Hamilton Bancorp, Inc. Reports Results for the Third Fiscal Quarter Ended December 31, 2013

PR Newswire

TOWSON, Md., Feb. 3, 2014 /PRNewswire/ -- Hamilton Bancorp, Inc. (the "Company") (HBK), today reported a net loss of $147,000, or $(0.04) per share (basic and diluted), for the quarter ended December 31, 2013, compared to net income of $65,000, or $0.02 per share (basic and diluted) for the quarter ended December 31, 2012. Net loss for the nine months ended December 31, 2013 was $629,000, or $(0.19) per share (basic and diluted), compared to net income of $429,000, or $0.12 per share (basic and diluted) for the nine months ended December 31, 2012. While net interest income and noninterest income increased for both the three and nine month periods compared to the prior year periods, these improvements were more than offset by increases in noninterest expense, and, in the nine month period, an increase in the provision for loan losses.   

Balance Sheet Review

Total assets at December 31, 2013 decreased $31.5 million, or 9.5%, to $300.5 million from $332.0 million at March 31, 2013.  The decrease in assets is attributable to a $17.6 million decrease in cash and cash equivalents, a $4.9 million decrease in investment securities, and a $10.0 million decrease in loans during the nine months ended December 31, 2013.

Net loans decreased $10.0 million to $149.3 million at December 31, 2013 from $159.3 million at March 31, 2013, after an increase in net loans of $2.1 million in the first quarter of the fiscal year. The largest decline in loans was a $9.0 million decrease in commercial business loans. Over the past two quarters, several larger commercial loan borrowers paid off their outstanding loan balances and refinanced with other financial institutions. In addition, residential one- to four-family loans  decreased $6.3 million as these loans either paid down, repaid or refinanced and newly originated residential loans were sold in the secondary market at a premium. The Bank continues to transform the composition of its loan portfolio by emphasizing commercial and commercial real estate lending which has resulted in residential loan balances declining. At December 31, 2013, commercial real estate loans accounted for 28.2% of gross loans compared to 22.5% at March 31, 2013, or a net increase of $6.6 million.  However, as noted above, commercial business loans have declined in the last nine months, representing 11.8% of gross loans at December 31, 2013, compared to 16.7% at March 31, 2013.

Total deposits were $237.1 million at December 31, 2013, compared to $260.1 million at March 31, 2013, a decline of $23.0 million or 8.8%. The decline in deposits was due to the continued decrease in time deposits. Time deposits decreased $23.8 million to $172.2 million at December 31, 2013 compared to $196.0 million at March 31, 2013. The Company remains focused on changing its deposit mix to rely less on certificates of deposit as a primary funding source and attract lower costing core deposits. Checking accounts increased $5.6 million to $26.0 million thru September 30, 2013, but declined $4.4 million to $21.6 million at December 31, 2013. The decline in checking accounts over the last quarter is primarily associated with interest-free commercial checking accounts. As of December 31, 2013, checking accounts have increased $1.2 million or 5.7% from $20.4 million at March 31, 2013. 

Total shareholders' equity at December 31, 2013 was $61.5 million, compared to total equity of $67.4 million at March 31, 2013.  The decrease in shareholders' equity was primarily attributable to a 5.0% stock buyback program completed in November 2013 for $2.8 million. In addition, there was a $2.6 million decrease in accumulated other comprehensive income and a $629,000 net loss for the nine months ended December 31, 2013.  The decrease in accumulated other comprehensive income was due to the negative impact of  rising interest rates on the market value of the investment portfolio during the past nine months. The Company's book value per common share at December 31, 2013 was $17.47 compared to $18.21 at March 31, 2013.  At December 31, 2013, tangible book value per share, which includes the $(0.80) per share effect of the Company's $2.9 million of goodwill and other intangibles, equaled $16.67 per share.

