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Frederick County Bancorp, Inc. Reports Results for the Fourth Quarter 2018

[January 18, 2019]

Frederick County Bancorp, Inc. Reports Results for the Fourth Quarter 2018

Frederick County Bancorp, Inc. (the "Company") (OTC Pink Marketplace: FCBI), the parent company for Frederick County Bank ("FCB"), announced today that, for the quarter ended December 31, 2018, the Company recorded net income of $712 thousand and diluted earnings per share of $0.45, as compared to net income of $341 thousand and diluted earnings per share of $0.22 recorded for the fourth quarter of 2017. The Company earned $3.0 million with diluted earnings per share of $1.88 for the year ended on December 31, 2018, as compared to $2.1 million in earnings and diluted earnings per share of $1.32 for the same period in 2017.

The increase in quarterly earnings was due primarily to an increase in net interest income of $269 thousand in the fourth quarter of 2018 as compared to the fourth quarter of 2017. A provision for loan losses in the amount of $70 thousand was recorded in the fourth quarter of 2018, while a provision for loan losses of $281 thousand was recognized in the same quarter of 2017. The provision for income taxes for the fourth quarter of 2018 decreased by $284 thousand as compared to the same period of 2017, as a result of the reduction of the Company's federal income tax rate in 2018 from 34% to 21%, and the absence in 2018 of the one-time adjustment of deferred tax assets required in the fourth quarter of 2017, offset by a higher level of pre-tax income.

The increase in full-year earnings was due primarily to an increase in net interest income of $932 thousand in 2018 as compared to the same period in 2017. A negative provision for loan losses in the amount of $442 thousand was recorded in the full year of 2018, while a provision for loan losses of $645 thousand was recognized in same period in 2017, for a year on year decrease of $1.1 million in the provision for loan losses. The provision for income taxes decreased by $401 thousand in the full year of 2018 as compared to the full year of 2017 as a result of the reduction of the Company's federal income tax rate in 2018 and the absence in 2018 of the one-time adjustment of deferred tax assets, offset by a higher level of pre-tax income.

The ratio of the allowance for loan losses to total loans stood at 1.01% and 1.01% as of December 31, 2018 and 2017, respectively. Total nonperforming assets stood at $2.1 million and $5.4 million at December 31, 2018 and 2017, respectively. The corresponding nonperforming assets to total assets ratios were 0.50% and 1.32% as of December 31, 2018 and 2017, respectively.

The Company also reported that, as of December 31, 2018, assets stood at $418.6 million, with total deposits of $352.4 million and gross loans of $339.5 million, representing increases of 3.2%, 6.1%, and 5.4%, respectively, compared to December 31, 2017. Total shareholders' equity at December 31, 2018 was $35.5 million, an increase of $2.9 million from December 31, 2017, primarily the result of retained earnings. On a per share basis, book value increased by $1.21 for 2018 to $23.06 per share at December 31, 2018 from $21.85 per share at December 31, 2017. The dividends declared per share were $0.34 for the twelve month period ended December 31, 2018 as compared to $0.30 per share for the same period in 2017. On September 24, 2018 and June 25, 2018, the Board declared quarterly dividends of $0.10 per share, an increase of $0.02 per share relative to prior quarters.

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

	December 31	December 31,
	2018	2017
(dollars in thousands)	(unaudited)	(audited)
Total assets	$418,588	$405,796
Loans	339,461	322,156
Deposits	352,373	332,005
Shareholders' equity	35,555	32,621

Nonperforming assets:
Nonaccrual loans	$ 492	$3,756
Accruing troubled debt restructurings	1,254	345
Loans 90 days or more past due and still accruing	-	-
Foreclosed properties	360	1,264
Total nonperforming assets	$2,106	$5,365

	For the Three Months Ended		For the Years Ended
	December 31,	December 31,	December 31,	December 31,
	2018	2017	2018	2017
(dollars in thousands, except for per share data)	(unaudited)	(audited)	(unaudited)	(audited)
SUMMARY OF OPERATING RESULTS:
Net income	$712	$341	$2,961	$2,050
Total comprehensive income	$47	$107	$2,816	$1,914

Charge-offs	$ 91	$1,091	$ 120	$1,369
(Recoveries)	(107)	(8)	(723)	(245)
Net charge-offs (recoveries)	$ (16)	$1,083	$(603)	$1,124

