Howard Bancorp, Inc. Reports Results for the Third Quarter of 2009

Company Release - 10/22/2009 16:04

ELLICOTT CITY, Md.--(BUSINESS WIRE)-- Howard Bancorp, Inc. (OTC, Electronic Bulletin Board: HBMD), the parent company of Howard Bank, today announced its operating results through September 30, 2009. For the three months ended September 30, 2009, the company reported net income of $57 thousand compared to net income of $87 thousand for the three months ending June 30, 2009, and net income of $148 thousand for the third quarter of 2008. Through the first nine months of 2009, net income was $162 thousand, versus net income of $234 thousand for the nine month period in 2008.

When comparing the results for the third quarter of 2009 to the similar period in 2008, net interest income of $2.3 million for 2009 increased by nearly $385 thousand or 20% compared to net interest income of $1.9 million in 2008. Similarly, non interest income was $182 thousand for the third quarter of 2009 versus $144 thousand for the same period of 2008, representing an increase of 27%. These revenue increases were well in excess of growth in staffing and facilities costs associated with the opening of the bank's fourth branch in the first quarter of 2009, and the expansion into Anne Arundel County where a fifth branch will open in the fourth quarter of 2009. However, like most in the banking industry, Howard Bank was assessed significant increases in fees to replenish the FDIC deposit insurance fund. For the third quarter of 2009, FDIC insurance costs increased from $37 thousand in 2008 to over $127 thousand, an increase of almost $91 thousand or 247%. This increase in regular quarterly assessments was in addition to the special assessment imposed by the FDIC which increased expenses for the second quarter of 2009 by $115 thousand. In addition to the planned expansion related increases in expenses, and the higher regulatory assessments, the bank also increased its provision for loan losses as a percentage of loans in the third quarter of 2009. The provision expense was $361 thousand for the third quarter of 2009, which represented an increase of $129 thousand or 56% over the $232 thousand provision recorded in the third quarter of 2008.

As noted above, the year to date results through the first three quarters of 2009 produced net income of $162 thousand versus $234 thousand for the same period in 2008, a decrease of $72 thousand or 31%. Through the nine months of 2009, net interest income was $6.3 million compared to $5.4 million for 2008, an increase of $900 thousand or 17%. Non interest income increased by $143 thousand or 37% from $391 thousand during the nine months of 2008 to $534 thousand for the same period of 2009. Total non interest expenses, including insurance assessments, increased from $4.5 million for the first three quarters of 2008 to $5.8 million for 2009. While many of the increased costs were attributable to growth and infrastructure investment initiatives, the increased FDIC insurance had a similar impact on the 2009 year to date results as it had on the previously mentioned third quarter of 2009. For the nine months ending September 30, 2009 the total FDIC insurance cost was $434 thousand, which, when compared to the $103 thousand for the same period in 2008, represented increased costs of $331 thousand or 321%. The increased FDIC assessment costs had a direct impact on the decreases in net income for both the quarter and year to date.

The improvement in net interest income and non interest income for 2009 was primarily the result of continued balance sheet growth. At September 30, 2009, total assets were $275 million, an increase of 21% over total assets of $226 million at the same point in 2008. Total Loans ended the third quarter of 2009 at $243 million, an increase of 26% over 2008, and total deposits increased by $43 million or 24% to end the third quarter of 2009 at $220 million. At September 30, 2009 total capital was $31 million which represented 11.3% of period end total assets and total risk based capital was 14.18% which is far in excess of the amounts required to be considered well capitalized by regulatory measurement standards.

From an asset quality perspective, the company has experienced an increase in its non-accrual loans and non-performing assets. As of September 30 2009, the company had a total of $5.5 million in non accrual loans (representing eight customers), and also had other real estate owned (OREO) of $2.1 million, for a total of $7.6 million in non performing assets representing 2.76 % of total assets. For the same period in 2008, the company had a total of $481 thousand in non accrual loans to two customers, and also had $2.1 million in OREO, for a total of $2.6 million in non performing assets representing 1.15% of total assets. Included in the $5.5 million of non accrual loans is one loan with a principal balance of $2.6 million for which foreclosure proceedings have been completed and Howard Bank has received and accepted an offer to purchase the underlying collateral at an amount sufficient for the bank to not incur any principal writedown. Final settlement and transfer of title is expected to occur early in the fourth quarter of 2009.

Chairman and CEO Mary Ann Scully reported, "Howard Bancorp remains committed to and rewarded by our focus on the traditional basics of community banking; management of local relationships; originating and holding loans in our portfolio; core deposit generation; and building capital and reserves. These basics have served us well in this tumultuous time and, most importantly, prepare us well for the future. We see the next two to four quarters as presenting us with many challenges. As a commercially focused bank, we will experience the lagging indicators of an economic downturn. Fortunately, our loans are local; our borrowers are known to us; the problems are isolated in a small number of loans and our capital plus reserves are healthy and growing which will allow us to handle any modification related writedowns. As a small bank, the impact of the FDIC's need to replenish the deposit insurance fund is significant. The pressure on earnings associated with these two types of reserves--our own loan provisions and the deposit insurance funding needs of the banking industry--is significant and is unlikely to abate in the short term. However, the bank is and always has been focused on what is necessary to drive long term shareholder value. On that front, while the short term challenges are great, the long term opportunities are even greater. Our balance sheet growth--both loans and core deposits--shows the success of our strategy, the resonance of our positioning, and the relevance of our message. The proceeds of our preferred stock issuance to the US Treasury early in 2009 has allowed us to continue to have community impact and in many cases to take the place of larger and older institutions who are receding from the marketplace. These continued opportunities to work with more local businesses and professionals support our long term optimism."

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.

For information about Howard Bank, call 410-750-0020 or visit