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Assets, deposits, and revenue rise as asset quality begins to improve Non-performing assets decline compared with 2nd quarter 2009 BALTIMORE, Oct. 30 /PRNewswire-FirstCall/ -- 1st Mariner Bancorp (NASDAQ: FMAR), parent company of 1st Mariner Bank, reported today a net loss for the third quarter of 2009 totaling $12.956 million or -$2.01 per share. Primarily due to the previously announced agreement to sell Mariner Finance, a wholly owned subsidiary, which totaled $10.584 million. The proceeds of this sale will be utilized in the recapitalization plan for Bancorp's primary subsidiary, 1st Mariner Bank. While the sale of Mariner Finance is anticipated to close in the fourth quarter, accounting rules require the company to record an impairment charge as of September 30, 2009 to reduce the carrying amount of its investment in Mariner Finance to the amount expected to be paid at closing. Effective with the third quarter of 2009, the Company's current and previous income statements will be adjusted to reflect the results of operations of Mariner Finance as "discontinued operations" in accordance with Generally Accepted Accounting Principles. First Mariner's loss from continuing operations totaled $3.146 million for the third quarter, of 2009 or $-.49 per share, compared to a loss of $2.780 million on the third quarter of 2008. The third quarter of 2009 reflected strong revenue from mortgage banking operations, higher costs for problem loans and increased expense for deposit insurance. Edwin F. Hale, Sr., 1st Mariner's chairman and chief executive officer, said, "While the sale of Mariner Finance negatively impacted our third quarter results, the proceeds to be generated from the sale are expected to provide a key step to increasing regulatory capital ratios of First Mariner Bank, and move us significantly closer to achieving compliance with our target capital levels. As we move into the fourth quarter we are identifying additional sources of capital, both internal and external, to fully comply with regulatory capital requirements." Mr. Hale continued "We experienced some improvement in asset quality in the quarter as our nonperforming assets, and loans past due 90 days or more declined from $79.332 million at June 30, 2009 to $74.516 million. Nonperforming asset levels have declined for two consecutive quarters. We are completely focused on bringing the company back to profitability and shedding problem assets." Operating Summary The net loss for the third quarter of 2009 included $3.774 million credit-related charges to earnings, including a $2.100 million provision for loan losses, and $1.674 million in expenses related to foreclosed properties. Additionally, there was a one-time charge of $10.584 million related to the planned sale of Mariner Finance. As noted above, all current and previous comparative income statement results will be adjusted to exclude in the various income statement revenues and expenses of Mariner Finance and consolidate these results into one line item titled "Discontinued Operations" -- Total revenue for the 3rd quarter 2009 was $13.677 million, an increase of $1.278 million, or 10.32%, over the 3rd quarter of 2008. This increase was driven primarily by higher mortgage banking revenue. -- Net interest margin for the 3rd quarter of 2009 was 2.30% a decrease of 42 basis points from 2.72% in the 3rd quarter of 2008. The decline reflects an increase in average interest bearing deposits of $171.330 million, or 21.2%, and a decrease in average non-interest bearing deposits of $12.048 million, or 9.2%, and a higher level of non-performing assets compared to the same quarter last year. -- Average earning assets grew by $112.009 million, or 10.8%, compared with last year's 3rd quarter, reflecting growth in portfolio loans, loans held for sale, and interest bearing deposits. -- The provision for loan losses totaled $2.100 million for the 3rd