As filed with the Securities and Exchange Commission on May 2, 2012

Registration No. 333-178204

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

Pre-Effective Amendment No. 3
to the
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

 

Howard Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Maryland		6022		20-3735949
(State or Other Jurisdiction of Incorporation or Organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

6011 University Boulevard
Suite 370
Ellicott City, Maryland 21043
(410) 750-0020

(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant’s Principal Executive Offices)

 

Ms. Mary Ann Scully
President, Chief Executive Officer
and Chairman of the Board
Howard Bancorp, Inc.
6011 University Boulevard
Suite 370
Ellicott City, Maryland 21043
(410) 750-0020

(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)

 

Copies to:

Frank C. Bonaventure, Esq.
Ober, Kaler, Grimes & Shriver, P.C.
100 Light Street
Baltimore, Maryland 21202
(410) 685-1120

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: x

If this Form is filed to register additional shares for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o
Non-accelerated filer o		Smaller reporting company x
(Do not check if a smaller reporting company)

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CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered		Amount to be Registered(1)				Proposed maximum offering price per share				Proposed maximum aggregate offering price				Amount of registration fee(2)
Common Stock, $0.01 par value per share, to be offered by the issuer			1,150,891			$	7.30			$	8,401,504.30			$	962.81
Common Stock, $0.01 par value per share, to be offered by the selling stockholder			173,003			$	7.30	(3)		$	1,262,921.90			$	144.74

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED MAY 2, 2012

PRELIMINARY PROSPECTUS

HOWARD BANCORP, INC.

1,150,891 SHARES OF COMMON STOCK OFFERED BY HOWARD BANCORP, INC.		173,003 SHARES OF COMMON STOCK WHICH COULD BE OFFERED BY THE SELLING STOCKHOLDER FROM TIME TO TIME ON A CONTINUOUS OR DELAYED BASIS

This prospectus relates to our initial public offering in which we are offering up to 1,150,891 shares of our common stock. This prospectus also relates to the possible sale, from time to time, in one or more transactions of 173,003 shares of common stock by an investor who is purchasing such shares in a private placement (see below) from us for investment and not with a view to resale.

Our common stock is currently quoted on the Over-the-Counter-Bulletin Board under the symbol “HBMD.” Our common stock has been approved for listing on The NASDAQ Stock Market LLC under the symbol “HBMD.”

In our initial public offering, we are distributing to holders of our common stock, at no charge, non-transferable subscription rights to purchase up to 1,150,891 shares of our common stock. We refer to this offering as the “rights offering.” In the rights offering, you will receive one subscription right for each full share of our common stock you owned at 5:00 p.m., Eastern Time, on February 27, 2012, the record date of the rights offering.

Each subscription right will entitle you to purchase 0.4359 share of our common stock at a subscription price of $7.30 per share, which we refer to as the basic subscription right. If you exercise all of your basic subscription rights, you may also have the opportunity to purchase additional shares of common stock at the same purchase price, subject to our acceptance of your request to purchase such additional shares, reduction, pro ration and certain other limitations.

The subscription rights will expire if they are not exercised by 5:00 p.m., Eastern Time, on [expiration date], but we may extend the rights offering for additional periods ending no later than [extension date]. Our board of directors may cancel the rights offering for any reason at any time before it closes. If we cancel the rights offering, all subscription payments received will be returned, without interest or deduction, as soon as practicable.

Shares of common stock that remain unsubscribed for (after taking into account all over-subscription options exercised and accepted) at the expiration of the rights offering will be offered for sale to the public in a public offering at a price of $7.30 per share, which we refer to at the “public offer.” The public offer will terminate on ___________, unless the rights offering is extended. We must receive subscriptions for a minimum of $2.6 million (356,165 shares), in the aggregate, in order to complete the rights offering and the public offer. Once submitted, exercises of subscription rights and subscriptions in the public offer are irrevocable.

On October 3, 2011, we commenced, and on March 28, 2012, we completed a private placement of our common stock, which we refer to as the “private placement,” pursuant to which we entered into investment agreements with certain institutional investors pursuant to which, subject to their respective terms and conditions, simultaneously with the closing of the rights offering and the public offer, Emerald Advisers, Inc. (“Emerald”) is obligated to purchase from us 173,003 shares of our common stock and Battlefield Capital Management, LLC (“Battlefield”) is obligated to purchase that number of shares which equals 9.8% of our common stock outstanding upon closing of the rights offering, the public offer and the private placement, each at a price of $7.30 per share.

Emerald may offer and sell shares purchased in the private placement from time to time in one or more transactions through one or more brokers or dealers or agents or directly to purchasers at prevailing market or negotiated prices after completion of the rights offering and the public offer. Although it has no present intent to do so, such offers and sales may be made on a continuous or delayed basis, in or off the market. In connection with any such resales, Emerald may, under certain circumstances, be deemed to be an “underwriter” as that term is used in the Securities Act of 1933, as amended.

This investment involves a degree of risk, including the risk that you may lose all of your investment.
Please read “Risk Factors” beginning on page 16.

Offering Summary

		Minimum				Maximum
Number of shares			356,165				1,150,891
Gross proceeds		$	2,600,004.50			$	8,401,504.30
Fixed administrative fee payable to sales agent(1)		$	50,000			$	50,000
Estimated placement fee to sales agent(1)		$	0			$	378,105.30
Estimated other expenses of the offering		$	463,946.75			$	463,946.75
Net proceeds		$	2,086,057.80			$	7,509,452.30

These securities are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

None of the Securities and Exchange Commission, Maryland Office of the Commissioner of Financial Regulation, Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve System, nor any state securities regulator has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

GRIFFIN FINANCIAL GROUP, LLC

Prospectus dated __________ __, 2012

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		Page
ABOUT THIS PROSPECTUS			1
QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING AND THE PUBLIC OFFER			2
SUMMARY			9
RISK FACTORS			16
RECENT DEVELOPMENTS			33
FORWARD LOOKING STATEMENTS			37
USE OF PROCEEDS			39
MARKET FOR COMMON STOCK, DIVIDEND POLICY AND RELATED STOCKHOLDER MATTERS			40
CAPITALIZATION			41
DILUTION			42
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			43
OUR BUSINESS			69
SUPERVISION AND REGULATION			80
MANAGEMENT OF HOWARD BANCORP, INC.			88
THE RIGHTS OFFERING			103
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES			111
THE PUBLIC OFFER			114
THE PRIVATE PLACEMENT			116
SELLING STOCKHOLDER			117
PLAN OF DISTRIBUTION			118
DESCRIPTION OF CAPITAL STOCK			122
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			133
TRANSFER AGENT			135
EXPERTS			135
LEGAL MATTERS			135
WHERE YOU CAN FIND ADDITIONAL INFORMATION			135
INDEX TO FINANCIAL STATEMENTS			F-1

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ABOUT THIS PROSPECTUS

In making your investment decision, you should only rely on the information contained in this prospectus. We have not authorized anyone to provide you with any other or different information. If anyone provides you with information that is different from, or inconsistent with, the information in this prospectus, you should not rely on it. We believe the information in this prospectus is materially complete and correct as of the date on the front cover. We cannot, however, guarantee that the information will remain correct after that date. For that reason, you should assume that the information in this prospectus is accurate only as of the date on the front cover and that it may not still be accurate on a later date. This document may only be used where it is legal to sell these securities. The information contained in this prospectus is current only as of its date, regardless of the time of delivery of this prospectus or of any sales of our shares of common stock.

Neither we, nor any of our officers, directors, agents or representatives, make any representation to you about the legality of an investment in our common stock. You should not interpret the contents of this prospectus to be legal, business, investment or tax advice. You should consult with your own advisors for that type of advice and consult with them about the legal, tax, business, financial and other issues that you should consider before investing in our common stock.

This prospectus does not offer to sell, or ask for offers to buy, any shares of our common stock in any state or other jurisdiction in which such offer or solicitation would be unlawful or where the person making the offer is not qualified to do so.

No action is being taken in any jurisdictions outside the United States to permit a public offering of our common stock or possession or distribution of this prospectus in those jurisdictions. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about, and to observe, any restrictions that apply in those jurisdictions to this offering or the distribution of this prospectus.

In this prospectus, we rely on and refer to information and statistics regarding the banking industry and certain markets in Maryland. We obtained this market data from independent publications or other publicly available information. Although we believe these sources are reliable, we have not independently verified and do not guarantee the accuracy and completeness of this information.

As used in this prospectus, “Howard Bancorp,” “we,” “us,” and “ours” refer to Howard Bancorp, Inc. and its subsidiaries. References to the “Bank” refer to Howard Bank, a wholly-owned subsidiary of Howard Bancorp, Inc., and references to the “offering” refer to both the rights offering and the public offer.

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QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING AND THE PUBLIC OFFER

The following are examples of what we anticipate will be common questions about the rights offering and the public offer. The answers are based on selected information included elsewhere in this prospectus. The following questions and answers do not contain all of the information that may be important to you and may not address all of the questions that you may have about the rights offering and the public offer. This prospectus contains more detailed descriptions of the terms and conditions of the rights offering and the public offer and provides additional information about us and our business, including potential risks related to the rights offering and public offer, the shares of our common stock offered hereby and our business, including those disclosed under “Risk Factors.”

What is the rights offering?

We are distributing, at no charge, to holders of our shares of common stock, non-transferable subscription rights to purchase shares of our common stock at a price of $7.30 per share. You will receive one subscription right for each share of common stock you owned as of 5:00 p.m., Eastern Time, on February 27, 2012, the record date for the rights offering. Each subscription right entitles the holder to a basic subscription right and an over-subscription option, as described below.

What is the basic subscription right?

The basic subscription right gives our stockholders the opportunity to purchase an aggregate of 1,150,891 shares of our common stock at a subscription price of $7.30 per share. For each share of our common stock you owned as of the record date for the rights offering, your basic subscription right gives you the opportunity to purchase 0.4359 share of our common stock. For example, if you owned 100 shares of common stock as of the record date, you would have received 100 subscription rights and would have the right to purchase [0.4359 X 100] shares of our common stock (rounded down to 43 shares, with the total subscription payment being adjusted accordingly, as discussed below) for $7.30 per full share (or a total payment of $313.90). You may exercise all or a portion of your basic subscription right, or you may choose not to exercise any subscription rights at all. If you exercise less than your full basic subscription right, however, you will not be entitled to subscribe for shares under your over-subscription option.

Fractional shares resulting from the exercise of basic subscription rights will be eliminated by rounding down to the nearest whole share, with the total subscription payment being adjusted accordingly. Any excess subscription payments received by the subscription agent will be returned, without interest or penalty, as soon as practicable.

If you hold a Howard Bancorp stock certificate, the number of rights you are entitled to pursuant to your basic subscription right is indicated on the enclosed rights certificate. If you hold your shares in the name of a broker, dealer, custodian bank or other nominee who uses the services of the Depository Trust Company (“DTC”), you will not receive a rights certificate. Instead, DTC will issue one subscription right to your nominee record holder for each share of our common stock that you beneficially own as of the record date. If you are not contacted by your nominee, you should contact your nominee as soon as possible.

What is the over-subscription option?

If you purchase all of the shares of common stock available to you pursuant to your basic subscription right, you may also choose to subscribe for a portion of any shares that our other stockholders do not purchase through the exercise of their basic subscription rights, although acceptance of such subscription pursuant to the over-subscription option is within our sole discretion. You should indicate on your rights certificate, or the form provided by your nominee if your shares are held in the name of a nominee, how many additional shares you would like to subscribe for pursuant to your over-subscription option.

If sufficient shares of common stock are available, we generally expect that we will honor your over-subscription request in full. If over-subscription requests exceed the number of shares of common stock available, however, we expect that we will generally allocate the available shares of common stock among stockholders who over-subscribed by multiplying the number of shares requested by each stockholder through the exercise of their over-subscription options by a fraction which equals (x) the number of shares available to be issued through over-subscription options divided by (y) the total number of shares requested by all

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subscribers through the exercise of their over-subscription options, subject to the limitations described below. As described above for the basic subscription right, we will not issue fractional shares through the exercise of over-subscription options.

To properly exercise your over-subscription option, you must deliver the full subscription payment related to your over-subscription option at the same time you deliver payment related to your basic subscription right. Because we will not know the total number of unsubscribed shares before the rights offering expires, if you wish to maximize the number of shares you purchase pursuant to your over-subscription option, you will need to deliver payment in an amount equal to the aggregate subscription price for the maximum number of shares of our common stock that may be available to you. For that calculation, you must assume that no other stockholder, other than you, will subscribe for any shares of our common stock pursuant to their basic subscription right. See “The Rights Offering — The Subscription Rights — Over-Subscription Option.”

Are there any limits on the number of shares I may purchase in the offering or own as a result of the offering?

As a bank holding company, we are subject to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). The Federal Reserve has the authority to prevent individuals and entities from acquiring control of us. Under Federal Reserve rules and regulations, if you, directly or indirectly, or through one or more subsidiaries, or acting in concert with one or more persons or entities, will own more than 25% of our common stock after the offering, then you will be conclusively deemed to control us and would need to obtain prior approval of the Federal Reserve to complete the purchase. If, after giving effect to the offering, you will hold 10% or more of our common stock, you will be presumed to control us and would need to obtain prior approval of the Federal Reserve to complete the purchase unless the circumstances support a rebuttal of such presumption. We will not issue shares pursuant to the exercise of basic subscription rights or over-subscription options, or to any subscriber in the public offer who, in our sole opinion, could be required to obtain prior clearance or approval from or submit a notice to any state or federal bank regulatory authority to acquire, own or control such shares if, as of the applicable offering expiration date, such clearance or approval has not been obtained or any applicable waiting period has not expired. See “The Rights Offering — Limitation on How Many Shares of Common Stock You May Purchase in the Rights Offering” and “The Public Offer — Limitation on How Many Shares of Common Stock You May Purchase in the Public Offer.” You are urged to consult your own legal counsel regarding whether you are required to seek the prior approval of the Federal Reserve in connection with your exercise of the subscription rights issued to you or your subscription for shares of common stock in the public offer.

Why are we conducting the offering?

We are conducting the offering primarily to increase our capital levels in order to support organic growth and potential acquisition opportunities we believe will be available to us as a result of anticipated consolidation in the financial services industry as a result of pressures resulting from the existing economic and regulatory environment, including current economic conditions and the regulatory changes being instituted by, among other things, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), and so that we will have sufficient capital to maintain our “well-capitalized” status after any such acquisition(s). We are actively looking for an appropriate acquisition opportunity, but we currently do not have any definitive agreements with respect to a potential acquisition.

The additional capital will also allow us to expand our loan and investment activities, including increasing our loans to one borrower limit, and provide us the means to take advantage of opportunities, including potential acquisition opportunities, that may become available to us in the future, especially in light of the current regulatory and economic environment.

We anticipate that we will use the proceeds of the offering: (i) to support potential acquisition(s) and pay related expenses; (ii) to contribute to the capital of Howard Bank for the primary purposes of supporting organic loan growth, increasing its investment activities, increasing the allowable maximum loan amount that it may extend to any one customer, and for the Bank’s working capital and other general corporate purposes; and (iii) for working capital and other general corporate purposes.

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Our board of directors has chosen the structure of the offering to raise capital while giving existing stockholders, pursuant to the rights offering, the opportunity to limit their ownership dilution from a sale of common stock to other investors in the public offer and in the private placement.

How was the subscription price in the rights offering and the offer price in the public offer determined?

We established an offering committee, comprised of members of our board of directors, the majority of whom are independent directors and all of whom we expect will purchase shares in the offering. The subscription price in the rights offering and the offer price in the public offer (which we refer to in general as the “subscription price”) was determined by the offering committee, in consultation with Griffin Financial Group, LLC (“Griffin Financial Group”), after taking into account various factors including: (i) the market price for our common stock after taking into account the fact that Howard Bancorp is not a registrant under the Securities Exchange Act of 1934 (the “Exchange Act”) and our shares are not listed on an exchange and the lack of trading volume in the over the counter market and the wide bid ask spreads; (ii) the committee’s perception of our future prospects; (iii) our recent performance in prior periods; (iv) the state of the new issue capital markets generally and for banks, including, particularly, for banks of our size; (v) pricing and related data on recent underwritings for banks, particularly for banks of the Bank’s size in the mid-Atlantic states; (vi) pricing and related data on recent private placements for banks, particularly for banks of the Bank’s size in the mid-Atlantic states; (vii) pricing of recent merger and acquisition transactions for banks, particularly those of the Bank’s size in the mid-Atlantic states, less assumed control premiums; (viii) pricing discussions between us and investors solicited in the private placement; and (ix) pricing agreed to between us and the investors who are participating in the private placement.

