Howard Bancorp Announces Increased Capitalization and Expansion of Community Lending Programs

Company Release - 03/03/2009 16:32

ELLICOTT CITY, Md.--(BUSINESS WIRE)-- Howard Bancorp, Inc. (OTC, Electronic Bulletin Board:HBMD), the parent company of Howard Bank, today announced that it has received $5.98 million in additional capital from the issuance of non-voting preferred shares to the United States Treasury as part of the Capital Purchase Program. It also announced a $15 million increase in Howard Bank's Renaissance Loan Program as well as a change in criteria to encourage greater access for small borrowers under its Sustainability Loan Fund.

The company had announced earlier this month that it had been approved for an investment of up to $5.98 million, the maximum level available to an institution of its asset size, and was evaluating the explicit and implicit costs associated with such a program as well as the benefits for the company, its wholly owned subsidiary, Howard Bank, its shareholders, depositors and the communities which it serves. In its earnings release dated January 22, Howard Bancorp announced a 160% improvement in full year pretax profits. At the end of 2008, the total risk based capital ratio at the Howard Bank level was 12.6% - in excess of the 10% requirement to be considered well capitalized. If downstreamed, the proceeds of the preferred share issuance would raise that ratio to 15.8%. Additionally, Howard Bancorp, the bank's parent holding company, holds additional capital of $1.9 million that has not been downstreamed.

The Capital Purchase Program was created to benefit healthy financial institutions by further strengthening their balance sheets through the issuance of non voting preferred stock to the U.S. Treasury. According to Treasury statements regarding the program, the intent of the program is to directly infuse capital into healthy, viable banks with the goal of increasing the flow of financing available to small businesses and consumers. With additional capital, banks are better able to meet the lending needs of their communities and customers, and businesses have greater access to the credit that they need to keep operating and growing. At the announcement of the program in November of 2008, banking regulators encouraged all healthy financial institutions to consider applying for the capital. Participation in the program is totally voluntary.

According to Howard Bancorp Chairman and CEO, Mary Ann Scully, "As noted earlier this month, we initially determined that we should follow the suggestion of regulators to consider this program and made application to our regulators for such consideration. We were pleased to have received their preliminary approval to participate in the Capital Purchase Program. We believe that our approval to participate in the Program provides further affirmation of our financial strength and viability. We have concluded an exhaustive analysis of all the costs associated with the program, as well as the present and anticipated requirements associated with the program. We also analyzed the immediate as well as the longer term benefits that could accrue to our shareholders, our customers - both loan and deposit - as well as to the small business communities that we serve.

"We have determined that while the costs of the preferred shares provide an attractive return to the US government and its taxpayers, they are not especially onerous for the holding company or the bank considering the ability of the company to include these proceeds in our capital accounts, thus allowing us to continue to safely and prudently grow both our assets and their associated reserves. This capital provides additional assurance that we can continue to work towards supporting our present and prospective borrowers in their own business activities and can provide our depositors with an additional capital cushion without diluting our shareholders. Therefore, in conjunction with this decision to accept the capital designated for healthy institutions, we are also announcing enhancements to two key programs to facilitate our immediate use of the capital to help our communities in this difficult environment. The additional funds allocated to critical development areas of our two 'home' markets reinforces our business model and allows us and our communities to quickly begin to leverage this new capital."

In concert with the intentions of the Capital Purchase Program, the bank is recognizing the success to date of their Renaissance Loan Fund by allocating another $15 million to the program as well as its extension to Anne Arundel County. In Howard County, the program is now targeted to areas along the Route 1 and Route 40 corridors as well as a number of the more mature villages of Columbia. The areas targeted in Anne Arundel County will parallel the Economic Development Authority's Business Corridor Investment Loan Program which includes areas in Brooklyn Park, Sun Valley-Pasadena, Glen Burnie and the West Street district of Annapolis. The program provides lower interest rates and longer amortization terms for commercial construction or rehabilitation projects in the targeted areas of both counties.

The bank is also broadening eligibility for its "going green" Sustainability Loan Fund, which is available for renovation or new construction of commercial buildings and residential homes in Howard and Anne Arundel counties. Special consideration will now be given to smaller projects for which LEED certification may be impractical.

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.