quarter of 2009, a decrease of 5% from the provision of $2.200 million in the corresponding quarter last year. The allowance for loans losses in the third quarter was $11.054 million, a decrease of 27% over the prior year's figure of $15.195 million. The decrease was primarily attributable to the exclusion of the $4.935 million allowance for loan losses related to Mariner Finance's loan portfolio. As a percentage of total loans outstanding, the allowance was 1.23% as of September 30, 2009, and 1.62% as of September 30, 2008. Non-performing assets and loans past due 90 days or more totaled $79.322 million at June 30, 2009 and $74.516 million at September 30, 2009. This is reflective of improvements in asset quality, the resolution of troubled loans, and sales of the other real estate owned. -- Non-interest income increased by $1.747 million, or 34%, for the 3rd quarter of 2009 primarily due to higher mortgage banking volume and revenues. Service charges and ATM fees decreased $306 thousand when compared to September 30, 2008. Income from trading assets and borrowings increased by $875 thousand, primarily resulting from gains on improved valuations of liabilities held at fair value. -- Non-interest expenses increased $2.492 million, or 16%, in the 3rd quarter of 2009 when compared to the corresponding period last year. Expenses incurred for the write-down or sales of foreclosed properties increased by $642 thousand, with $1.674 being incurred in the 3rd quarter of 2009, versus $1.032 million in the same period of 2008. Professional services fees, including legal fees incurred as a result of loan work outs and foreclosed property sales and the sale of Next Generation Financial Services, were $961 thousand for the 3rd quarter, an increase of $707 thousand when compared with the 3rd quarter of 2008. Salary and benefits increased due to higher mortgage origination incentives. Comparing balance sheet data as of September 30, 2009 and 2008, total assets increased to $1.410 billion, 11% over the prior year's $1.276 billion. -- Total loans outstanding were $900 million as of September 30, 2009, a decrease of $40 million, or 4%, when compared with the 3rd quarter of 2008. The decrease is attributable to the exclusion of the assets of Mariner Finance in 2009, which are now classified as assets held for sale. Residential mortgage loans grew by $37.900 million, while residential construction loans declined by $38.561 million. The commercial loan portfolio increased by $41.357 million, or 8%, quarter-to-quarter primarily as a result of a decrease in commercial loan payoffs. -- Total deposits grew to $1.078 billion as of September 30, 2009, compared with $910 million in the year earlier quarter. Certificates of deposit were the primary leader in the overall increase in deposits, growing 33% to $733 million as of September 30, 2009. Non-interest bearing checking accounts decreased $1.3 million, NOW accounts declined $3.2 million, and money market accounts decreased $10.7 million. -- Stockholders' Equity was $29.435 million as of September 30, 2009, resulting in a book value per share of $4.56, a decrease of $4.25, compared with a book value of $8.81 at September 30, 2008. Capital Ratios at September 30, 2009 for First Mariner Bank were as follows: Leverage Ratio = 5.4%; Tier 1 risk-based ratio = 6.7% Total Capital Ratio = 8.4%. Management expects these ratios to be positively impacted in the fourth quarter by the proceeds to be received from the sale of Mariner Finance will be contributed to First Mariner Bank simultaneously with the close. As of September 30, 2009 capital ratios for 1st Mariner Bank continue to exceed minimum requirement levels under current regulatory definitions. 1st Mariner Bancorp is a bank holding company with total assets of $1.410 billion. Its wholly owned banking subsidiary, 1st Mariner Bank, with total assets of $1.293 billion, operates 24 full service bank branches in Baltimore, Anne Arundel, Harford, Howard, Talbot, and Carroll counties in Maryland, the City of Baltimore, and Shrewsbury, Pennsylvania. 