PER COMMON SHARE DATA:
Basic earnings per share	$0.46	$0.23	$1.95	$1.37
Diluted earnings per share	$0.45	$0.22	$1.88	$1.32
Basic weighted average number of shares outstanding	1,537,286	1,493,018	1,520,817	1,492,792
Diluted weighted average number of shares outstanding	1,582,813	1,554,769	1,574,817	1,551,807
Common shares outstanding	1,541,737	1,493,044	1,541,737	1,493,044
Dividends declared ⁽¹⁾	$0.08	$0.16	$0.34	$0.30
Book value per share	$23.06	$21.85	$23.06	$21.85

SELECTED UNAUDITED FINANCIAL RATIOS:
Return on average assets	0.67%	0.34%	0.70%	0.52%
Return on average equity	8.09%	4.12%	8.64%	6.34%
Allowance for loan losses to total loans	1.01%	1.01%	1.01%	1.01%
Nonperforming assets to total assets	0.50%	1.32%	0.50%	1.32%
Ratio of net (recoveries) charge-offs to average loans	0.00%	0.34%	(0.18)%	0.36%
Common Equity Tier 1 to risk-weighted assets	9.44%	8.72%	9.44%	8.72%
Tier 1 capital to risk-weighted assets	11.02%	10.35%	11.02%	10.35%
Total capital to risk-weighted assets	11.93%	11.23%	11.93%	11.23%
Tier 1 capital to average assets	9.83%	9.65%	9.83%	9.65%
Average equity to average assets	8.27%	8.34%	8.12%	8.16%
Net interest margin	3.57%	3.58%	3.58%	3.59%

⁽¹⁾ Includes dividends of $0.08 per share declared on both October 2, 2017 and December 18, 2017.


Frederick County Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
	December 31,		December 31,
		2018		2017
	(unaudited)		(audited)
(dollars in thousands)
ASSETS
Cash and due from banks	$	2,778	$	2,726
Federal funds sold		5		5
Interest-bearing deposits in other banks		33,342		34,628
Cash and cash equivalents		36,125		37,359
Investment securities available-for-sale at fair value		21,558		24,745
Restricted stock		1,979		2,367
Loans held for sale		268		-
Loans		339,461		322,156
Less: Allowance for loan losses		(3,426)		(3,265)
Net loans		336,035		318,891
Bank premises and equipment		9,280		9,542
Bank owned life insurance		10,628		8,946
Foreclosed properties		360		1,264
Other assets		2,355		2,682
Total assets	$	418,588	$	405,796

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
Deposits
Noninterest-bearing deposits	$	100,200	$	89,616
Interest-bearing deposits		252,173		242,389
Total deposits		352,373		332,005
Short-term borrowings		3,450		4,200
FHLB advances		20,000		29,700
Junior subordinated debentures		6,186		6,186
Accrued interest and other liabilities		1,024		1,084
Total liabilities		383,033		373,175

Shareholders' Equity
Common stock, per share par value $0.01; 10,000,000 shares authorized; 1,541,737 and 1,493,044 shares issued and outstanding, respectively		15		15
Additional paid-in capital		16,031		15,397
Retained earnings		19,794		16,829
Accumulated other comprehensive (loss) income		(285)		380
Total shareholders' equity		35,555		32,621
Total liabilities and shareholders' equity	$	418,588	$	405,796

Frederick County Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
	For the Three Months Ended		For the Years Ended
(dollars in thousands, except per share amounts)	December 31, 2018	December 31, 2017	December 31, 2018	December 31, 2017
Interest income
Interest and fees on loans	$3,969	$3,563	$15,438	$14,075
Interest and dividends on investment securities:
Interest - taxable	125	113	495	408
Interest - tax exempt	22	26	92	105
Dividends	35	42	148	118
Interest on federal funds sold	-	-	-	1
Other interest income	240	99	858	402
Total interest income	4,391	3,843	17,031	15,109
Interest expense
Interest on deposits	557	332	1,864	1,250
Interest on short-term borrowings	44	43	182	164
Interest on FHLB advances	112	74	496	198
Interest on junior subordinated debentures	62	47	237	177
Total interest expense	775	496	2,779	1,789
Net interest income	3,616	3,347	14,252	13,320
Provision for loan losses	70	281	(442)	645
Net interest income after provision for loan losses	3,546	3,066	14,694	12,675
Noninterest income
Securities (losses) gains	(10)	251	(9)	416
Change in fair value of equity securities	(33)	-	2	-
Gain on sale of loans	194	41	370	439
Gain (loss) on foreclosed properties	-	-	12	(34)
Bank owned life insurance income	69	52	226	211
Service fees	107	101	413	380
Other operating income	169	32	572	456
Total noninterest income	496	477	1,586	1,868
Noninterest expense
Salaries and employee benefits	1,775	1,538	7,119	6,572
Occupancy and equipment expenses	472	351	1,841	1,719
Other operating expenses	839	785	3,318	2,760
Total noninterest expense	3,086	2,674	12,278	11,051
Income before provision for income taxes	956	869	4,002	3,492
Provision for income taxes	244	528	1,041	1,442
Net income	$ 712	$ 341	$ 2,961	$ 2,050
Basic earnings per share	$0.46	$0.23	$1.95	$1.37
Diluted earnings per share	$0.45	$0.22	$1.88	$1.32
Basic weighted average number of shares outstanding	1,537,286	1,493,018	1,520,817	1,492,792
Diluted weighted average number of shares outstanding	1,582,813	1,554,769	1,574,817	1,551,807
Dividends declared per share ⁽¹⁾	$0.08	$0.16	$0.34	$0.30

