Slide 1: 2020 Second Quarter Earnings Presentation
2020 Second Quarter Earnings Presentation July 28, 2020 1
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation and statements by the Company’s management contains “forward-looking statements” as that phrase is defined in the Private Securities Litigation Reform Act of 1995. Forward looking statements can be identified by words such as “anticipated,” “expects,” “in
Slide 3: Non-GAAP Information
Non-GAAP Information This presentation contains references to financial measures that are not defined in generally accepted accounting principles (“GAAP”). Such non-GAAP financial measures should not be considered in isolation or as a substitute for the most directly comparable or other financial me
Slide 4: Howard's Investment Value Thesis
Howard’s Investment Value Thesis • Commercially focused bank, operating in demographically attractive region, H leveraging both scale and market positon as largest locally owned bank and 3rd largest state headquartered bank in a consolidating industry • Core PPNR increased 29% YOY reflecting fruits
Slide 5: Howard's Investment Value Thesis (continued)
Howard’s Investment Value Thesis (continued) H • Significant participation (1,034 loans and $199 million) in the PPP program, will have significant fee upside impact in late 2020/early 2021 but has also driven customers of larger out of state banks to open relationships. Participation level twice de
Slide 6: COVID-19 in Our Market and Impact on Local Economy
COVID-19 in Our Market and Impact on Local Economy Governor Hogan held a press conference on July 15, 2020 and shared the following facts relating to the impact of the pandemic on the Maryland economy: • In MD, we were able to keep 70% of economy open during pandemic. • In MD’s Roadmap to Recovery,
Slide 7: COVID-19 and What We've Learned to Date – Customer Delivery and Work From Home
COVID-19 and What We’ve Learned to Date – Customer Delivery and Work From Home Headquarters and regional commercial staffs still working successfully from home; branches still successfully operating in drive through / call ahead mode Customers have taken advantage of digital banking offerings over t
Slide 8: Strong Capital Position
Strong Capital Position • Recorded a goodwill impairment charge of $34.5 million in 2nd quarter of 2020; this charge had no impact on regulatory capital • At June 30, 2020, regulatory capital ratios exceed all well-capitalized standards: • Tier 1 leverage ratio at June 30, 2020 of 9.18%, up from 9.1
Slide 9: Strong Liquidity Position
Strong Liquidity Position Available liquidity at June 30, 2020 consisted of the following: • We continue to reduce the excess on-balance sheet liquidity that we added in the early stages of the pandemic; this excess liquidity continues to weigh on our net interest margin • We continue to increase ou
Slide 10: SBA Paycheck Protection Program
SBA Paycheck Protection Program • Balances are as of June 30, 2020 • An additional $1.5 million have been funded through July 24 • Substantially all of our PPP loans were made to existing customers • Processing fees, net of origination costs, are being deferred and amortized over the contractual lif
Slide 11: Loan Portfolio Composition
Loan Portfolio Composition • Our loan portfolio includes 68.8% of commercial loans (excluding PPP loans) consistent with successful differentiated positioning as the largest locally headquartered bank in the Greater Baltimore market. • Commercial loan volumes are down due to the current pandemic sit
Slide 12: Credit Line Utilization
Credit Line Utilization • Loan outstandings from our commercial lines of credit decreased by $31.1 million during the quarter. • Our line utilization is down about 5% from this time last year, reflecting higher liquidity levels at many of our borrowers. 12
Slide 13: Credit Culture / Underwriting Standards
Credit Culture / Underwriting Standards • Strong credit culture built off experienced, credit-trained loan officers charged with generation of quality assets; credit bench is deep and tenured with several members > 20 years of experience with larger institutions • Bank is focused on building long-st
Slide 14: Asset Quality Trends
