<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
-----------------
OR
/_/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------- -------------------
COMMISSION FILE NUMBER: 333-16011
FIRST MARINER BANCORP
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-1834860
- ------------------------ --------------------------------------
(State of incorporation) (I.R.S. Employer Identification Number)
1801 South Clinton Street, Baltimore, MD 21224 410 - 342 - 2600
- ---------------------------------------- ---------- ------------------
(Address of principal executive offices) (Zip Code) (Telephone Number)
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 of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports, and (2) has been subject to
filing requirements for the past 90 days.
YES /_/ NO /_/
The number of shares of common stock outstanding as of September 30, 1997
is 2,839,363 shares.
<PAGE>
FIRST MARINER BANCORP
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets at
September 30, 1997 and December 31,1996 ................. 1
Consolidated Statements of Operations for the
Nine Month Periods Ended September 30, 1997 and 1996 .... 2
Consolidated Statements of Cash Flows for the
Nine Month Periods Ended September 30, 1997 and 1996 .... 3
Notes to Consolidated Financial Statements ................ 4
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ............. 4 - 7
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON 8-K ............................... 8
SIGNATURES ........................................................ 9
<PAGE>
FIRST MARINER BANCORP AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------- -----------------
(UNAUDITED)
<S> <C> <C>
Cash on hand and in banks............... $ 9,036,171 $ 5,323,984
Interest bearing deposits............... 26,124,308 27,186,076
Available-for-sale securities, at fair
value................................. 23,058,713 324,875
Investment securities, fair value of
$4,497,547 and $1,097,438,
respectively.......................... 4,500,938 1,099,000
Federal Home Loan Bank of Atlanta stock,
at cost............................... 900,500 480,800
Loans receivable, net................... 130,868,030 91,535,024
Loans held for sale..................... 9,974,000 3,072,163
Other real estate owned................. 1,862,143 --
Property and equipment , net............ 3,934,156 2,671,018
Accrued interest receivable and other
assets................................ 2,246,713 868,606
------------ ------------
Total assets:........................... $212,505,672 $132,561,546
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits................................ $173,445,488 $102,289,146
Federal Home Loan Bank of Atlanta
advances.............................. 5,000,000 6,000,000
Other borrowings........................ 6,832,592 --
Accrued expenses and other
liabilities........................... 419,461 476,398
------------ ------------
Total liabilities:...................... 185,697,541 108,765,544
------------ ------------
Stockholder's Equity
Common stock, $.05 par value; 5,000,000
shares authorized; 2,839,363 and
2,627,263 shares issued and outstanding,
respectively.......................... 141,863 131,363
Additional paid-in capital.............. 29,704,218 27,350,118
Accumulated deficit..................... (3,505,627) (3,696,904)
Unrealized gain on available-for-sale
securities............................ 467,677 11,425
------------ ------------
Total stockholders' equity:............. 26,808,131 23,796,002
------------ ------------
------------ ------------
Total liabilities and stockholders'
equity:............................... $212,505,672 $132,561,546
------------ ------------
------------ ------------
</TABLE>
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<PAGE>
FIRST MARINER BANCORP AND SUBSIDIARY
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Interest income:
Loans................................................ 3,174,842 1,789,120 8,422,042 3,981,916
Investments.......................................... 608,048 64,175 1,425,553 334,507
------------- ------------- ------------- -------------
Total interest income................................. 3,782,890 1,853,295 9,847,595 4,316,423
------------- ------------- ------------- -------------
Interest expense:
Deposits............................................. 1,681,598 811,171 4,146,326 1,949,995
Borrowed funds and other............................. 97,625 28,456 173,428 28,456
------------- ------------- ------------- -------------
Total interest expense................................ 1,779,223 839,627 4,319,754 1,978,451
------------- ------------- ------------- -------------
Net interest income before provision for loan
losses.............................................. 2,003,667 1,013,668 5,527,841 2,337,972
Provision for loan losses............................. 129,742 436,139 365,504 674,828
------------- ------------- ------------- -------------
Net interest income after provision for loan losses... 1,873,925 577,529 5,162,337 1,663,144
------------- ------------- ------------- -------------
Non-interest income:
Fees on loans........................................ 605,685 98,605 1,114,288 208,162
Service fees on deposits............................. 339,596 130,033 852,427 229,728
Gain on sale of securities........................... 166,911 329,923 236,158 331,695
Other................................................ 49,032 (1,286) 139,164 42,352
------------- ------------- ------------- -------------
Total non-interest income............................. 1,161,224 557,275 2,342,037 811,937
------------- ------------- ------------- -------------
Non-interest expense:
Salary............................................... 1,676,992 706,590 3,880,271 1,859,988
Occupancy............................................ 319,354 206,800 831,168 480,079
FDIC Insurance Premiums.............................. 25,387 181,383 55,423 229,810
Furniture, fixtures and equipment.................... 102,910 68,888 304,198 173,169
Professional services................................ 35,602 74,074 112,496 59,841
Advertising.......................................... 136,968 168,653 391,539 290,944
Data processing...................................... 143,000 72,000 339,999 201,067
Office supplies...................................... 34,747 151,956 91,918 183,357