1st Mariner Mortgage, a division of 1st Mariner Bank, operates retail offices in Central Maryland and the Eastern Shore of Maryland. 1st Mariner Mortgage also operates direct marketing mortgage operations in Baltimore County. Mariner Finance, LLC, with total assets $109 million, is a consumer finance subsidiary that currently operates branches in Maryland, Delaware, Virginia, New Jersey, and Tennessee. 1st Mariner Bancorp's common stock is traded on the NASDAQ National Market under the symbol "FMAR". 1st Mariner's Web site address is http://www.1stmarinerbancorp.com/, which includes comprehensive level investor information. In addition to historical information, this press release contains forward-looking statements that involve risks and uncertainties, such as statements of the Company's plans and expectations regarding efficiencies resulting from new programs and expansion activities, revenue growth, anticipated expenses, profitability of mortgage banking operations, and other 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, its concentration in real estate lending, increased competition, changes in technology, particularly Internet banking, impact of interest rates, possibility of economic recession or slowdown (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. FINANCIAL HIGHLIGHTS (UNAUDITED) First Mariner Bancorp (Dollars in thousands, except per share data) As of or for the three months ended September 30, 2009 2008 $ Change % Change ---- ---- -------- -------- Summary of Earnings: Net interest income $6,738 $7,207 (469) -7% Provision for loan losses 2,100 2,200 (100) -5% Noninterest income 6,939 5,192 1,747 34% Noninterest expense 18,016 15,524 2,492 16% Loss before income taxes (6,439) (5,325) (1,114) 21% Income tax benefit (3,293) (2,545) (748) 29% Net loss - Continuing Operations (3,146) (2,780) (366) -13% Discontinued Operations - Mariner Finance (1) (9,810) 499 (10,309) -2066% Net Loss (12,956) (2,281) (10,675) -468% Profitability and Productivity: Return on average assets -3.56% -0.76% - -371% Return on average equity -121.29% -21.36% - -468% Net interest margin 2.30% 2.72% - -15% Net overhead ratio 3.06% 3.94% - -22% Efficiency ratio 131.04% 118.11% - 11% Mortgage loan production 305,928 295,573 10,355 4% Average deposits per branch 44,974 36,391 8,584 24% Per Share Data: Basic earnings per share - Continuing Operations $(0.49) $(0.44) (0.05) -12% Diluted earnings per share - Continuing Operations $(0.49) $(0.44) (0.05) -12% Basic earnings per share - Discontinued Operations $(1.52) $0.08 (1.60) -2046% Diluted earnings per share - Discontinued Operations $(1.52) $0.08 (1.60) -2046% Basic earnings per share $(2.01) $(0.36) (1.65) -462% Diluted earnings per share $(2.01) $(0.36) (1.65) -462% Book value per share $4.56 $8.81 (4.25) -48% Number of shares outstanding 6,452,631 6,452,775 (144) 0% Average basic number of shares 6,452,631 6,388,109 64,522 1% Average diluted number of shares 6,452,631 6,388,109 64,522 1% Summary of Financial Condition: At Period End: Assets $1,410,427 $1,276,336 134,091 11% Investment Securities 41,805 60,895 (19,090) -31% Loans 899,627 939,592 (39,965) -4% Deposits 1,079,379 909,764 169,615 19% Borrowings and repurchase agreements 123,795 224,762 (100,967) -45% Stockholders' equity 29,435 56,831 (27,396) -48% Average for the period: Assets $1,442,088 $1,196,429 245,659 21% Investment Securities 50,975 79,882 (28,907) -36% Loans 888,658 840,616 48,042 6% Deposits 1,098,333 939,051 159,282 17% Borrowings and repurchase agreements 208,944 209,169 (225) 0% Stockholders' equity 42,378 42,366 12 0% Capital Ratios At Period End: First Mariner Bank Leverage 5.4% 6.3% - -14% Tier 1 Capital to risk weighted assets 6.7% 7.4% - -9% Total Capital to risk weighted assets 8.4% 13.3% - -37% Asset Quality Statistics and Ratios: Net Chargeoffs 2,576 2,446 130 