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Frederick County Bancorp, Inc. Reports Results for the Second Quarter 2019

Frederick County Bancorp, Inc. (the “Company”) (OTCPink Marketplace: FCBI), the parent company for Frederick County Bank (“FCB”), announced today that, for the quarter ended June 30, 2019, the Company recorded net income of $385 thousand and diluted earnings per share of $0.24, as compared to net income of $864 thousand and diluted earnings per share of $0.55 recorded for the second quarter of 2018. The Company earned $1.0 million and diluted earnings per share of $0.65 for the six months ended June 30, 2019, as compared to $1.7 million in earnings and diluted earnings per share of $1.09 for the same period in 2018.

The decrease in quarterly earnings was due primarily to a negative provision for loan losses of $367 thousand which was recognized in 2018 compared to no provision in 2019. In addition, total interest expense increased from $679 thousand in 2018 to $1.06 million in the second quarter of 2019.

The decrease in year-to-date earnings was due primarily to a negative provision for loan losses of $512 thousand which was recognized in 2018 compared to no provision in 2019. In addition, total interest expense increased from $1.29 million in 2018 to $1.99 million in the first half of 2019. This exceeded the $394 thousand increase in interest income recognized in the first half of 2019 which was $8.76 million compared to $8.37 million in 2018.

The ratio of the allowance for loan losses to total loans stood at 0.99% and 1.02% as of June 30, 2019 and 2018, respectively, and at 1.01% as of December 31, 2018. Total nonperforming assets stood at $3.8 million and $2.9 million at June 30, 2019 and 2018, respectively, and at $2.1 million at December 31, 2018. The increase in the nonperforming assets as of June 30, 2019 primarily relates to one commercial loan relationship. The corresponding nonperforming assets to total assets ratios were 0.83% and 0.67% as of June 30, 2019 and 2018, respectively, and 0.50% at December 31, 2018.

The Company also reported that, as of June 30, 2019, assets stood at $455.4 million, with total deposits of $384.8 million and gross loans of $351.0 million, representing increases of 7.2%, 8.4%, and 7.5%, respectively, compared to June 30, 2018. Total shareholders’ equity at June 30, 2019 was $37.1 million, an increase of $1.6 million from December 31, 2018. The increase primarily resulted from earnings of $1.0 million, offset by dividends of $252 thousand, an increase in additional paid-in capital of $410 thousand, which was from the exercise of stock options, and an increase in the fair value of available-for-sale securities of $363 thousand from December 31, 2018. On a per share basis, book value increased by $0.45 for 2019 to $23.51 per share at June 30, 2019 from $23.06 per share at December 31, 2018. The dividends declared per share decreased to $0.16 per share for the six month period ended June 30, 2019 as compared to $0.18 for the same period in 2018. A quarterly cash dividend was declared on the Company’s common stock of $0.08 per share, plus a special cash dividend of $0.02 per share for the second quarter of 2018, as compared to $0.08 per share for the same period in 2019.

On July 2, 2019, the Company and ACNB Corporation (“ACNB”), the parent financial holding company of ACNB Bank, a Pennsylvania state-chartered, FDIC insured community bank headquartered in Gettysburg, PA, jointly announced the execution of a definitive agreement pursuant to which the Company will be merged with and into an ACNB acquisition subsidiary and, as soon as possible thereafter, Frederick County Bank, FCBI’s wholly-owned subsidiary, will merge with and into ACNB Bank. Over the next few months, both entities will be finalizing several matters to consummate the merger, including filings with regulatory agencies. The merger is currently expected to close in the fourth quarter of 2019 or the first quarter of 2020.

Speaking on behalf of the Company, William R. Talley, Jr., Frederick County Bancorp, Inc. President & Chief Executive Officer, said, “We are pleased to join forces with a company that has laid a clear course for the future, and one in which we believe meets the objectives of our stakeholders due to its rich history and strong financial performance. ACNB Corporation provides the opportunity to continue the community banking vision upon which Frederick County Bank was founded with greater resources to serve the Frederick community into the future. We believe that by bringing these two banks together, our clients will benefit from additional resources such as insurance, trust/wealth management, treasury management services, government banking and a higher legal lending limit.”

Frederick County Bank is headquartered in Frederick, Maryland, and conducts full service commercial banking services through five bank centers located in Frederick County, Maryland.