Asset Quality Trends NPA’s / Total Assets (%) (1) NCO’s (2) / Average Portfolio Loans Accruing 30+ Days PD / Portfolio Loans( %) Classified Loans (3) / Portfolio Loans( %) (1) NPAs include NPL’s (i.e., nonaccruals and troubled debt restructurings) and OREO. (2) Net charge offs (“NCOs” Annualized) /
Slide 15: Asset Quality Trends (continued)
Asset Quality Trends (continued) Allowance / Portfolio Loans (%) “Portfolio loans,” which exclude PPP loans, and the “Allowance + FV Marks”, are non-GAAP measures. See the reconciliation of GAAP to non-GAAP in the Appendix. 15
Slide 16: Loan Modifications for Borrowers
Loan Modifications for Borrowers Our loan modifications to qualified borrowers have consisted primarily of interest-only and P&I deferrals, generally for periods of 2-3 months but for as long as 6 months. Balances modified in the following table are in millions: • Total modifications as of June 30,
Slide 17: Potential Highly Impacted Loan Sectors
Potential Highly Impacted Loan Sectors The following table presents the industry segments within our loan portfolio that may be most highly impacted by COVID-19. Loan balances and PPP balances are at June 30, 2020; loan modification balances are as of July 24, 2020; $ in millions): • The potential h
Slide 18: Increasing Our Allowance for Credit Losses
Increasing Our Allowance for Credit Losses The following table presents our allowance, both in $ and as a % of total loans (1), for the last three quarters ($ in thousands): • The rolling average loss rate used in our incurred • While loan modification and PPP loan assistance will loss allowance mod
Slide 19: Net Interest Income & NIM
Net Interest Income & NIM • Our change in funding mix led to a decrease in interest expense which more than offset the reduction in interest income from Q1 ‘20 to Q2 ‘20 • Mix of fixed rate loan assets and a high percentage of low cost transaction deposits provides protection against declining rates
Slide 20: Loan Yields and Deposit Rate Trends
Loan Yields and Deposit Rate Trends • Loan yield down 69 bp from Q2 2019 (ex. PPP loans) • Good mix of fixed rate loans partially mitigates the rate of decline in yield Dramatic drop in market rates during the last five quarters, including: • Prime – down 225 bp • 10 yr Treasury – down 165 bp • 1 mo
Slide 21: Deposit Composition & Trends
Deposit Composition & Trends • Transaction deposits now 47% of deposits • Cost of deposits 51bps vs 77bps in March 2020 • Demand deposits grew by $188 million from March 2020 to June 2020. Some portion of this growth due to funding PPP loans into accounts at the bank; analyses of PPP accounts show n
Slide 22: Potential Growth and 2021 Opportunities
Potential Growth and 2021 Opportunities • Leverage the heightened brand awareness achieved through a successful PPP initiative • Proactively hire experienced Commercial Bankers who have deep relationships with their business banking, commercial and industrial and commercial real estate clients • Cau
Slide 23: Cost Savings Initiatives / Recap of Cost Savings Since FMB Merger
Cost Savings Initiatives / Recap of Cost Savings Since FMB Merger • Consistent emphasis on cost savings since FMB merger: • 532 employees in March 2018 (332 ex mortgage); 238 employees today • 28 branches proforma March 2018; 15 branches today • Core processing renegotiation completed in Q4 2019 • 2
Slide 24: Quarterly Highlights
Quarterly Highlights Cur Qtr vs. Cur Qtr vs. ($ in thousands) Q2 '20 Q1 '20 Q2 '19 Prior Qtr Prior Yr REPORTED (LOSS) EARNINGS Pre-provision net revenue (Non-GAAP) $ (24,749) $ 6,331 $ 3,741 $ (31,080) $ (28,490) Net (loss) income (GAAP) $ (29,409) $ 3,343 $ 2,088 $ (32,752) $ (31,497) CORE EARNINGS
Slide 25: Earnings Snapshot
Earnings Snapshot REPORTED NET INCOME (LOSS) AND EPS ($ in thousands) Q2 '20 Q1 '20 Q2 '19 vs. Prior Qtr vs. Prior Yr Net interest income $ 18,119 $ 17,525 $ 17,354 $ 594 $ 765 Noninterest income 4,759 3,366 5,841 1,393 (1,082) Total revenue 22,878 20,891 23,195 1,987 (317) Noninterest expense 47,62
Slide 26: Profitability Measures
Profitability Measures Cur Qtr vs. Cur Qtr vs. (1,2) Reported Q2 '20 Q1 '20 Q2 '19 Prior Qtr Prior Yr A Pre-provision net revenue (Non-GAAP) $ (24,749) $ 6,331 $ 3,741 $ (31,080) $ (28,490) B Net (loss) income (GAAP) $ (29,409) $ 3,343 $ 2,088 $ (32,752) $ (31,497) C Diluted EPS (GAAP) $ (1.57) $ 0.
