<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. For the quarterly period ended March 31, 2000.
--------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. For the transition period from _______________________.
Commission file number: 0-21815
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 such
filing requirements for the 90 days. Yes __X__ No ____
The number of shares of common stock outstanding as of May 8, 2000 was
3,175,947 shares.
<PAGE>
FIRST MARINER BANCORP
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Item 1 - Financial Statements
Consolidated Statements of Financial Condition at
March 31, 2000 (unaudited) and at December 31, 1999.......................3
Consolidated Statements of Operations for the Three Months
Ended March 31, 2000 and March 31, 1999
(unaudited)...............................................................4
Consolidated Statements of Cash Flow for the
Three Months Ended March 31, 2000
and March 31, 1999 (unaudited)............................................5
Notes to Consolidated Financial Statements (unaudited)......................6
Item 2 - Management's discussion and analysis of
financial condition and results of operations.......................................9
Item 3 - Quantitative and Qualitative Disclosures About Market Risk..........................16
PART II - OTHER INFORMATION
Item 1 - Legal proceedings...................................................................17
Item 2 - Changes in securities and use of proceeds...........................................17
Item 3 - Defaults on senior securities.......................................................17
Item 4 - Submission of matters to a vote of security holders.................................17
Item 5 - Other information...................................................................17
Item 6 - Exhibits and reports on Form 8-K...................................................17
Signatures...................................................................................18
</TABLE>
2
<PAGE>
First Mariner Bancorp and Subsidiaries
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
- -----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS (Unaudited)
Cash and due from banks $ 16,535 $ 19,490
Interest-bearing deposits 7,940 24,346
Available for sale securities, at fair value 206,421 191,895
Loans held for sale 30,323 26,299
Loans receivable 354,699 329,528
Allowance for loan losses (3,404) (3,322)
--------------------------
Loans, net 351,295 326,206
Other real estate owned 1,294 1,360
Federal Home Loan Bank of Atlanta stock, at cost 4,300 4,365
Property and equipment, net 11,014 10,300
Accrued interest receivable 3,799 3,312
Deferred income taxes 5,946 5,781
Prepaid expenses and other assets 3,607 2,718
- -----------------------------------------------------------------------------------
Total assets $ 642,474 $ 616,072
- -----------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 412,643 $ 368,751
Borrowings 111,061 109,739
Repurchase agreements 72,185 77,185
Company-obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely
debentures of the Company 21,450 21,450
Proceeds on loan sales received in advance -- 14,458
Accrued expenses and other liabilities 3,489 2,626
- -----------------------------------------------------------------------------------
Total liabilities 620,828 594,209
- -----------------------------------------------------------------------------------
Stockholders' equity
Common stock, $.05 par value; 20,000,000 shares
authorized; 3,175,947 and 3,166,813 shares
Issued and outstanding 158 158
Additional paid-in capital 34,394 34,394
Accumulated deficit (5,784) (5,830)
Accumulated other comprehensive income (loss) (7,122) (6,859)
- -----------------------------------------------------------------------------------
Net stockholders' equity 21,646 21,863
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 642,474 $ 616,072
- -----------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
First Mariner Bancorp and Subsidiaries
Consolidated Statements of Operations (Unaudited)
For the three months ended March 31,
(dollars in thousands)
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
Interest income:
Loans $ 7,597 $ 5,768
Investments 3,869 3,263
------- -------
Total interest income 11,466 9,031
------- -------
Interest expense:
Deposits 3,857 2,461
Borrowed funds and other 2,759 2,672
------- -------
Total interest expense 6,616 5,133
------- -------
Net interest income 4,850 3,898
Provision for loan losses 80 220
------- -------
Net interest income after provision for loan
losses 4,770 3,678
------- -------
Noninterest income:
Gain on sale of loans 188 440
Service fees on deposits 1,079 699
