1st Mariner Bancorp Reports 2nd Quarter 2011 Results

BALTIMORE, July 29, 2011 /PRNewswire/ -- 1st Mariner Bancorp (NASDAQ: FMAR), parent company of 1st Mariner Bank, reported a pretax net loss of $11.0 million for the second quarter of 2011 compared to a pretax net loss of $8.5  million for the second quarter of 2010. For the six months ended June 30, 2011, the Company reported a pretax net loss of $18.3 million in 2011 versus $14.2 million in 2010. In the three and six months ended June 30, 2010, the Company recorded a $3.8 million and $6.2 million tax benefit, respectively, while no tax benefit was recognized for the three and six months ended June 30, 2011. On an after tax basis 1^st Mariner Bank, reported a net loss of $11.0 million for the second quarter of 2011 compared to net loss of $4.7 million for the second quarter of 2010, while for the six months ended June 30, 2011, the Company reported a net loss of $18.3 million in 2011 versus $8.1 million in 2010.

Edwin F. Hale, Sr., 1st Mariner's Chairman and Chief Executive Officer, said, " While we have reduced our controllable expenses, write-downs associated with declining appraised values on other real estate owned and non-performing loans continue to impact our results."

Hale added, "We continue our efforts to increase our capital levels to achieve compliance with regulatory requirements."  

Operating Summary

Net interest income for the second quarter of 2011 was $6.7 million compared to $6.9 million in the second quarter of 2010. The net interest margin improved to 2.86% in the second quarter of 2011, compared to 2.75% in the second quarter of 2010. While the net interest margin improved, interest income declined due to lower levels of earnings assets. Interest expense was $5.0 million for the quarter ended June 30, 2011 which was a decrease of $1.5 million compared to the $6.5 million recorded in the quarter ended June 30, 2010. Reduced interest expense on borrowings and deposits contributed to the improvement in 2011 compared to 2010. Total average interest rates paid on borrowings were 2.16% for the quarter ended June 30, 2011 versus 2.54% for the quarter ended June 30, 2010. Average interest rates paid on deposits were 1.77% in the second quarter of 2011 compared to 2.07% in the second quarter of 2010.

Net interest income was $13.5 million for the six months ended June 30, 2011. This is a $0.4 million decrease when compared to the six months ended June 30, 2010. Lower loan balances during the six months ended June 30, 2011 caused the decrease in total interest income. Total interest income was $23.8 million for the six months ended June 30, 2011 versus $27.7 million for the six months ended June 30, 2010. The net interest margin improved during the six months ended June 30, 2011 to 2.85%, from 2.73% in the six months ended June 30, 2010. Reduced average interest rates paid on borrowings and deposits were the primary reason for the improved net interest margin. Total average interest rate paid on borrowings was 2.13% for the six months ended June 30, 2011 compared to 3.07% paid in the six months ended June 30, 2010.

The provision for loan losses was $5.8 million and $6.6 million for the three and six months ended June 30, 2011, respectively. Costs related to foreclosed properties, including write-downs due to declining appraised values, amounted to $1.7 million and $3.4 million for the three and six months ended June 30, 2011, respectively. Combined, these credit related costs amounted to $7.5 million, which were a significant contributor to the loss for the quarter ended June 30, 2011.

Non-interest income was $4.7 million for the three months ended June 30, 2011. This represents a decrease of $1.4 million from the $6.1 million in the second quarter of 2011. Included in the non-interest income for the quarter ended June 30, 2010 was a non-recurring gain of $1.0 million on the extinguishment of debt. The balance of the decrease in non-interest income for the quarter was primarily due to the reduction of service fees on deposits of $0.4 million. The decrease in service fees on deposit accounts was due to the imposition of new regulations that lowered deposit account service charges beginning in July 2010.

For the six months ended June 30, 2011, non-interest income decreased to $7.8 million, down $4.1 million from the $11.9 million recorded during the six months ended June 30, 2010. As previously mentioned, the Company recorded a non-recurring gain of $1.0 million on the extinguishment of debt during the six months ended June 30, 2010. Additionally, the Company recorded a gain on financial instruments carried at fair value of $1.4 million during through the second quarter of 2010. The Company did not have any gains on financial instruments carried at fair value through the second quarter ended June 30, 2011. Finally, the Company's gross mortgage banking revenue decreased by $1.4 million from $4.7 million for the six months ended June 30, 2010 to $3.3 million for the six months ended June 30, 2011. The primary reason for this decline was lower volumes of loans in the first half of 2011 versus the first half of 2010.

Non-interest expenses decreased 3% with $16.6 million recorded in the second quarter of 2011 and $17.1 million recorded in the second quarter of 2010. Controllable expenses such as salaries and benefits, occupancy, and furniture, fixtures and equipment expenses decreased a total of $0.8 million in the second quarter of 2011. However, regulatory related costs increased significantly during the quarter. For the three months ended June 30, 2011, the Company was charged $1.5 million in FDIC deposit insurance premiums. For the six months ended June 30, 2011, those premiums totaled $2.5 million. In comparison, the FDIC deposit insurance premiums for the three and six months ended June 30, 2010 were $0.96 million and $1.9 million, respectively.  Additionally, professional fees related to regulatory compliance, loan workouts and efforts related to capital raising increased $0.7 million to $1.3 million in the second quarter of 2011 compared to $0.6 million in the second quarter of 2010.