The subscription price of $7.30 represents 80% of our reported tangible common book value per share at December 31, 2011 and may or may not be considered the fair market value of our common stock on that date or any date relevant hereto. You should not assume or expect that, after the offering, our shares of common stock will trade at or above the $7.30 purchase price.

Am I required to exercise all of the subscription rights I receive in the rights offering?

No. You may exercise any number of your subscription rights, or you may choose not to exercise any subscription rights. If you do not exercise any subscription rights, the number of shares of our common stock you own will not change. However, if you choose not to exercise your basic subscription rights in full, your ownership interest in Howard Bancorp will be diluted as a result of the offering, and even if you fully exercise your basic subscription rights, but do not exercise, and we do not accept, a certain level of over-subscription options (to the extent shares are available through the over-subscription option), you will experience dilution as a result of the sale of shares to the investors in the private placement. In addition, if you do not exercise your basic subscription rights in full, you will not be entitled to participate in the over-subscription option.

How soon must I act to exercise my subscription rights?

If you received a rights certificate and elect to exercise any or all of your subscription rights, the subscription agent must receive your completed and signed rights certificate and payment, including final clearance of any personal check, before the rights offering expires on [expiration date], at 5:00 p.m., Eastern Time. If you hold your shares in the name of a broker, dealer, custodian bank or other nominee, your nominee may establish a deadline before the expiration of the rights offering by which you must provide it with your instructions to exercise your subscription rights. Although our board of directors may, in its discretion, extend the expiration date of the rights offering, we currently do not intend to do so. Our board of directors may cancel the rights offering at any time. If we cancel the rights offering, all subscription payments received will be returned, without interest or deduction, as soon as practicable.

Stockholders residing in the U.S. that can be located without unreasonable effort or expense will be provided with reasonable notice (at least seven business days) of the rights offering via this prospectus prior to the expiration of the rights offering. Although we will make reasonable attempts to provide this prospectus to our stockholders, the rights offering and all subscription rights will expire on the expiration date, whether or not we have been able to locate each person entitled to subscription rights.

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May I transfer my subscription rights?

No. You may not sell, transfer or assign your subscription rights to anyone, other than by operation of law. Subscription rights will not be listed for trading on any stock exchange or market. Rights certificates may be completed only by the stockholder who receives the certificate or such stockholder’s transferee by operation of law.

Are we requiring a minimum overall subscription to complete the rights offering?

There is no individual minimum purchase requirement in the rights offering. However, we cannot complete the rights offering unless we receive aggregate subscriptions for at least $2.6 million (356,165 shares) of common stock in the rights offering and public offer.

Can the board of directors cancel or extend the offering?

Yes. Our board of directors may decide to cancel the rights offering or the public offer at any time and for any reason before the closing of the rights offering and the public offer, respectively. If our board of directors cancels the offering, any money received from subscribers will be returned, without interest or deduction, as soon as practicable. If we cancel only the public offer, however, subscription payments will not be returned to subscribers in the rights offering.

We also have the right to extend the rights offering for additional periods ending no later than [extension date], and the public offer for a total of 67 days after the expiration of the rights offering, although we do not presently intend to do so.

Has the board of directors made a recommendation to stockholders regarding the rights offering?

No. Our board of directors is making no recommendation regarding your exercise of the subscription rights. Stockholders who exercise subscription rights will incur investment risk on new money invested. We cannot predict the price at which our shares of common stock will trade after the offering. The market price for our common stock may decrease to an amount below the subscription price, and if you purchase shares of our common stock at the subscription price, you may not be able to sell your shares in the future at the same price or a higher price. You should make your decision based on your assessment of our business and financial condition, our prospects for the future and the terms of the rights offering. See “Risk Factors” for a discussion of some of the risks involved in investing in our common stock.

Will our directors and executive officers participate in the offering?

We expect our directors and executive officers, together with their affiliates, to participate in the offering at varying degrees, but they are not required to do so. Based on conversations with our directors and executive officers, we currently anticipate that our directors and executive officers will purchase approximately $1,500,000 of common stock in the offering. The purchase price paid by them will be $7.30 per share, the same paid by all other persons who purchase shares of our common stock in the offering. Following the offering, we expect our directors and executive officers, together with their affiliates, to own approximately 876,739 shares of common stock, or 25.0% and 19.9%, respectively, of our total outstanding shares of common stock if we sell 356,165 and 1,150,891 shares of stock in the offering and 517,354 and 603,699 shares in the private placement, respectively.

How do I exercise my subscription rights if I own shares in certificate form?

If you hold a Howard Bancorp common stock certificate and you wish to participate in the rights offering, you must deliver a properly completed and signed rights certificate, together with payment of the aggregate purchase price, to the subscription agent at or prior to 5:00 p.m., Eastern Time, on [expiration date]. If you send a personal check, payment will not be deemed to have been delivered to the subscription agent until the check has cleared. In certain cases, you may be required to provide additional documentation or signature guarantees.

Please follow the delivery instructions on the rights certificate. Do not deliver documents to Howard Bancorp or the Bank. You are solely responsible for completing delivery to the subscription agent of your subscription documents, rights certificate and payment. You should allow sufficient time for delivery of your subscription materials to the subscription agent so that the subscription agent receives them by 5:00 p.m., Eastern Time, on [expiration date].

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If you send a payment that is insufficient to purchase the number of shares you requested, or if the number of shares you requested is not specified in the forms, the payment received will be applied to exercise your basic subscription rights to the fullest extent possible, and your over-subscription option to the fullest extent for which we accept your subscription pursuant to the over-subscription option, based on the amount of the payment received, subject to the availability of shares under the over-subscription option and the elimination of fractional shares. Any excess subscription payments received by the subscription agent will be returned, without interest or penalty, as soon as practicable following the expiration of the rights offering.

What should I do if I want to participate in the rights offering but my shares are held in the name of a broker, dealer, custodian bank or other nominee?

If you hold your shares of common stock through a custodian bank, broker, dealer or other nominee, then your nominee is the record holder of the shares you own. If you are not contacted by your nominee, you should contact your nominee as soon as possible. Your nominee must exercise the subscription rights on your behalf for the shares of common stock you wish to purchase. You will not receive a rights certificate. Please follow the instructions of your nominee. Your nominee may establish a deadline that may be before the 5:00 p.m., Eastern Time, [expiration date] expiration date that we have established for the rights offering.

What form of payment is required to purchase the shares of common stock in the rights offering?

As described in the instructions accompanying the rights certificate, payments submitted to the subscription agent must be made in U.S. currency, by personal check drawn on a U.S. bank or certified check drawn on Howard Bank and payable to “Registrar and Transfer Company,” or by wire transfer of immediately available funds to the account maintained by the subscription agent. If you send payment by personal check, payment will not be deemed to have been delivered to the subscription agent until the check has cleared.

When will I receive my new shares?

If you purchase stock in the rights offering by submitting a rights certificate and payment or if you purchase stock in the public offer by submitting a subscription agreement and payment, we will issue your new shares to you electronically in book entry form upon the closing of the rights offering and public offer, as applicable, which, in both cases, we expect will take place approximately two weeks after the expiration date of the rights offering, assuming our receipt of aggregate subscriptions for at least 356,165 shares in the offering. If your shares as of February 27, 2012 were held by a custodian bank, broker, dealer or other nominee, and you participate in the rights offering your nominee will be credited with the shares of common stock you purchase in the rights offering as soon as practicable after the closing of the rights offering.

After I send in my payment and rights certificate, may I cancel my exercise of subscription rights?

No. All exercises of subscription rights are irrevocable unless the rights offering is cancelled, even if you later learn information that you consider to be unfavorable to the exercise of your subscription rights. You should not exercise your subscription rights unless you are certain that you wish to purchase shares of our common stock in the rights offering.

Are there risks in exercising my subscription rights?

Yes. The exercise of your subscription rights involves risks. Exercising your subscription rights involves the purchase of additional shares of our common stock and you should consider this investment as carefully as you would consider any other equity investment. Among other things, you should carefully consider the risks described under the heading “Risk Factors” beginning on page 16 of this prospectus.

If the rights offering is not completed, will my subscription payment be refunded to me?

Yes. The subscription agent will hold all funds it receives in a segregated bank account until completion of the rights offering. If we do not complete the rights offering, all subscription payments received by the subscription agent will be returned, without interest or deduction, as soon as practicable. If you own shares in the name of a custodian bank, broker, dealer or other nominee, it may take longer for you to receive your subscription payment because the subscription agent will return payments through the record holder of your shares.

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What fees or charges apply if I purchase shares of common stock in the rights offering?

We are not charging any fee or sales commission to issue subscription rights to you or to issue shares to you if you exercise your subscription rights. If you exercise your subscription rights through a broker, dealer, custodian bank or other nominee, you are responsible for paying any fees your record holder may charge you.

What are the U.S. federal income tax consequences of exercising my subscription rights?

For U.S. federal income tax purposes, you should not recognize income or loss in connection with the receipt or exercise of subscription rights in the rights offering. You should consult your tax advisor as to your particular tax consequences resulting from the rights offering. For a detailed discussion, see “Material U.S. Federal Income Tax Consequences.”

What is the public offer?

Concurrent with the rights offering, we and Griffin Financial Group will offer for sale to members of the public identified by Howard Bancorp and others in a public offering on a best efforts basis at the same $7.30 per share subscription price those shares of common stock that remain unsubscribed for (after taking into account all over-subscription options exercised and accepted) at the expiration of the rights offering. See “The Public Offer.”

If I am not a stockholder but wish to subscribe for shares of common stock in the public offer of any unsubscribed shares, what do I do?

We will conduct the public offer concurrently with the rights offering and accept subscription agreements for unsubscribed shares of common stock during the pendency of the rights offering. Such subscription agreements will be binding upon receipt by Griffin Financial Group. The public offer will remain open, and subscribers may submit subscription agreements to purchase shares in the public offer, for up to one week following the expiration of the rights offering (_______ __, 2012 if the rights offering is not extended) or the date on which we have accepted subscriptions for all shares of common stock remaining available for sale. Our board of directors may choose to end the public offer prior to the expiration date of the public offer, extend the public offer or cancel the public offer. In the event the public offer is cancelled, all subscription payments received in the public offer will be returned promptly, without interest or deduction. Subscriptions will be accepted in the public offer only to the extent that shares are not subscribed for in the rights offering (taking into account all over-subscription options exercised and accepted).

Is the public offer subject to any minimum or maximum subscription amount?

There is no minimum or maximum amount of shares you can subscribe for in the public offer as long as we have shares remaining available for sale after the rights offering is completed and subject to the purchase limitations described discussed above. See “— Are there any limits on the number of shares I may purchase in the offering or own as a result of the offering?” above. You may not revoke or change your subscription after you have submitted your subscription agreement (which must be accompanied by payment for the shares you subscribe for). We may choose to reject your subscription entirely or accept it for only a portion of the shares for which you subscribe for any reason, including if an insufficient number of shares remain available for purchase after expiration of the rights offering.

Note, however, that we cannot complete the public offer unless we receive aggregate subscriptions for at least $2.6 million (356,165 shares) of common stock in the offering.

Are there backstop or standby purchasers?

No. We have entered into investment agreements with certain investors pursuant to which such investors will purchase between 517,354 and 603,699 shares of our common stock in the private placement at the same $7.30 per share subscription price as in the offering, subject to certain closing conditions. The number of shares they purchase will not be dependent on the number of shares that remain unsold after completion of the rights offering and the public offer. We expect the closing of the private placement to take place concurrently with the closing of the rights offering and public offer, assuming all conditions to closing of the private placement are satisfied by such closing date.

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What effects will the offering have on our outstanding common stock?

As of May 2, 2012, we had 2,640,264 shares of our common stock issued and outstanding. In addition, we expect to sell up to 603,699 shares of common stock in the private placement, subject to satisfaction of certain closing conditions. Assuming no options or warrants are exercised prior to the closing of the offering and that all shares offered by us hereby are sold in the offering, we expect approximately 3,791,155 shares to be outstanding immediately after the closing of the offering, not including any shares sold in the private placement. In addition, if all 603,699 shares are sold in the private placement, then we expect 4,394,854 shares of our common stock will be outstanding immediately after closing of the offering and the private placement.

The issuance of shares of our common stock in the offering and the private placement will dilute, and thereby reduce, your proportionate ownership in our shares of common stock even if you fully exercise your basic subscription rights. In addition, the market price of the shares is unlikely to increase beyond the $7.30 subscription price in the offering between now and the closing of the offering, which prior to closing of the offering may limit any potential increase in market price per share of shares you already hold.

How much will Howard Bancorp receive from the offering?

We expect the aggregate proceeds in the offering, net of sales commission and expenses, will be approximately $2.1 million if the minimum number of shares is sold in the offering and $7.5 million if all of the shares offered hereby by us are sold.

What is the role of Griffin Financial Group in the public offer?

We have entered into an agreement with Griffin Financial Group pursuant to which Griffin Financial Group is acting as our financial advisor in connection with the public offer. Griffin Financial Group will also offer and sell shares of common stock on our behalf in the public offer, on a best efforts basis, primarily to investors who are not existing stockholders and who have been identified by our management and directors and others. Griffin Financial Group also consulted with our offering committee in setting the subscription price. Griffin Financial Group is not obligated to purchase any shares of our common stock in the offering. Griffin Financial Group provides us with on-going investment banking advisory services including advice on capital and mergers and acquisitions. We have agreed to pay certain fees to, and expenses of, Griffin Financial Group. Battlefield Capital Management, LLC, one of the investors in the private placement, is affiliated with Griffin Financial Group.

Whom should I contact if I have other questions?

If you have any questions regarding completing a rights certificate or submitting payment in the rights offering, please contact our subscription agent for the rights offering, Registrar and Transfer Company, at (800) 368-5948 or info@rtco.com.

If you have any questions about the public offer, including with respect to submitting subscription agreements or payments in the public offer, please contact Eric S. Magrisi, Senior Managing Director of Griffin Financial Group at (757) 286-6527. You may also contact Mary Ann Scully or George C. Coffman at (410) 750-0020 with general questions about the public offer.

If you have any general questions regarding the rights offering, Howard Bancorp or the Bank please contact Mary Ann Scully or George C. Coffman at (410) 750-0020.

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SUMMARY

The following summary highlights material information in this prospectus. It may not contain all the information that is important to you. For additional information, you should read this entire prospectus carefully, including “Risk Factors” the financial statements and the notes to the financial statements.

Howard Bancorp, Inc. is the holding company for Howard Bank, a Maryland trust company operating as a commercial bank. We are headquartered in Ellicott City, Maryland. We engage in a general commercial banking business, making various types of loans and accepting deposits. We market our financial services to small to medium sized businesses and their owners, professionals, and high-net-worth individuals (the “mass affluent”).

At December 31, 2011, we had total assets of $323 million, loans outstanding, net, of $274 million, deposits of $263 million, shareholders’ equity of $37 million, and a book value per share of $9.12. Net income available to common stockholders for the year ended December 31, 2011 was $934 thousand.

Our core business strategy involves delivering advice and superior customer service to clients through local decision makers. Our specialized community banking focus on both local markets and small and medium-sized business related market segments is combined with a broad array of products, new technology and seasoned banking professionals which positions the Bank differently from most competitors. Our experienced executives establish a relationship with each client and bring value to all phases of a client’s business and personal banking needs. We call it “Hands-On Service.”