Gain on securities, net 9 (2)
Other 359 356
------- -------
Total noninterest income 1,635 1,493
------- -------
Noninterest expenses:
Salaries and employee benefits 3,233 2,490
Net occupancy 831 685
Deposit insurance premiums 18 38
Furniture, fixtures and equipment 382 267
Professional services 96 87
Advertising 250 174
Data processing 389 288
Cleaning and maintenance 201 146
ATM expenses 141 127
Other 781 541
------- -------
Total noninterest expenses 6,322 4,843
------- -------
Income before taxes 83 328
Provision for income taxes 32 127
------- -------
Net income $ 51 $ 201
------- -------
Net income per common share:
Basic $ 0.02 $ 0.06
Diluted 0.02 0.06
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
First Mariner Bancorp and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
For the three months ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
Cash flows from operating activities: 2000 1999
-------- --------
(dollars in
thousands)
<S> <C> <C>
Net income $ 51 $ 201
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization 474 341
Amortization of unearned loan fees and costs, net (29) (124)
Amortization of premiums and discounts on loans 7 (13)
Amortization of premiums and discounts on mortgage-backed securities, net 39 108
Gain on securities (9) 2
Increase in accrued interest receivable (487) (419)
Provision for loan losses 80 220
Net decrease (increase) in mortgage loans held-for-sale (4,024) 3,276
Net (decrease) increase in accrued expenses and other liabilities 863 (1,718)
Decrease in proceeds on loan sales received in advance (14,458) --
Net increase in prepaids and other assets (889) (383)
-------- --------
Net cash provided by (used in) operating activities (18,382) 1,491
-------- --------
Cash flows from investing activities:
Loan disbursements, net of principal repayments (25,147) (27,806)
Purchases of property and equipment (1,188) (1,254)
Redemptions (purchases) of Federal Home Loan Bank of Atlanta stock 65 (15)
Purchases of available for sale securities (18,691) (2,789)
Sales of available for sale securities 19 231
Principal repayments of available for sale securities 3,688 9,640
Construction disbursements-other real estate owned (81) (55)
Sales of other real estate owned 147 251
-------- --------
Net cash used in investing activities (41,188) (21,797)
-------- --------
Cash flows from financing activities:
Net increase in deposits 43,892 41,026
Net increase (decrease) in other borrowings (2,378) 10,968
Proceeds from advances from Federal Home Loan Bank of Atlanta 68,000 --
Repayment of advances from Federal Home Loan Bank of Atlanta (69,300) (9,700)
Proceeds from stock issuance, net 58 --
Dividends paid (63) --
-------- --------
Net cash provided by financing activities 40,209 42,294
-------- --------
Increase (decrease) in cash and cash equivalents (19,361) 21,988
Cash and cash equivalents at beginning of period 43,836 24,439
Cash and cash equivalents at end of period $ 24,475 $ 46,427
Supplemental information:
Interest paid on deposits and borrowed funds $ 6,511 $ 4,770
Real estate acquired in satisfaction of loans -- --
Income taxes paid 250 265
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
FIRST MARINER BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
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 Annual Report on Form
10-K for the year ended December 31, 1999. The results shown in this interim
report are not necessarily indicative of results to be expected for the full
year.
Consolidation of financial information has resulted in the elimination
of all significant intercompany accounts and transactions.
NOTE 2 - COMPREHENSIVE INCOME (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three months ended
March 31,
2000 1999
(Unaudited)
(dollars in thousands)
<S> <C> <C>
Net income $ 51 $ 201
Other comprehensive income items:
Unrealized holding losses arising during the period
(net of tax (benefit) of $(162) and $(339), respectively) (257) (540)
Less: reclassification adjustment for gains (net of taxes of
$3 and $(1), respectively) included in net income 6 (1)
----- -----
Total other comprehensive income (loss) (263) (539)
----- -----
Total comprehensive income (loss) $(212) $(338)
===== =====
</TABLE>
6
<PAGE>
NOTE 3 - PER SHARE DATA
Basic earnings per share is computed by dividing income available to
common shareholders by the weighted-average number of common shares outstanding.
Diluted earnings per share is computed after adjusting the numerator and
denominator of the basic earnings per share computation for the effects of all
dilutive potential common shares outstanding during the period. The dilutive
effects of options, warrants and their equivalents are computed using the
"treasury stock" method.