5% Non-performing assets 54,357 55,702 (1,345) -2% 90 Days or more delinquent loans 20,159 11,643 8,516 73% Annualized net chargeoffs to average loans 1.16% 1.16% - 0% Non-performing assets to total assets 3.85% 4.36% - -12% 90 Days or more delinquent loans to total loans 2.24% 1.24% - 81% Allowance for loan losses to total loans 1.23% 1.62% - -24% (1) All results of operations related to Mariner Finance are presented separately as Discontinued Operations above. FINANCIAL HIGHLIGHTS (UNAUDITED) First Mariner Bancorp (Dollars in thousands, except per share data) As of or for the nine months ended September 30, 2009 2008 $ Change % Change ---- ---- -------- -------- Summary of Earnings: Net interest income $19,438 $22,719 (3,281) -14% Provision for loan losses 8,360 6,700 1,660 25% Noninterest income 22,189 15,948 6,241 39% Noninterest expense 50,875 46,413 4,462 10% Loss before income taxes (17,608) (14,446) (3,162) 22% Income tax benefit (8,108) (7,081) (1,027) 15% Net loss - Continuing Operations (9,500) (7,365) (2,135) 29% Discontinued Operations - Mariner Finance (1) (8,966) 1,337 (10,303) -771% Net Loss (18,466) (6,028) (12,438) 206% Profitability and Productivity: Return on average assets -1.77% -0.68% - -161% Return on average equity -53.82% -17.25% - -212% Net interest margin 2.24% 2.90% - -23% Net overhead ratio 2.58% 3.37% - -24% Efficiency ratio 116.95% 117.76% - -1% Mortgage loan production 1,385,448 1,072,783 312,665 29% Average deposits per branch 44,974 36,391 8,584 24% Per Share Data: Basic earnings per share - Continuing Operations $(1.47) $(1.16) (0.32) -27% Diluted earnings per share - Continuing Operations $(1.47) $(1.16) (0.32) -27% Basic earnings per share - Discontinued Operations $(1.39) $0.21 (1.60) -762% Diluted earnings per share - Discontinued Operations $(1.39) $0.21 (1.60) -762% Basic earnings per share $(2.86) $(0.95) (1.92) -202% Diluted earnings per share $(2.86) $(0.95) (1.92) -202% Book value per share $4.56 $8.81 (4.25) -48% Number of shares outstanding 6,452,631 6,452,775 (144) 0% Average basic number of shares 6,452,631 6,368,985 83,646 1% Average diluted number of shares 6,452,631 6,368,985 83,646 1% Summary of Financial Condition: At Period End: Assets $1,410,427 $1,276,336 134,091 11% Trading and available for sale securities 41,805 60,895 (19,090) -31% Loans 899,627 939,592 (39,965) -4% Deposits 1,079,379 909,764 169,615 19% Borrowings 123,795 224,762 (100,967) -45% Stockholders' equity 29,435 56,831 (27,396) -48% Average for the period: Assets $1,391,780 $1,187,265 204,515 17% Trading and available for sale securities 50,998 80,756 (29,758) -37% Loans 884,771 804,975 79,796 10% Deposits 1,038,648 928,575 110,073 12% Borrowings 214,600 205,098 9,502 5% Stockholders' equity 45,871 46,678 (807) -2% Capital Ratios At Period End: First Mariner Bank Leverage 5.4% 6.3% - -14% Tier 1 Capital to risk weighted assets 6.7% 7.4% - -9% Total Capital to risk weighted assets 8.4% 13.3% - -37% Asset Quality Statistics and Ratios: Net Chargeoffs 9,451 7,019 2,432 35% Non-performing assets 54,357 55,702 (1,345) -2% 90 Days or more delinquent loans 20,159 11,643 8,516 73% Annualized net chargeoffs to average loans 1.43% 1.16% - 23% Non-performing assets to total assets 3.85% 4.36% - -12% 90 Days or more delinquent loans to total loans 2.24% 1.24% - 81% Allowance for loan losses to total loans 1.23% 1.62% - -24% (1) All results of operations related to Mariner Finance are presented separately as Discontinued Operations above. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) First Mariner Bancorp (Dollars in thousands) As of September 30, 2009 2008 $ Change % Change ---- ---- ---------- -------- Assets: Cash and due from banks $45,079 $25,241 19,838 79% Interest-bearing deposits 55,087 50,310 4,777 9% Available-for-sale investment securities, at fair value 30,526 48,701 (18,175) -37% Trading Securities 11,279 12,194 (915) -8% Loans held for sale 102,569 58,785 43,784 74% Loans receivable 899,627 939,592 (39,965) -4% Allowance for loan losses (11,054) (15,195) 4,141 -27% ------- ------- ----- Loans, net 888,573 924,397 (35,824) -4% Other real estate owned 24,703 16,466 8,237 50% Restricted stock investments, at cost 7,934 7,516 418 6% Property and equipment 45,419 50,822 (5,403) -11% Accrued interest receivable 5,188 6,783 (1,595) -24% Deferred income taxes 22,542 14,278 8,264 58% Bank owned life insurance 34,402 36,062 (1,660) -5% Assets Held For Sale -Mariner Finance (1) 101,048 - 101,048 N/A Prepaid expenses and other assets 36,078 24,781 11,297 46% ------ ------ ------ Total Assets $1,410,427 $1,276,336 134,091 11% ========== ========== ======= Liabilities and Stockholders' Equity: Liabilities: Deposits $1,079,379 $909,764 169,615 19% Borrowings 123,795 224,762 (100,967) -45% Junior subordinated deferrable interest debentures 73,724 73,724 - 0% Liabilities related to assets held for sale (1) 90,076 - 90,076 100% Accrued expenses and other liabilities 14,018 11,255 2,763 25% ------ ------ ----- Total Liabilities 1,380,992 1,219,505 161,487 13% Stockholders' Equity Common Stock 323 323 - 0% Additional paid-in- capital 56,770 56,731 39 0% Retained earnings (22,803) 3,575 (26,378) -738% Accumulated other comprehensive loss (4,855) (3,798) (1,057) 28% ------ ------ ------ Total Stockholders Equity 29,435 56,831 (27,396) -48% ------ ------ ------- Total Liabilities and Stockholders' Equity $1,410,427 $1,276,336 134,091 11% ========== ========== ======= (1) All assets and liabilities of Mariner Finance are classified separately in 2009 as assets and liabilities held for sale. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) First Mariner Bancorp For the three For the nine (Dollars in thousands) months months ended September ended September 30, 30, 2009 2008 2009 2008 ---- ---- ---- ---- Interest Income: Investments and interest-bearing deposits $776 $1,590 $2,356 $4,959 Loans 14,229 14,138 42,381 43,584 ------ ------ ------ ------ Total Interest Income 15,005 15,728 44,737 48,543 Interest Expense: Deposits 6,289 6,038 18,977 18,213 Borrowings and repurchase agreements 1,978 2,483 6,322 7,611 ----- ----- ----- ----- Total Interest Expense 8,267 8,521 25,299 25,824 ----- ----- ------ ------ Net Interest Income Before Provision for Loan Losses 6,738 7,207 19,438 22,719 Provision for Loan Losses 2,100 2,200 8,360 6,700 ----- ----- ----- ----- Net Interest Income After Provision for Loan Losses 4,638 5,007 11,078 16,019 Noninterest Income: Service fees on deposits 1,353 1,644 3,992 4,767 ATM Fees 789 804 2,300 2,409 Gains on sales of mortgage loans 2,728 1,922 9,552 3,686 Other mortgage banking revenue 715 502 3,204 2,140 (Loss)/gain on sales of investment securities, net (71) (745) (1,876) (745) Commissions on sales of nondeposit investment products 156 181 423 696 Commissions on sales of other insurance products - - - - Income from bank owned life insurance 333 385 1,005 1,131 Income (loss) on trading assets and liabilities 801 (74) 2,239 (74) Other 135 573 1,350 1,938 --- --- ----- ----- Total Noninterest Income 6,939 5,192 22,189 15,948 Noninterest Expense: Salaries and employee benefits 7,543 7,039 19,681 21,429 Occupancy 2,219 2,375 6,809 6,897 Furniture, fixtures and equipment 685 856 2,296 2,568 Advertising 140 134 731 722 Data Processing 450 538 1,422 1,601 Professional services 961 254 2,419 999 Costs of other real estate owned 1,674 1,032 5,670 2,730 Valuation and secondary marketing reserves - 28 - 262 FDIC Insurance 903 191 2,411 563 Other 3,441 3,077 9,436 8,642 ----- ----- ----- ----- Total Noninterest Expense 18,016 15,524 50,875 46,413 Loss Before Income Taxes (6,439) (5,325) (17,608) (14,446) Income Tax Benefit (3,293) (2,545) (8,108) (7,081) ------ ------ ------ ------ Net Loss From Continuing Operations $(3,146) $(2,780) $(9,500) $(7,365) ------- ------- ------- ------- Discontinued Operations - Mariner Finance (1) $(9,810) $499 $(8,966) $1,337 ------- ---- ------- ------ Net Loss $(12,956) $(2,281) $(18,466) $(6,028) ======== ======= ======== ======= (1) All results of operations related to Mariner Finance are presented separately as Discontinued Operations above. CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES (UNAUDITED) First Mariner Bancorp (Dollars in thousands) For the three months ended September 30, 2009 2008 Average Yield/ Average Yield/ Balance Rate Balance Rate ------- ---- ------- ---- Assets: Loans Commercial Loans and LOC $84,166 5.44% $78,616 5.45% Comm/Res Construction 99,866 5.21% 114,498 5.40% Commercial Mortgages 343,483 6.54% 316,848 7.26% Residential Constr - Cons 54,823 6.04% 90,749 5.52% Residential Mortgages 155,257 5.94% 103,351 6.05% Consumer 151,063 4.59% 136,554 5.90% ------- ------- Total Loans 888,658 5.82% 840,616 6.28% Loans held for sale 85,568 5.16% 47,649 6.21% Trading and available for sale securities, at fair value 50,975 5.66% 79,882 6.24% Interest bearing deposits 117,878 0.11% 64,302 1.85% Restricted stock investments, at cost 7,934 1.18% 6,555 2.88% ----- ----- Total earning assets 1,151,013 5.15% 1,039,004 5.98% Allowance for loan losses (11,720) (10,527) Cash and other non earning assets 302,795 167,952 ------- ------- Total Assets $1,442,088 $1,196,429 ========== ========== Liabilities and Stockholders' Equity: Interest bearing deposits NOW deposits 6,471 0.61% 13,683 0.69% Savings deposits 56,570 0.32% 56,100 0.33% Money market deposits 170,445 0.86% 190,849 1.29% Time deposits 746,575 3.12% 548,098 3.88% ------- ------- Total interest bearing deposits 980,060 2.55% 808,730 2.97% Borrowings 208,944 3.76% 209,169 4.72% ------- ------- Total interest bearing liabilities 1,189,004 2.76% 1,017,899 3.33% Noninterest bearing demand deposits 118,273 130,321 Other liabilities 92,433 5,843 Stockholders' Equity 42,378 42,366 ------ ------ Total Liabilities and Stockholders' Equity $1,442,088 $1,196,429 ========== ========== Net Interest Spread 2.39% 2.65% Net Interest Margin 2.30% 2.72% CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES (UNAUDITED) First Mariner Bancorp (Dollars in thousands) For the nine months ended September 30, 2009 2008 Average Yield/ Average Yield/ Balance Rate Balance Rate ------- ---- ------- ---- Assets: Loans Commercial Loans and LOC $86,525 5.49% $79,067 6.01% Comm/Res Construction 102,838 5.16% 118,514 6.27% Commercial Mortgages 332,743 6.66% 292,569 7.46% Residential Constr - Cons 62,101 5.47% 91,423 6.68% Residential Mortgages 149,347 5.92% 93,653 6.00% Consumer 151,217 4.47% 129,749 6.23% ------- ------- Total Loans 884,771 5.79% 804,975 6.69% Loans held for sale 93,255 5.13% 65,576 5.78% Trading and available for sale securities, at fair value 50,998 5.95% 80,756 5.84% Interest bearing deposits 78,641 0.12% 69,559 2.30% Restricted stock investments, at cost 7,714 0.11% 6,161 4.75% ----- ----- Total earning assets 1,115,379 5.30% 1,027,027 6.25% Allowance for loan losses (12,121) (9,888) Cash and other non earning assets 288,522 170,126 ------- ------- Total Assets $1,391,780 $1,187,265 ========== ========== Liabilities and Stockholders' Equity: Interest bearing deposits NOW deposits 6,661 0.64% 15,450 0.53% Savings deposits 55,656 0.34% 55,724 0.33% Money market deposits 162,675 0.84% 222,195 1.54% Time deposits 697,013 3.45% 499,553 4.13% ------- ------- Total interest bearing deposits 922,005 2.78% 792,922 3.07% Borrowings 214,600 3.98% 205,098 4.96% ------- ------- Total interest bearing liabilities 1,136,605 3.01% 998,020 3.46% Noninterest bearing demand deposits 116,643 135,653 Other liabilities 92,661 6,914 Stockholders' Equity 45,871 46,678 ------ ------ Total Liabilities and Stockholders' Equity $1,391,780 $1,187,265 ========== ========== Net Interest Spread 2.29% 2.79% Net Interest Margin 2.24% 2.90% DATASOURCE: 1st Mariner Bancorp CONTACT: Mark A. Keidel - EVP/COO, +1-410-558-4281 Web Site: http://www.1stmarinerbank.com/

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