We seek to enhance stockholder value through market share growth, related revenue growth and the resulting growth in operating profits. Our long-term vision includes supplementing our historically organic growth with strategically significant acquisitions. We believe that acquiring other financial institutions — in whole or in part (through business line spin offs, branch sales or the hiring of teams of individuals) will allow us to expand our market, achieve certain operating efficiencies and grow our stockholder base and thus our share value and liquidity. We believe that our demonstrated expertise in commercial lending, deposit gathering (especially noninterest bearing transactional deposits) and community, trade and industry leadership positions us as an attractive acquirer. We also anticipate that increasing our capital levels will give us the ability to continue our organic asset growth and expand our relationships with key clients through a larger legal lending limit.

The recent economic recession and continuing sluggish economy have negatively impacted the real estate market and financial opportunities in our market area. While the drop in housing values in our primary market area has largely moderated, except for the high-end market, the sluggish economy and higher than usual unemployment has resulted in a continued slowdown in housing sales. Similarly the decrease in commercial real estate values has resulted in fewer commercial real estate loans being made or refinanced. Finally, the slow economic recovery has resulted in fewer businesses and less need for business funding. As a result, the financial opportunities for the banking industry in general and banks in our market areas have been negatively impacted by the recent economic recession and slow recovery. We have, however, except for the year ended December 31, 2009, reported net income in every year since the recession started in 2007.

On September 22, 2011, we issued to the Secretary of the Treasury 12,562 shares of our Senior Non-Cumulative Perpetual Preferred Stock, Series AA (the “Series AA Preferred Stock”), having a liquidation amount per share equal to $1,000, for an aggregate purchase price of $12,562,000. We issued the Series AA Preferred Stock pursuant to Treasury’s Small Business Lending Fund (“SBLF”), which was created for qualifying community banks and is intended to encourage small business lending. 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. As part of, and as required by, the SBLF investment transaction, we redeemed the preferred stock that we had issued to the U.S. Department of the Treasury (“Treasury”) pursuant to the Capital Purchase Program under the Troubled Asset Relief Program (“TARP”) described below.

On February 27, 2009, pursuant to the Capital Purchase Program under TARP, we issued to Treasury, for an aggregate purchase price of $5,983,000, (i) 5,983 shares of our Fixed Rate Cumulative Preferred Stock, Series A (the “Series A Preferred Stock”), having a liquidation amount per share equal to $1,000 and (ii) a

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warrant to purchase 299.29930 shares of our Fixed Rate Cumulative Perpetual Preferred Stock, Series B (the “Series B Preferred Stock”), having a liquidation amount per share equal to $1,000, for an exercise price of $0.01 per share, which was immediately exercised for 299 shares of Series B Preferred Stock. As part of, and as required by, the SBLF investment transaction, we redeemed the Series A Preferred Stock and Series B Preferred Stock we had issued to Treasury pursuant to the TARP Capital Purchase Program with the proceeds of the SBLF program described above, for an aggregate of $6.3 million (for a net investment of $6.2 million).

As a bank holding company registered under the Bank Holding Company Act of 1956, we are subject to the supervision of the Board of Governors of the Federal Reserve System. In addition, the Bank is subject to regulation, supervision and regular examination by the Maryland Commissioner of Financial Regulation and the Federal Deposit Insurance Corporation (“FDIC”), and the Bank’s deposits are insured by the FDIC. Our principal executive offices are located at 6011 University Boulevard, Suite 370, Ellicott City, Maryland 21043. Our telephone number is (410) 750-0020. Our website is www.howardbank.com. Information on our website is not incorporated by reference into this prospectus and is not a part of this prospectus.

Private Placement

On March 28, 2012, we completed a private placement of our common stock, pursuant to which we entered into investment agreements with certain investors. Pursuant to the investment agreements, subject to the terms and conditions contained therein:

The investors’ obligations to purchase the shares subscribed for in the private placement are subject to certain closing conditions, including that we raise an aggregate of at least $6.0 million in this offering and the private placement (which $6.0 million amount includes the amounts committed to be purchased by Emerald ($1.26 million) and Battlefield (between $1.26 million and $1.57 million)). For more information, see “Risk Factors — Risks Related to the Offering Generally — We may not sell all or even a substantial amount of the shares we are offering hereby, the private placement may not be consummated and the closing of the offering is not dependent on the closing of the private placement, which means that if you subscribe for shares of common stock in the offering, you may acquire securities in our company even though the proceeds raised in the offering alone may be insufficient to meet our objectives” and “The Private Placement.”

Risk Factors

An investment in our common stock involves risk that could result in the loss of some or all of your investment. Such risks include, but are not limited to, the following: (i) the fact that the recent economic recession could reduce demand for our products and services; (ii) that our loan portfolio, which consists substantially of commercial and commercial real estate loans, subjects us to risks unique to these types of loans; (iii) our dependence on our executive officers; (iv) that our growth strategy will increase our noninterest expense and may not be successful; (v) we face strong competition; (vi) we are subject to extensive regulation that could adversely affect our business and growth strategy and we may be adversely affected by regulatory changes, (vii) the private placement is subject to certain conditions and therefore may not close and we may not sell all or even a significant number of shares we are offering hereby, which may leave us with insufficient funds to execute our business plan; and (viii) there is limited market in our common stock and other factors that could negatively affect our stock price or your ability to re-sell your shares. You should carefully review all of the risk factors discussed in the “Risk Factors” section beginning on page 16.

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Our Market Area

We are headquartered in Ellicott City, Maryland and we consider our primary market area to be Howard County and Anne Arundel County, Maryland. Our secondary market area includes the Maryland counties of Baltimore, Carroll and Harford as well as Baltimore City. We market our financial services to small to medium sized businesses and their owners, professionals and executives, and high-net-worth individuals. We have four full service branches located Ellicott City, Columbia, Laurel and western Ellicott City, Maryland. In addition, in 2010, we opened a fifth branch in Anne Arundel County in the Annapolis Exchange Building located in Annapolis, Maryland. This fifth branch provides all services except for cash services (for example, customers cannot cash checks or make cash deposits).

For information about our primary market area, see “Our Business — Business of Howard Bancorp — Location and Market Area.”

The Rights Offering

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Unless otherwise indicated, the number of outstanding shares of common stock presented in this prospectus excludes: 119,375 shares of our common stock issuable upon exercise of outstanding warrants to purchase shares of our common stock; 395,351 shares of our common stock issuable upon the exercise of outstanding options under our stock incentive plans and employment agreements; 267,738 shares of our common stock that are available for future issuance under our stock incentive plans; and 517,354 shares and 603,699 shares, respectively, to be issued to investors pursuant to the private placement based on sales of the minimum and maximum number of shares offered by us hereby.

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Summary Historical Consolidated Financial Information

You should read the summary historical consolidated financial information set forth below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Capitalization” and the consolidated financial statements and the related notes thereto included elsewhere in this prospectus. The summary historical consolidated financial information set forth below at December 31, 2011 and 2010 has been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary historical consolidated financial information set forth below at and for the fiscal years ended December 31, 2009, 2008 and 2007 has been derived from our audited consolidated financial statements that are not included in this prospectus. In the opinion of our management, these amounts contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly our financial position and results of operations for such periods in accordance with generally accepted accounting principles.

		Year ended December 31,
(in dollars, except per share data.)		2011				2010				2009				2008				2007
Operation Statement Data:
Interest income		$	14,640			$	14,255			$	12,426			$	12,288			$	11,236
Interest expense			2,017				2,907				3,744				4,938				5,423
Provision for credit losses			1,164				1,633				3,670				1,150				1,325
Noninterest income			1,137				741				756				515				272
Noninterest expense			10,148				8,707				9,260				6,145				5,716
Federal and state income tax expense (benefit)			1,063				816				(1,304	)			233				(2,427	)
Net income			1,385				933				(2,188	)			337				1,471
Dividends			451				326				274				—				—
Net income (loss) available to common shareholders			934				607				(2,462	)			337				1,471
Per share data and shares outstanding:
Net income per share, basic		$	0.35			$	0.23			$	(0.93	)		$	0.13			$	0.57
Net income per share, diluted		$	0.35			$	0.23			$	(0.93	)		$	0.13			$	0.55
Book value per common share at period end		$	9.12			$	8.73			$	8.44			$	9.40			$	9.19
Average common shares outstanding			2,638,443				2,634,822				2,633,066				2,631,438				2,602,352
Diluted average common shares outstanding			2,638,443				2,634,822				2,633,066				2,640,473				2,684,114
Shares outstanding at period end			2,640,264				2,636,837				2,633,836				2,633,064				2,629,099
Financial Condition data:
Total assets		$	323,082			$	300,219			$	286,296			$	229,811			$	191,033
Loans receivable (gross)			277,177				256,307				252,745				204,090				172,491
Allowance for credit losses			3,433				3,523				3,508				2,659				2,671
Other interest-earning assets			13,655				15,338				20,277				14,017				9,657
Total deposits			262,642				239,314				228,743				182,486				152,119
Borrowings			22,984				31,024				28,458				21,928				13,989
Stockholders’ equity			36,630				29,288				28,514				24,756				24,151
Selected performance ratios:
Return on average assets			0.45%				0.31	%			(0.85) %				0.16	%			0.88	%
Return on average equity			4.36%				3.22	%			(7.28) %				1.38	%			6.54	%
Net interest margin(1)			4.37%				4.01	%			3.54 %				3.68	%			3.64	%
Net interest spread(2)			4.16%				3.77	%			3.06 %				2.94	%			2.63	%
Efficiency ratio(3)			73.75%				72.02	%			98.11 %				78.13	%			93.94	%
Asset quality ratios:
Nonperforming loans to gross loans			2.12%				2.20	%			3.03 %				2.22	%			1.64	%
Allowance for credit losses to loans			1.24%				1.37	%			1.39 %				1.30	%			1.55	%
Allowance for credit losses to nonperforming loans			58.39%				62.36	%			45.86 %				58.64	%			94.54	%
Nonperforming assets to loans and other real estate			2.80%				3.35	%			3.34 %				3.23	%			1.64	%
Capital ratios:
Leverage ratio			11.52%				9.52	%			10.08 %				10.89	%			13.16	%
Tier I risk-based capital ratio			13.14%				11.14	%			11.30 %				12.24	%			13.78	%
Total risk-based capital ratio			14.36%				12.39	%			12.55 %				13.49	%			15.03	%
Average equity to average assets			11.55%				9.60	%			11.69 %				11.67	%			13.51	%

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Emerging Growth Company Status

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”) enacted into law on April 5, 2012, and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not applicable to emerging growth companies. Many of these exemptions are also available to smaller reporting companies like us that have less than $75 million of worldwide common equity held by non-affiliates. Absent unforeseeable changed circumstances, however, we will not take advantage of those exemptions that are available to us solely as a result of our status as an emerging growth company, except with respect to allowable pre-offering communications in any future securities offerings.

In that regard, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to take advantage of the extended transition period for complying with new or revised accounting standards is irrevocable.

We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.0 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three year period.

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RISK FACTORS

Before you invest in our common stock, you should be aware of various risks, including those described below. You should carefully consider these risk factors, together with all of the other information included in this prospectus, before you decide whether to make an investment in our common stock. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial condition and results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Us and Our Business

The recent economic recession could result in increases in our level of nonperforming loans and/or reduce demand for our products and services, which could adversely affect our results of operations.

The recent recession contributed to a rise in unemployment and underemployment, a decline in the value of real estate and other assets and a lack of confidence in the financial markets and the economy both among financial institutions and their customers. Dramatic declines in the housing market over the past several years, with falling home prices and increasing foreclosures, negatively impacted the credit performance of real estate related loans and resulted in poor operating results and significant write-downs of asset values by many financial institutions. Asset write-downs, which initially were focused on asset-backed securities and later spread to other securities and loans, such as commercial and residential real estate loans, caused many financial institutions to seek additional capital, to reduce or eliminate dividends, to merge with larger and stronger institutions and, in some cases, to fail. Reflecting concern about the stability of the financial markets generally and the strength of counterparties, many lenders and institutional investors reduced or ceased providing funding to borrowers, including to other financial institutions, or made such funding more costly. This market disruption and tightening of credit led to a lack of liquidity, an increased level of commercial and consumer delinquencies, lack of customer confidence, increased market volatility, widespread reduction of business activity generally and increased competition for deposits and quality loans among financial institutions. Although the economy has shown signs that it may begin to rebound from the recent recession, economic growth has been slow and inconsistent. The economic pressure on consumers and commercial borrowers and lack of confidence in the economy and financial markets resulting from the recent recession have adversely affected, and continue to affect, the willingness of companies to borrow to fund their future growth and otherwise decrease loan demand, which negatively impacts our business. Market developments may affect consumer confidence levels and may cause adverse changes in payment patterns, causing increases in delinquencies and default rates for financial institutions, which may impact charge-offs and provisions for credit and fraud losses. A continuation or worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on the banking industry and our business.

Unlike many of our larger competitors, the majority of our customers are businesses and individuals located or doing business in our target markets. As a result, we may be more impacted by a local economic downturn or recession than those of larger, more geographically diverse competitors. Furthermore, based on the size and resources of our small and medium size business customers, they may be less able to withstand sustained difficult economic conditions than larger companies with which they compete. Factors that adversely affect the economy in our target markets could reduce our deposit base and demand for our services and products and increase our credit losses. Consequently, we may be adversely affected, potentially materially, by adverse changes in economic conditions in and around our market areas.

The discounts and reserves we have taken against our loan portfolio based on our review of the recent recession’s impact on real estate values in our market areas may be insufficient. Furthermore, the economy could slip back into recession and the recent decline in real estate values could continue, either of which could lead to increased portfolio losses in the future that would materially and adversely affect us.

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Because our loan portfolio consists largely of commercial business and commercial real estate loans, our portfolio carries a higher degree of risk than would a portfolio composed primarily of residential mortgage loans.

Our loan portfolio is made up largely of commercial business loans and commercial real estate loans. These types of loans generally expose a lender to a higher degree of credit risk of non-payment and loss than do residential mortgage loans because of several factors, including dependence on the successful operation of a business or a project for repayment, the collateral securing these loans may not be sold as easily as residential real estate, and loan terms with a balloon payment rather than full amortization over the loan term. In addition, commercial real estate and commercial loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one-to four-family residential mortgage loans. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss compared to an adverse development with respect to a one-to four-family residential mortgage loan. Underwriting and portfolio management activities cannot completely eliminate all risks related to these loans. Any significant failure to pay on time by our customers or a significant default by our customers would materially and adversely affect us.

We make both secured and some unsecured commercial and industrial loans. Unsecured loans generally involve a higher degree of risk of loss than do secured loans because, without collateral, repayment is wholly dependent upon the success of the borrowers’ businesses. Secured commercial and industrial loans are generally collateralized by accounts receivable, inventory, equipment or other assets owned by the borrower and include a personal guaranty of the business owner. Compared to real estate, that type of collateral is more difficult to monitor, its value is harder to ascertain, it may depreciate more rapidly and it may not be as readily saleable if repossessed. Further, commercial and industrial loans generally will be serviced primarily from the operation of the business, which may not be successful, and commercial real estate loans generally will be serviced from income on the properties securing the loans.

Approximately 74% of our loan portfolio as of December 31, 2011 was comprised of commercial business and commercial real estate loans collateralized by real estate. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. The real estate markets in Maryland have deteriorated in the last several years. Accordingly, it may be more difficult for commercial real estate borrowers to repay their loans in a timely manner in the current economic climate, as commercial real estate borrowers’ ability to repay their loans frequently depends on the successful development of their properties. We also may incur losses on commercial real estate loans due to declines in occupancy rates and rental rates, which may decrease property values and may decrease the likelihood that a borrower may find permanent financing alternatives. Currently, the availability of permanent financing alternatives in the market has been reduced and the terms have become more onerous, thereby increasing the re-financing risks inherent in our loan portfolio. Given the continued weaknesses in the commercial real estate market in general, there may be loans where the value of our collateral has been negatively impacted. The weakening of the commercial real estate market may increase the likelihood of default of these loans, which could negatively impact our loan portfolio’s performance and asset quality. If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, we could incur material losses. Any of these events could increase our costs, require management time and attention, and materially and adversely affect us.