⁽¹⁾Includes dividends of $0.08 per share declared on both October 2, 2017 and December 18, 2017.


Frederick County Bancorp, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
	For the Three Months Ended
(dollars in thousands)	December 31, 2018	December 31, 2017
Net income	$712	$341
Changes in net unrealized (losses) gains on securities available for sale, net of income tax benefits of $255 in 2018 and income taxes of $53 in 2017	(672)	(82)
Reclassification adjustment for losses (gains) realized, net of income tax benefits of $3 in 2018 and income taxes of $99 in 2017	7	(152)
Total other comprehensive (loss) income	(665)	(234)
Total comprehensive income	$ 47	$107

	For the Years Ended
(dollars in thousands)	December 31, 2018	December 31, 2017
Net income	$2,961	$2,050
Changes in net unrealized (losses) gains on securities available for sale, net of income tax benefits of $58 in 2018 and income taxes of $76 in 2017	(151)	115
Reclassification adjustment for losses (gains) realized, net of income tax benefits of $2 in 2018 and income taxes of $165 in 2017	6	(251)
Total other comprehensive (loss) income	(145)	(136)
Total comprehensive income	$2,816	$1,914


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, 2017	1,491,844	$15	$15,404	$15,289	$ 453	$31,161
Comprehensive income				2,050	(136)	1,914
Reclassification of remaining tax effects on deferred tax assets on securities available for sale				(63)	63	-
Dividends declared on common stock, $0.30 per share				(447)		(447)
Shares issued under stock option transactions	1,200		13			13
Compensation expense from stock option transactions			(20)			(20)
Balance, December 31, 2017	1,493,004	$15	$15,397	$16,829	$380	$32,621
Comprehensive income				2,961	(145)	2,816
Cumulative change in accounting principles				520	(520)	-
Dividends declared on common stock, $0.34 per share				(516)		(516)
Shares issued under stock option transactions	48,693		634			634
Balance, December 31, 2018	1,541,737	$15	$16,031	$19,794	$(285)	$35,555


Frederick County Bancorp, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)
	For The Years Ended
	December 31,	December 31,
(dollars in thousands)	2018	2017
Cash flows from operating activities:
Net income	$2,961	$ 2,050
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	497	497
Deferred income taxes	211	294
Provision for loan losses	(442)	645
Securities losses (gains)	9	(416)
Change in fair value of equity securities	(2)	-
Gain on sale of loans	(370)	(439)
Loans originated for sale	(8,486)	(7,865)
Proceeds from loans sold	8,856	8,303
Net premium amortization on investment securities	117	133
Loss on disposal of bank premises and equipment	-	2
Bank owned life insurance income	(226)	(211)
Loss on surrender of bank owned life insurance	19	-
(Gain) loss on sale of foreclosed property	(12)	34
Stock-based compensation expense	-	(20)
Provision for foreclosed properties	346	-
Decrease (increase) in accrued interest and other assets	29	(237)
Increase in accrued interest and other liabilities	84	81
Net cash provided by operating activities	3,591	2,851
Cash flows from investing activities:
Purchases of investment securities available for sale	(1,231)	(4,794)
Proceeds from sales of investment securities available for sale	858	901
Proceeds from maturities, prepayments and calls investment securities available for sale	3,234	3,851
Purchase (redemption) of restricted stock	388	(680)
Net increase in loans	(16,970)	(17,238)
Purchase of bank owned life insurance	(1,475)	-
Purchases of bank premises and equipment	(235)	(2,551)
Proceeds from sale of foreclosed property	570	126
Net cash used in investing activities	(14,861)	(20,385)
Cash flows from financing activities:
Net increase in NOW, money market accounts, savings accounts and noninterest-bearing deposits	11,217	18,121
Net increase (decrease) increase in time deposits	9,151	(8,068)
Net (decrease) increase in short-term borrowings	(750)	900
Net (decrease) increase in FHLB advances	(9,700)	14,700
Proceeds from issuance of common stock	634	13
Dividends paid on common stock	(516)	(447)
Net cash provided by financing activities	10,036	25,219
Net increase (decrease) in cash and cash equivalents	(1,234)	7,685
Cash and cash equivalents - beginning of period	37,359	29,674
Cash and cash equivalents - end of period	$36,125	$37,359
Supplemental cash flow disclosures:
Interest paid	$2,717	$1,753
Income taxes paid	$545	$1,419
Transfer of loans to foreclosed properties	-	$558

