ELLICOTT CITY, Md.--(BUSINESS WIRE)--July 17, 2015--Howard Bancorp, Inc. (Nasdaq: HBMD), the parent company of Howard Bank (the “Bank”), today reported its financial results for the three month and six month periods ended June 30, 2015.

Highlights for the three and six month periods ended June 30, 2015 were as follows:

Chairman and CEO Mary Ann Scully stated, “This is both an exciting and a rewarding time for the Bank and all its stakeholders. Our balance sheet growth - most especially our loan and demand deposit growth reflect the decisions made in the past around both organic and acquired growth; and that growth has flowed into significantly more meaningful as well as diversified revenue streams. At the same time that we begin to reap the harvest of past growth, we are very focused on the new growth set to come in the third quarter of this year with the anticipated legal closing on the merger with Patapsco Bancorp. The first half year consummation of NBRS integration activities as well as the focus on our future in Greater Baltimore has created some significant one-time expense increases - primarily systems integration, and merger related legal costs - while the people and system efficiencies associated with all the merger activities are only beginning to work their way through the income statement. However, the operational and capital framework that has been established, positions us well for even greater net income and EPS growth than are suggested in this release, as well as improved stock market structure and liquidity.”

For the first six months of 2015, the Company reported net interest income of $13.6 million compared to $9.3 million for the first six months of 2014, an increase of approximately $4.3 million or 47%. This was driven primarily by a $4.6 million, or 44%, increase in total interest income for the first six months of 2015 due to the growth in average loans. Given the overall growth in deposits and borrowing levels, the Company recorded an increase in total interest expense of $261 thousand or 24% for the first half of 2015 versus the same period in 2014. We were able to increase interest income by 47% while only increasing interest expense by 24%, largely due to our successful growth in noninterest bearing deposits.

In addition to the large growth in net interest income there was an even more dramatic increase in noninterest income for the first half of 2015 compared to the first half of 2014. Total noninterest income for the first half of 2015 was $5.8 million, which represents an increase of $3.1 million or 116% from the $2.7 million in the first half of 2014. Service charges on deposits increased by nearly $96 thousand or 31% for the first six months of 2015 versus the same period in 2014, due mostly to the growth in deposit balances and customers as well as the retail oriented deposit mix acquired with the 2014 NBRS transaction. Other transaction related fees increased by $218 thousand or 112% for the first six months of 2015 compared to the same period in 2014, given the increase in transaction related fees from our higher deposit base. By far, the largest increase in noninterest revenue was generated from our mortgage banking activities, which generated revenue from fees and gains on sales of mortgage loans totaling $4.8 million for the first half of 2015, compared to $2.0 million for the same period in 2014, representing a revenue increase of 127%.

Provision for credit losses was $785 thousand for the six months ended June 30, 2015 compared to $501 thousand for the same period in 2014. This increase is largely due to the continuing growth in our loan portfolio, as well as any specific amounts required from our ongoing monitoring of troubled credits.

Total noninterest expenses grew to $16.3 million for the first half of 2015 compared to $9.8 million for the first half of 2014, an increase of $6.5 million or 66%, of which $1.1 million is non-recurring. Approximately one-third of this increase was in the compensation category, which grew by $2.1 million or 37% when comparing the first six months of 2015 versus the same period in 2014. This increase resulted partially from the increase in the number of locations we operate as we expanded our markets further into Harford and Cecil Counties in Maryland, resulting from acquisitions in the second half of 2014. As we have grown our balance sheet and geographic footprint, we have also increased the infrastructure staffing to ensure appropriate support levels, risk oversight, information technology platforms, and human resource initiatives. In addition to the increased compensation costs, occupancy related costs increased by $823 thousand or 78%, primarily from the franchise growth previously discussed. We have altered the mix of owned versus leased locations to better manage this expense component and will continue to evaluate utilization and opportunities. In addition to the combined $2.9 million increase in compensation and occupancy expenses, other operating expense categories accounted for the remaining $3.6 million increase in expenses. Nearly $1.9 million of incremental expenses resulted from increases in marketing and business development, loan related expenses, and other general and administrative expenses, which are directly related to the increases in our loans, deposits, mortgage banking activities, and their related increase in revenues. Two other categories of expenses, professional fees and data processing expense, were impacted more by our acquisition related activities. Professional fees, which include legal and accounting costs, increased from $571 thousand for the first six months of 2014 to $1.2 million for the same period in 2015. Of this $600 thousand increase, nearly $500 thousand was related to our upcoming merger with Patapsco Bancorp, which is expected to close in the third quarter of 2015. Data processing expenses increased from $314 thousand for the first six months of 2014 to $1.2 million for the same period in 2015. Included in this nearly $900 thousand increase were approximately $600 thousand in data conversion related costs resulting from our integration of the records of NBRS into our own systems. Between these two categories, approximately $1.1 million in non-recurring and non-operational expenses were absorbed in the first half of 2015.

When comparing the second quarter of 2015 results to the same three month period of 2014, net income available to common shareholders increased to $760 thousand in the second quarter of 2015 from $705 thousand in the second quarter of 2014, and resulting earnings per share decreased to $0.16 for the second quarter of 2015 compared to $0.17 in the same quarter for 2014. Again, this quarter over quarter change is inclusive of large non-recurring expenses which reduced net results for the second quarter of 2015, as well as an increase in the average number of shares outstanding for the quarter. Additional details on 2015 year-to-date and quarterly results are provided in the financial table below.