Due to the economic recession and slow economic recovery, the real estate market and local economy has deteriorated. While the declines in the value of our real estate collateral securing loans have been reflected in existing reserves, further deterioration in the real estate market or a prolonged economic recovery could adversely affect the value of the properties securing the loans or revenues from borrowers’ businesses, thereby increasing the risk of non-performing loans.

In addition, our commercial borrowers have been impacted by the current economic slowdown as consumers and other businesses have pulled back on spending. Small businesses that make up the majority of our commercial borrowers generally do not have the cash reserves to help cushion them from an economic slowdown to the same extent that large borrowers do and thus may be more heavily impacted by an economic

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downturn. A continued deterioration in the economy and slow economic recovery may also have a negative effect on the ability of our commercial borrowers to make timely repayments of their loans, which could have an adverse impact on our earnings.

Current market conditions include an over-supply of land, lots and finished homes in many markets, including those where we do business. As of December 31, 2011, we had $39.3 million, or 14%, of our total loans in real estate construction and land loans. Of this amount, $17.2 million were land loans, $3.2 million were made to finance residential construction with an identified purchaser while none were made to finance residential construction with no identified purchaser. Substantially all of these loans are located in Maryland. Further, $18.9 million of real estate construction loans were made to finance commercial construction. Construction loans are subject to risks during the construction phase that are not present in standard residential real estate and commercial real estate loans. These risks include:

Real estate construction and land loans also present risks of default in the event of declines in property values or volatility in the real estate market during the construction phase. If we are forced to foreclose on a project prior to completion, we may not be able to recover the entire unpaid portion of the loan, may be required to fund additional amounts to complete a project and may have to hold the property for an indeterminate amount of time. If any of these risks were to occur, it could adversely affect our financial condition, results of operations and cash flows.

The federal banking agencies have issued guidance regarding high concentrations of commercial real estate loans within bank loan portfolios. The guidance requires financial institutions that exceed certain levels of commercial real estate lending compared with their total capital to maintain heightened risk management practices that address the following key elements: including board and management oversight and strategic planning, portfolio management, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing, and maintenance of increased capital levels as needed to support the level of commercial real estate lending. If there is any deterioration in our commercial real estate or real estate construction and land portfolios or if our regulators conclude that we have not implemented appropriate risk management practices, it could adversely affect our business and result in a requirement of increased capital levels, and such capital may not be available at that time.

If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings would decrease.

We maintain an allowance for loan losses that we believe is adequate for absorbing any potential losses in our loan portfolio. Management, through a periodic review and consideration of our loan portfolio, determines the amount of the allowance for loan losses. We cannot, however, predict with certainty the amount of probable losses in our portfolio or be sure that our allowance will be adequate in the future. If management’s assumptions and judgments prove to be incorrect and the allowance for loan losses is inadequate to absorb future losses, our losses will increase and our earnings will suffer.

In particular, it is more difficult to estimate loan losses for those types of loans — commercial and commercial real estate — that constitute the majority of our portfolio as compared to, for example, residential mortgage loans. Also, because these types of loans tend to have large loan balances, a loss on a single loan could have a significant adverse effect on our operations.

In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and evaluate economic conditions. If our assumptions are incorrect, our allowance for loan losses may not be sufficient to cover future incurred losses in our loan portfolio, resulting in additions to the allowance and a corresponding decrease to earnings. Howard Bank’s allowance for loan losses was 1.24% of total loans and 58.39% of nonperforming assets at December 31, 2011, and material additions to the

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allowance could materially decrease our net income. If delinquencies and defaults continue to increase, we may be required to further increase our provision for loan losses.

In addition, bank regulators periodically review our allowance for loan losses and may require an increase in the provision for loan losses or further loan charge-offs to the allowance for loan losses. Any increase in the allowance for loan losses or loan charge-offs might have a material adverse effect on our financial condition and results of operations.

Because our loan portfolio includes residential real estate loans, our earnings are sensitive to the credit risks associated with these types of loans.

As of December 31, 2011, we had a total of $34.5 million in outstanding residential real estate loans, including construction and land loans, comprising 12.5% of our total loan portfolio. While residential real estate loans are more diversified than loans to commercial borrowers, a systematic decline in the economic health of a community, such as major job loss, could materially and adversely affect us. Also, a continuing decline in the value of residential real estate that serves as our secondary source of repayment could also materially and adversely affect us.

Downgrade of U.S. credit rating and uncertain political, credit and financial market conditions may reduce our net income, capital levels, liquidity and increase our future borrowing costs.

We are invested in U.S. government agency securities and residential mortgage-backed securities issued or guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae. As a result of the uncertain domestic political, credit and financial market conditions, investments in these types of financial instruments pose risks arising from liquidity and credit concerns. On August 5, 2011, Standard and Poor’s downgraded the United States credit rating from its AAA rating to AA+. On August 8, 2011, Standard & Poor’s also downgraded the long-term credit ratings of U.S. government-sponsored enterprises. The impact of this or any further downgrades to the U.S. government’s sovereign credit rating, or its perceived creditworthiness, and the impact of the current crisis in Europe with respect to the ability of certain European Union countries to continue to service their sovereign debt obligations is inherently unpredictable and could adversely affect the U.S. and global financial markets and economic conditions. These actions and events initially have had an adverse effect on financial markets and although we are unable to predict the longer-term impact on such markets and the participants therein, it may be material and adverse. These events could affect the liquidity or valuation of our current portfolio of such investment securities in the future, and could result in our counterparties requiring additional collateral for our borrowings. Further, unless and until the current United States political, credit and financial market conditions have been sufficiently resolved, it may increase our future borrowing costs.

Our profitability depends on interest rates, and changes in interest rates could have an adverse impact on our results of operations and financial condition.

Our results of operations will depend to a large extent on our “net interest income,” which is the difference between the interest expense incurred in connection with our interest-bearing liabilities, such as interest on deposit accounts, and the interest income received from our interest-earning assets, such as loans and investment securities. Changes in interest rates can increase or decrease our net interest income, because different types of assets and liabilities may react differently, and at different times, to market interest rate changes. When interest bearing liabilities mature or reprice more quickly than interest earning assets in a period, an increase in interest rates could reduce net interest income. Similarly, when interest earning assets mature or reprice more quickly than interest bearing liabilities, falling interest rates could reduce net interest income. Additionally, an increase in interest rates may, among other things, reduce the demand for loans and our ability to originate loans and decrease loan repayment rates. A decrease in the general level of interest rates may affect us through, among other things, increased prepayments on our loan and mortgage-backed securities portfolios and increased competition for deposits. Accordingly, changes in the level of market interest rates affect our net yield on interest earning assets, loan origination volume, loan and mortgage-backed securities portfolios, and our overall results. Fluctuations in interest rates are highly sensitive to many factors that are not predictable or controllable. Therefore, while we attempt to manage our risk from changes in market interest rates by adjusting the rates, maturity, repricing, and balances of the different types of interest-earning assets and interest bearing liabilities, we might not be able to maintain a consistent positive spread

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between the interest that we receive and the interest that we pay. As a result, a rapid increase or decrease in interest rates could have an adverse effect on our net interest margin and results of operations.

Monetary policy and general economic conditions will influence our results of operations.

Governmental economic and monetary policy will influence our results of operations. The rates of interest payable on deposits and chargeable on loans are affected by fiscal policy as determined by various governmental and regulatory authorities, in particular the Federal Reserve, as well as by national, state and local economic conditions. In addition, adverse general economic conditions may impair the ability of our borrowers to repay loans.

Because the Bank serves a limited market area, we could be more adversely affected by an economic downturn in our market area than our larger competitors that are more geographically diverse.

Our current primary market area consists of Howard County, Maryland and Anne Arundel County, Maryland, and our secondary market area includes the Maryland counties of Baltimore, Carroll and Harford and Baltimore City. Broad geographic diversification is not currently part of our community bank focus. As a result, if our market areas suffer an economic downturn, our business and financial condition may be more severely affected by such circumstances. Our larger bank competitors serve more geographically diverse market areas, parts of which may not be affected by the same economic conditions that may exist in our market areas.

The small to medium-sized businesses that the Bank lends to may have fewer resources to weather a downturn in the economy, which may impair a borrower’s ability to repay a loan to the Bank that could materially harm our operating results.

The Bank targets its business development and marketing strategy primarily to serve the banking and financial services needs of small to medium-sized businesses. These small to medium-sized businesses frequently have smaller market share than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete and may experience significant volatility in operating results. Any one or more of these factors may impair the borrower’s ability to repay a loan. In addition, the success of a small to medium-sized business often depends on the management talents and efforts of one or two persons or a small group of persons, and the death, disability or resignation of one or more of these persons could have a material adverse impact on the business and its ability to repay a loan. Economic downturns and other events that negatively impact our market areas could cause the Bank to incur substantial credit losses that could negatively affect our results of operations and financial condition.

We depend heavily on four key employees, Mary Ann Scully, Paul G. Brown, Charles E. Schwabe and George C. Coffman, to continue the implementation of our long-term business strategy and the loss of their services could disrupt our operations and result in reduced earnings.

Ms. Scully is our President and Chief Executive Officer, Mr. Brown is an Executive Vice President and our Chief Lending Officer, Chief Client Services Officer and Chief Credit Risk Officer, Mr. Schwabe is an Executive Vice President and our Secretary, Chief Administrative Officer, Chief Information Officer and Chief Operational Risk Officer, and Mr. Coffman is an Executive Vice President and our Chief Financial Officer. We believe that our continued growth and future success will depend in large part on the skills of our senior management team. We believe our senior management team possesses valuable knowledge about and experience in the banking industry and that their knowledge and relationships would be difficult to replicate. We have entered into an employment agreement with each of Ms. Scully, Mr. Brown, Mr. Schwabe and Mr. Coffman and acquired key-person life insurance on each such executive officer, but the existence of such agreements and insurance does not assure that we will be able to retain their services or recover losses associated with the loss of their services. The unexpected loss of the services of Ms. Scully, Mr. Brown, Mr. Schwabe and Mr. Coffman could have a material adverse effect on our business, operations, financial condition and operating results, as well as the value of our common stock.

Regulatory changes allowing the payment of interest on commercial accounts may negatively impact our core deposit strategy and our net interest income.

Our current core deposit strategy includes continuing to increase our noninterest bearing commercial accounts in order to lower our cost of funds. Recent changes effected by the Dodd-Frank Act, however, permit the payment of interest on such accounts, which was previously prohibited. If our competitors begin paying

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interest on commercial accounts, this may increase competition from other financial institutions for these deposits and negatively affect our ability to continue to increase commercial deposit accounts, may require us to consider paying interest on such accounts, or may otherwise require us to revise our core deposit strategy, any of which could increase our interest expense and therefore our cost of funds and, as a result, decrease our net interest income which would adversely impact our results of operations.

Our growth strategy may not be successful, may be dilutive and may have other adverse consequences.

As previously noted, a key component of our growth strategy is to pursue acquisitions of other financial institutions or branches of other financial institutions. As consolidation of the banking industry continues, the competition for suitable acquisition candidates may increase. We compete with other banking companies for acquisition opportunities, and there are a limited number of candidates that meet our acquisition criteria. Consequently, we may not be able to identify suitable candidates for acquisitions. If we are unable to locate suitable acquisition candidates willing to sell on terms acceptable to us, our net income could decline and we would be required to find other methods to grow our business. We may also open additional branches organically and expand into new markets or offer new products and services. These activities would involve a number of risks, including:

In addition, we may not be able to integrate successfully or operate profitably any financial institutions we may acquire. We may experience disruption and incur unexpected expenses in integrating acquisitions. Any acquisitions we do make may not enhance our cash flows, business, financial condition, results of operations or prospects and may have an adverse effect on our results of operations, particularly during periods in which the acquisitions are being integrated into our operations.

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Also, the costs to lease and start up new branch facilities or to acquire existing financial institutions or branches, and the additional costs to operate these facilities, may increase our noninterest expense. It also may be difficult to adequately and profitably manage the anticipated growth from the new branches. We can provide no assurance that any new branch sites will successfully attract a sufficient level of deposits and other banking business to offset their operating expenses.

Further, we plan to make significant investment in our infrastructure in the immediate future. We plan to relocate and expand our fifth branch during the first half of 2012. We also currently plan to open additional branches in the counties where we now operate and contiguous counties over the next few years, although we have no definitive plans or agreements in place with respect to any such additional branches. We anticipate that this will have the short-term effect of, at least temporarily, increasing our expenses at a faster rate than revenue growth, which will have an adverse effect on net income.

If we grow too quickly and are not able to control costs and maintain asset quality, growth could materially and adversely affect our financial condition and results of operations. Further, we may not be successful in our growth strategy, which would negatively impact our financial condition and results of operations.

Our need to comply with extensive and complex governmental regulation could have an adverse effect on our business and our growth strategy, and we may be adversely affected by changes in laws and regulations.

The banking industry is subject to extensive regulation by state and federal banking authorities. Many of these regulations are intended to protect depositors, the public or the FDIC insurance funds, not stockholders. Regulatory requirements affect our lending practices, capital structure, investment practices, dividend policy and many other aspects of our business. These requirements may constrain our operations, and changes in regulations could adversely affect us. The burden imposed by these federal and state regulations may place banks in general, and Howard Bank specifically, at a competitive disadvantage compared to less regulated competitors. In addition, the cost of compliance with regulatory requirements could adversely affect our ability to operate profitably or increase profitability. See “Supervision and Regulation” for more information about applicable banking laws and regulations.

Further, regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, classification of our assets and determination of the level of our allowance for loan losses. If regulators require Howard Bank to charge-off loans or increase its allowance for loan losses, our earnings would suffer. Any change in such regulation and oversight, whether in the form of regulatory policy, regulation, legislation or supervisory action, may have a material impact on our operations. For a further discussion, see “Supervision and Regulation.”

In addition, because federal regulation of financial institutions changes regularly and is the subject of constant legislative debate, we cannot forecast how federal regulation of financial institutions may change in the future and impact our operations. Changes in regulation and oversight, including in the form of changes to statutes, regulations or regulatory policies or changes in interpretation or implementation of statutes, regulations or policies, could affect the service and products we offer, increase our operating expenses, increase compliance challenges and otherwise adversely impact our financial performance and condition. In addition, the burden imposed by these federal and state regulations may place banks in general, and Howard Bank specifically, at a competitive disadvantage compared to less regulated competitors.

Further, as a public company, we will incur significant legal, accounting, insurance and other expenses. Compliance with other rules of the United States Securities and Exchange Commission and the rules of The NASDAQ Stock Market LLC, will increase our legal and financial compliance costs and make some activities more time consuming and costly.

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The dividend rate on the Series AA Preferred Stock we issued in connection with the SBLF will fluctuate initially from 1% to 5% based on our level of “Qualified Small Business Lending,” or “QSBL,” as compared to our “baseline” level. The cost of the capital we received from the Series AA Preferred Stock will increase if the level of our “QSBL” as of September 30, 2013 does not represent an increase from our “baseline” level. This cost also will increase if we have not redeemed the Series AA Preferred Stock within 4.5 years of the closing of the SBLF transaction.

The per annum dividend rate on the Series AA Preferred Stock can fluctuate on a quarterly basis during the first ten quarters during which the Series AA Preferred Stock is outstanding, based upon changes in the amount of qualified small business lending (“QSBL”), as defined in the Supplemental Reports related to the SBLF transaction, from a “baseline” level (“QSBL Baseline”). The dividend rate for the initial dividend period was 5.0% per annum. For the second dividend period through the ninth dividend period, the annual dividend rate may be adjusted to between 1% and 5%, to reflect the amount of percentage change in the Bank’s level of QSBL from the QSBL Baseline to the level as of the end of the second quarter preceding the dividend period in question. For the tenth dividend period through 4.5 years after the closing of the SBLF transaction, the annual dividend rate will be fixed at between 1% and 5%, based upon the percentage increase in QSBL from the QSBL Baseline to the level as of the end of the ninth dividend period (i.e., as of September 30, 2013) however, if there is no increase in QSBL from the QSBL Baseline to the level as of the end of the ninth dividend period (or if QSBL has decreased during that time period), the dividend rate will be fixed at 7%. Further, the potential dividend rate reduction in any period is limited, such that the reduction will not apply to any Series AA Preferred Stock proceeds that exceed the dollar amount of the increase in QSBL for that period as compared to the QSBL Baseline.

