Howard Bancorp, Inc. Announces Second Quarter 2008 Profit and Growth Results


Howard Bancorp, Inc. (OTC, Electronic Bulletin Board: HBMD), the parent company of Howard Bank, today announced net income of $87 thousand for the six months ending June 30, 2008. Because the company was not yet recording tax expense during the similar period in 2007, a more meaningful comparison of operating results is achieved by comparing pre-tax income. For the first six months of 2008, pretax income was $188 thousand which represents an increase of $287 thousand or 288% over the pretax loss of $100 thousand for the first half of 2007. The improvement in operating performance was primarily the result of an increase in net interest income which increased by $631 thousand or 23% from $2.8 million in 2007 to $3.4 million for the six months ending June 30, 2008. The increased net interest income was, in turn, due to a 27% growth in interest earning assets when comparing June 30, 2008 to June 30, 2007. Complementing the increase in earning assets was deposit growth of $41 million or 30% over the 12 months, of which demand deposits, which are the lowest cost source of deposits, rose by 60%. The growth in net interest income of $631 thousand along with increases in non interest income which grew by $131 thousand or 113% significantly outpaced growth in noninterest expenses, which increased by $185 thousand or 7%.

When comparing the second quarter only results, pretax income was $40 thousand for the second quarter of 2008 compared to $16 thousand for the second quarter of 2007, an increase of nearly 145%. Increases in the quarterly components were similar to the year-to-date growth, with net interest income increasing by 21% for the quarter, while total expenses grew by 8% for the second quarter of 2008 versus the same three months of 2007.

However, the net income results for the second quarter were lower than the results achieved for the first quarter of 2008. The second quarter of 2008 generated net income of $10 thousand compared to a net income of $77 thousand for the first quarter of 2008. The reason for this decrease in quarterly earnings was an increase in the provision for loan losses taken during the second quarter of 2008.

The year-to-date provision for loan losses for 2008 was $587 thousand, of which $445 thousand was recorded in the second quarter of 2008. This compares to a year-to-date provision of $297 thousand for 2007.

Howard Bank had $3.7 million in non-performing assets at June 30, 2008 compared to $2.8 million at June 30, 2007, a 32% increase relative to the 29% growth in loans outstanding over the same period. Four loans out of a total of over 700 loans account for 100% of the non-performing assets; one $2.8 million land development loan disclosed in 2007 is progressing through the foreclosure ratification process. The bank's loan loss reserve balance has increased 81% since the second quarter of 2007.

Chairman and CEO Mary Ann Scully stated: "We are happy to report once again that despite the stresses in the local and national economy, we continue to demonstrate strong growth in our balance sheet, our revenue, our net income and our capitalization levels. Given the significant challenges facing businesses of all sizes, we are closely monitoring our borrowers and are proactively working with them especially as some are experiencing stagnating revenues and rising costs. As a bank committed to both face to face relationship development and the fundamentals of loan underwriting and portfolio management, we have an intimate knowledge of our client base and have generally been able to identify problems at an early stage of development. We have taken an aggressive approach to placing loans on non accrual, usually well before a 90 day delinquency occurs, and to begin specific provisioning where appropriate to supplement our general loan loss provisions. We intend to continue to actively manage these processes to quickly identify problems and to work with those borrowers.

"Given the economic situation and some limited portfolio problems, our ability to absorb the additional provisions and still report profitable results for both the second quarter and year-to-date for 2008 is gratifying. Just as important strategically is our commitment and ability to continue to grow our balance sheet and to fund our loan portfolio growth largely through core deposits. Our consistent focus on expanding our share of the small and medium sized businesses, their owners and employees headquartered in Howard and contiguous counties has, in turn, allowed us to realize significant interest and non-interest revenue growth. Because of this focus, and despite a challenging funding environment, our net interest margin is stable. We also remain focused on selective strategic investments in products, delivery systems and, most importantly, talented and experienced people. In anticipation of our new branch opening on Route 40 and Centennial Lane later this year, we have prudently invested in additional staff to allow us to continue to provide our clients with the unparalleled access to better advice and service for which we are noted.

"While we remain cautious about the challenges ahead for us and some of our clients, we believe that we are exceptionally well positioned to continue our growth, and to leverage our leadership role in our communities served. We continue to take seriously our responsibility as a community bank and continue to be recognized as a company and individually for our role as a corporate philanthropist. We also believe that the consistent execution of our relationship management philosophy is more important than ever and both allows and complements our commitment to the community."

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.

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