Information relating to the calculation of earnings per common share is
summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Net income-basic and diluted $ 51,069 $ 201,537
==========================
Weighted-average shares outstanding 3,166,913 3,166,813
Dilutive securities-options and warrants -- 287,687
--------------------------
Adjusted weighted-average shares outstanding-dilutive 3,166,913 3,454,500
==========================
</TABLE>
NOTE 4 - SEGMENT INFORMATION
The Company is in the business of providing financial services, and
operates in two business segments--commercial and consumer banking and mortgage
banking. Commercial and consumer banking is conducted through the Bank and
involves delivering a broad range of financial products and services, including
lending and deposit taking, to individuals and commercial enterprises. Mortgage
banking is conducted through First Mariner Mortgage Corporation, a subsidiary of
the Bank, and involves originating residential single family mortgages for sale
in the secondary market and to the Bank.
<TABLE>
<CAPTION>
For the quarter ended March 31, 2000
(dollars in thousands)
<S> <C> <C>
Total revenue:
Commercial and consumer banking $ 5,781 (1)
Mortgage banking 927
Less related party transactions (223) (3)
------
Net mortgage banking 704 (2)
--------
Consolidated revenue $ 6,485
========
Income (loss) before income taxes:
Commercial and consumer banking $ 559
Mortgage banking (253)
Less related party transactions (223) (3)
------
Net mortgage banking (476)(2)
=========
Consolidated income before income taxes $ 83
=========
Identifiable assets:
Commercial and consumer banking $620,066
Mortgage banking 22,408
--------
Consolidated total assets $642,474
========
</TABLE>
7
<PAGE>
(1) Includes net interest income of $4,581.
(2) Includes net interest income of $269.
(3) Management's policy for the mortgage banking segment is to Recognize a
value for loans sold to the Bank at market prices determined on a loan by
loan basis.
<TABLE>
<CAPTION>
For the quarter ended March 31, 1999
(dollars in thousands)
<S> <C> <C>
Total revenue:
Commercial and consumer banking $ 4,695 (1)
Mortgage banking 1,157
Less related party transactions (461) (3)
-----
Net mortgage banking 696 (2)
========
Consolidated revenue $ 5,391
========
Income (loss) before income taxes:
Commercial and consumer banking $ 636
Mortgage banking 153
Less related party transactions (461) (3)
-----
Net mortgage banking (308)(2)
========
Consolidated income before income taxes $ 328
========
Identifiable assets:
Commercial and consumer banking $ 16,315
Mortgage banking 21,410
========
Consolidated total assets $537,725
========
</TABLE>
(1) Includes net interest income of $3,828.
(2) Includes net interest income of $70.
(3) Management's policy for the mortgage banking segment is to recognize a
value for loans sold to the Bank at market prices determined on a loan by
loan basis.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read and reviewed in conjunction
with Management's Discussion and Analysis of Financial Condition and Results of
Operations set forth in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999.
In addition to historical information, this Form 10-Q contains
forward-looking statements that involve risks and uncertainties, such as
statements of the Company's plans and expectations regarding the Year 2000 and
other matters, and 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, changes in regulations
applicable to the Company's business, successful implementation of Company's
branch expansion strategy, its concentration in real estate lending, increased
competition,
8
<PAGE>
changes in technology, particularly internet banking, impact of interest rates,
possibility of economic recession or slow down (which could impact credit
quality, adequacy of loan loss reserve and loan growth) and control by and
dependency on key personnel, particularly Edwin F. Hale, Sr., chairman of the
board of directors and CEO of the Company.
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
Bancorp in May 1995. The business of the Company is conducted primarily 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 26 full service branches and 40 Automated Teller Machines.
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 offices are located at 1801 South Clinton
Street, Baltimore, Maryland 21224 and its telephone number is (410) 342 - 2600.
FINANCIAL CONDITION
The Company's total assets were $642,474,000 at March 31, 2000,
compared to $616,072,000 at December 31, 1999, increasing $26,402,000 or 4.3%
for the three months of 2000. Earning assets increased $27,250,000 or 4.7% to
$603,683,000 from $576,433,000, primarily due to increases in loans outstanding
of $25,171,000.
Total loans receivable increased $25,171,000 or 7.6% to $354,699,000
for the first three months of 2000. The majority of the increase was real estate
secured loans. Mortgage loans held for sale increased $4,024,000 from
$26,299,000 at December 31, 1999 to $30,323,000 at March 31, 2000. First Mariner
Mortgage Corporation originated $83,062,000 of residential mortgages during the
first three months of 2000 in comparison to approximately $76,063,000 during the
first three months of 1999. Increased loan demand and additions to the loan
production staff were the significant factor in the growth in residential
mortgages.