On a year to date basis, total non-interest expenses were $32.9 million for the six months ended June 30, 2011, which is down from $33.4 million incurred in the six months ended June 30, 2010. As mentioned above, the company has reduced its controllable expenses. For the six months ended, salaries and benefits, occupancy, and furniture, fixtures & equipment expenses collectively decreased a total of $1.4 million. Offsetting these decreases were increases in professional fees of $1.2 million. And as previously mentioned above, FDIC deposit insurance premiums increased $0.4 million during the six months ended June 30, 2011. For the six months ended June 30, 2011, the Company was charged $2.5 million in premiums by the FDIC. For the same period in 2010, those premiums were $1.9 million.

Net charge-offs increased $1.4 million during the quarter, with $5.8 million in the second quarter of 2011 compared to $4.3 million in the second quarter of 2010. For the six months ended June 30, 2011, net charge-offs were $6.6 million, versus $6.1 million in the same period in the prior year.

Comparing balance sheet data as of June 30, 2011 and 2010, total assets decreased 13% to $1.16 billion, from the prior year's $1.34 billion. The decrease is primarily attributable to a $121.6 million decrease in loans, a $51.4 million decrease in loans held for sale, and a $26.6 million reduction in the deferred tax assets.

• Average earning assets were $919.7 million for the second quarter of 2011, which was an 8% decrease over the second quarter 2010 balance of $996.8 million. The decrease was due to a reduction in loans and loans held for sale.

• Total loans outstanding decreased $121.6 million, or 14%, to $736.6 million as of June 30, 2011. Commercial loan maturities and refinances primarily contributed to the decrease.

• Total loans held for sale decreased $51.4 million, or 44%, to $64.2 million as of June 30, 2011. The decrease was due to lower mortgage production volume and faster funding of loans by investors.

• The allowance for loans losses at the end of the second quarter of 2011 was $14.1 million, an increase of 17% over the prior year's figure of $12.0 million. The allowance for loan losses as a percentage of total loans was increased to 1.92% as of June 30, 2011, compared to 1.40% as of June 30, 2010, an increase of 37%.

• Net deferred tax assets decreased $26.6 million as a result of the establishment of a $26.6 million valuation allowance in the fourth quarter of 2010. While this allowance reduces the carrying value of the asset, it does not necessarily preclude the Company from utilizing this asset in the future.

• Total deposits decreased 10.8% from $1.12 billion as of June 30 2010 to $995 million as of June 30, 2011. Money market and NOW accounts decreased $16.1 million, from $149.3 million as of June 30, 2010 to $133.2 million as of June 30, 2011. Certificates of deposit were $694.3 million as of June 30, 2011. This is a decrease of $107.5 million, or 13.4%, over the $801.9 million as of June 30, 2010. The decrease in interest bearing deposits was due to lower rates being offered on these deposit products in 2011 versus 2010.

• As of June 30, 2011, 1st Mariner Bank's capital ratios were as follows: Total Risk Based Capital 6.9%; Tier 1 Risk Based Capital 5.7%; and Tier 1 Leverage 3.8%.  

1st Mariner Bancorp is a bank holding company with total assets of $1.16 billion.  Its wholly owned banking subsidiary, 1st Mariner Bank, with total assets of $1.21 billion, operates 22 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 and the Eastern Shore of Maryland.  1st Mariner Mortgage also operates direct marketing mortgage operations in Baltimore.  1st Mariner Bancorp's common stock is traded on the NASDAQ Capital Market under the symbol "FMAR".  1st Mariner's Website address is www.1stMarinerBancorp.com, which includes comprehensive level investor information.

In addition to historical information, this press release contains forward-looking statements that involve risks and uncertainties, such as statements of the Company's plans and expectations regarding the Company's efforts to meet regulatory capital requirements established by the Federal Reserve and the FDIC, revenue growth, anticipated expenses, profitability of mortgage banking operations, and other unknown outcomes.  The Company's actual results could differ materially from management's expectations.  Factors that could contribute to those differences include, but are not limited to, the Company's ability to increase its capital levels and those of 1st Mariner Bank, volatility in the financial markets, changes in regulations applicable to the Company's business,  its concentration in real estate lending, increased competition, changes in technology, particularly Internet banking, impact of interest rates, and the possibility of economic recession or slowdown (which could impact credit quality, adequacy of loan loss reserve and loan growth).Greater detail regarding these  factors is provided in the forward looking statements and  Risk Factors  sections included in the reports filed by the Company with the SEC, including the Company's Annual Report on Form 10-K for the year ended December 31, 2010 and its Quarterly Report of Form 10-Q for the three months ended March 31, 2011. Our forward-looking statements may also be subject to other risks and uncertainties, including those we may discuss elsewhere in this news release, or in our SEC filings, which are accessible on our web site and at the SEC's web site, www.sec.gov.

SOURCE 1st Mariner Bancorp