Slide 27: Balance Sheet / Other Comments
Balance Sheet / Other Comments • During the quarter ended June 30, 2020, we embarked on a strategy to monetize certain unrealized gains in our mortgage-backed securities (“MBS”) portfolio. • $105 million of MBS with high prepayment speeds were identified and sold, resulting in net gains of $3.0 mill
Slide 28: Reiterating Our Value Proposition
Reiterating Our Value Proposition • Unique market positioning tangibly strengthened by marketplace reaction to PPP program process and performance • Building on tangible growth from earlier in the year and funding strengths exhibited earlier in the quarter • Core operating /PPNR growth evidences und
Slide 29: Appendix
APPENDIX HOWARD BANCORP
Slide 30: Quarterly Financial Performance
Quarterly Financial Performance HOWARD BANCORP, INC. AND SUBSIDIARY Selected Financial Data (in thousands except per share data) THREE MONTHS ENDED June 30, March 31, June 30, 2020 2020 2019 Vs Q1 2020 Vs Q2 2019 Income Statement Data: Interest income $ 21,473 $ 22,226 $ 23,145 $ (753) $ (1,672) Int
Slide 31: Quarterly Financial Performance (continued)
Quarterly Financial Performance (continued) HOWARD BANCORP, INC. AND SUBSIDIARY Selected Financial Data (in thousands except per share data) THREE MONTHS ENDED June 30, March 31, June 30, 2020 2020 2019 Vs Q1 2020 Vs Q2 2019 Selected Performance Ratios: Return on average assets (2) (4.68) % 0.57 % 0
Slide 32: Earning Asset Yields
Earning Asset Yields Howard Bancorp, Inc. and Subsidiary Average Balances, Yields, and Rates (in thousands) Three Months Ended March 31, 2020 Three Months Ended December 31, 2019 Three Months Ended March 31, 2019 Average Income / Yield / Average Income / Yield / Average Income / Yield / Change Chang
Slide 33: Funding Rates and NIM
Funding Rates and NIM Howard Bancorp, Inc. and Subsidiary Average Balances, Yields, and Rates (in thousands) Three Months Ended March 31, 2020 Three Months Ended December 31, 2019 Three Months Ended March 31, 2019 Average Income / Yield / Average Income / Yield / Average Income / Yield / Change Chan
Slide 34: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP RECONCILIATION - CORE NET INCOME AND EPS (in thousands except per share data) FOR THE THREE MONTHS ENDED June 30, March 31, June 30, Prior Qtr Prior Yr 2020 2020 2019 $/% $/% Net (loss) income (GAAP) $ (29,409) $ 3,
Slide 35: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP RECONCILIATION - PRE-PROVISION NET REVENUE ("PPNR") (in thousands) FOR THE THREE MONTHS ENDED June 30, March 31, June 30, Prior Qtr Prior Yr 2020 2020 2019 $/% $/% Net (loss) income (GAAP) $ (29,409) $ 3,343 $ 2,088
Slide 36: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP RECONCILIATION - EFFICIENCY RATIO (in thousands) FOR THE THREE MONTHS ENDED June 30, March 31, June 30, Prior Qtr Prior Yr 2020 2020 2019 $/% $/% Net interest income (GAAP) $ 18,119 $ 17,525 $ 17,354 $ 594 $ 765 Adj
Slide 37: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP RECONCILIATION - TANGIBLE BOOK VALUE PER COMMON SHARE (in thousands except per share data) FOR THE THREE MONTHS ENDED June 30, March 31, June 30, Prior Qtr Prior Yr 2020 2020 2019 $/% $/% Common and total stockholde
Slide 38: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP RECONCILIATION - RETURN ON AVERAGE COMMON EQUITY (in thousands) FOR THE THREE MONTHS ENDED June 30, March 31, June 30, Prior Qtr Prior Yr 2020 2020 2019 $/% $/% Net (loss) income (GAAP) $ (29,409) $ 3,343 $ 2,088 Av
Slide 39: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP RECONCILIATION - TANGIBLE RETURN ON AVERAGE TANGIBLE COMMON EQUITY (in thousands) FOR THE THREE MONTHS ENDED June 30, March 31, June 30, Prior Qtr Prior Yr 2020 2020 2019 $/% $/% Net (loss) income (GAAP) $ (29,409)
Slide 40: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP RECONCILIATION - RETURN ON AVERAGE ASSETS (in thousands) FOR THE THREE MONTHS ENDED June 30, March 31, June 30, Prior Qtr Prior Yr 2020 2020 2019 $/% $/% Net (loss) income (GAAP) $ (29,409) $ 3,343 $ 2,088 Average t
Slide 41: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP RECONCILIATION - TANGIBLE RETURN ON AVERAGE TANGIBLE ASSETS (in thousands) FOR THE THREE MONTHS ENDED June 30, March 31, June 30, Prior Qtr Prior Yr 2020 2020 2019 $/% $/% Net (loss) income (GAAP) $ (29,409) $ 3,343
Slide 42: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP RECONCILIATION - ALLOWANCE FOR CREDIT LOSSES AS A % OF PORTFOLIO LOANS (in thousands) FOR THE THREE MONTHS ENDED June 30, March 31, June 30, Prior Qtr Prior Yr 2020 2020 2019 $/% $/% Allowance for credit losses (GAA
Slide 43: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP RECONCILIATION - NONPERFORMING ASSETS AS A % OF PORTFOLIO LOANS + OREO (in thousands) FOR THE THREE MONTHS ENDED June 30, March 31, June 30, Prior Qtr Prior Yr 2020 2020 2019 $/% $/% Nonperforming assets $ 20,606 $
Slide 44: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation HOWARD BANCORP, INC. AND SUBSIDIARY GAAP TO NON-GAAP RECONCILIATION - ALLOWANCE FOR CREDIT LOSSES + FV MARKS AS A % OF PORTFOLIO LOANS + FV MARKS (in thousands) FOR THE THREE MONTHS ENDED June 30, March 31, June 30, Prior Qtr Prior Yr 2020 2020 2019 $/% $/% Allowance