In addition, if our QSBL is not above the QSBL Baseline at the end of the eighth dividend period, because of our participation in TARP Capital Purchase Program, we must also pay a lending incentive fee of 2% per annum (payable quarterly), calculated based on the liquidation value of the outstanding Series AA Preferred Stock as of the end of that quarter, beginning with dividend payment dates on or after April 1, 2014 and ending on April 1, 2016. After 4.5 years from the closing of the SBLF transaction, the annual dividend rate will be fixed at 9%, regardless of the level of QSBL. Depending on our financial condition at the time, any such increases in the dividend rate could have a material negative effect on our liquidity.

Failure to pay dividends on our Series AA Preferred Stock may have negative consequences, including external involvement in our board of directors.

If dividends on the Series AA Preferred Stock are not paid in full for six quarterly dividend periods, whether or not consecutive, and if the aggregate liquidation preference amount of the then-outstanding shares of Series AA Preferred Stock is at least $25.0 million, the total number of positions on our board of directors will automatically increase by two and the holders of the Series AA Preferred Stock, acting as a single class, will have the right to elect two individuals to serve in the new director positions. This right and the terms of such directors will end when we have paid full dividends for at least four consecutive quarterly dividend periods. If full dividends have not been paid on the Series AA Preferred Stock for five or more quarterly dividend periods, whether or not consecutive, we must invite a representative selected by the holders of a majority of the outstanding shares of Series AA Preferred Stock, voting as a single class, to attend all meetings of our board of directors in a nonvoting observer capacity. Any such representative would not be obligated to attend any board meeting to which he or she is invited, and this right will end when we have paid full dividends for at least four consecutive dividend periods.

Our preferred shares impact net income available to our common stockholders and our earnings per share.

The dividends declared on the Series AA Preferred Stock reduce net income available to common shareholders and our earnings per common share. The Series AA Preferred Stock will also receive preferential treatment in the event of liquidation, dissolution or winding up of the Company.

The recently enacted Dodd-Frank Act may adversely impact our results of operations, liquidity or financial condition.

On July 21, 2010, President Obama signed into law the Dodd-Frank Act. The Dodd-Frank Act represents a comprehensive overhaul of the U.S. financial services industry. Among other things, the Dodd-Frank Act

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established the new federal Consumer Financial Protection Bureau (the “CFPB”), includes provisions that allow financial institutions to pay interest on business checking accounts, broadens the base for FDIC insurance assessments, includes new restrictions on how mortgage brokers and loan originators may be compensated, includes additional mortgage origination provisions including risk retention, and adds and modifies many other regulations applicable to insured depository institutions. The Dodd-Frank Act requires the CFPB and other federal agencies to implement many new and significant rules and regulations to implement its various provisions, and the full impact of the Dodd-Frank Act on our business will not be known for years until regulations implementing the statute are adopted and implemented. As a result, we cannot at this time predict the extent to which the Dodd-Frank Act will impact our business, operations or financial condition. However, compliance with these new laws and regulations may require us to make changes to our business and operations, impose on us more stringent capital, liquidity and leverage requirements or otherwise adversely affect our business. These changes will also likely result in additional costs and a diversion of management’s time from other business activities. Any of these consequences, as well as the failure to comply with new requirements or any future changes in laws or regulations, may adversely impact our results of operations, liquidity or financial condition. For a more detailed description of the Dodd-Frank Act, see “Supervision and Regulation — The Dodd-Frank Act.”

Federal and state banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions to which we are or become subject as a result of such examinations may adversely affect us.

State and federal banking agencies, including the FDIC and the Maryland Office of the Commissioner of Financial Regulation, periodically conduct examinations of our business, including compliance with laws and regulations. If, as a result of an examination, a state or federal banking agency were to determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of any of our operations had become unsatisfactory, or that we or our management was in violation of any law or regulation, it may take a number of different remedial actions as it deems appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to assess civil monetary penalties against our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate the Bank’s deposit insurance. If we become subject to such regulatory actions, our business, results of operations and reputation may be negatively impacted.

Many of our new activities and expansion plans require regulatory approvals, and failure to obtain them may restrict our growth.

We intend to complement and expand our business by pursuing strategic acquisitions of banks and other financial institutions. We must generally receive regulatory approval before we can acquire an institution or business. Such regulatory approvals may not be granted on terms that are acceptable to us, or at all. We may also be required to sell branches as a condition to receiving regulatory approval, which condition may not be acceptable to us or, if acceptable to us, may reduce the benefit of any acquisition.

In addition to the acquisition of existing financial institutions, as opportunities arise, we plan to continue de novo branching as a part of our internal growth strategy and possibly enter into new markets through de novo branching. De novo branching and any acquisition carries with it numerous risks, including the inability to obtain all required regulatory approvals. The failure to obtain these regulatory approvals for potential future strategic acquisitions and de novo branches may impact our business plans and restrict our growth.

We may be required to raise additional capital in the future, but that capital may not be available when it is needed on attractive terms, or at all.

We are required by regulatory authorities to maintain adequate levels of capital to support our operations. Our capital requirements for the foreseeable future are currently satisfied. We may at some point, however, need to raise additional capital to support our continued growth. Our ability to raise additional capital, if needed, will depend in part on conditions in the capital markets at that time, which are outside our control. Accordingly, we cannot assure you of our ability to raise additional capital, if needed, on terms acceptable to

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us. If we cannot raise additional capital when needed, our ability to further expand our operations could be materially impaired. In addition, if we decide to raise additional equity capital, your interest in Howard Bancorp could be diluted. Furthermore, if we raise additional capital through the issuance of debt securities, there can be no assurance that sufficient revenues or cash flow will exist to service such debt.

The market value of our investments could negatively impact stockholders’ equity.

All of our securities investment portfolio as of December 31, 2011 has been designated as available for sale pursuant to Statement of Financial Accounting Standards (SFAS) No. 115, relating to accounting for investments. SFAS 115 requires that unrealized gains and losses in the estimated value of the available for sale portfolio be “marked to market” and reflected as a separate item in stockholders’ equity, net of tax. Also, at December 31, 2011, we maintained approximately 4.1% of total assets in securities available for sale. Although our securities investment portfolio currently has an average maturity of approximately 1.47 years, if the market value of the investment portfolio declines, this could cause a corresponding decline in stockholders’ equity.

Our lending limit may limit our growth.

We are limited in the amount we can loan to a single borrower by the amount of our capital. Generally, under current law, we may lend up to 15% of our unimpaired capital and surplus to any one borrower. Based upon our current capital levels, the amount we may lend is significantly less than that of many of our competitors and may discourage potential borrowers who have credit needs in excess of our lending limit from doing business with us. We accommodate larger loans by selling participations in those loans to other financial institutions, but this strategy may not always be available.

Because our stock is not guaranteed or insured by any governmental agency, you could lose your entire investment.

The shares of common stock offered in the offering are not savings accounts or deposits, are not insured or guaranteed by the FDIC or any other governmental agency, and involve investment risk, including the possible loss of your entire investment.

We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.

We are a community bank, and our reputation is one of the most valuable components of our business. As such, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and associates. If our reputation is negatively affected, by the actions of our employees or otherwise, our business and, therefore, our operating results may be materially adversely affected.

We are subject to security and operational risks relating to our use of technology that could damage our reputation and our business.

Security breaches in our Internet banking activities or other communication and information systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations. We rely on standard Internet and other security systems to provide the security and authentication necessary to effect secure transmission of data. These precautions may not protect our systems from compromises or breaches of our security measures.

Increased and/or special FDIC assessments will hurt our earnings.

The recent economic recession has caused a high level of bank failures, which has dramatically increased FDIC resolution costs and led to a significant reduction in the balance of the Deposit Insurance Fund. As a result, the FDIC has significantly increased the initial base assessment rates paid by financial institutions for deposit insurance. Increases in the base assessment rate have increased our deposit insurance costs and negatively impacted our earnings. In addition, in May 2009, the FDIC imposed a special assessment on all insured institutions. Our special assessment, which was reflected in earnings for the quarter ended June 30,

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2009, was $115,000. In lieu of imposing an additional special assessment, the FDIC required all institutions to prepay their assessments for the fourth quarter of 2009 and all of 2010, 2011 and 2012. Additional increases in the base assessment rate or special assessments would negatively impact our earnings.

Strong competition within our market area may limit our growth and profitability.

Competition in the banking and financial services industry is intense. In our market area, we compete with, among others, commercial banks, savings institutions, mortgage brokerage firms, credit unions, mutual funds, and insurance companies operating locally and elsewhere. There are also a number of smaller community-based banks that pursue similar operating strategies as Howard Bank. In addition, some of our competitors have recently offered loans with lower fixed rates and loans on more attractive terms than we have been willing to offer. Our continued profitability depends upon our continued ability to successfully compete in our market area. The greater resources and deposit and loan products offered by our competition may limit our ability to increase our interest earning assets. See “Our Business — Business of Howard Bank — Competition” for more information about competition in our market area.

The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. Increased competition among financial services companies due to the recent consolidation of certain competing financial institutions may adversely affect our ability to market our products and services. Also, technology has lowered barriers to entry and made it possible for banks to compete in our market without a retail footprint by offering competitive rates, as well as non-banks to offer products and services traditionally provided by banks. Additionally, due to their size, many competitors may offer a broader range of products and services as well as better pricing for certain products and services than we can, which could affect our ability to grow and remain profitable on a long-term basis. Our profitability depends upon our ability to successfully compete in our market area. If we must raise interest rates paid on deposits or lower interest rates charged on our loans, our net interest margin and profitability could be adversely affected.

Anti-takeover provisions in our corporate documents and in Maryland corporate law may make it difficult and expensive to remove current management.

Anti-takeover provisions in our corporate documents and in Maryland law may render the removal of our existing board of directors and management more difficult. Consequently, it may be difficult and expensive for our stockholders to remove current management, even if current management is not performing adequately. See “Description of Capital Stock” for a description of anti-takeover provisions in our corporate documents and under Maryland law.

Our articles of incorporation limit the liability of our directors and officers.

Our articles of incorporation provide that, to the full extent permitted by Maryland law, no director or officer of Howard Bancorp will be liable to us or our stockholders for money damages. This limitation could impair the ability of us and our stockholders to recover for damages resulting from acts or omissions of our directors and officers.

Risks Related to an Investment in Our Common Stock

Future dividend payments and common stock repurchases are subject to certain restrictions by the terms of the Secretary of the Treasury’s equity investment in us.

Under the terms of the SBLF, for so long as any preferred stock issued under the SBLF remains outstanding, we are prohibited from making a dividend payment or share repurchase on our common stock if we do not remain current on our preferred stock dividend payments or, after the payment or repurchase, our Tier 1 capital would not be at least 90% of the amount existing at the time immediately after September 22, 2011, excluding any subsequent net charge-offs and partial repayments of the SBLF funding. After two years, and until the tenth anniversary of the investment date, this 90% limitation will decrease by a dollar amount equal to 10% of the SBLF funding for every 1% increase in QSBL that we have achieved over the QSBL Baseline. These restrictions will no longer apply to us after we have repaid the SBLF funding in full.

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We do not intend to pay cash dividends in the foreseeable future, and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We expect that we will retain all earnings, if any, for operating capital, and we do not expect to pay any dividends in the near future. In addition, the payment of cash dividends may be made only if we are in compliance with certain applicable regulatory requirements governing the payment of cash dividends. Our ability to declare and pay cash dividends is dependent upon, among other things, restrictions imposed by the reserve and capital requirements of Maryland and federal law and regulations, our income and financial condition, tax considerations and general business conditions. Even if we have earnings in an amount sufficient to pay cash dividends, the board of directors may decide to retain earnings for the purpose of financing growth. We cannot assure you that cash dividends on our common stock will ever be paid. You should not purchase common stock in the offering if you need or desire dividend income from this investment. See “Market for Common Stock, Dividend Policy and Related Stockholder Matters.”

We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which would result in dilution of stockholders’ interests in Howard Bancorp and could depress our stock price.

Our articles of incorporation currently authorize an aggregate of 10,000,000 shares of common stock, 2,640,264 of which are outstanding as of the date of this prospectus, 119,375 are reserved for issuance pursuant to outstanding warrants, 395,531 of which are reserved for issuance pursuant to outstanding options granted under our stock incentive plans and employment agreements, 267,738 are reserved for issuance pursuant to future grants under our stock incentive plans, up to 603,699 of which will be issued pursuant to the private placement and 1,150,891 of which are offered by us hereby, and 5,000,000 shares of preferred stock. Our board of directors has the authority to amend our articles of incorporation, without stockholder approval, to increase or decrease the aggregate number of shares of stock or the number of shares of any class of stock that we have the authority to issue. The board of directors is further authorized to issue additional shares of common stock and preferred stock, at such times and for such consideration as it may determine, without stockholder action. The ability of the board of directors to increase our authorized shares of capital stock, and the existence of authorized but unissued shares of common stock and preferred stock, could have the effect of rendering more difficult or discouraging hostile takeover attempts, or of facilitating a negotiated acquisition and could affect the market for and price of our common stock. Because our common stockholders do not have preemptive rights to purchase shares of our capital stock (that is, the right to purchase a stockholder’s pro rata share of any securities issued by Howard Bancorp), any future offering of capital stock could have a dilutive effect on holders of our common stock. See “Description of Capital Stock.”

There is a limited trading market in our common stock, which will hinder your ability to sell our common stock and may lower the market price of the stock.

Although there are market makers in our common stock, our common stock is traded only sporadically. An active trading market for shares of our common stock may never develop or be sustained following this offering. Persons purchasing shares in the offering may not be able to sell their shares when they desire if a liquid trading market does not develop or sell them at a price equal to or above the subscription price even if a liquid trading market does develop. This limited trading market for our common stock also may reduce the market value of our common stock. Before purchasing you should consider the limited trading market for our shares and be financially prepared and able to hold your shares for an indefinite period. See “Market for Common Stock, Dividend Policy and Related Stockholder Matters.”

While our common stock has been approved for listing on The NASDAQ Stock Market in connection with the offering, we must still meet the requirements for listing upon closure of the offering and therefore we cannot assure you that our stock will so be listed. If our common stock is not listed on NASDAQ, it will continue to be quoted on the Over-the-Counter Bulletin Board. The Over-the-Counter Bulletin Board is a market with less liquidity and fewer buyers and sellers than The NASDAQ Stock Market. If an active trading market for our stock does not develop, you may not be able to sell your shares in an efficient manner and the sale of a large number of shares at one time could temporarily depress the market price. The limited trading market could also result in a wider spread between the “bid” and “ask” prices for the stock. When there is a wide spread between the bid and asked price, the price at which you may be able to sell our common stock may be significantly lower than the price at which you could buy it at that time. For these reasons, our

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common stock should not be viewed as a short-term investment. See “Market for the Common Stock, Dividend Policy and Related Stockholder Matters.” Further, we cannot assure you that an active and liquid market will develop in our common stock even if the common stock is listed on The NASDAQ Stock Market.

Our share price will fluctuate, which may make it difficult for you to sell your common stock.

The market price of our common stock could be subject to significant fluctuations due to changes in sentiment in the market regarding our operations or business prospects. As a result, the market price of our common stock may be below the price you want to sell it at if and when you decide to sell your shares of common stock. Factors that may affect market sentiment include:

Since 2008 and continuing through the present, the business environment for financial services firms has been extremely challenging. During this period many publicly traded financial services companies have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance or prospects of such companies. We may experience market fluctuations that are not directly related to our operating performance but are influenced by the market’s perception of the state of the financial services industry in general and, in particular, the market’s assessment of general credit quality conditions, including default and foreclosure rates in the industry.

While the U.S. and other governments continue efforts to restore confidence in financial markets and promote economic growth, further market and economic turmoil could still occur in the near- or long-term, negatively affecting our business, financial condition and results of operations, as well as the price, trading volume and volatility of our common stock.

Our stock value may suffer from anti-takeover provisions that may impede potential takeovers.