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 December 31,	2018			2017

(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	$ -	0.00%
Interest bearing deposits in other banks	44,698	240	2.13	32,916	100	1.21
Investment securities ⁽¹⁾:
Taxable	20,276	158	3.09	22,363	113	2.00
Tax-exempt ⁽²⁾	3,328	28	3.34	3,636	39	4.26
Loans ⁽³⁾	335,212	3,983	4.71	315,775	3,585	4.50
Total interest-earning assets	403,519	4,409	4.33	374,695	3,837	4.06
Noninterest-earning assets	22,067			21,742
Total assets	$425,586			$396,437

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
NOW accounts	$ 50,619	75	0.59	$ 40,402	20	0.20
Savings accounts	14,758	1	0.03	13,294	1	0.03
Money market accounts	97,763	100	0.41	98,061	71	0.29
Certificates of deposit	94,423	382	1.61	86,006	240	1.11
Federal Funds Purchased	-	-	-	1	-
Short-term borrowings	3,450	43	4.94	4,200	43	4.06
FHLB advances	20,000	112	2.22	21,004	74	1.40
Junior subordinated debentures	6,186	62	3.98	6,186	47	3.01
Total interest-bearing liabilities	287,199	775	1.07	269,154	496	0.73
Noninterest-bearing deposits	102,315			92,916
Noninterest-bearing liabilities	873			1,288
Total liabilities	390,387			363,358
Total shareholders' equity	35,199			33,079
Total liabilities and shareholders' equity	$425,586			$396,437
Net interest income		$3,634			$3,341
Net interest spread			3.26%			3.33%
Net interest margin			3.57%			3.54%

⁽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% in 2018 and 34% in 2017. Taxable-equivalent adjustments of $6 thousand in 2018 and $13 thousand in 2017 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% in 2018 and 34% in 2017. Taxable-equivalent adjustments of $14 thousand in 2018 and $22 thousand in 2017 are included in the calculation of the loan interest income. Net loan origination income (expense) in interest income totaled $(23) thousand in 2018 and $5 thousand in 2017.


For the Years Ended December 31,	2018			2017
(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	$ -	-%	$ 146	$ 1	0.68
Interest bearing deposits in other banks	47,618	858	1.80	38,281	402	1.05
Investment securities ⁽¹⁾:
Taxable	21,652	643	2.97	21,823	526	2.41
Tax-exempt ⁽²⁾	3,334	116	3.48	3,759	159	4.23
Loans ⁽³⁾	327,894	15,487	4.72	311,431	14,175	4.55
Total interest-earning assets	400,503	17,104	4.27	375,440	15,263	4.07
Noninterest-earning assets	21,423			20,850
Total assets	$421,926			$396,290

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
NOW accounts	$ 46,956	173	0.37	$ 38,474	75	0.19
Savings accounts	14,051	4	0.03	12,584	4	0.03
Money market accounts	97,577	312	0.32	101,039	288	0.29
Certificates of deposit	96,465	1,375	1.43	91,404	883	0.97
Short-term borrowings	3,799	182	4.79	4,192	164	3.91
FHLB advances	25,164	496	1.97	17,554	198	1.13
Junior subordinated debentures	6,186	237	3.83	6,186	177	2.86
Total interest-bearing liabilities	290,198	2,779	0.96	271,433	1,789	0.66
Noninterest-bearing deposits	96,605			91,174
Noninterest-bearing liabilities	843			1,329
Total liabilities	387,646			363,936
Total shareholders' equity	34,280			32,354
Total liabilities and shareholders' equity	$421,926			$396,290
Net interest income		$14,325			$13,474
Net interest spread			3.31%			3.41%
Net interest margin			3.58%			3.59%

⁽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% in 2018 and 34% in 2017. Taxable-equivalent adjustments of $24 thousand in 2018 and $54 thousand in 2017 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 34%. Taxable-equivalent adjustments of $49 thousand in 2018 and $100 thousand in 2017 are included in the calculation of the loan interest income. Net loan origination income (expense) in interest income totaled $(34) thousand in 2018 and $53 thousand in 2017.

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20190118005279/en/

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