 

June 30,

June 30,

December 31,

2019

2018

2018

(dollars in thousands)

(unaudited)

(unaudited)

(audited)

Total assets

$455,373

$424,780

$418,588

Loans

350,952

326,344

339,461

Deposits

384,763

354,892

352,373

Shareholders’ equity

37,106

34,282

35,555

Nonperforming assets:

Nonaccrual loans

$2,408

$1,284

$492

Accruing troubled debt restructurings

1,189

1,208

1,254

Loans 90 days or more past due and still accruing

-

-

-

Foreclosed properties

200

360

360

Total nonperforming assets

$3,797

$2,852

$2,106

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

June 30,

June 30,

2019

2018

2019

2018

(dollars in thousands, except for per share data)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

SUMMARY OF OPERATING RESULTS:

Net income

$385

$864

$1,030

$1,713

Total comprehensive income

$618

$848

$1,393

$1,418

Charge-offs

$3

$-

$6

$26

(Recoveries)

(55)

(66)

(67)

(606)

Net (recoveries) charge-offs

$(52)

$(66)

$(61)

$(580)

PER COMMON SHARE DATA:

Basic earnings per share

$0.25

$0.57

$0.67

$1.14

Diluted earnings per share

$0.24

$0.55

$0.65

$1.09

Basic weighted average number of shares outstanding

1,552,719

1,520,922

1,547,259

1,507,078

Diluted weighted average number of shares outstanding

1,587,227

1,573,857

1,581,767

1,570,014

Common shares outstanding

1,578,064

1,530,887

1,578,064

1,530,887

1,541,737

Dividends declared

$0.08

$0.10

$0.16

$0.18

Book value per share

$23.51

$22.39

$23.51

$22.39

$23.06

SELECTED UNAUDITED FINANCIAL RATIOS:

Return on average assets

0.35%

0.82%

0.47%

0.82%

Return on average equity

4.20%

10.16%

5.66%

10.21%

Allowance for loan losses to total loans

0.99%

1.02%

0.99%

1.02%

1.01%

Nonperforming assets to total assets

0.83%

0.67%

0.83%

0.67%

0.50%

Ratio of net (recoveries) charge-offs to average loans

(0.01)%

(0.02)%

(0.02)%

(0.18)%

Common Equity Tier 1 to risk-weighted assets

9.39%

9.57%

9.39%

9.57%

9.44%

Tier 1 capital to risk-weighted assets

10.91%

11.23%

10.91%

11.23%

11.02%

Total capital to risk-weighted assets

11.79%

12.15%

11.79%

12.15%

11.93%

Tier 1 capital to average assets

9.72%

9.62%

9.72%

9.62%

9.83%

Average equity to average assets

8.27%

8.04%

8.36%

8.03%

Net interest margin

3.23%

3.62%

3.35%

3.62%

 

Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

June 30,

June 30,

December 31,

2019

2018

2018

(unaudited)

(unaudited)

(audited)

(dollars in thousands)

ASSETS

Cash and due from banks

$

2,647

$

2,649

$

2,778

Federal funds sold

5

5

5

Interest-bearing deposits in other banks

51,826

52,768

33,342

Cash and cash equivalents

54,478

55,422

36,125

Investment securities available-for-sale at fair value

24,802

23,021

21,558

Restricted stock

1,992

2,187

1,979

Loans held for sale

1,635

-

268

Loans

350,952

326,344

339,461

Less: Allowance for loan losses

(3,487)

(3,333)

(3,426)

Net loans

347,465

323,011

336,035

Bank premises and equipment

11,838

9,346

9,280

Bank owned life insurance

10,762

9,047

10,628

Foreclosed properties

200

360

360

Other assets

2,201

2,386

2,355

Total assets

$

455,373

$

424,780

$

418,588

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities

Deposits

Noninterest-bearing deposits

$

112,595

$

98,501

$

100,200

Interest-bearing deposits

272,168

256,391

252,173

Total deposits

384,763

354,892

352,373

Short-term borrowings

3,450

3,450

3,450

FHLB advances

20,000

24,900

20,000

Junior subordinated debentures

6,186

6,186

6,186

Accrued interest and other liabilities

3,868

1,070

1,024

Total liabilities

418,267

390,498

383,033

Shareholders' Equity

Common stock, per share par value $0.01; 10,000,000 shares authorized; 1,578,064; 1,530,887 and 1,541,737 shares issued and outstanding, respectively

