Corporate Profile

Howard Bancorp, Inc. Reports 2016 Results Reaches Milestone of $1 Billion in Asset Size,
Increasing Revenues and Improving Returns

ELLICOTT CITY, Md.--(BUSINESS WIRE)-- Howard Bancorp, Inc. (NASDAQ: HBMD), the parent company of Howard Bank, today reported its financial results for the fiscal year ending December 31, 2016 with the following highlights:

• During the third quarter of 2016, total assets surpassed the $1 billion threshold and grew to $1.027 billion at December 31, 2016, representing growth of $80 million, or 8%, from assets of $947 million at December 31, 2015. Total loans held in our portfolio increased $65 million, or 9%, from $757 million at December 31, 2015 to $822 million at year end 2016. This growth in both total assets and loans was derived solely from organic activities throughout 2016. Total deposits at December 31, 2016 increased to $809 million from $747 million at December 31, 2015, representing growth of $62 million or 8%, all of which is also attributable to organic growth activities.

• Total common shareholders’ equity increased by $6 million or 7% from $80 million at December 31, 2015 to $86 million at December 31, 2016, primarily from the retention of 2016 earnings. Total stockholders’ equity, however, decreased $7 million from $93 million at December 31, 2015 to $86 million at December 31, 2016, due to the second quarter of 2016 redemption of $12.6 million of preferred stock issued under the U S Treasury Small Business Lending Fund program.

• Net income available to common shareholders increased to $5.1 million for 2016 compared to $1.0 million for 2015, representing an increase of $4.1 million or over 400%. Basic earnings per common share (EPS) for 2016 were $0.74 compared to $0.16 for 2015, representing an increase of $.58 or 360%. The earnings for 2015 were impacted by pretax merger related expenses of $4.3 million relating to the acquisition of Patapsco Bancorp (“Patapsco”) in 2015.

• Net income available to common shareholders increased to $5.1 million for 2016 compared to $1.0 million for 2015, representing an increase of $4.1 million or over 400%. Basic earnings per common share (EPS) for 2016 were $0.74 compared to $0.16 for 2015, representing an increase of $.58 or 360%. The earnings for 2015 were impacted by pretax merger related expenses of $4.3 million relating to the acquisition of Patapsco Bancorp (“Patapsco”) in 2015.

• Net interest income of $34.2 million for 2016 increased by $3.9 million or 13% compared to net interest income of $30.3 million during 2015. Net interest income for 2015 included approximately $1.6 million in income from fair value adjustments on acquired loans, while 2016 only benefited by $714 thousand from these adjustments. Supplementing the net interest income increase, noninterest income increased by $2.9 million or 24% when comparing 2016 to 2015 results. Thus, adding these two sources of our revenues together, 2016 revenues increased by $6.8 million compared to 2015. Total noninterest expenses were $38.7 million for 2016 compared to $38.3 million, or excluding the merger expenses incurred in 2015, $33.9 million in 2015. Excluding the merger-related expenses, this represents an increase of $4.8 million or 14%.

• Primarily as a result of increased earnings, our book value per share increased by $0.73 or 6% from $11.54 at December 31, 2015 to $12.27 at December 31, 2016. Similarly, our tangible book value per share increased by $0.82 or 7% from $11.04 at December 31, 2015 to $11.86 at December 31, 2016.

• For the three months ended December 31, 2016, net income available to common shareholders increased to $953 thousand from $456 thousand for the fourth quarter of 2015, an increase of $497 thousand or 109%. Basic EPS for the fourth quarter of 2016 was $0.14 compared to $0.07 for the same quarter in 2015, an increase $.07 or 100%. Similar to the full year earnings for 2015, the fourth quarter of 2015 earnings were also impacted by pretax merger related expenses of $1.0 million relating to the Patapsco acquisition.

