Howard Bancorp, Inc. Announces Third Quarter 2007 Earnings and Market Share Growth Results

Ellicott City, MD, October 24, 2007 — Howard Bancorp, Inc. (OTC, Electronic Bulletin Board: HBMD), the parent company of Howard Bank, today announced its first consecutive quarterly profit with net income of $1.3 million recorded for the third quarter of 2007.  The bank also announced that in less than three years of operations it has advanced into the top 10 ranking of deposit market share for all banks operating branches in Howard County as measured by the FDIC’s annual Summary of Deposit report.

The third quarter net income compares to $16 thousand recorded in the second quarter of 2007.  On a year-to-date basis, Howard Bancorp’s reported net income of $1.2 million for the first nine months of 2007 compares to a $516 thousand loss reported for the first nine months of 2006. Strong asset growth funded largely by core deposits drove a net interest income increase of 32% for the nine month period ending September 30, 2007 as compared to 2006.  The continuous improvements in revenues and resulting net profits permitted Howard Bancorp to realize and record a deferred tax asset of nearly $2.5 million. Prior to this quarter no income tax benefit or deferred tax asset had been reflected in the financial statements.  Including the third quarter, five of the previous six quarters reflected taxable income for Howard Bancorp which allowed the one time income tax benefit and resultant deferred asset to be realized.

Total revenue growth was primarily attributable to gains in net interest income resulting from strong balance sheet growth, improvement in asset mix and reliance on core deposit funding. Total assets grew to $179 million as of September 30, 2007, a 36% increase compared to the same period in 2006. Total loans increased by 52% ending at $162 million at the end of the third quarter of 2007 versus loans of $106 million at September 30, 2006. The loan growth was  originated internally as the bank has no dependency on brokered or purchased loans and thus Howard Bank does not have the type of exposure to the recent downturn in the residential real estate mortgage market as some other institutions. This asset growth was funded primarily with deposits and other customer funds as total deposits grew by 32%, with September 30, 2007 deposits of $144 million compared to deposits of $109 million at September 30, 2006. Transaction deposits, which generally represent both the lowest cost sources of funds and the key metric of a customer’s primary relationship, grew by 38% when comparing September 2007 to September 2006. This consistent improvement in both growth and optimal mix of the balance sheet led to core revenue growth as shown in the 32% improvement in net interest income before loan loss provision and an 8% increase in net interest income after the provision.

At the end of the second quarter, Howard Bank announced the placement of a land development loan with an original loan to value of 54% into non-accrual status. As previously communicated at the end of the second quarter, the bank determined that it was prudent, given the emerging downturn in the local real estate market, to independently re-evaluate the sufficiency of the collateral value under various scenarios. The result of those evaluations determined that the value of one of four parcels in the collateral package had been seriously impaired as a result of the negative impact of surrounding developments. Therefore, the bank has increased its allowance for loan losses by an additional $709 thousand to specifically reflect the collateral valuation reduction. Also, included in third quarter expenses is approximately $250 thousand relating to the costs of engineering/appraisal, auction, foreclosure expenses, as well as legal and other expenses relating to this issue. The bank continues to evaluate the possibility of alternative land uses and the costs associated with those alternatives.

Chairman and CEO Mary Ann Scully stated: “We are pleased with our core operating results especially our growth in revenues as reflected in the increased net interest income which was, driven by the continuing balance sheet growth that we have achieved thus far for 2007. This growth reflects, as does the most recent FDIC deposit share statistics, the resonance in the marketplace of our message around the power and value brought to clients by a sophisticated local community bank. We are also very pleased by our ability to record the deferred tax asset which serves as tangible evidence of our consistent advances in revenues and overall positive operating income results. These positive achievements were muted by the circumstances surrounding the collateral value for a large land development loan. We have many reasons to believe that this issue is not a reflection of our credit underwriting standards or commitment to superior asset quality, but instead reflects a unique occurrence. We look forward to continuing our focus on targeted balance sheet growth, enhanced operating results and concurrent growth in our client base and our market share.

As a reflection of the success of those underlying focuses on relationship development and management as well as community leadership, we are also pleased to have moved into the top ten in terms of deposit market share for financial institutions operating in Howard County Maryland. In less than three years of operations, Howard Bank has achieved the tenth largest deposit market share out of the 21 institutions - all much older than Howard Bank - with branches located in Howard County. This information is collected and reported by the FDIC for each branch of every financial institution based upon deposit levels as of June 30, 2007. We are also very proud of the ongoing involvement and recognition in the community of the achievements of several associates including awards recently received for the bank’s work in promoting financial literacy among adults in the county.