9
<PAGE>
The loan portfolio was comprised of the following (dollars in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
-------- --------
AMOUNT AMOUNT
<S> <C> <C>
TYPE OF LOANS
Commercial $ 69,568 $ 67,917
Commercial real estate and construction (1) 153,160 141,169
Residential real estate 97,088 85,874
Consumer 35,445 35,101
-------- --------
Total loans 355,261 330,061
-------- --------
Unamortized loan premiums 73 47
Unearned income and costs, net 635 580
-------- --------
Loans receivable $354,699 $329,528
======== ========
</TABLE>
(1) Net of undisbursed principal
CREDIT RISK MANAGEMENT
The first quarter provision for loan losses in 2000 was $80,000, which
compares to $220,000 for the three month period ended March 31, 1999. The
allowance for loan losses stands at $3,404,000 at March 31, 2000 compared to
$3,322,000 at December 31, 1999. As of March 31, 2000 the allowance for loan
losses is 0.96% of outstanding loans as compared to 1.01% at December 31, 1999.
The allowance for loan losses as a percentage of non-residential real estate
loans was 1.32% at March 31, 2000 as compared to 1.36% at December 31, 1999.
Activity in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
Allowance for Loan Losses Three Months Ended March 31,
(Dollars in thousands) ----------------------------
2000 1999
--------- ---------
<S> <C> <C>
Allowance for loan losses, beginning of year $ 3,322 $ 2,676
Loans charged off:
Commercial -- --
Real estate -- --
Consumer (3) (4)
Total loans charged off (3) (4)
Recoveries
Commercial -- --
Real estate -- --
Consumer 5 1
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C>
Total recoveries 5 1
Net chargeoffs 2 (3)
Provision for loan losses 80 220
Allowance for loan losses, end of year $ 3,404 $ 2,893
Loans (net of premiums and discounts)
Period-end balance 354,699 270,665
Average balance during period 344,017 255,145
Allowance as percentage of period-end loan balance 0.96% 1.07%
Percent of average loans:
Provision for loan losses 0.09% 0.35%
Net chargeoffs 0.00% 0.00%
</TABLE>
11
<PAGE>
Non-performing assets, expressed as a percentage of total assets,
decreased to 0.83% at March 31, 2000 from 0.91% at December 31, 1999, reflecting
the decrease in other real estate owned of $66,000, a decrease in loans on
nonaccrual basis of $171,000 and the increase in assets. The decrease in other
real owned for the period was due to the sale of properties.
<TABLE>
<CAPTION>
March 31, December 31, March 31,
-----------------------------------------------
2000 1999 1999
---- ---- ----
<S> <C> <C> <C>
Loans on nonaccrual basis $ 4,058 $ 4,229 $ 1,504
Real estate acquired by foreclosure
1,294 1,360 1,437
===============================================
Total non-performing assets $ 5,352 $ 5,589 $ 2,941
===============================================
Loans past-due 90 days or more and accruing $ 2,378 $ 2,062 $ 449
</TABLE>
At March 31, 2000, the allowance for loan losses represented 83.9% of
nonaccruing loans compared to 78.6% at December 31, 1999. Management believes
the allowance for loan losses at March 31, 2000 is adequate.
DEPOSITS
Deposits were $412,643,000 as of March 31, 2000, increasing $43,892,000
or 11.9% from the December 31, 1999 balance of $368,751,000. The increase in
deposits is attributable to management's growth strategy, which includes
significant marketing and promotion and the development of a branching network.
RESULTS OF OPERATIONS
NET INCOME First quarter net income for 2000 was $51,000 compared to
earnings of $201,000 for the first quarter of 1999. The reduction in earnings
was primarily associated with the expansion of the Bank's mortgage banking
subsidiary, First Mariner Mortgage Corporation (FMMC) and the Bank's branch
locations. FMMC now has ten mortgage banking offices in Maryland and Virginia.
NET INTEREST INCOME First quarter net interest income before provision
for loan losses was $4,850,000 in 2000, an increase of 24.4% over $3,898,000 for
the first quarter of 1999, reflecting primarily an increase of $99,223,000 in
average earning assets. The increase in average earning assets consisted
primarily of an increase of $87,651,000 in average loans. The net interest
margin was 3.38% for the first three months of 2000 as compared to 3.33% for the
comparable period of 1999.