Amortization of intangible assets.................... 18,731 22,367 56,195 56,195
Other................................................ 437,014 109,026 1,248,641 466,063
------------- ------------- ------------- -------------
Total noninterest expense............................. 2,930,705 1,761,737 7,311,848 4,000,513
------------- ------------- ------------- -------------
Income (Loss) before income tax benefit............... 104,444 (626,933) 192,526 (1,525,432)
Income taxes.......................................... 1,250 -- 1,250 --
Net income (loss)..................................... 103,194 (626,933) 191,276 (1,525,432)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Earnings per common and common equivalent shares
Primary.............................................. 0.03 (0.46) 0.06 (1.24)
Fully diluted........................................ 0.03 (0.46) 0.06 (1.24)
</TABLE>
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<PAGE>
FIRST MARINER BANCORP AND SUBSIDIARY
Consolidated Statement of Cash Flows (Unaudited)
For the nine months ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1997 1996
---- ----
<S> <C> <C>
Net income (loss)................................................................... 191,276 (1,525,432)
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Amortization of unearned loan fees, net............................................ (522,001) (413,786)
Amortization of premiums on deposits............................................... (18,140) (21,025)
Accretion of discounts on loans.................................................... 49,310 58,961
Depreciation and amortization...................................................... 445,090 284,572
Provision for loan losses.......................................................... 365,505 674,828
Gain on sale of securities......................................................... (236,158) 331,695
Net changes in:
Accrued expenses and other liabilities............................................ (1,434,303) 685,271
Prepaids and other assets......................................................... (35,937) (489,542)
------------- -------------
Net cash used by operating activities............................................... (1,195,358) (414,458)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Loan disbursements, net of principal repayments.................................... (47,989,799) (51,157,320)
Purchases of property and equipment................................................ (1,652,032) (1,015,938)
Purchases of Federal Home Loan Bank of Atlanta stock............................... (419,700) (179,800)
Proceeds from sale of available for sale securities................................ 2,337,625
Purchase of investment securities available-for-sale securities.................... (22,497,680) --
Purchase of investment securities held-to-maturity................................. (3,401,938)
------------- -------------
Net cash used in investing activities............................................... (75,961,149) (50,015,433)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits........................................................... 71,174,482 37,061,412
Proceeds from advances from Federal Home Loan Bank of Atlanta...................... 5,000,000 6,000,000
Proceeds from other borrowings..................................................... 6,832,592 (43,220)
Repayment of advances from Federal Home Loan Bank of Atlanta....................... (6,000,000) --
Proceeds from stock issuance, net.................................................. 2,343,600 6,000
------------- -------------
Net cash provided by financing activities........................................... 79,350,674 43,024,192
------------- -------------
DECREASE IN CASH AND CASH EQUIVALENTS............................................... 2,194,167 (7,405,699)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.................................... 32,510,060 17,654,115
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.......................................... 35,160,479 10,248,416
------------- -------------
------------- -------------
Supplemental information:
Interest paid on deposits and borrowed funds....................................... $ 4,319,754 $ 1,499,588
------------- -------------
------------- -------------
Transfer of loan to other real estate owned........................................ $ 1,862,143 $ --
------------- -------------
------------- -------------
</TABLE>
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<PAGE>
FIRST MARINER BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
SEPTEMBER 30, 1997
NOTE 1 - GENERAL
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. These
statements should be read in conjunction with the financial statements and
accompanying notes included in First Mariner Bancorp's 1996 Annual Report to
Shareholders, The results shown in this interim report are not necessarily
indicative of results to be expected for the full year 1997.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles and to general practice within the banking
industry. Certain reclassifications have been made to amounts previously
reported to conform with current classifications.
Consolidation has resulted in the elimination of all significant
intercompany accounts and transactions.
NOTE 2 - PER SHARE DATA
Net income per common share is based on the weighted average number of
shares outstanding of 2,830,379 in 1997 and 1,226,863 in 1996.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
This Management's discussion and analysis contains forward-looking
statements, including statements of goals, intentions and expectation,
regarding or based upon general economics conditions, interest rates,
developments in national and local markets, and other matters, and which, by
their nature, are subject to significant uncertainties.
THE COMPANY
The Company is a bank holding company formed in Maryland in 1994 under the
name MarylandsBank Corporation that later changed its name to First Mariner Bank
in May 1995. The business of the Company is conducted through its
wholly-owned subsidiary First Mariner Bank (the "Bank"), whose deposits are
insured by the Federal Deposit Insurance Corporation ("FDIC"). The Bank, which
is headquartered in Baltimore City, serves the central region of the State of
Maryland through 16 full service branches and 27 Automated Teller Machines
("ATMs").