In summary, Howard Bancorp and Howard Bank have been able to navigate through a very challenging compressed and inverted interest rate cycle, ever increasing competitive and regulatory pressures, and continued change in the local banking providers through merger/acquisition activities to become a recognized leader as Howard County’s only locally owned and locally managed financial institution.  We are honored that customers and the community have embraced our commitment to combine a competitively broad suite of products and services with a much higher level of personalized and experienced advice than is available elsewhere.”

This press release contains statements that are forward-looking, as that term is defined by the Private Securities Litigation Reform Act of 1995 or the Securities and Exchange Commission in its rules, regulations, and releases. The Company intends that such forward-looking statements be subject to the safe harbors created thereby. All forward-looking statements are based on current expectations regarding important risk factors, including but not limited to real estate values, local and national economic conditions, and the impact of interest rates on financing. Accordingly, actual results may differ from those expressed in the forward-looking statements, and the making of such statements should not be regarded as a representation by the Company or any other person that results expressed therein will be achieved. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

 

Additional information is available at www.howardbank.com.

Contact:
Howard Bancorp, Inc.
George C. Coffman, Chief Financial Officer, 410-750-0020

 

 

HOWARD BANCORP, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)

Annual
Increase / (Decrease)
September 30, 2007
September 30, 2006
$
%
ASSETS
Cash and due from banks
 $4,849,898
 $4,276,641
 $573,257
13
%
Federal funds sold
 875,775
 6,650,810
 (5,775,035)
 (87)
Total cash and cash equivalents
 5,725,673
 10,927,451
 (5,201,778)
 (48)
Securities available-for-sale
 7,471,364
 12,748,641
 (5,277,277)
 (41)
Nonmarketable equity securities
 581,000
 278,300
 302,700
109
Loans, net of unearned income
162,015,456
106,350,018
55,665,438
52
Allowance for credit losses
(2,543,800)
(1,177,500)
(1,366,300)
116
Net loans
159,471,656
105,172,518
54,299,138
52
Bank premises and equipment, net
 2,554,246
 2,225,133
 329,113
15
Interest receivable and other assets
 2,610,038
909,759
 1,700,279
187
Total assets
 $178,413,977
 $132,261,802
 $46,152,175
35
%
LIABILITIES
Noninterest-bearing deposits
 $22,397,067
 $16,202,389
 $6,194,678
38
%
Interest-bearing deposits
 121,253,557
 92,776,806
 28,476,751
31
Total deposits
 143,650,624
 108,979,195
 34,671,429
32
Federal funds purchased and repurchase agreements
10,988,373
5,189,877
5,798,496
112
Accrued expenses and other liabilities
920,780
484,663
436,117
90
Total liabilities
 155,559,777
 114,653,735
 40,906,042
36
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock
26,284
22,520
3,764
 17
Capital surplus
27,921,064
22,685,940
5,235,124
 23
Accumulated deficit
 (4,115,670)
(5,090,364)
974,694
(19)
Accumulated other comprehensive loss
22,522
(10,029)
32,551
(325)
Total shareholders’ equity
23,854,200
17,608,067
6,246,133
35
Total liabilities and shareholders’equity
 $179,413,977
 $132,261,802
 $47,152,175
36
%

 

HOWARD BANCORP, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)

Quarterly
Increase / (Decrease)
September 30, 2007
June 30, 2007
$
%
ASSETS
Cash and due from banks
$4,849,898
$5,450,625
$(600,727)
(11)
%
Federal funds sold
875,775
2,369,110
(1,493,335)
(63)
Total cash and cash equivalents
5,725,673
7,819,735
(2,094,062)
(27)
Securities available-for-sale
7,471,364
10,084,786
(2,613,422)
(26)
Nonmarketable equity securities
581,000
266,000
315,000
118
Loans, net of unearned income
162,015,456
146,783,316
15,232,140
10
Allowance for credit losses
(2,543,800)
(1,643,500)
(900,300)
55
Net loans
159,471,656
145,139,816
14,331,840
10
Bank premises and equipment, net
 2,554,246
2,621,475
(67,229)
 (3)
Interest receivable and other assets
 3,610,038
1,137,814
2,472,224
217
Total assets
$179,413,977
$167,069,626
$12,344,351
7
%
LIABILITIES
Noninterest-bearing deposits
$22,397,067
$21,759,763
$637,304
3
%
Interest-bearing deposits
121,253,557
116,457,274
4,796,283
4
Total deposits
143,650,624
138,217,037
5,433,587
4
Federal funds purchased and repurchase agreements
10,988,373
5,793,908
5,194,465
90
Accrued expenses and other liabilities
920,780
571,526
349,254
61
Total liabilities
155,559,777
144,582,471
10,977,306
8
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock
26,284
26,280
4
0
Capital surplus
27,921,064
27,897,079
23,985
0
Accumulated deficit
(4,115,670)
(5,419,854)
1,304,184
(24)
Accumulated other comprehensive (loss)/income
22,522
(16,350)
38,872
(238)
Total shareholders’ equity
23,854,200
22,487,155
1,367,045
6
Total liabilities and shareholders’equity
$179,413,977
$167,069,626
$12,344,351
7
%

