Howard Bancorp, Inc. Announces 2011 Annual Earnings Increase 48%

Howard Bancorp, Inc. (OTC, Electronic Bulletin Board: HBMD), the parent company of Howard Bank, today reported its financial results for the fiscal year ending December 31, 2011. For the year ended December 31, 2011, the company reported net income of $1.4 million compared to net income of $933 thousand in 2010, an improvement of $452 thousand or 48%. Net interest income was $12.6 million for 2011 which represented an increase of $1.3 million or 11% compared to 2010. In addition to the increase in net interest income, the provision for loan losses in 2011 of $1.2 million was 29% less than the 2010 provision of $1.63 million. Non interest revenues of $1.1 million for 2011 increased by $395 thousand or 53% compared to $.7 million in 2010. While service charges on deposits decreased year-over-year by $92 thousand due to fewer overdraft fees, 2011 non interest revenue included $459 thousand in gains on sale of OREO properties. Total non interest expenses for 2011 of $10.1 million increased by $1.4 million or 17% over total expenses of $8.7 million in 2010. The $1.4 million 2011 increase included approximately $427 thousand more in staffing related costs, and a $1 million increase in costs associated with Other Real Estate Owned (OREO) including increased operating and maintenance expenses and write-downs of $777 thousand for the declines in value of OREO property.

2011 represented a year of continued balance sheet growth with December 31, 2011 total assets of $323 million, total loans of $277 million, and total deposits of $263 million, representing growth of 8%, 8%, and 10%, respectively, over the 2010 year end balances. Included in the $263 million of total deposits at year end 2011 were non-interest bearing balances of $62.0 million, which increased by $13.4 million or 27%, compared to non-interest balances of $48.7 million at the end of 2010. This growth in operating accounts reflects significant customer acquisition as well as increased balances from existing customers. At the end of the third quarter of 2011, the company also received additional capital via its approval and participation in the U.S. Treasury Small Business Lending Fund (SBLF). The SBLF is a program created by the U.S. Treasury exclusively for qualifying community banks and is intended to encourage small business lending by providing Tier 1 capital to those qualified banks at favorable rates. Simultaneously with the receipt of the SBLF funds, and as required under the SBLF Program, the company redeemed the full balance of $6.3 million of shares of preferred stock issued to the Treasury under the U.S. Treasury Capital Purchase Program (the "CPP"). The resulting net increase of up to approximately $6.2 million of additional capital will allow Howard Bancorp to support expected balance sheet growth in 2012 and beyond.

For the fourth quarter of 2011, Howard Bancorp recorded net income of $353 thousand, which compares to net income of $272 thousand for the fourth quarter of 2010, representing an increase of 30% and net income of $336 thousand for the third quarter of 2011. Comparing the fourth quarter of 2011 to the same quarter in 2010 net interest income increased by $325 thousand or 11%, the provision for loan losses increased by $50 thousand or 14% and total expenses were up by $453 thousand or 19%.

Asset quality for Howard Bank continued to be a major focus of attention for management and the board of directors throughout 2011. One of the bank’s primary measures of asset quality is the relationship between non-accrual loans, troubled debt restructurings, loans in excess of 90 days delinquent and OREO as a percentage of total assets. This asset quality measure showed a slight improvement for 2011 with a ratio of 2.40 % as of December 31, 2011 versus 2.89% at the end of 2010.

At December 31, 2011 Howard Bancorp, Inc. had total capital of $36.6 million representing 11.34% of period end total assets. This is an increase of $7.3 million or 25% over total capital of $29.3 million at December 31, 2010. As stated earlier, over $6 million of the increase represented the net proceeds, from the preferred shares issued under the SBLF. Howard Bancorp was one of only four commercial banks in Maryland to be approved for this influx of Tier 1 capital to enable continued small business loan portfolio growth. The remainder of the capital growth represents retention of the previous four quarters of earnings. With the increases in capital, Howard Bank continues to be well in excess of the required capital levels to be considered well-capitalized under all regulatory capital guidelines.

Chairman and CEO Mary Ann Scully stated: “Howard Bank is gratified to report a profitable year marked by four successive quarters of profitability in this still difficult economic environment. These profits were driven by continued asset growth, an advantageous funding mix, and strategically allocated resources. As a result, the bank has been able to continue its investment in and support of our local communities and has strengthened its capital position while growing these investments. Notably, we were able to generate this stream of earnings after allocating funds to both reserves for loss provisions on loans, and OREO property related expenses (write-downs, maintenance costs and collection expenses). While the aggregate of these asset quality related costs were modestly higher than in 2010, our emphasis on risk management complements our focus on relationship management and allows us to ensure that we are correctly identifying and accounting for impairments and to continue to maintain an adequate allowance based upon our current performing portfolio. This ability to correctly value the portfolio even in an environment of declining values for some asset classes has allowed us to show a steady decrease in the relative level of problem assets. However, this continues to be a challenging time for all in the banking industry because it is a difficult time for so many of the communities from which we derive our livelihood. Howard Bank is fortunate to operate in strong and vibrant counties and we are proud that our steady performance has tracked theirs. We are most proud of our ability to plan for continued investments and continued growth in the year to come. Our focus on the future is illustrated by our previous announcement that on November 28, 2011 Howard Bancorp had filed a registration statement on Form S-1 with the Securities and Exchange Commission (SEC) relating to its proposed initial public offering of its common stock.”

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.

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