for credit losses, a decline in noninterest income and growth in noninterest expenses.

 

Net Interest Income.  Net interest income for the first three months of 2005 totaled $11.244 million, an increase of 13.3% over $9.921 million for the three months ended March 31, 2004. The net interest margin for the three month period was 3.90% compared to 4.08% for the comparable period of 2004, while average earning assets increased by $183.699 million or 19.1%.

 

Total interest income increased by $3.018 million primarily due to growth in average loans and investments.  Average loans outstanding increased by $132.690 million, average investment securities increased by $41.321 million while average loans held for sale increased $19.556 million.  Yields on earning assets for the period increased to 6.35% from 6.26% due to the higher mix of loans (which carry higher yields than investments and other earning assets).  Interest expense increased by $1.695 million.  Average interest-bearing liabilities increased by $159.679 million.  Average interest-bearing deposits increased by $33.334 million and average borrowings increased by $126.345 million.  Yields on interest bearing liabilities increased to 2.80% from 2.49% for the same period in 2004 as a result of increased mix of borrowings as a percentage of interest-bearing funding sources and higher interest rates.

 

12

 

		For three months ended March 31,
		2005					2004
(Dollars in thousands)		Average Balance			Yield/ Rate		Average Balance			Yield/ Rate
Assets:
Loans
Commercial Loans and LOC		$	71,762		5.75	%	$	76,522		5.85	%
Comm/Res Construction		70,060			7.29	%	47,488			7.09	%
Commercial Mortgages		302,916			6.73	%	241,967			7.03	%
Residential Constr - Cons		129,717			7.27	%	118,955			7.23	%
Residential Mortgages		41,014			6.00	%	40,132			7.20	%
Consumer		133,534			10.71	%	91,249			10.83	%
Total Loans		749,003			7.45	%	616,313			7.50	%
Loans held for sale		60,318			5.05	%	40,762			4.77	%
Available for sale securities, at fair value		314,245			4.23	%	272,924			4.29	%
Interest bearing deposits		11,995			2.24	%	27,802			0.89	%
Restricted stock investments, at cost		11,453			3.41	%	5,514			3.48	%
Total earning assets		1,147,014			6.35	%	963,315			6.26	%
Allowance for loan losses		(9,642		)			(8,692		)
Cash and other non earning assets		93,076					80,046
Total Assets		$	1,230,448				$	1,034,669
Liabilities and Stockholders’ Equity
Interest bearing deposits
NOW deposits		12,196			0.17	%	60,561			0.49	%
Savings deposits		70,090			0.31	%	62,970			0.47	%
Money market deposits		203,657			1.13	%	153,193			0.85	%
Time deposits		376,304			3.11	%	352,189			3.01	%
Total interest bearing deposits		662,247			2.15	%	628,913			1.99	%
Borrowings		339,148			4.07	%	212,803			3.99	%
Total interest bearing liabilities		1,001,395			2.80	%	841,716			2.49	%
Noninterest bearing demand deposits		159,680					129,191
Other liabilities		5,434					3,465
Stockholders Equity		63,939					60,297
Total Liabilities and Stockholders’ Equity		$	1,230,448				$	1,034,669
Net Interest Spread					3.55	%				3.77	%
Net Interest Margin					3.90	%				4.08	%

 

13