Asset Quality Review

Nonperforming assets remained unchanged as of December 31, 2013 at $5.9 million compared to March 31, 2013. Total nonperforming assets were 2.0% of total assets at December 31, 2013 compared to 1.77% at March 31, 2013.  Included in nonperforming assets are several loans totaling $1.0 million that are on accrual status and paying under the  contractually agreed upon terms, however, they are 90 days past their contractual maturity date and are therefore reported as nonperforming.

Nonaccrual loans totaled $3.9 million at December 31, 2013 compared to $5.1 million at March 31, 2013. The $1.2 million decrease in nonaccrual loans is primarily due to one non-accrual participation loan that was transferred to foreclosed real estate in the second quarter upon foreclosure by the lead bank in the amount of $1.0 million. Nonaccrual loans include three commercial business loans totaling $1.3 million, one of which is a troubled debt restructure, that are paying as agreed but have been placed on nonaccrual by management until the borrower can show improved cash flow.

The provision for loan losses totaled $180,000 for the quarter ended December 31, 2013 compared to a $335,000 provision for the same quarter ended 2012. The provision for loan losses totaled $1.5 million for the nine months ended December 31, 2013 compared to $393,000 for the same 2012 period. The provision for loan loss in the third quarter of 2013 was related to net charge offs totaling $291,000, largely related to one commercial business borrower and several smaller 1-4 family residential loans. The provision for loan losses associated with the net charge offs was partially offset by a declining loan portfolio and the required allowance for loan loss balance calculated in accordance with ASC 450.   

The allowance for loan losses at December 31, 2013 totaled $2.5 million, or 1.68% of total loans, compared to $2.1 million at March 31, 2013, or 1.28% of total loans. The $477,000 increase in the allowance for loan losses is the result of $1.5 million in provision for loan losses, partially offset by $1.0 million in net charge-offs for the nine months ending December 31, 2013.   

Income Statement Review

Net interest income increased $123,000 to $2.1 million for the quarter ended December 31, 2013 from $1.9 million for the quarter ended December 31, 2012. Net interest income increased $284,000 to $6.3 million for the nine months ended December 31, 2013, compared to $6.0 million for the same 2012 period. The increases for the three and nine month periods in 2013 were primarily attributable to declines in both the cost and average balance of interest-bearing deposits. The declines in the cost of interest-bearing deposits were partially offset by declines in the average balance of interest-earning assets for the same periods despite the yield on interest-earning assets increasing for the three month period ended December 31, 2013 compared to the same 2012 period. The yield on interest earning assets for the nine month period ended December 31, 2013 decreased slightly compared to the same 2012 period.  For the three and nine months ended December 31, 2013, the net interest rate spread increased 55 and 23 basis points to 2.72% and 2.67%, respectively, from the prior year periods. The net interest margin also increased from 2.61% for the nine month period ended December 31, 2012 to 2.84% for the nine month period ended December 31, 2013. The  increase in the net interest rate spread and net interest margin when comparing periods was primarily due to the excess cash received from the initial stock offering in the third quarter of last fiscal year that reduced the overall yield on interest earning assets in that period.

Noninterest income for the third quarter of 2013 totaled $259,000, an increase of $63,000, or 32.1%, compared to the third quarter of 2012.  A large portion of the increase in noninterest income is attributable to the sale of the Belmar branch building that occurred in December 2013, which resulted in a gain of approximately $83,000. The increase was also attributable to earnings on bank-owned life insurance and service charges, partially offset by decreases in the gain on sale of loans held for sale and gain on sale of investment securities. For the nine months ended December 31, 2013, noninterest income totaled $716,000, an increase of $108,000 compared to the nine months ended December 31, 2012. The increase between the nine month periods was primarily due to the sale of the Belmar branch building as well as increases in service charges, income from bank-owned life insurance and gain on sale of investment securities, partially offset by a decrease in gain on sale of SBA loans. Income from service charges increased due to an increase in the number of core deposits (checking and savings) as well as increases in our fee based structure to be more aligned with the competitive market place.     

