The provision for loan and lease losses for the first quarter of 2012 was $141 thousand compared to $112 thousand for the same period in 2011. The ratio of the allowance for credit losses as a percentage of total loans outstanding was 1.26% at March 31, 2012, compared to 1.51% at March 31, 2011, and the ratio of nonperforming assets (non-performing loans plus other real estate owned (OREO)) to total assets was 2.22% at the end of the first quarter of 2012, compared to 2.67% at the same point in 2011.Partially offsetting the increase in net interest income was a decrease in noninterest income for the first quarter of 2012 compared to the first quarter of 2011. Total noninterest income was $182 thousand for the first quarter of 2011, compared to a total of $85 thousand for the same period in 2012. This decrease of $97 thousand or 53% was impacted by a loss on the sale of one property classified as OREO, which resulted in a loss on the sale of $131 thousand in the first quarter of 2012. There were no such losses recorded in the first quarter of 2011. Total expenses were basically unchanged at $2.5 million for both the 2012 and 2011 periods. However in 2011, an expense related to the decline of approximately $190 thousand in the value of a property held as OREO was recorded. No such valuation adjustments were included in total expenses during the first quarter of 2012. Thus after adjusting expense levels for the valuation adjustment in 2011, total operating expenses increased by $233 thousand or 10% during the quarter ended March 31, 2012. This increase in expenses was from continuing growth of our operating infrastructure, as well as professional fees relating to expansion plans and other strategic projects. When comparing the first quarter of 2012 to the fourth quarter of 2011, assets and deposits both increased by 8%, while loan levels increased by 1%. As mentioned earlier, net income for the first quarter of 2012 was $399 thousand, compared to $353 thousand for the fourth quarter of 2011. This improvement was due to reductions in the loan loss provision compared to the fourth quarter of 2011, and an overall reduction in total expenses for the first quarter of 2012.
The company’s nonperforming asset levels have continued to compare favorably to peers and the company continues to focus time and talent on asset quality improvement- valuation, restructuring, and collection. We have been able to realize some modest improvement in the overall nonperforming assets levels, as well as a reduction in the number of newly identified borrowers showing signs of stress.All of our regulatory capital ratios continue to significantly exceed those levels that categorize us as a well capitalized bank. Chairman and CEO Mary Ann Scully stated: “We are pleased to report strong core earnings results in a period of residual stress for many in our industry. This quarter represents the highest quarterly net income in our history. The fact that this growth is driven by revenue and balance sheet growth - more customers borrowing and more customers depositing – and not just improving asset quality is especially rewarding. Many signs of this public recognition were received in this first quarter. We were selected for the sixth consecutive year by Smart CEO magazine as a Future 50 company- one of the fastest growing companies in Greater Baltimore. Six employees were also recognized as among the region’s best bankers. And the senior vice president responsible for all of our branches, Rosa Scharf, became a two time Daily Record Top 100 Women winner. "We still see some signs of the business community’s reluctance to invest in the future via borrowings and we still see the plans of many businesses to maintain higher levels of liquidity as a hedge against an uncertain and volatile future. However, we are encouraged by some emerging signs of new hires, new contracts and strategic alliances that are influencing loan demand. We also continue to benefit from the movement of small and medium sized business relationships from competitors who are weakened by historical losses and/or lower capital levels. We remain confident in the markets in which we operate, and the relevance of the business model that we employ to both our customers and employees. As seen in our non interest expenses, we continue to hire - most recently for greater penetration in the Baltimore market - and to expand with a new branch scheduled to open in Annapolis in the second quarter. On a larger scale, we have continued with our plans to become an SEC registrant through our planned initial public offering of our common stock and in connection with such offering have applied to have our common stock listed on the NASDAQ Stock Market, LLC. We plan to conduct our initial public offering as a rights offering followed by a public offering of the unsold shares early in the second quarter.”
This release is neither an offer to sell nor a solicitation of an offer to buy shares of common stock. The offer is made only by the prospectus. A registration statement relating to the common stock has been filed with the Securities and Exchange Commission but has not yet become effective. The common stock may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. The shares of common stock are not deposits or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.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.