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<PAGE>
The Bank is an independent community bank engaged in the general
commercial banking business with particular emphasis on the needs of
individuals and small to mid-sized businesses. The Bank emphasizes personal
attention and professional service to its customers while delivering a range
of traditional and contemporary financial products.
The Company's executive officers are located at 1801 South Clinton Street,
Baltimore, Maryland 21224 and its telephone number is (410) 342 - 2600.
a) Financial Condition
The Company's total assets were $212,505,672 at September 30, 1997,
compared to $132,561,546 at December 31, 1996, increasing $79,944,126 or
60.3% for the first nine months of 1997. Earning assets increased
$72,069,204 or 57.7% to $196,933,656 from $124,939,601.
Total loans receivable increased $39,333,006 or 42.9% to $130,868,030 for
the first nine months of 1997. As a result of the loan growth a provision for
loan losses of $365,504 was recorded during the first three quarters of 1997.
The allowance for loan losses stands at $1,507,167 at September 30, 1997
compared to $1,241,663 at December 31, 1996. As of September 30, 1997 the
allowance for loan loss coverage is 1.13% of outstanding loans (excluding
loans held for sale).
Loans held for sale increased $6,901,837 from $3,072,163 at December 31,
1996 to $9,994,000 at September 30, 1997, reflecting the growth in the banks
mortgage banking subsidiary, First Mariner Mortgage Corporation. Loans held
for sale are residential mortgages originated by First Mariner Mortgage
Corporation for sale to investors.
The investment portfolio, consisting of available-for-sale and
held-to-maturity securities increased $26,135,776 from December 31, 1996.
The increase was funded primarily from deposit growth experienced during the
same period together with an increase in other borrowings. Interest bearing
deposits as of September 30, 1997 fell $1,061,768 to $26,124,308 when
compared to the December 31, 1996 balance of $27,186,076. Interest bearing
deposits and securities designated as available-for-sale represent a
significant source of liquidity as of September 30, 1997.
Deposits were $173,445,488 as of September 30, 1997, increasing
$71,156,342 or 69.6% from the December 31, 1996 balance of $102,289,146. The
increase in deposits is attributable to an advertising campaign and the
expanding branch network. FHLB advances decreased to $5,000,000 as of
September 30, 1997 from $6,000,000 as of December 31, 1996.
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<PAGE>
Net Interest Income
Third quarter net interest income before provision for loan losses was
$2,003,667 in 1997, an increase of 97.6% over $1,013,668 in 1996, reflecting
primarily a higher volume of average earning assets. For the nine month
period, net interest income before provision for loan losses was $5,527,841
compared to $2,337,972 reflecting an increase of 136.4%. The net yield on
earning assets was 4.96% for the first nine months of 1997 as compared to
4.71% for the first nine months of 1996.
Credit Risk Management
The third quarter provision for loan losses was $129,742 in 1997 resulted
in a year-to-date loan loss provision of $365,504, which compared to $674,828
for the nine month period in 1996. Net chargeoffs for September 30, 1997
were $100,000 compared to $92,251 for the same nine month period in 1996.
Non-performing assets, expressed as a percentage of total assets,
increased to 1.7% at September 30, 1997 from 1.2% at December 31, 1996. The
balance of non-performing assets was $3,633,102 at September 30, 1997
compared to $1,573,766 at December 31, 1996.
At September 30, 1997, the allowance for loan losses was 1.13% of total
loans versus 1.30% at December 31, 1996. Coverage of risk in the loan
portfolio may be evaluated using a ratio of the allowance for loan losses to
non-performing assets. Significant variation in this coverage ratio may occur
from period to period because the amount of nonperforming assets depends
largely upon the condition of a small number of individual assets and
borrowers relative to the total assets portfolio. At September 30, 1997, the
allowance for loan losses represented 41.1% of nonperforming assets compared
to 78.9% at December 31, 1996. Management believes the allowance for loan
losses at September 30, 1997 is adequate.
Noninterest Income and Expenses
Third quarter noninterest income increased $603,949 or 108.3% in 1997 to
$1,161,224 from $557,275 in 1996. For the nine month period in 1997,
noninterest income was $2,342,037 compared to the nine month period in 1996
of $811,937, an increase of $1,530,100 or 188.4%. The primary causes were an
increased volume of fees on loans originated by the Bank's mortgage banking
subsidiary (First Mariner Mortgage Corporation) and by an increase in deposit
related fees, primarily ATM fees and overdraft fees. First Mariner Mortgage
Corporation originated $50,392,709 in residential mortgage loans in 1997
compared to $18,724,550 in 1996 for the nine month period. The substantial
majority of these loans are sold in the secondary market.