16

15

15

Additional paid-in capital

16,440

15,911

16,031

Retained earnings

20,572

18,791

19,794

Accumulated other comprehensive income (loss)

78

(435)

(285)

Total shareholders' equity

37,106

34,282

35,555

Total liabilities and shareholders' equity

$

455,373

$

424,780

$

418,588

 

Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income (Unaudited)

 

For the Three Months Ended

For the Six Months Ended

(dollars in thousands, except per share amounts)

June 30,

2019

June 30,

2018

June 30,

2019

June 30,

2018

Interest income

Interest and fees on loans

$3,928

$3,837

$7,922

$7,628

Interest and dividends on investment securities:

Interest – taxable

131

124

257

244

Interest – tax exempt

30

24

54

47

Dividends

29

39

60

79

Interest on federal funds sold

-

-

-

-

Other interest income

255

229

467

368

Total interest income

4,373

4,253

8,760

8,366

Interest expense

Interest on deposits

825

436

1,535

825

Interest on short-term borrowings

47

51

92

96

Interest on FHLB advances

117

133

227

255

Interest on junior subordinated debentures

66

59

134

110

Total interest expense

1,055

679

1,988

1,286

Net interest income

3,318

3,574

6,772

7,080

Provision for loan (recoveries) losses

-

(367)

-

(512)

Net interest income after provision for loan (recoveries) losses

3,318

3,941

6,772

7,592

Noninterest income

Securities gains

-

1

-

1

Change in fair value of equity securities

(18)

28

(11)

34

Gain on sale of loans

124

85

182

166

Gain on foreclosed properties

-

-

-

12

Bank owned life insurance income

68

53

134

101

Service fees

84

97

161

191

Other operating income

168

149

337

272

Total noninterest income

426

413

803

777

Noninterest expense

Salaries and employee benefits

1,816

1,717

3,581

3,404

Occupancy and equipment expenses

477

464

949

910

Other operating expenses

957

1,000

1,684

1,726

Total noninterest expense

3,250

3,181

6,214

6,040

Income before provision for income taxes

494

1,173

1,361

2,329

Provision for income taxes

109

309

331

616

Net income

$385

$864

$1,030

$1,713

Basic earnings per share

$0.25

$0.57

$0.67

$1.14

Diluted earnings per share

$0.24

$0.55

$0.65

$1.09

Basic weighted average number of shares outstanding

1,552,719

1,520,922

1,547,259

1,507,078

Diluted weighted average number of shares outstanding

1,587,227

1,573,857

1,581,767

1,570,014

Dividends declared per share

$0.08

$0.10

$0.16

$0.18

 
 

Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Unaudited)

For the Three Months Ended

(dollars in thousands)

June 30,

2019

June 30,

2018

Net income

$385

$864

Changes in net unrealized gains (losses) on securities available for sale, net of income taxes of $88 in 2019 and income tax benefits of $5 in 2018

233

(15)

Reclassification adjustment for (gains) realized, net of income taxes of $0 in 2019 and $0 in 2018

-

(1)

Total other comprehensive income (loss)

233

(16)

Total comprehensive income

$618

$848

 

For the Six Months Ended

(dollars in thousands)

June 30,

2019

June 30,

2018

Net income

$1,030

$1,713

Changes in net unrealized gains (losses) on securities available for sale, net of income taxes of $137 in 2019 and income tax benefits of $112 in 2018

363

(294)

Reclassification adjustment for (gains) realized, net of income taxes of $0 in 2019 and $0 in 2018

-

(1)

Total other comprehensive income (loss)

363

(295)

Total comprehensive income

$1,393

$1,418

 
 

Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)

(dollars in thousands)

Shares

Outstanding

Common

Stock

Additional

Paid-in

Capital

Retained

Earnings

Accumulated

Other

Comprehensive

Income

(Loss)

Total

Shareholders'

Equity

Balance, January 1, 2018

1,493,044

$15

$15,397

$16,829

$ 380

$32,621

Comprehensive income

1,713

(295)

1,418

Cumulative change in accounting principle

520

(520)

-

Dividends declared on common stock, $0.18 per share

(271)

(271)

Shares issued under stock option transactions

37,843

514

514

Balance, June 30, 2018

1,530,887

$15

$15,911

$18,791

$(435)

$34,282

Balance January 1, 2019

1,541,737

$15

$16,031

$19,794

$(285)

$35,555

Comprehensive income

1,030

363

1,393

Dividends declared on common stock, $0.16 per share

(252)