HOWARD BANCORP, INC.
CONSOLIDATED STATEMENTS of OPERATIONS (Unaudited)

For the six months
ended September 30,
Increase /
(Decrease)
2007
2006
$
%
INTEREST INCOME
Interest and fees on loans
$7,519,377
$4,675,953
$2,843,424
61%
Interest and dividends on securities
349,176
479,000
(129,824)
(27)
Other interest income
303,090
202,029
101,061
50
Total interest income
8,171,643
5,356,982
2,814,661
53
                 
INTEREST EXPENSE  
Deposits  
3,742,435
2,078,714
1,663,721
80
Borrowings  
196,431
66,646
129,785
195
Total interest expense  
3,938,866
2,145,360
1,793,506
84
                 
NET INTEREST INCOME  
4,232,777
3,211,622
1,021,155
32
Provision for credit losses  
1,197,800
402,000
795,800
198
Net interest income after
provision for credit losses
 
3,034,977
2,809,622
225,355
8
                 
NONINTEREST INCOME  
Service charges on deposit accounts  
69,601
33,980
35,621
105
Other operating income  
116,627
105,553
11,074
10
Total noninterest income  
186,228
139,533
46,695
33
                 
REVENUES  
4,419,005
3,351,155
1,067,850
32
                 
NONINTEREST EXPENSE  
Compensation and benefits  
2,333,166
1,935,609
397,557
21
Occupancy and equipment  
849,564
651,435
198,129
30
Marketing and business development  
334,841
265,382
68,459
26
Professional fees  
156,287
177,474
(21,187)
(12)
Data processing fees  
254,186
192,656
61,530
32
Other operating expense  
572,811
242,885
329,926
136
Total noninterest expense  
4,500,855
3,465,441
1,035,414
30
                 
LOSS BEFORE
INCOME TAXES
 
(1,279,650)
(516,286)
(763,364)
148
Income tax benefit  
(2,484,124)
-
(2,484,124)
100
NET LOSS  
$1,204,474
$(516,286)
$1,720,760
333%

 

HOWARD BANCORP, INC.
CONSOLIDATED STATEMENTS of OPERATIONS (Unaudited)

For the three months ended:
Increase /
(Decrease)
September 30, 2007
June 30 , 2007
$
%
INTEREST INCOME
Interest and fees on loans
$2,688,270
$2,527,837
$160,433
6%
Interest and dividends on securities
113,248
119,953
(6,705)
(6)
Other interest income
29,791
116,547
(86,756)
(74)
Total interest income
2,831,309
2,764,337
66,972
2
                 
INTEREST EXPENSE  
Deposits  
1,297,505
1,250,160
47,345
4
Borrowings  
84,812
53,207
31,605
59
Total interest expense  
1,382,317
1,303,367
78,950
6
                 
NET INTEREST INCOME  
1,448,992
1,460,970
(11,978)
(1)
Provision for credit losses  
900,300
183,500
716,800
391
Net interest income after
provision for credit losses
 
548,692
1,277,470
(728,778)
(57)
                 
NONINTEREST INCOME  
Service charges on deposit accounts  
21,638
26,566
(4,928)
(19)
Other operating income  
48,844
37,698
11,146
30
Total noninterest income  
70,482
64,264
6,218
10
                 
REVENUES  
1,519,474
1,525,234
(5,760)
(0)
                 
NONINTEREST EXPENSE  
Compensation and benefits  
865,871
714,377
115,494
21
Occupancy and equipment  
291,602
269,542
22,060
8
Marketing and business development  
130,315
115,059
15,256
13
Professional fees  
49,796
46,403
3,393
7
Data processing fees  
87,605
85,375
2,230
3
Other operating expense  
373,926
94,601
279,325
295
Total noninterest expense  
1,799,114
1,325,358
473,756
36
                 
INCOME/(LOSS) BEFORE
INCOME TAXES
 
(1,179,941)
16,376
(1,196,317)
7,305
Income tax benefit  
(2,484,124)
-
(2,484,124)
100
NET INCOME/(LOSS)  
$1,304,183
$16,376
$1,287,807
7,864%