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<PAGE>
Third quarter noninterest expense increased $1,168,968 or 66.4% to
$2,930,705 in 1997 from $1,761,737 in 1996. For the nine month period in
1997, noninterest expense was $7,311,848 compared to the nine month period in
1996 of $4,000,513, an increase of $3,311,335 or 82.8%. Increases in almost
all areas were realized as noninterest expenses increased to support the
substantially increased asset base and the expanding branch network.
Liquidity and Capital Resources
Stockholders' equity increased $3,012,129 or 12.6% in 1997 to $26,808,131
from $23,796,002 as of December 31, 1996. The majority of the increase in
capital is due to issuance of 210,000 shares of common stock in January 1997.
No dividends have been declared by the Company since its inception.
Banking regulatory authorities have implemented strict capital guidelines
directly related to the credit risk associated with an institution's assets.
Banks and bank holding companies are required to maintain capital levels
based on their "risk adjusted" assets so that categories of assets with
higher "defined" credit risks will require more capital support than assets
with lower risk. Additionally, capital must be maintained to support certain
off-balance sheet instruments.
The Bank has exceeded its capital adequacy requirements to date. The
Company continually monitors its capital adequacy ratios to assure that the
Bank exceeds its regulatory capital requirements.
Capital is classified as Tier 1 (common stockholders' equity less certain
intangible assets) and Total Capital (Tier 1 plus the allowance for loan
losses). Minimum required levels must at least equal 4% for Tier 1 capital
and 8% for Total Capital. See below for the current ratios for the Bank:
9/30/97 12/31/96
------- ---------
Tier 1 capital to risk weighted assets...... 10.7% 13.3%
Total capital to risk weighted assets....... 10.8% 14.2%
Tier 1 capital leverage ratio............... 8.5% 14.7%
The Bank's most liquid assets are cash and cash equivalents, which are
cash on hand, amounts due from finanical institutions, federal funds sold,
interest bearing deposits, stock investments and money market mutual funds.
The levels of such assets are dependent on the Bank's operating, financing
and investment activities at any given time. The variations in levels of cash
and cash equivalents are influenced by deposit flows, anticipated deposit
flows and loan growth.
The Company may draw on a $20,000,000 line of credit from the Federal
Home Loan Bank of Atlanta. Borrowings under the line are secured by a lien on
the Company's residential mortgage loans. As of September 30, 1997,
$5,000,000 of the line was utilized.
Income Taxes
The Company did not recognize any income tax benefit or expense for the
nine months ended September 30, 1996. For the three months ended September
30, 1997, the income tax expense has been $1,250 representing a portion of
the quarterly tax payment. As of September 30, 1997 and December 31, 1996
the entire net deferred asset, consisting primarily of net operating loss
carryforwards, has been offset by a valuation allowance.
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<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on 8-K
(a) Exhibit No. 27 - Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K have been filed during 1997 through
November 11, 1997
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this quarterly report to be signed on its behalf
by the undersigned, thereunto duly authorized.
FIRST MARINER BANCORP
(Registrant)
By: /s/ Edwin F. Hale, Sr.
------------------------------------
Edwin F. Hale, Sr.
President and Chief Executive Officer
Date: November 14, 1997
-------------------------
By: /s/ Kevin M. Healy
------------------------------------
Kevin M. Healy
Controller and Senior Vice President
Date: November 14, 1997
-------------------------
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 9,036,171
<INT-BEARING-DEPOSITS> 26,124,308
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 23,058,713
<INVESTMENTS-CARRYING> 900,500
<INVESTMENTS-MARKET> 4,500,938
<LOANS> 132,375,197
<ALLOWANCE> 15,071,167
<TOTAL-ASSETS> 212,515,672
<DEPOSITS> 173,445,488
<SHORT-TERM> 11,832,592
<LIABILITIES-OTHER> 419,461
<LONG-TERM> 0
0
0
<COMMON> 141,863
<OTHER-SE> 26,666,268
<TOTAL-LIABILITIES-AND-EQUITY> 212,505,672
<INTEREST-LOAN> 3,174,842
<INTEREST-INVEST> 608,048
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,782,890
<INTEREST-DEPOSIT> 1,681,598
<INTEREST-EXPENSE> 1,779,223
<INTEREST-INCOME-NET> 2,003,667
<LOAN-LOSSES> 129,742
<SECURITIES-GAINS> 166,911
<EXPENSE-OTHER> 29,930,705
<INCOME-PRETAX> 104,444
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103,194
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
<YIELD-ACTUAL> 4.63
<LOANS-NON> 3,633,102
<LOANS-PAST> 696,505
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,241,663
<CHARGE-OFFS> 100,000
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,507,167
<ALLOWANCE-DOMESTIC> 1,507,167
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