Noninterest expenses increased $680,000 to $2.4 million for the three months ended December 31, 2013, compared to $1.7 million for the three months ended December 31, 2012. The increase in noninterest expense for the three months ended December 31, 2013 includes an $189,000 increase in legal and professional services, a $290,000 increase in salaries, and a $154,000 loss on the sale of REO property, partially offset by decreases in advertising and foreclosed real estate expense. The increase in legal and professional services is due the added costs associated with operating as a public company and the workouts on problem loans. The increase in salary expense is a due to an accounting entry in the prior year period to reverse the bonus accrual. The $154,000 loss on the sale of REO property is from the sale of one property held by the Bank. The Bank, however, is expecting to receive an additional $200,000 from the buyer at a future date contingent on the buyer being able to obtain certain permits from the state of Maryland. Due to the contingent terms of this sale, the Bank has not recognized the additional $200,000 at this time. Noninterest expense increased $1.1 million to $6.7 million for the nine months ended December 31, 2013, compared to $5.7 million for the nine months ended December 31, 2012. The largest contributors to the increase between the nine month periods were increases in salaries and employee benefits, legal and professional services, and loss on sale of REO, offset by decreases in advertising, deposit insurance premiums and foreclosed real estate expense.

Use of Non-GAAP Financial Measures

This press release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). Tangible book value is a non-GAAP financial measure.  The Company believes that the presentation of non-GAAP financial measures will permit investors to assess the Company's core operating results on the same basis as management. Non-GAAP financial measures should be considered supplemental to, not a substitute for or superior to, financial measures calculated in accordance with GAAP. As other companies may use different calculations for these measures, this presentation may not be comparable to other similarly titled measures reported by other companies.

About Hamilton Bank

Hamilton Bank is a federally-chartered savings bank that has served the banking needs of its customers since 1915. Hamilton Bank conducts business primarily from its four full service banking offices located in Baltimore City, Maryland and the Maryland counties of Baltimore and Anne Arundel.

This press release may contain statements relating to the future results of the Company (including certain projections and business trends) that are considered "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995). Forward-looking statements include statements regarding anticipated future events and can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements, by their nature, are subject to risks and uncertainties. Certain factors that could cause actual results to differ materially from expected results include increased competitive pressures, changes in the interest rate environment, general economic conditions or conditions within the securities markets, legislative and regulatory changes that could adversely affect the business in which Hamilton Bancorp, Inc. and Hamilton Bank are engaged, and other factors that may be described in the Company's annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the Securities and Exchange Commission. The forward-looking statements are made as of the date of this release, and, except as may be required by applicable law or regulation, the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

  










Hamilton Bancorp, Inc. and Subsidiary



Consolidated Statements of Financial Condition



(dollars in thousands)










December 31,


March 31,




2013


2013




(unaudited)


(audited)



ASSETS






Cash and cash equivalents

$ 16,345


$ 33,969



Investment securities available for sale

111,294


116,234



Loans receivable, net

149,330


159,317



Foreclosed real estate

1,003


756



Premises and equipment, net

2,104


2,461



Bank-owned life insurance

11,913


11,623



Goodwill and other intangible assets

2,845


2,877



Other assets

5,636


4,725



Total Assets

$ 300,470


$ 331,962









LIABILITIES AND SHAREHOLDERS' EQUITY






Deposits

$ 237,123


$ 260,117



Other liabilities

1,873


4,409



Total Liabilities

238,996


264,526



Total Shareholders' Equity

61,474


67,436



Total Liabilities and Shareholders' Equity

$ 300,470


$ 331,962















Hamilton Bancorp, Inc. and Subsidiary

Consolidated Statements of Operations

(Unaudited)










Three Months Ended December 31,


Nine Months Ended December 31,


2013


2012


2013


2012


(Dollars in thousands except per share data)