NONINTEREST INCOME AND EXPENSES-Noninterest income increased $142,000
or 9.5% for the first quarter of 2000 to $1,635,000 from $1,493,000 for the
first quarter of 1999. The principal reason for the increase was an increase in
deposit related fees. The decrease in the gains on sale of loans was a result of
the decreased margin on residential mortgage loans originated and sold by First
Mariner Mortgage Corporation due to rising interest rates.
Deposit service charges rose 54.4% as compared to the quarter ending
March 31, 1999 which is primarily due to the increased number of deposit
accounts. The number of deposit accounts increased approximately 45% to over
50,000 accounts. These increases are the result of continuing marketing and
promotion of the retail banking products.
The gain on the sales of securities was $9,000 for the quarter ending
March 31, 2000 compared to a loss of $2,000 for the quarter ending March 31,
1999.
First quarter noninterest expense increased $1,479,000 or 30.5% to
$6,322,000 in 2000 from $4,843,000 in the first quarter of 1999. Increases in
almost all categories of expense were incurred to
12
<PAGE>
support the substantially increased asset base and the expanding branch network
including increases in personnel.
INCOME TAXES- The Company recorded income tax expense of $32,000 on
income before taxes of $83,000, resulting in an effective tax rate of 38.62% for
the first quarter ended March 31, 2000. Tax expense of $127,000 was recorded for
March 31, 1999 on income before taxes of $328,000, resulting in an effective tax
rate of 38.62% for the first quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
Stockholders' equity decreased $217,000 in the first three months of
2000 to $21,646,000 from $21,863,000 as of December 31, 1999. The change is due
to the decrease in accumulated other comprehensive income which decreased
$263,000 resulting from the decline in net unrealized holding gains on certain
investments. This decrease was partially offset by net income of $51,000 for the
first quarter.
The first cash dividend for the Company was paid on May 31, 1999, a
second quarter dividend was paid on August 31, 1999 and a third quarter dividend
was paid on November 30, 1999. A cash dividend was paid on February 29, 2000 for
the fourth quarter of 1999. The Company's Board of directors suspended the cash
dividend for the first quarter, 2000 in order to retain capital to fund the
continued strong asset growth.
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 regularly monitors its capital adequacy ratios to assure that the Bank
exceeds its regulatory capital requirements. The regulatory capital ratios are
listed below:
<TABLE>
<CAPTION>
At March 31,
--------------------------------
(unaudited)
2000 1999
<S> <C> <C>
Regulatory capital ratios
Leverage
Consolidated 6.3% 7.5%
The Bank 6.4% 6.7%
Tier 1 capital to risk weighted assets
Consolidated 10.0% 12.6%
The Bank 10.4% 12.0%
Total capital to risk weighted assets
Consolidated 13.9% 17.6%
The Bank 11.3% 13.0%
</TABLE>
The Bank's principal sources of liquidity are cash and cash
equivalents, which are cash on hand, amounts due from financial institutions,
federal funds sold, stock investments, money market mutual funds, interest
bearing deposit and available-for-sale securities. The levels of such assets are
dependent on the Bank's operating, financing and investment activities at any
given time and are influenced by anticipated deposit flows and loan growth.
13
<PAGE>
RECENT ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES" ("SFAS No.
133"). SFAS No. 133 established accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial condition and measure those
instruments at fair value. In June 1999, the FASB issued SFAS No. 137,
"ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - DEFERRAL OF THE
EFFECTIVE DATE OF FASB STATEMENT NO. 133" ("SFAS No. 137"). Pursuant to SFAS No.
137, the revised effective date of SFAS No. 133 is for all fiscal quarters of
all fiscal years beginning after June 15, 2000. Earlier application is
encouraged. Upon application, hedging relationships must be designated anew and
documented and recognized in accordance with the transition pursuant to the
provisions of SFAS Nos. 133 and 137. While the Company has not completed its
analysis of SFAS Nos. 133 and 137 and has not made a decision regarding timing
of adoption, management does not believe that adoption will have a material
effect on the financial position or results of operations since the Bank is not
currently using derivative instruments.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Results of operations for financial institutions, including the
Company, may be materially and adversely affected by changes in prevailing
economic conditions, including declines in real estate values, rapid changes in
interest rates and the monetary and fiscal policies of the federal government.