Provisions in our corporate documents and in Maryland corporate law may make it difficult and expensive for a potential acquiror to pursue a tender offer, change in control or takeover attempt of us. As a result, you may not have an opportunity to participate in such a transaction, even if the potential acquirer were to offer a premium over the then prevailing market price of our stock. See “Description of Capital Stock” for a description of anti-takeover provisions in our corporate documents and under Maryland law.

We will need to implement additional finance and accounting systems, procedures and controls in order to satisfy our new public company reporting requirements, which will increase our operating costs.

Upon completion of the offering, we will become a public reporting company. The federal securities laws and regulations of the Securities and Exchange Commission require that we file annual, quarterly and current reports, and that we maintain effective disclosure controls and procedures and internal control over financial reporting. We expect that the obligations of being a public company, including substantial public reporting obligations, will require significant expenditures and place additional demands on our management team. These obligations will increase our operating expenses and could divert management’s attention from our banking operations.

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Compliance with the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the Securities and Exchange Commission will require us to certify the adequacy of our disclosure control and procedures and internal control over financial reporting, which could require us to upgrade our systems and/or hire additional staff, which will increase our operating costs.

Risks Related to the Offering Generally

We may not sell all or even a substantial amount of the shares we are offering hereby, the private placement may not be consummated and the closing of the offering is not dependent on the closing of the private placement, which means that if you subscribe for shares of common stock in the offering, you may acquire securities in our company even though the proceeds raised in the offering alone may be insufficient to meet our objectives.

Our current funds are insufficient to fully implement our current business plan, particularly with respect to growth and future acquisitions, as discussed elsewhere in this prospectus, and we will still have insufficient funds in this regard even if we receive subscriptions for the minimum amount in the offering. Completion of the offering is conditioned solely on our receiving subscriptions for a minimum of $2.6 million (356,165 shares) in the offering, and your exercise of subscription rights in the rights offering or a subscription for shares in the public offer pursuant is irrevocable. Closing of the private placement (i.e. when we will receive the proceeds for the shares the private placement investors have committed to purchase in the private placement) is subject to various closing conditions including that we receive aggregate gross proceeds of at least $6.0 million in this offering and the private placement (including the amounts to be purchased by the investors in the private placement), which requires that we raise at least $2.6 million in this offering. Therefore, if you commit to purchase shares in the offering, but we are unable to close the private placement or sell a significant number of shares in the offering, you may be investing in a company that does not, at present, have the funds to implement its business strategy, including future growth and entry into acquisitions in the future. In such case, we may be required to try to raise additional capital in the future. See “— Risks Related to Us and our Business — We may be required to raise additional capital in the future, but that capital may not be available when it is needed on attractive terms, or at all.”

The offering is not underwritten on a firm commitment basis.

While we have retained Griffin Financial Group to assist us in connection with sales of the common stock in the public offer, Griffin Financial Group will act on a “best efforts” basis only, and will offer and sell the shares to investors who are not existing stockholders and who have been identified by our management and directors, as well as to others. Its services to us in this connection cannot be construed as any assurance that the public offer will be successful. Because the offering is not underwritten by a broker-dealer on a firm commitment basis, there can be no assurance that all, or even a substantial number, of the shares of common stock we are offering hereby will be sold. If we do not sell all of the shares we are offering hereby, we could be required to raise additional capital earlier than we would if we did sell all of the shares we are so offering.

The subscription price may not be indicative of the future price of our common stock.

Because there is currently no active trading market for our common stock, our board of directors established the subscription price for the offering based on factors it considered appropriate.

We established an offering committee, comprised of members of our board of directors, the majority of whom are independent directors. The price of the shares offered in the rights offering and the public offer was set at the price of the shares of common stock offered and sold in the private placement, was determined by the offering committee after consultation with Griffin Financial Group and arms-length negotiation with the investors in the private placement, and is based on a variety of factors. The subscription price of $7.30 per share represents 80% of our reported tangible common book value per share at December 31, 2011 and may or may not be considered the fair value or intrinsic value of our common stock to be offered in the offering.

Also, there is no firm commitment underwriter involved in the offering. When a firm commitment underwriter is involved, the subscription price typically reflects market forces at work because the underwriter works with the issuer to price the offering, based on factors that include demand for the shares from securities dealers and the underwriter’s analysis of the issuer’s financial performance. Although imperfect and expensive, this process provides some protection that the subscription price is the market price.

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If you purchase shares in the offering, you may not be able to sell them at or above the subscription price. The trading price of the common stock will be determined by the marketplace, and will be influenced by many factors outside of our control, including prevailing interest rates, investor perceptions, securities analyst research reports and general industry, geopolitical and economic conditions. Publicly traded stocks, including stocks of financial institutions, often experience substantial market price volatility. These market fluctuations might not be related to the operating performance of particular companies whose shares are traded. Accordingly, we cannot assure you that if you purchase common stock in the offering you will later be able to sell it at or above the subscription price. See “The Rights Offering — Determination of Subscription Price.”

We will have broad discretion over the use of the net proceeds of the offering and may apply the proceeds of this offering to uses that do not improve our operating results or increase the value of your investment.

Although this prospectus generally describes the use of the proceeds of the offering, we will have broad discretion in determining the specific timing and use of the offering proceeds. Until utilized, we anticipate that we will invest the net offering proceeds in liquid assets. We have not made a specific allocation for the use of the net proceeds. Therefore, we will have broad discretion as to the timing and specific application of the net proceeds, and investors may not have the opportunity to evaluate the economic, financial and other relevant information that we will use in applying the net proceeds, and we may spend the proceeds in a manner that stockholders do not deem desirable. Our application of the net proceeds of the offering may not ultimately improve our operating results or increase the value of your investment.

We can decide to not accept all or a part of your subscription pursuant to the exercise of over-subscription options and in the public offer. Until that decision is made, you will not have use of your funds.

With respect to the exercise of over-subscription options in the rights offering, and in the public offer, to the extent shares remain available after expiration of the rights offering, we will have broad and sole discretion in determining which subscriptions to accept, in whole or in part. In deciding which subscriptions to accept, we may consider, among other things, the order in which subscriptions are received, a subscriber’s potential to do business with, or to direct business to, the Bank and legal or regulatory restrictions. As a result, a subscriber cannot be assured of receiving any shares subscribed for pursuant to the exercise of over-subscription options or in the public offer of the unsubscribed shares, and may forego use of all or a portion of such subscriber’s funds pending allocation of available shares.

You will not be able to sell the shares you buy in the offering until your account is credited with the shares of common stock.

If you purchase shares of our common stock in the rights offering by submitting a rights certificate and payment, we will issue to you in book entry form the shares of common stock you purchase in the rights offering upon closing of the rights offering, which we expect will take place concurrently with the closing of the public offer, assuming in each case we receive aggregate subscriptions for at least 356,165 shares of common stock in the offering, and the private placement. If your shares are held by a custodian bank, broker, dealer or other nominee and you purchase shares of our common stock in the rights offering, your account with your nominee will be credited with the shares of common stock you purchased in the rights offering upon closing of the rights offering. Similarly, if you purchase shares in the public offer, we will issue your shares in book entry form or credit your account with your nominee at closing of the public offer, which will anticipate will be approximately one week after expiration of the public offer. Until the shares of common stock you purchase in the offering are issued to you in book entry form or credited to your account, you may not be able to sell your shares.

Because our securities are not guaranteed or insured by any governmental agency, you could lose your entire investment.

The shares offered in this offering are not savings accounts or deposits, are not insured or guaranteed by the FDIC or any other governmental agency, and involve investment risk, including the possible loss of your entire investment.

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Risks Related to the Rights Offering

If you do not exercise your subscription rights, including a certain percentage of your over-subscription option, or we do not accept a certain percentage of your subscription pursuant to your exercise of the over-subscription option, your percentage ownership will be diluted.

Assuming we sell the full amount of shares issuable in connection with the rights offering, we will issue approximately 1,150,891 shares of our common stock. If you choose not to exercise your subscription rights and we sell shares to other stockholders in the rights offering or to current and new stockholders in the public offer and to the investors in the private placement, your relative ownership interest in our common stock will be diluted. Even if you fully exercise your basic subscription rights, but do not subscribe for a certain number of additional shares pursuant to the exercise of your over-subscription option (to the extent shares are available through the over-subscription option), or we do not accept such subscription in whole or in part, you will experience dilution as a result of the sale of shares to the investors in the private placement.

You may not revoke your exercise of rights; we may cancel the rights offering at any time without further obligation to you.

Once you have exercised your subscription rights, you may not revoke your exercise even if you learn information about us that you consider to be unfavorable. We may terminate the rights offering at our discretion. If we cancel the rights offering, we will not have any obligation to you except to return any payment received, without interest or deduction, as soon as practicable.

The subscription rights are not transferable, and there is no market for the subscription rights.

You may not sell, give away or otherwise transfer your subscription rights. The subscription rights are only transferable by operation of law. Because the subscription rights are non-transferable, there is no market or other means for you to directly realize any value associated with the subscription rights. You must exercise the subscription rights and purchase common stock to realize any potential value from your subscription rights.

If you do not act promptly and follow the subscription instructions, we may reject your exercise of subscription rights.

If you desire to purchase shares in the rights offering, you must act promptly to ensure that the subscription agent actually receives all required forms and payments before the expiration of the rights offering at 5:00 p.m., Eastern Time, on [expiration date]. If you are a beneficial owner of shares, you must act promptly to ensure that your broker, dealer, custodian bank or other nominee acts for you and that all required forms and payments are actually received by the subscription agent before the expiration of the rights offering. We are not responsible if your nominee fails to ensure that the subscription agent receives all required forms and payments before the expiration of the rights offering. If you fail to complete and sign the required subscription forms, send an incorrect payment amount, or otherwise fail to follow the subscription procedures that apply to your exercise of your subscription rights prior to the expiration of the rights offering, the subscription agent may reject your subscription or accept it only to the extent of the payment received. Neither we nor the subscription agent undertake any action to contact you concerning an incomplete or incorrect subscription form or payment, nor are we under any obligation to correct such forms or payment. We have the sole discretion to determine whether a subscription exercise properly complies with the subscription procedures.

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We cannot guarantee that you will receive any or the entire amount of shares for which you over-subscribed.

Holders who fully exercise their basic subscription rights will be entitled to subscribe for an additional number of shares, however, we have the right to accept or reject subscriptions in whole or in part pursuant to the exercise of over-subscription options in our sole discretion. To the extent we do not otherwise reject a subscription, we expect that in general shares will be allocated pursuant to the exercise of over-subscription options pro rata among rights holders who over-subscribed, based on the number of over-subscription shares to which they subscribed. We cannot guarantee that you will receive any or the entire amount of shares for which you over-subscribed. If the amount of shares allocated to you in connection with your over-subscription option is less than your over-subscription request, or we otherwise reject all or a portion of your subscription pursuant to your exercise of the over-subscription option, then the excess funds held by the subscription agent on your behalf will be returned to you as soon as practicable, without interest or penalty, and we will have no further obligations to you.

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RECENT DEVELOMENTS

On April 12, 2012, we reported earnings for the first quarter of 2012. Outlined below is a summary of those results. The following tables contain certain information concerning the financial position and results of operations of Howard Bancorp, Inc. at and for the three months ended March 31, 2012 as well as the prior comparison period. You should read this information in conjunction with the audited financial statements included in this prospectus. The financial information at March 31, 2012 and for the three months ended March 31, 2011 are unaudited and are derived from our interim financial statements. The financial condition data at December 31, 2011 is derived from our audited financial statements. In the opinion of management, financial information at March 31, 2012 and for the three months ended March 31, 2012 and 2011 reflect all adjustments, consisting only of normal recurring accruals, which are necessary to present fairly the results for such periods. Results for the three-month period ended March 31, 2012 may not be indicative of operations for the year ending December 31, 2012.

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		Three Months ended March 31,								Year ended December 31, 2011
(in thousands, except per share data)		2012				2011
Operation Statement Data:
Interest income		$	3,809			$	3,533			$	14,640
Interest expense			527				515				2,017
Net Interest Income			3,282				3,018				12,623
Provision for credit losses			141				112				1,164
Noninterest income			86				182				1,137
Noninterest expense			2,546				2,503				10,148
Federal and state income tax expense (benefit)			282				241				1,063
Net income (loss)			399				344				1,385
Dividends			157				82				451
Net income (loss) available to common shareholders			242				262				934
Per share data and shares outstanding:
Net income (loss) per share, basic		$	0.09			$	0.10			$	0.35
Net income per (loss) share, diluted		$	0.09			$	0.10			$	0.35
Book value per common share at period end		$	9.20			$	8.83			$	9.12
Average common shares outstanding			2,640,264				2,636,837				2,638,443
Diluted average common shares outstanding			2,640,264				2,636,837				2,638,443
Shares outstanding at period end			2,640,264				2,636,837				2,640,264
Financial Condition data:
Total assets		$	347,821			$	305,421			$	323,082
Loans receivable (gross)			280,661				251,235				277,177
Allowance for credit losses			3,521				3,806				3,433
Other interest-earning assets			22,187				19,740				13,655
Total deposits			284,899				241,201				262,642
Borrowings			25,180				33,869				22,984
Stockholders’ equity			36,865				29,552				36,630
Selected performance ratios:
Return on average assets			0.48	%			0.47	%			0.45	%
Return on average equity			4.34	%			4.71	%			4.36	%
Net interest margin			4.11	%			4.33	%			4.37	%
Net interest spread			3.86	%			4.13	%			4.16	%
Efficiency ratio			75.60	%			78.21	%			73.75	%
Asset quality ratios:
Nonperforming loans to gross loans			2.25	%			1.99	%			2.12	%
Allowance for credit losses to loans			1.25	%			1.51	%			1.24	%
Allowance for credit losses to nonperforming loans			55.85	%			76.21	%			58.39	%
Nonperforming assets to loans and other real estate			2.74	%			3.83	%			2.80	%
Capital ratios:
Leverage ratio			10.91	%			9.84	%			11.52	%
Tier I risk-based capital ratio			12.98	%			11.41	%			13.14	%
Total risk-based capital ratio			14.22	%			12.66	%			14.36	%
Average equity to average assets			9.13	%			9.89	%			11.55	%

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Earnings Overview

Our consolidated net income for the first quarter of 2012 of $399 thousand was up 16% compared to $344 thousand earned during the same period in 2011. Consolidated net income available to common shareholders for the first quarter of 2012 was $242 thousand, which was lower than the similar period in 2011 of $262 million by $20 thousand or 8% due to an increase in the preferred dividends, which increased by $75 thousand or 92% from the $82 thousand in the first quarter of 2011 to the $157 thousand incurred for the first three months of 2012. On a diluted per common share basis, earnings for the first quarter of 2012 were $0.09, down 10% compared to $0.10 for the same period in 2011. Our results of operations for the first quarter of 2012 produced an annualized return on average assets of 0.48% and an annualized return on average common stockholders’ equity of 4.34% compared to prior year ratios of 0.47% and 4.71%, respectively.

Our first quarter net interest income for 2012 versus 2011 increased by $264 thousand or 9%, primarily driven by an increase in earnings assets and lower funding costs. The net interest margin was 4.11%, down 22 basis points compared to the first quarter of 2011. Noninterest income decreased $96 thousand or 53%. The decrease in noninterest income was primarily attributable to a $132 thousand loss incurred upon the sale of a property held as Other Real Estate Owned (OREO) during the first quarter of 2012. No sales of OREO occurred during the first quarter of 2011. Excluding this sale, other sources of noninterest income were $218 thousand, which increased by $36 thousand or 20% over the same period in 2011.

The provision for credit losses for the first quarter of 2012 increased $29 thousand, or 26%, compared to the first quarter of 2011, given the growth of the loan portfolio. The principal amount of loans charged-off for the first quarter of 2012 was $79 thousand, which was lower than the $130 thousand charged-off during the first quarter of 2011.

Noninterest expenses were $2.55 million for the first quarter of 2012, up slightly compared to the first quarter of 2011 expenses of $2.50 million. The increase in noninterest expenses was primarily due to higher personnel costs, which were up $106 thousand or 8% compared to the first quarter of 2011. The increase in personnel costs was due to increases in salaries and benefits, as well as increasing the number of our associates as we continue to expand. In addition, professional fees were increased due to the cost of legal and investment banking experts partnering with us along our strategic growth initiatives.