Interest Income

$           2,505


$           2,607


$           7,789


$            8,213

Interest Expense

451


676


1,484


2,192

Net Interest Income

2,054


1,931


6,305


6,021

Provision for Loan Losses

180


335


1,499


393

Net Interest Income After 








   Provision for Loan Losses

1,874


1,596


4,806


5,628

Total Noninterest Income

259


196


716


608

Total Noninterest Expenses

2,413


1,733


6,739


5,674

Income Before Income Taxes

(280)


59


(1,217)


562

Income Tax Expense (Benefit)

(133)


(6)


(588)


133

Net Income Available to 








   Common Shareholders 

$            (147)


$               65


$            (629)


$              429









Basic Earnings Per Common Share

$           (0.04)


$            0.02


$           (0.19)


$             0.12

Diluted Earnings Per Common Share

$           (0.04)


$            0.02


$           (0.19)


$             0.12







Hamilton Bancorp, Inc. and Subsidiary



Tangible Book Value



(Unaudited)










December 31,


March 31,




2013


2013




(dollars in thousands except per share data)









Tangible book value per common share:






    Total shareholders' equity

$ 61,474


$ 67,436



    Less: Goodwill and other intangible assets

(2,845)


(2,877)



    Tangible common equity

$ 58,629


$ 64,559









Outstanding common shares

3,517,850


3,703,000









Book value per common share

$ 17.47


$ 18.21









Tangible book value per common share

$ 16.67


$ 17.43



Tangible common equity to tangible assets

19.70%


19.62%






















Hamilton Bancorp, Inc. and Subsidiary






Allowance for Loan Losses






(Unaudited)




















For the


For the







Three Months Ended December 31,


Nine Months Ended December 31,







2013


2012


2013


2012







(Dollars in thousands)



















Balance, beginning

$ 2,659


$                  1,822


$                  2,071


$                 3,552






    Provision charged to income

180


335


1,499


393






    Charge-offs

(315)


(214)


(1,087)


(2,002)






    Recoveries

24


-


65


-






Balance, ending

$ 2,548


$                  1,943


$                  2,548


$                 1,943



















Allowance for Loan Losses as a 













   percentage of gross loans

1.68%


1.17%


1.68%


1.17%



















Hamilton Bancorp, Inc. and Subsidiary






Non-Performing Assets






(Unaudited)






















As Of and For The


As Of and For The


As Of and For The









Nine Months Ended


Six Months Ended


Fiscal Year Ended









December 31, 2013


September 30, 2013


March 31, 2013









 (dollars in thousands) 



















Nonaccruing loans



$                  3,888


$                  4,272


$                 5,132






Accruing loans delinquent more than 90 days



1,025


675


-






Foreclosed assets



1,003


1,759


756






  Total nonperforming assets



$                  5,916


$                  6,706


$                 5,888



















ASC 450 - Allowance for loan losses



$                  2,224


$                  2,346


$                 1,562






ASC 310 - Impaired loan valuation allowance



324


313


509






  Total allowance for loan losses



$                  2,548


$                  2,659


$                 2,071



















Ratio of nonperforming assets to total assets at end of period (1)



1.97

%

2.14

%

1.77

%





Ratio of nonperforming loans to total loans at end of period (2)



3.23

%

3.21

%

3.18

%





Ratio of net charge offs to average loans for the period ended (3)



0.86

%

0.91

%

1.96

%





Ratio of allowance for loan losses to total loans at end of period



1.68

%

1.72

%

1.28

%





Ratio of allowance for loan losses to nonperforming













  loans at end of period (2)



51.86

%

53.75

%

40.35

%































(1)  Nonperforming assets include nonaccruing loans, accruing loans delinquent more than 90 days

       and foreclosed assets.













(2)  Nonperforming loans include both nonaccruing loans and accruing loans delinquent













       more than 90 days.













(3)  Percentages for the six and nine months ended September 30, 2013 and December 31, 2013 have been annualized.







































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