The profitability of the Company is in part a function of the spread between the
interest rates earned on assets and the interest rates paid on deposits and
other interest-bearing liabilities (net interest income), including advances
from Federal Home Loan Bank of Atlanta ("FHLB") and other borrowings. Interest
rate risk arises from mismatches (i.e., the interest sensitivity gap) between
the dollar amount of repricing or maturing assets and liabilities and is
measured in terms of the ratio of the interest rate sensitivity gap to total
assets. More assets repricing or maturing than liabilities over a given time
period is considered asset-sensitive and is reflected as a positive gap, and
more liabilities repricing or maturing than assets over a give time period is
considered liability-sensitive and is reflected as negative gap. An
asset-sensitive position (i.e., a positive gap) will generally enhance earnings
in a rising interest rate environment and will negatively impact earnings in a
falling interest rate environment, while a liability-sensitive position (i.e., a
negative gap) will generally enhance earnings in a falling interest rate
environment and negatively impact earnings in a rising interest rate
environment. Fluctuations in interest rates are not predictable or controllable.
The Company has attempted to structure its asset and liability management
strategies to mitigate the impact on net interest income of changes in market
interest rates. However, there can be no assurance that the Company will be able
to manage interest rate risk so as to avoid significant adverse effects on net
interest income. At March 31, 2000, the Company had a one year cumulative
negative gap of approximately $110 million.
14
<PAGE>
PART II - Other Information
Item 1 - Legal proceedings - None
Item 2 - Changes in securities and use of proceeds - None
Item 3 - Defaults on senior securities - None
Item 4 - Submission of matters to a vote of security holders
At the Company's Annual Meeting of Stockholders held May 2, 2000, the
following directors were elected to serve a three-year term expiring upon the
date of the Company's 2003 Annual Meeting or until their respective successors
are elected and qualified:
<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST
--------- -------------
<S> <C> <C>
Joseph A. Cicero 2,597,191 46,666
Melvin S. Kabik 2,596,641 47,216
Howard Friedman 2,597,191 46,666
Jay J.J. Matricciani 2,597,191 46,666
John J. Oliver, Jr 2,596,561 47,296
Hanan Y. Sibel 2,597,191 46,666
Leonard Stoler 2,597,191 46,666
</TABLE>
The following director was elected to serve a two-year term expiring
upon the date of the Company's 2002 Annual Meeting or until their respective
successors are elected and qualified:
<TABLE>
<S> <C> <C>
Patricia Schmoke, MD 2,595,511 48,346
</TABLE>
The following director was elected to serve a one-year term expiring
upon the date of the Company's 2001 Annual Meeting or until his respective
successor is elected and qualified:
<TABLE>
<S> <C> <C>
Michael J. Lynch 2,597,191 46,666
</TABLE>
Item 5 - Other information - None
Item 6 - Exhibits and reports on Form 8-K
a. Exhibits-27 Financial Data Schedule filed electronically herein
b. Reports on Form 8-K-None
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIRST MARINER BANCORP
Date: 5/15/00 By: /S/ EDWIN F. HALE SR.
------------------- --------------------------
Edwin F. Hale Sr.
Chairman and Chief Executive Officer
Date: 5/15/00 By: /S/ JOSEPH A. CICERO
----------------- --------------------------
Joseph A. Cicero
President
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<CIK> 0000946090
<NAME> FIRST MARINER BANCORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 16,535
<INT-BEARING-DEPOSITS> 7,940
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 210,721
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<LOANS> 384,835
<ALLOWANCE> 3,404
<TOTAL-ASSETS> 642,474
<DEPOSITS> 412,643
<SHORT-TERM> 50,166
<LIABILITIES-OTHER> 3,489
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0
0
<COMMON> 158
<OTHER-SE> 21,488
<TOTAL-LIABILITIES-AND-EQUITY> 642,474
<INTEREST-LOAN> 7,597
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<INTEREST-TOTAL> 11,466
<INTEREST-DEPOSIT> 3,857
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<INTEREST-INCOME-NET> 4,850
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<INCOME-PRE-EXTRAORDINARY> 93
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<LOANS-PAST> 2,378
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