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.
HOWARD BANCORP, INC.
HOWARD BANCORP, INC.
HOWARD BANCORP, INC.
HOWARD BANCORP, INC.