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As demonstrated by the above, during 2016 Howard Bancorp continued with its growth plan by organically growing assets, loans, and deposits by 8%, 9%, and 8% respectively. This balance sheet growth led to increases in both net interest income and noninterest income for 2016 compared to 2015. Supplementing these traditional banking revenue sources were increased revenue generated from our mortgage banking division, which recorded noninterest income of $11.9 million for 2016 compared to $9.7 million in 2015, an increase of $2.2 million or 23%. Excluding the $4.3 million in merger related expenses in 2015, our noninterest expenses increased by $4.8 million or 14%. Approximately $1.8 million of this increase was compensation related representing the full year operations of the business and locations acquired in the Patapsco acquisition, compared to four months in 2015. Similarly, occupancy costs represented $800 thousand of the expense increase for 2016 and were primarily attributable to the Patapsco acquisition. These two categories represent $2.6 million or 54% of the year over year increase, with the remainder attributable to higher business development and infrastructure, largely information system investments given our increased size, as well as a higher level of expenses associated with our mortgage banking activities throughout 2016.

Similar to the full year results for 2016, the fourth quarter of 2016 represented a continuation of our organic growth initiatives with balance sheet, revenue and as noted net income growth and progress on improving returns. The earnings for the fourth quarter were however, adversely impacted by the recent dramatic increase in mortgage interest rates. While the recent increase in interest rates did not impact our balance sheet growth, net interest income, or even level of mortgage originations, the increase did necessitate a non cash, fair market re-valuation of a small portion of our residential loan portfolio. Over the last two years, $8.8 million of mortgage loans, representing 0.8% of the over $1 billion in mortgage loans originated since inception were added to the portfolio after being originally intended for sale to secondary market investors, and, due to management’s fair value option election, are recorded at fair value. This year-end valuation adjustment reduced noninterest revenues by $701 thousand in the fourth quarter, although the overall adjustment amounted to $213 thousand for the full year of 2016. While the 90 basis point swing in mortgage rates in last three months of 2016 was unprecedented, Howard Bank has determined that this quarterly volatility should be avoided and had begun to reduce the principal level of these loans in the fourth quarter, and is continuing to sell them to remove any further market based earnings volatility.

Chairman and CEO Mary Ann Scully stated, “Howard Bank continues to demonstrate that balance sheet, revenue and net income growth leading to improved returns is achievable in years with and without acquisition activity. This has long been one of the strategic pillars of the company and is reflective of both the exceptionally strong footprint in which we operate as well as the internal engines for both commercial banking revenue and mortgage banking revenue that have been built over the years. While profitability was impacted in the fourth quarter due to non-recurring items as mentioned previously, as well as a lower net interest margin due in part to both lower accretion income as well as pre-funding loan growth which ultimately closed in January, we continue to position the Company for future growth. 2016 saw the addition of a very strong team of Baltimore based commercial banking managers to leverage the core customer base acquired in the 2015 Patapsco acquisition. This team lift out was complemented by our attraction of a number of experienced bankers joining us independently, the return of a highly experienced SBA expert and of course the retention of long time talented colleagues. Howard’s value proposition is as dependent on the retention, development and acquisition of talent as it is on customers. Additionally, a number of system enhancements are making an impact on both front office and back office productivity. We expect to see the continued fruits of the people as well as data infrastructure investments. The level of discipline reflected in activities that we chose as well as those not chosen this year bodes well for the sustainability of the improvement in both earnings per share and tangible book value.”

The statements in this press release regarding improvement in both earnings per share and tangible book value are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995 or the Securities and Exchange Commission in its rules, regulations, and releases. Howard Bancorp intends that such forward-looking statement be subject to the safe harbors created thereby. Such forward-looking statements are based on current expectations regarding important risks, including but not limited to real estate values, local and national economic conditions, and the impact of interest rates on financing, as well as other risks detailed from time to time in filings made by Howard Bancorp with the Securities and Exchange Commission. Accordingly, actual results may differ from those expressed in these forward-looking statements, and the making of such statements should not be regarded as a representation by Howard Bancorp or any other person that results expressed therein will be achieved. Howard Bancorp 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.

The press release, in its entirety, is available under the "Press Release" tab on the right.
 
Contact Information
Howard Bancorp, Inc.
6011 University Boulevard
Suite 370
Ellicott City, MD 21043
(410) 750-0020

Investor Relations Contact
Mr. George C. Coffman
Howard Bancorp, Inc.
6011 University Boulevard
Suite 370
Ellicott City, MD 21043
(410) 750-0020

Howard Bank