The provision for income taxes was $282 thousand for the first quarter of 2012 compared to $241 thousand for the first quarter of 2011. This resulted in an effective tax rate for the first quarter of 2012 of 41.35% compared to 41.25% for the prior year’s first quarter. The increase in the income tax increase was primarily due to higher levels of pre-tax earnings. The effective tax rate is influenced by certain nondeductible expense items relative to pre-tax income.

Balance Sheet Overview

Total assets increased $42 million, or 14%, to $347.1 million at March 31, 2012 compared to $305.4 million at March 31, 2011. The March 31, 2012 level of total assets also reflected an increase of $24.7 million, or 7.7%, compared to $323.1 million at December 31, 2011. Compared to year end 2011, this increase in assets was primarily due to a $14.7 million increase in cash and cash equivalents, an additional $7.2 million in our investment securities portfolio and net growth of $3.2 million in loans outstanding.

The asset growth was funded primarily from increases in customer deposits, which increased from $241.2 million on March 31, 2011, and $262.6 million at December 31, 2011 to $284.9 million at March 31, 2012, an increase of $44 million or 18% compared to March 31, 2011, and an increase of $22.3 million or 8.5% from December 31, 2011. From a funding and client service perspective, most important was the growth in noninterest-bearing deposits of $10.2 million or 16.4% from $62.0 million at December 31, 2011 to $72.2 million at March 31, 2012.

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Asset Quality

Asset quality continued to improve during the first quarter of 2012. 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 1.25% at March 31, 2012, compared to 1.51% at March 31, 2011, and the ratio of nonperforming assets (non-performing loans, OREO and restructured loans) to total assets was 2.23% at the end of the first quarter of 2012, compared to 2.40% at the end of 2011 and 3.15% on March 31, 2011.

Dividends and Capital

Our capital levels improved further during the first quarter of 2012. We recorded net income of $399 thousand during the first three months of 2012 and paid preferred dividends under the SBLF Program of $157 thousand for the quarter. To date, we have not paid any dividends on our common stock.

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FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “may,” “should” and words of similar meaning. You can also identify them by the fact that they do not relate strictly to historical or current facts. These forward-looking statements include, but are not limited to:

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not undertake any obligation to update any forward-looking statements after the date of this prospectus.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

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Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. You should not put undue reliance on any forward-looking statements. Please see “Risk Factors” beginning on page 16.

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USE OF PROCEEDS

Because the offering is a best efforts offering, we are presenting this information assuming that we sell the minimum and maximum number of shares of common stock available for sale in the offering. We will not receive any proceeds from the sale of the 173,003 shares of common stock being offered for resale by the selling stockholder.

		Minimum				Maximum
Gross offering proceeds		$	2,600,004.50			$	8,401,504.30
Fixed administrative fee payable to sales agent(1)		$	50,000			$	50,000
Estimated placement fee to sales agent(1)		$	0			$	378,105.30
Estimated other expenses of the offering		$	463,946.75			$	463,946.75
Net proceeds from the offering		$	2,086,057.80			$	7,509,452.30

We intend to use the net proceeds of the offering: (i) to support potential acquisition(s) and pay related expenses; (ii) to contribute to the capital of Howard Bank for the primary purposes of supporting organic loan growth, increasing its investment activities, increasing the allowable maximum loan amount that it may extend to any one customer, and for the Bank’s working capital and other general corporate purposes; and (iii) for working capital and other general corporate purposes, provided, however, that no more than 15% of the net offering proceeds will be allocated to working capital and general corporate purposes.

We have not quantified plans for use of the offering proceeds for each of the foregoing purposes.

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MARKET FOR COMMON STOCK, DIVIDEND POLICY AND RELATED
STOCKHOLDER MATTERS

Our common stock is quoted on the Over-The-Counter Bulletin Board (the “OTCBB”) under the symbol “HBMD.” However, there is not an active trading market for our common stock at this time. While our common stock has been approved for listing on The NASDAQ Stock Market in connection with this offering, such approval is contingent upon our meeting the listing standards upon closing of the offering and therefore we cannot assure you that the common stock will be so listed. While we believe there are currently several market makers in our stock, we cannot assure you that these entities will continue to make a market in our stock or that other entities will make a market in our common stock if our current market makers cease to do so. To our knowledge, to date, our common stock has traded only on a very limited basis. As reported by the OTCBB as of the date of this prospectus, the last reported trade in our common stock was $6.50, on April 27, 2012 and the common stock’s 52-week high trading price was $7.00 and its 52-week low trading price was $4.51.

We cannot predict whether or if a liquid trading market in shares of our common stock will develop or be maintained. Investors in our common stock should have a long-term investment intent. Persons purchasing shares in the offering may not be able to sell their shares at a price equal to or above subscription price. See “Risk Factors — There is a limited trading market in our common stock, which will hinder your ability to sell our common stock and may lower the market price of the stock.”

At April 30, 2012, we had 336 stockholders of record.

Dividend Policy

We have not paid any dividends on our common stock since our inception and we presently do not intend to pay any dividends in the foreseeable future. We expect that we will retain all earnings, if any, for operating capital. Our ability to pay dividends is dependent upon, among other things, restrictions imposed by the reserve and capital requirements of Maryland and federal law and regulations, our income and financial condition, tax considerations, and general business conditions. In addition, there are restrictions on our ability to pay dividends on our common stock if we are in arrears in the required dividend payment on our Series AA Preferred Stock. See “Description of Capital Stock — Series AA Preferred Stock — Restrictions on Dividends and Repurchases.” If you are looking for an investment that pays dividends, you should not invest in the offering.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization at December 31, 2011:

This table should be read in conjunction with “Summary Historical Consolidated Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto appearing elsewhere in this prospectus.

		As of December 31, 2011				As Adjusted to Reflect Private Placement								Pro Forma
						Assuming Minimum Shares Sold in Offering				Assuming Maximum Shares Sold in Offering				Assuming Minimum Shares Sold in Offering				Assuming Maximum Shares Sold in Offering
Cash and cash equivalents		$	18,204,668			$	21,706,983			$	22,293,179			$	23,793,041			$	29,802,631
Indebtedness:
Long term debt		$	10,000,000			$	10,000,000			$	10,000,000			$	10,000,000			$	10,000,000
Total Indebtedness		$	22,983,855			$	22,983,855			$	22,983,855			$	22,983,855			$	22,983,855
Stockholders’ Equity:
Preferred Stock, par value $0.01 per share; (liquidation preference of $1,000 per share) 5,000,000 shares authorized; shares issued and outstanding of 12,562 at December 31, 2011		$	12,562,000			$	12,562,000			$	12,562,000			$	12,562,000			$	12,562,000
Common Stock, par value $0.01 per share; 5,000,000 shares authorized; 2,640,264 shares issued and outstanding			26,403				31,577				32,440				35,138				43,949
Surplus			28,412,754				31,909,895				32,495,227				33,992,391				39,993,171
Accumulated Deficit			(4,391,439	)			(4,391,439	)			(4,391,439	)			(4,391,439	)			(4,391,439	)
Accumulated other comprehensive income			20,215				20,215				20,215				20,215				20,215
Total stockholders’ equity		$	36,629,933			$	40,132,248			$	40,718,443			$	42,218,305			$	48,227,896
Total stockholders’ equity and long term debt		$	46,629,933			$	50,132,248			$	50,718,443			$	52,218,305			$	58,227,896
Capital Ratios:
Tier 1 risk based capital ratio			13.14	%			14.39	%			14.60	%			15.14	%			17.29	%
Total risk based capital ratio			14.36	%			15.62	%			15.83	%			16.36	%			18.52	%
Leverage ratio			11.52	%			12.49	%			12.64	%			13.05	%			14.63	%
Equity to assets ratio			11.34	%			12.29	%			12.45	%			12.85	%			14.41	%

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DILUTION

If you invest in our common stock in this offering, your interest will be accreted to the extent of the difference between the subscription price of our common stock and the pro forma as adjusted net tangible book value of our common stock after giving effect to this offering.

As of December 31, 2011, our net tangible common book value was approximately $24,067,933, or $9.12 per share of common stock. Our net tangible common book value per share represents our tangible assets less our liabilities and preferred stock divided by our shares of common stock outstanding as of December 31, 2011.

After giving effect to our sale of shares of common stock in both the private placement (assuming the sale of 517,354 shares and 603,699 shares in the private placement assuming the minimum and maximum amounts offered hereby) and 356,165 and 1,150,891 shares in this offering at the subscription price of $7.30 per share, and after deducting estimated sales commissions and estimated offering expenses payable by us, our as adjusted net tangible common book value as of December 31, 2011 would have been $29,656,305, or $8.44 per share of common stock if we sold 356,165 shares and been $35,665,895 or $8.12 per share of common stock if we sold 1,150,891 shares. This represents an immediate decrease in the as adjusted net tangible common book value of $0.68 per share to existing stockholders and an immediate increase of $1.14 per share to new investors assuming the sale of 356,165 shares and an immediate decrease in the as adjusted net tangible common book value of $1.00 per share to existing stockholders and an immediate increase of $0.82 per share to new investors assuming the sale of 1,150,891 shares.

The following tables illustrates this dilution:

Sale of 356,165 shares:
Per-share subscription price						$	7.30
Net tangible common book value as of December 31, 2011		$	9.12
Dilution per share attributable to this offering			(0.68	)
As adjusted net tangible common book value per share after the private placement and this offering						$	8.44
Increase in net tangible common book value per share to new investors in this offering						$	1.14
Sale of 1,150,891 shares:
Per-share subscription price						$	7.30
Net tangible common book value as of December 31, 2011		$	9.12
Dilution per share attributable to this offering			(1.00	)
As adjusted net tangible common book value per share after the private placement and this offering						$	8.12
Increase in net tangible common book value dilution per share to new investors in this offering						$	0.82

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

This section is intended to help potential investors understand our financial performance through a discussion of the factors affecting our consolidated financial condition at December 31, 2011, 2010 and 2009. This section should be read in conjunction with the Consolidated Financial Statements and notes to the consolidated financial statements that appear elsewhere in this prospectus.

Overview

Howard Bancorp, Inc. is the holding company for Howard Bank. Howard Bank is a trust company chartered under Subtitle 2 of Title 3 of the Financial Institutions Article of the Annotated Code of Maryland. The Bank was formed in March 2004 and commenced banking operations on August 9, 2004. Howard Bank does not exercise trust powers, and our regulatory structure is the same as a Maryland-chartered commercial bank. As such, our business has consisted primarily of originating both commercial and real estate loans secured by property in our market area. Typically, commercial real estate and business loans involve a higher degree of risk and carry a higher yield than one-to four-family residential loans. Although we plan to continue to focus on commercial customers, we intend to increase our originations of one- to four-family residential mortgage loans going forward, increasing our portfolio of mortgage lending and also selling select loans into the secondary markets.

We are headquartered in Ellicott City, Maryland and we consider our primary market area to be Howard County, Maryland and Anne Arundel County, Maryland. Our secondary market area, primarily for commercial lending, includes the Maryland counties of Baltimore, Carroll, Frederick, Montgomery and Prince George’s as well as Baltimore City. We engage in a general commercial banking business, making various types of loans and accepting deposits. We market our financial services to small to medium sized businesses and their owners, professionals and executives, and high-net-worth individuals. Our loans are primarily funded by core deposits of customers in our market.

Our core business strategy is to deliver superior customer service that is supported by an extremely high level of banking sophistication. Our specialized community banking focus on both local markets and small business related market segments is combined with a broad array of products, new technology and seasoned banking professionals which positions the Bank differently than most competitors. Our experienced executives establish a relationship with each client and bring value to all phases of a client’s business and personal banking needs. We call it Hands-On Service.

Our results of operations depend mainly on our net interest income, which is the difference between the interest income we earn on our loan and investment portfolios and the interest expense we pay on deposits and borrowings. Results of operations are also affected by provisions for credit losses, noninterest income and noninterest expense. Our noninterest expense consists primarily of compensation and employee benefits, as well as office occupancy, deposit insurance and general administrative and data processing expenses. Our operations are significantly affected by general economic and competitive conditions, particularly with respect to changes in interest rates, government policies and actions of regulatory authorities. Future changes in applicable law, regulations or government policies may materially affect our financial condition and results of operations.

During the year ended December 31, 2011, our net interest income increased $1.3 million, or 11%, compared to the year ended December 31, 2010, primarily as a result of lower interest paid on deposits during the 2011 period. We had net income of $1.4 million at December 31, 2011 compared to net income of $933 thousand for the same period in 2010, a $452 thousand or 48% increase. This increase was primarily as a result of the increased net interest income and a decrease in the provision for credit losses, partially offset by an increase in noninterest expenses resulting from increased infrastructure costs to support a growing institution and increased cost associated with Other Real Estate Owned (“OREO”) properties. Comparing December 31, 2011 to the same period in 2010, total assets, total loans, and total deposits grew by 8%, 8%, and 10% respectively. While this growth was modest compared to growth in prior years, our noninterest-bearing deposit accounts, which are the most indicative of our growth in overall core relationships, increased by nearly $13.4 million, or 28%.

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During the year ended December 31, 2010, our net interest income increased $2.7 million or 31%, compared to the year ended December 31, 2009, due to increased interest income resulting from an increase in average earning assets of $37 million or 15% over 2009, as well as lower interest paid on interest-bearing funds for 2010. Although average interest-bearing funds increased by $37 million for 2010 over 2009, the interest cost of those funds decreased by over $800 thousand or more than 20%. We had net income of $933 thousand in 2010, compared to a net loss of $2.2 million in 2009. In addition to the increase in net interest income, the provision for credit losses decreased from $3.7 million in 2009 to $1.6 million for 2010, and while noninterest income levels were similar for both years, total noninterest expenses decreased by $553 thousand for 2010 compared to 2009 due primarily to a $1.3 million valuation adjustment that we recorded in 2009 on a property we acquired via foreclosure.

Our nonperforming assets totaled $7.8 million, or 2.40% of total assets, at December 31, 2011, compared to $8.7 million, or 2.89% of total assets, at December 31, 2010 and $8.5 million, or 2.97% of total assets, at December 31, 2009. We had one loan totaling $90 thousand delinquent more than 90 days at December 31, 2011 compared to $150 thousand (one loan) and $10 thousand (one loan) of such delinquencies at December 31, 2010 and December 31, 2009, respectively. In addition, we provided $1.2 million for credit losses for the year ended December 31, 2011 compared to $1.6 million for credit losses during the year ended December 31, 2010 and $3.7 million during the year ended December 31, 2009, reflecting a decrease in nonperforming loans and a lower level of required specific reserves for the credit loss provision.

On March 28, 2012, we completed a private placement of our common stock, pursuant to which we entered into investment agreements with certain investors. Pursuant to the investment agreements, subject to the terms and conditions contained therein:

The investors’ obligations to purchase the shares subscribed for in the private placement are subject to certain closing conditions. For more information, see “Risk Factors — Risks Related to the Offering Generally — We may not sell all or even a substantial amount of the shares we are offering hereby, the private placement may not be consummated and the closing of the offering is not dependent on the closing of the private placement, which means that if you subscribe for shares of common stock in the offering, you may acquire securities in our company even though the proceeds raised in the offering alone may be insufficient to meet our objectives” and “The Private Placement.”

We do not offer “interest only” mortgage loans on one- to four-family residential properties (where the borrower pays interest but no principal for an initial period, after which the loan converts to a fully amortizing loan). We also do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on their loan, resulting in an increased principal balance during the life of the loan. We do not offer “subprime loans” (loans that generally are made to borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (traditionally defined as loans having less than full documentation). We also do not own any private label mortgage-backed securities.

Our Business Strategy

Highlights of our business strategy are as follows:

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While we have been successful in growing loans and gathering noninterest-bearing deposits, we plan to focus on expanding our existing relationships with core products and services that enhance our cost of funds and noninterest income and attracting new “target customers” with the intention of acquiring, retaining and continuously developing profitable core relationships with the potential for depth and longevity. This will require extending the culture of consultative sales/cross sales, proactive relationship management, and extraordinary service (internal and external) held by certain key employees across the Bank and coupling this culture extension with greater discipline, thus resulting in greater efficiency and productivity in our execution.