With the increase in capital levels resulting from the recently closed private placement, the ratio of total equity to total assets was 11.33% at June 30, 2015, compared to 9.30% at June 30, 2014, and as shown on the table that follows, all of our regulatory capital ratios have increased and continue to significantly exceed those levels that categorize us as a well-capitalized bank.

Our asset quality measures continue to remain a major focus of attention for management and the Board of Directors. One of the Company’s primary measures of asset quality is the ratio of non-performing loans and other real estate owned (OREO) to total assets. This asset quality measure increased slightly to 1.28% at June 30, 2015, compared to 1.24% at March 31, 2015 and 0.82% at the end of June 2014. While OREO has been relatively unchanged, non-performing loans increased by $733 thousand during the second quarter of 2015, resulting from the addition of two credit relationships. When comparing June 30, 2015 to June 30, 2014, the increase also includes loans acquired in the FDIC assisted NBRS acquisition.

The statements in this press release regarding the expected timing of and growth expected from the pending merger with Patapsco Bancorp, and that we are positioned for greater net income and EPS growth than suggested in this press release, 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 statement be subject to the safe harbors created thereby. Such forward-looking statement is based on current expectations regarding important risk factors, including but not limited to receipt of any required stockholder approvals of the merger, the successful integration of the businesses of Howard real estate values, local and national economic conditions, and the impact of interest rates, as well as other risks and uncertainties, as described in Howard Bancorp, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2014, and Registration Statement on Form S-4, as amended, as filed with the Securities and Exchange Commission. 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.


HOWARD BANCORP, INC.

	Six months ended								Three months ended
(in thousands, except per share data.)	June 30,								June 30				March 31				June 30
Operation Statement Data:	2015				2014				2015				2015				2014
Interest income	$	14,910			$	10,340			$	7,484			$	7,426			$	5,397
Interest expense		1,344				1,083				685				659				568
Net interest income		13,566				9,257				6,799				6,767				4,829
Provision for credit losses		785				501				535				250				325
Noninterest income		5,787				2,682				3,438				2,349				2,059
Noninterest expense		16,274				9,842				8,439				7,835				5,349
Federal and state income tax expense		853				593				471				382				477
Net income		1,440				1,003				791				649				737
Preferred stock dividends		63				63				32				31				32
Net income available to common shareholders	$	1,378			$	940			$	760			$	618			$	705

Per share data and shares outstanding:
Net income per common share, basic	$	0.31			$	0.23			$	0.16			$	0.15			$	0.17
Book value per common share at period end	$	11.33			$	9.06			$	11.33			$	11.53			$	9.06
Tangible book value per common share at period end	$	11.14			$	8.99			$	11.14			$	11.21			$	8.99
Average common shares outstanding		4,504,520				4,051,388				4,859,389				4,112,379				4,056,174
Shares outstanding at period end		6,358,788				4,090,402				6,358,788				4,147,633				4,090,402

Financial Condition data:
Total assets	$	746,881			$	533,535			$	746,881			$	710,480			$	533,535
Loans receivable (gross)		582,702				433,336				582,702				570,437				433,336
Allowance for credit losses		(4,199	)			(3,053	)			(4,199	)			(3,839	)			(3,053	)
Other interest-earning assets		126,288				68,261				126,288				58,947				68,261
Total deposits		575,716				422,335				575,716				580,655				422,335
Borrowings		79,525				60,116				79,525				60,532				60,116
Total stockholders’ equity		84,627				49,629				84,627				60,384				49,629
Common equity		72,065				37,067				72,065				47,822				37,067

Average assets	$	699,114			$	503,236			$	707,289			$	690,836			$	510,152
Average stockholders' equity		62,998				48,980				67,270				58,678				49,148
Average common stockholders' equity		50,436				36,418				54,708				46,116				36,586

Selected performance ratios:
Return on average assets		0.42		%		0.40		%		0.45		%		0.38		%		0.58
Return on average common equity		5.76		%		5.55		%		5.80		%		5.71		%		8.08
Net interest margin⁽¹⁾		4.13		%		3.96		%		4.06		%		4.19		%		4.05
Efficiency ratio⁽²⁾		84.09		%		82.44		%		82.44		%		85.95		%		77.66

Asset quality ratios:
Nonperforming loans to gross loans		1.21		%		0.46		%		1.21		%		1.11		%		0.46
Allowance for credit losses to loans		0.72		%		0.70		%		0.72		%		0.67		%		0.70
Allowance for credit losses to nonperforming loans		59.52		%		151.74		%		59.52		%		60.73		%		151.74
Nonperforming assets to loans and other real estate		1.63		%		1.01		%		1.63		%		1.53		%		1.01
Nonperforming assets to total assets		1.28		%		0.82		%		1.28		%		1.24		%		0.82

Capital ratios:
Leverage ratio		11.90		%		9.65		%		11.90		%		8.66		%		9.65
Tier I risk-based capital ratio		13.16		%		10.67		%		13.16		%		9.86		%		10.67
Total risk-based capital ratio		13.82		%		11.33		%		13.82		%		10.49		%		11.33
Average equity to average assets		9.01		%		9.73		%		9.51		%		8.49		%		9.63

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

(1)		Net interest margin is net interest income divided by average earning assets.
(2)		Efficiency ratio is noninterest expense divided by the sum of net interest income and noninterest income.