(252)

Shares issued under stock option transactions

36,327

1

409

410

Balance, June 30, 2019

1,578,064

$16

$16,440

$20,572

$78

$37,106

 

Frederick County Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

For The Six Months Ended

June 30,

June 30,

(dollars in thousands)

2019

2018

Cash flows from operating activities:

Net income

$1,030

$1,713

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

331

247

Deferred income taxes

25

186

(Recoveries) provision for loan losses

-

(512)

Securities gains

-

(1)

Change in fair value of equity securities

11

(34)

Gain on sale of loans

(182)

(166)

Loans originated for sale

(8,308)

(3,853)

Proceeds from loans sold

8,490

4,019

Net premium amortization on investment securities

64

62

Bank owned life insurance income

(134)

(101)

Gain on sale of foreclosed property

-

(12)

Provision for foreclosed properties

160

346

Decrease in accrued interest and other assets

22

79

(Decrease) increase in accrued interest and other liabilities

(19)

130

Net cash provided by operating activities

1,490

2,103

Cash flows from investing activities:

Purchases of investment securities available for sale

(4,925)

(1,231)

Proceeds from sales of investment securities available for sale

-

858

Proceeds from maturities, prepayments and calls investment securities available for sale

2,106

1,662

(Purchase) redemption of restricted stock

(13)

180

Net increase in loans

(12,797)

(3,608)

Purchases of bank premises and equipment

(55)

(51)

Proceeds from sale of foreclosed property

-

570

Net cash used in investing activities

(15,684)

(1,620)

Cash flows from financing activities:

Net increase in NOW, money market accounts, savings accounts and noninterest-bearing deposits

22,686

9,467

Net increase in time deposits

9,704

13,420

Net decrease in short-term borrowings

-

(750)

Decrease in FHLB advances

-

(4,800)

Proceeds from issuance of common stock

409

514

Dividends paid on common stock

(252)

(271)

Net cash provided by financing activities

32,547

17,580

Net increase in cash and cash equivalents

18,353

18,063

Cash and cash equivalents – beginning of period

36,125

37,359

Cash and cash equivalents – end of period

$54,478

$55,422

Supplemental cash flow disclosures:

Interest paid

$2,016

$1,271

Income taxes paid

$460

$125

Supplemental noncash disclosures:

Right of use assets - operating leases

$2,838

$-

Lease liability arising from right of use assets - operating leases

$3,013

$-

 

Distribution of Assets, Liabilities and Shareholders’ Equity; Interest Rates and Interest Differential

The following tables show average balances of asset and liability categories, interest income and interest expense, and average yields and rates for the periods indicated.

 

For the Three Months Ended June 30,

2019

2018

(dollars in thousands)

Average

daily

balance

Interest

Income/

Expense

Average

Yield/

Rate(%)

Average

daily

balance

Interest

Income/

Expense

Average

Yield/

Rate(%)

Assets

Interest-earning assets:

Federal funds sold

$5

$-

-

$5

$-

-

Interest bearing deposits in other banks

44,634

255

2.32

54,200

229

1.71

Investment securities (1):

Taxable

23,065

160

2.81

21,795

163

3.03

Tax-exempt (2)

4,272

38

3.61

3,336

30

3.65

Loans (3)

347,582

3,945

4.60

323,027

3,849

4.83

Total interest-earning assets

419,558

4,398

4.25

402,363

4,271

4.30

Noninterest-earning assets

24,246

20,721

Total assets

$443,804

$423,084

Liabilities and Shareholders’ Equity

Interest-bearing liabilities:

NOW accounts

$49,946

92

0.75

$45,222

30

0.27

Savings accounts

14,473

1

0.03

14,101

1

0.03

Money market accounts

92,828

214

0.93

98,430

68

0.28

Certificates of deposit

105,604

518

1.99

98,939

337

1.38

Short-term borrowings

3,450

47

5.52

4,109

51

5.06

FHLB advances

20,000

117

2.37

26,462

51

5.03

Junior subordinated debentures

6,186

66

4.33

6,186

59

3.87

Total interest-bearing liabilities

292,487

1,055

1.46

293,449

679

0.94

Noninterest-bearing deposits

110,924

94,793

Noninterest-bearing liabilities

3,698

839

Total liabilities

407,109

389,081

Total shareholders’ equity

36,695

34,003

Total liabilities and shareholders’ equity

$443,804

$423,084

Net interest income

$3,343

$3,592

Net interest spread

2.79%

3.36%

Net interest margin

3.22%

3.62%

 

(1)

Yields on securities available-for-sale have been calculated on the basis of historical cost and do not give effect to changes in the fair value of those securities, which is reflected as a component of shareholders’ equity.

