Carroll Bancorp, Inc. (OTCQB: CROL), the parent company of Carroll Community Bank announced net income of $27,000 or $0.03 per diluted common share for the quarter ended June 30, 2017.  By comparison, the Company recorded net income of $53,000 or $0.05 per diluted common share for the quarter ended June 30, 2016.  For the six months ended June 30, 2017, the Company recorded net income of $153,000 or $0.15 per diluted common share compared to net income of $123,000, or $0.12 per diluted common share for the six months ended June 30, 2016.  The historical earnings per share amounts have been restated to reflect the impact of the 10% stock dividend paid on May 1, 2017.

During the second quarter, the Bank recorded a partial charge-off of $213,000 on a multifamily commercial real estate loan.  The Bank had previously determined the collateral to be sufficient to cover the value of the loan.  However, based on current valuation estimates including reported vacancy rates; the collateral value has deteriorated resulting in the Bank recording a partial charge-off.  The Bank has a 15.24% ownership in the loan and continues to work closely with the lead bank during the loan workout process.

 “While we are disappointed with the second quarter earnings as a result of the impact from the charge-off taken on a commercial loan, the Bank’s core earnings continued to improve during the first half of 2017. The strategy to control non-interest expense continues to have an impact as our non-interest expense to average assets ratio decreased to 2.74% for the six months ended June 30, 2017 compared to 3.12% for the six months ended June 30, 2016.  Additionally, the Bank continues to add new customer relationships in both of our core markets as consolidation continues in the community bank market.” stated Russell J. Grimes, the Company’s President and CEO.

Second Quarter Highlights

• The Company paid a 10% stock dividend on May 1, 2017 for stockholders of record on April 10, 2017 increasing our issued and outstanding shares to 1,093,301. 

Balance Sheet and Credit Quality Overview

• At June 30, 2017, total assets increased by $13.0 million, or 8.2%, to $171.3 million from $158.3 million at June 30, 2016.  This growth was driven by an increase of 12.0% in total deposit balances with core deposits growing by 20.6%.  The funding generated by the deposit growth was used to increase loan balances by 3.3%, investment securities and investment certificates of deposit by 82.4% and cash equivalents by 7.4% (for pending loan fundings).

• Non-performing loans totaled $2.7 million at June 30, 2017 compared to $112,000 at June 30, 2016 and $2.9 million at December 31, 2016.  Non-performing loans increased significantly in the fourth quarter as two commercial loans were placed on non-accrual status.  As mentioned above, the Bank took a partial charge-off on one of those loans during the second quarter of 2017.

• Past due loans were $955,000 at June 30, 2017 (3 loans) compared to $622,000 at June 30, 2016 (4 loans) and $1.1 million at December 31, 2016 (5 loans).  In all periods, the past due loans were less than 60 days past due.

• Stockholders’ equity increased by $563,000 to $16.9 million at June 30, 2017 from $16.4 million at June 30, 2016 due primarily to the proceeds from the exercise of warrants in the first quarter of 2017.  The warrants were issued as part of the 2014 rights offering and expired on March 20, 2017.

Income Statement Overview 

• Net interest income increased by 3.8% for the three months ended June 30, 2017 and 2.9% for the six months ended June 30, 2017 compared to same periods in 2016.  The net interest margin declined to 3.17% for the second quarter of 2017 compared to 3.35% for the second quarter of 2016 and declined to 3.18% for the six months ended June 30, 2017 compared to 3.37% for the same period last year.  This decline reflects the impact of the continuing downward pressure on loan interest rates and the upward pressure on deposit interest rates as short-term rates have increased for each of the last three quarters.

• The provision for loan losses rose by $172,000 and $147,000, respectively, for the three and six months ended June 30, 2017 compared to the same periods in 2016 primarily due to the Bank recording a partial charge-off on a commercial loan during the second quarter of 2017.

• Non-interest income increased by $33,000 during the three months ended June 30, 2017 compared to the three months ended June 30, 2016 due to last year including a write-down of $30,000 on an OREO property.  Non-interest income increased by $12,000 for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 due to the OREO write-down mentioned above and a decrease in gains on loans held for sale.  The decline in gains on loans held for sale was due to the resignation of the Bank’s residential mortgage loan underwriter in December 2016.  The Bank was able to fill the vacancy in April 2017 with an experienced underwriter.

• Non-interest expense decreased by 3.9% to $1.1 million for the three months ended June 30, 2017 compared to $1.2 million for the three months ended June 30, 2016 and decreased by 4.7% to $2.3 million for the six months ended June 30, 2017 compared to $2.4 million for the six months end June 30, 2016.  Our efficiency ratio was 84.7% for the second quarter of 2017 compared to 93.7% for the second quarter of 2016 as a result of our expense control strategy, which included the cost savings from deregistering our common stock with the SEC and the continued growth of net interest income.

About Carroll Bancorp, Inc. and Carroll Community Bank

Carroll Bancorp, Inc. is the holding company of Carroll Community Bank.  Carroll Community Bank, originally founded in 1870, is a state-chartered commercial bank with branch offices in Eldersburg, Westminster and Bethesda, Maryland.  Carroll Community Bank operates as a community-oriented institution, offering a variety of loan and deposit products and serving the financial needs of its local community.  Carroll Bancorp, Inc.’s common stock trades on the OTC Markets (www.otcmarkets.com) under the symbol “CROL.”  For more information, visit our website at www.carrollcobank.com or contact Russell Grimes, President & CEO at 410-795-1900.