(2)

Presented on a taxable-equivalent basis using the statutory federal income tax rate of 21%. Taxable-equivalent adjustments of $8 thousand in 2019 and $6 thousand in 2018 are included in the calculation of the tax-exempt investment interest income.

(3)

Presented on a taxable-equivalent basis using the statutory federal income tax rate of 21%. Taxable-equivalent adjustments of $16 thousand in 2019 and $12 thousand in 2018 are included in the calculation of the loan interest income. Net loan origination income (expense) in interest income totaled $(2) thousand in 2019 and $4 thousand in 2018.

 

For the Six Months Ended June 30,

2019

2018

(dollars in thousands)

Average

daily

balance

Interest

Income/

Expense

Average

Yield/

Rate(%)

Average

daily

balance

Interest

Income/

Expense

Average

Yield/

Rate(%)

Assets

Interest-earning assets:

Federal funds sold

$

5

$

-

-

$

5

$

-

-

Interest bearing deposits in other banks

41,216

467

2.28

46,507

368

1.60

Investment securities (1):

Taxable

21,810

317

2.93

22,474

323

2.90

Tax-exempt (2)

3,866

68

3.55

3,337

59

3.57

Loans (3)

344.325

7,960

4.66

324,079

7,651

4.76

Total interest-earning assets

411,222

8,812

4.32

396,402

8,401

4.27

Noninterest-earning assets

24,057

21,216

Total assets

$

435,279

$

417,618

Liabilities and Shareholders’ Equity

Interest-bearing liabilities:

NOW accounts

$

48,614

175

0.73

$

43,768

55

0.25

Savings accounts

14,821

2

0.03

13,821

2

0.03

Money market accounts

92,658

391

0.85

98,002

135

0.28

Certificates of deposit

103,279

967

1.89

96,733

633

1.32

Short-term borrowings

3,450

92

5.38

4,154

96

4.66

FHLB advances

19,972

227

2.29

28,086

255

1.83

Junior subordinated debentures

6,186

134

4.37

6,186

110

3.59

Total interest-bearing liabilities

288,980

1,988

1.39

290,750

1,286

0.89

Noninterest-bearing deposits

106,576

92,481

Noninterest-bearing liabilities

3,314

843

Total liabilities

398,870

384,074

Total shareholders’ equity

36,409

33,544

Total liabilities and shareholders’ equity

$

435,279

$

417,618

Net interest income

$

6,824

$

7,115

Net interest spread

2.93%

3.38%

Net interest margin

3.35%

3.62%

 

(1)

Yields on securities available-for-sale have been calculated on the basis of historical cost and do not give effect to changes in the fair value of those securities, which is reflected as a component of shareholders’ equity.

(2)

Presented on a taxable-equivalent basis using the statutory federal income tax rate of 21%. Taxable-equivalent adjustments of $14 thousand in 2019 and $12 thousand in 2018 are included in the calculation of the tax-exempt investment interest income.

(3)

Presented on a taxable-equivalent basis using the statutory federal income tax rate of 21%. Taxable-equivalent adjustments of $38 thousand in 2019 and $23 thousand in 2018 are included in the calculation of the loan interest income. Net loan origination income (expense) in interest income totaled $(8) thousand in 2019 and $(8) thousand in 2018.

The statements in this press release that are not historical facts constitute "forward-looking statements" as defined by Federal securities laws. Forward-looking statements can generally be identified by the use of forward- looking terminology such as "believes," "expects," "intends," "may," "will," "should," "anticipates" or similar terminology. Such statements, specifically regarding the Company's intentions regarding growth and market expansion, are subject to risks and uncertainties that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, changes in interest rates, deposit flows, loan demand and real estate values, as well as changes in economic, competitive, governmental, regulatory, technological and other factors which may affect the Company specifically, its existing and target market areas or the banking industry generally. Forward-looking statements speak only as of the date they are made. The Company will not update forward-looking statements to reflect factual assumptions, circumstances or events that have changed after a forward-looking statement was made.

Contacts:

Crystal L. Wiles, Senior Vice President and Chief Financial Officer, (240) 529-1506

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