Critical Accounting Policies

Our accounting and financial reporting policies conform to the accounting principles generally accepted in the United States of America and general practice within the banking industry. Accordingly, the financial statements require management to exercise significant judgment or discretion or make significant assumptions based on the information available that have, or could have, a material impact on the carrying value of certain assets or on income. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the periods presented. In reviewing and understanding financial information for us, you are encouraged to read and understand the significant accounting policies used in preparing our financial statements. We consider the allowance for credit losses to be our most significant accounting policy, which is further described in Note 6 of the Notes to the financial statements.

The allowance for credit losses is established through a provision for credit losses charged against income. Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Subsequent recoveries are added to the allowance. The allowance is an amount that represents the amount of probable and reasonably estimable known and inherent losses in the loan portfolio, based on evaluations of the collectability of loans. The evaluations take into consideration such factors as changes in the types and amount of loans in the loan portfolio, historical loss experience, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral,

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estimated losses relating to specifically identified loans, and current economic conditions. This evaluation is inherently subjective as it requires material estimates including, among others, exposure at default, the amount and timing of expected future cash flows on impacted loans, value of collateral, estimated losses on our loan portfolios as well as consideration of general loss experience. Based on our estimate of the level of allowance for credit losses required, we record a provision for credit losses to maintain the allowance for credit losses at an appropriate level.

We cannot predict with certainty the amount of loan charge-offs that we will incur. We do not currently determine a range of loss with respect to the allowance for credit losses. In addition, our regulatory agencies, as an integral part of their examination processes, periodically review our allowance for credit losses. Such agencies may require that we recognize additions to the allowance for credit losses based on their judgments about information available to them at the time of their examination. To the extent that actual outcomes differ from management’s estimates, additional provisions to the allowance for credit losses may be required that would adversely impact earnings in future periods.

We account for income taxes under the asset/liability method. We recognize deferred tax assets for the future consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, as well as operating loss and tax credit carry-forwards. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We recognize the effect on deferred tax assets and liabilities of a change in tax rates in income in the period indicated by the enactment date. We establish a valuation allowance for deferred tax assets when, in the judgment of management, it is more likely than not that such deferred tax assets will not become realizable. The judgment about the level of future taxable income is dependent to a great extent on matters that may, at least in part, be beyond our control. It is at least reasonably possible that management’s judgment about the need for a valuation allowance for deferred tax assets could change in the near term.

We follow the provisions of ASC Topic 718 “Compensation,” which requires the expense recognition over a service period for the fair value of share based compensation awards, such as stock options, restricted stock, and performance based shares. This standard allows management to establish modeling assumptions as to expected stock price volatility, option terms, forfeiture rates and dividend rates which directly impact estimated fair value. The accounting standard also allows for the use of alternative option pricing models which may impact fair value as determined. Our practice is to utilize reasonable and supportable assumptions which are reviewed with the appropriate Board Committee.

Balance Sheet Analysis and Comparison of Financial Condition

A comparison between December 31, 2011, December 31, 2010 and December 31, 2009 balance sheets is presented below.

Assets

Total assets increased $22.9 million, or 7.6%, to $323.1 million at December 31, 2011 compared to $300.2 million at December 31, 2010. This increase in assets was primarily due to a $20.2 million, or 7.9%, increase in loans, to $276.5 million at December 31, 2011 from $256.3 million at December 31, 2010, and also a $6.5 million, or 56.5%, increase in cash and due from banks. The asset growth was funded primarily from increases in customer deposits, which increased from $239.3 million at December 31, 2010 to $262.6 million at December 31, 2011, an increase of $23.3 million or 9.7%. From a funding perspective, most important was the growth in noninterest-bearing deposits of $13.4 million or 27.5% from $48.7 million at December 31, 2010 to $62.0 million at December 31, 2011. In addition, our total capital levels increased by over $7.3 million or 25.1% year over year, due to both increased levels of earnings and the additional funds we received as a result of our participation in the SBLF program.

Securities Available for Sale

We currently hold both U.S. agency securities and mortgage backed securities in our securities portfolio, all of which are considered as available for sale. Our securities portfolio is used to provide the required collateral for funding via commercial customer repurchase agreements as well as to provide sufficient liquidity to fund our loans and provide funds for withdrawals of deposited funds. At December 31, 2011 and

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December 31, 2010 we held an investment in stock of the Federal Home Loan Bank of Atlanta (“FHLB”) of $1.3 million and $1.5 million, respectively. This investment, which is required for continued membership, is based partially upon the dollar amount of borrowings outstanding from the FHLB. These investments are carried at cost. We have never held stock in Fannie Mae or Freddie Mac.

The following tables set forth the composition of our investment securities portfolio at the dates indicated.

		December 31,
(in thousands)		2011								2010								2009
		Amortized Cost				Estimated Fair Value				Amortized Cost				Estimated Fair Value				Amortized Cost				Estimated Fair Value
U.S. Federal agencies		$	12,774			$	12,773			$	14,037			$	14,037			$	13,707			$	13,709
Mortgage-backed			568				603				953				1,003				1,614				1,694
Total		$	13,342			$	13,376			$	14,990			$	15,040			$	15,321			$	15,403

We had securities available for sale of $13.4 million and $15.0 million at December 31, 2011 and December 31, 2010, respectively, which were recorded at fair value. This represents a decrease of $1.7 million, or 11.1%, for the year ended December, 2011 from the prior year end. We did not record any gains or losses on the sales or calls of securities or mortgage backed securities in either the years ended December 31, 2011 or 2010.

With respect to our portfolio of securities available for sale, we held securities with unrealized losses of $2,494 and $2,708 at December 31, 2011 and 2010, respectively. The minimal changes in the fair value of these securities resulted primarily from interest rate fluctuations. We do not intend to sell these securities nor is it more likely than not that we would be required to sell these securities before their anticipated recovery, and we believe the collection of the investment and related interest is probable. Based on this analysis, we consider all of the unrealized losses to be temporary impairment losses.

Portfolio Maturities and Yields

The composition and maturities of the investment securities portfolio at December 31, 2011 and 2010 are summarized in the following tables. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur.

As of December 31, 2011
(in thousands)		One year or less								After one through five years								After five through ten years								After ten years								Total
		Amortized Cost				Weighted Average Yield				Amortized Cost				Weighted Average Yield				Amortized Cost				Weighted Average Yield				Amortized Cost				Weighted Average Yield				Amortized Cost				Weighted Average Yield
U.S. Government Agencies		$	6,000				0.01	%		$	6,774				0.51	%		$	—				—	%		$	—				—	%		$	12,774				0.27	%
Mortgage-backed			—				—				247				5.11				168				4.97				153				4.85				568				5.00
		$	6,000				0.01	%		$	7,021				0.67	%		$	168				4.97	%		$	153				4.85	%		$	13,342				0.48	%

As of December 31, 2010
(in thousands)		One year or less								After one through five years								After five through ten years								After ten years								Total
		Amortized Cost				Weighted Average Yield				Amortized Cost				Weighted Average Yield				Amortized Cost				Weighted Average Yield				Amortized Cost				Weighted Average Yield				Amortized Cost				Weighted Average Yield
U.S. Government Agencies		$	12,037				0.25	%		$	2,000				0.60	%		$	—				—	%		$	—				—	%		$	14,037				0.30	%
Mortgage-backed			—				—				424				5.21				—				—				529				5.00				953				5.09
		$	12,037				0.25	%		$	2,424				1.41	%		$	—				—	%		$	529				5.00	%		$	14,990				0.61	%

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Loan Portfolio

Total loans increased by $20.2 million or 7.9%, to $276.5 million at December 31, 2011 from $256.3 million at December 31, 2010. At December 31, 2011, total loans were 85.6% of total assets relatively unchanged compared to 85.4% of total assets at December 31, 2010. Loan growth throughout the banking industry has been hampered by decreased loan demand resulting from uncertain economic conditions.

The following table sets forth the composition of our loan portfolio at the dates indicated. We had loans held for sale of $646 thousand at December 31, 2011, and $1.06 million at December 31, 2010.

December 31,
(dollars in thousands)		2011								2010								2009								2008								2007
		Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent
Real Estate
Construction and land		$	39,268				14.2%			$	30,604				11.9	%		$	33,437				13.2	%		$	32,230				15.8	%		$	29,225				16.9	%
Residential – first lien			22,087				8.0				22,309				8.7				20,202				8.0				18,986				9.3				17,181				10.0
Residential – junior lien			9,242				3.3				9,889				3.9				10,401				4.1				9,261				4.5				7,237				4.2
Total residential real estate			31,329				11.3				32,198				12.6				30,603				12.1				28,247				13.8				24,418				14.2
Commercial – owner occupied			46,588				16.8				46,947				18.3				43,397				17.2				35,366				17.3				33,523				19.4
Commercial – non-owner occupied			76,880				27.8				58,438				22.8				51,193				20.3				28,758				14.1				20,336				11.8
Total commercial real estate			123,468				44.6				105,385				41.1				94,590				37.4				64,124				31.4				53,859				31.2
Total real estate loans			194,065				70.2				168,187				65.6				158,630				62.8				124,601				61.1				107,502				62.3
Commercial loans and leases			81,243				29.4				86,851				33.9				92,816				36.7				77,436				37.9				62,959				36.5
Consumer loans			1,223				0.4				1,269				0.5				1,299				0.5				2,053				1.0				2,030				1.2
Total loans		$	276,531				100.0%			$	256,307				100.0	%		$	252,745				100.0	%		$	204,090				100.0	%		$	172,491				100.0	%
Allowance for loan and lease losses			(3,433)								(3,523	)							(3,508	)							(2,659	)							(2,671	)
Net loans		$	273,098							$	252,784							$	249,237							$	201,431							$	169,820

Loan Portfolio Maturities and Yields

The following table summarizes the scheduled repayments of our loan portfolio at December 31, 2011.

		December 31, 2011
		Construction & Land								Residential Real Estate First Lien								Residential Real Estate Junior Lien
(dollars in thousands)		Amount				Weighted Average Rate				Amount				Weighted Average Rate				Amount				Weighted Average Rate
Due during the twelve months ending December 31,
2012		$	30,585				5.22	%		$	—				—	%		$	12				5.82	%
2013			4,398				4.60				—				—				—				—
2014			861				6.00				—				—				40				3.00
2015 to 2016			3,423				6.03				—				—				1,767				3.08
2017 to 2021			—				—				—				—				4,302				3.30
2022 to 2026			—				—				2,476				5.08				482				6.75
2027 and beyond			—				—				19,611				5.54				2,639				5.56
Total		$	39,268				5.24	%		$	22,087				5.49	%		$	9,242				4.09	%

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		Commercial Real Estate Owner Occupied								Commercial Real Estate Non Owner Occupied								Commercial Loans & Leases
		Amount				Weighted Average Rate				Amount				Weighted Average Rate				Amount				Weighted Average Rate
Due during the twelve months ending December 31,
2012		$	4,883				5.94	%		$	8,152				4.78	%		$	36,533				4.40	%
2013			1,573				6.15				6,266				5.49				5,478				4.26
2014			6,437				6.41				19,047				6.22				7,423				6.22
2015 to 2016			20,114				6.03				20,644				6.09				10,336				5.88
2017 to 2021			11,169				5.76				22,677				4.68				19,559				6.44
2022 to 2026			2,412				4.88				—				—				1,914				6.09
2027 and beyond			—				—				93				6.50				—				—
Total		$	46,588				5.95	%		$	76,880				5.52	%		$	81,243				5.28	%

		Consumer Loans								Total Loans
		Amount				Weighted Average Rate				Amount				Weighted Average Rate
Due during the twelve months ending December 31,
2012		$	236				6.00	%		$	80,401				4.85	%
2013			650				3.48				18,366				4.89
2014			49				7.29				33,857				6.25
2015 to 2016			222				6.60				56,507				5.94
2017 to 2021			66				8.38				57,773				5.38
2022 to 2026			—				—				7,284				5.39
2027 and beyond			—				—				22,344				5.55
Total		$	1,223				4.95	%		$	276,531				5.43	%

The following table sets forth the scheduled repayments of fixed and adjustable rate loans in our portfolio as of December 31, 2011, that are contractually due after one year, or after December 31, 2012.

		Due After one year
(in thousands)		Fixed				Adjustable				Total
Real Estate
Construction & Land		$	7,271			$	1,412			$	8,683
Residential – First Lien			21,729				358				22,087
Residential – Junior Lien			2,104				7,126				9,230
Total Residential Real Estate			23,833				7,484				31,317
Commercial – Owner Occupied			35,419				6,285				41,704
Commercial – Non-owner Occupied			57,850				10,878				68,728
Total Commercial Real Estate			93,270				17,163				110,432
Total Real Estate Loans			124,374				26,059				150,432
Commercial Loans & Leases			37,359				7,352				44,711
Consumer Loans			392				595				987
Total Loans		$	162,124			$	34,006			$	196,130

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Premises and Equipment

The composition of our investments in premises and equipment are presented in the following table:

		December 31,
(in thousands)		2011				2010				2009
Land			2,660			$	2,660			$	—
Building and leasehold improvements			7,141				6,653				2,282
Furniture and equipment			1,912				1,702				1,540
Software			163				161				141
			11,876				11,176				3,963
Less: accumulated depreciation and amortization			2,392				1,937				1,581
Net premises and equipment		$	9,484			$	9,239			$	2,382

For the year ended December 31, 2011, the primary increase in our fixed assets was the purchase of additional furniture and equipment associated with the growth of our operational and administrative infrastructure staff, which has increased to correspond with the increase in assets, deposits and customers. We did not open any new branches during 2011, but we do anticipate the addition of a new branch early in 2012. During 2010, we purchased and now own a property that includes one of our branch locations as well as both office and retail space. In addition to the current branch, we expect to utilize a portion of the center for future Bank expansion and intend to lease the remainder of the space.

Deposits

We accept deposits primarily from the areas in which our offices are located. We have consistently focused on building broader customer relationships and targeting small business customers to increase our core deposits. We also rely on our customer service to attract and retain deposits. We offer a variety of deposit accounts with a range of interest rates and terms. Customer deposits have historically provided us with a sizeable source of relatively stable and low-cost funds to support asset growth. Our deposit accounts consist of commercial and retail checking accounts, savings accounts, certificates of deposit (“CDs”), money market accounts, and individual retirement accounts. We do not currently accept brokered deposits other than those obtained under Promontory Interfinancial Network’s certificate of deposit account registry service (“CDARS”) program.

We review and update interest rates paid, maturity terms, service fees and withdrawal penalties on a periodic basis. Deposit rates and terms are based primarily on current operating strategies and market interest rates, liquidity requirements, anticipated short term loan demand and our deposit growth goals.

Our deposits increased from $239.3 million at December 31, 2010 to $262.6 million at December 31, 2011, an increase of $23.3 million or 9.7%. The increase resulted primarily from a $13.4 million or 27.5% increase in noninterest-bearing checking accounts, which increased from $48.7 million at December 31, 2010 to $62.0 million at December 31, 2011. In addition, CDs increased from $95.2 million at December 31, 2010 to $111.0 million at December 31, 2011, an increase of $15.8 million or 16.6%. As the growth in noninterest bearing checking and CDs were sufficient to fund the growth in loans and assets, other categories of deposits were not maintained at previous levels and experienced minor declines.

Deposits increased $10.6 million, or 4.6%, to $239.3 million at December 31, 2010 from $228.7 million at December 31, 2009. The increase resulted from a $9.7 million or 24.8% increase in noninterest-bearing checking accounts from $39.0 million at December 31, 2009 to $48.7 million at December 31, 2010. Money market accounts also increased by $19.9 million or 44.4% from December 31, 2009 to December 31, 2010.

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The following tables set forth the distribution of total deposits, by account type, at the dates indicated.

		December 31,
(dollars in thousands)		2011												2010												2009
		Amount				% of Total				Weighted Average Rate				Amount				% of Total				Weighted Average Rate				Amount				% of Total				Weighted Average Rate
Noninterest-bearing demand			62,044				24%				—%			$	48,679				20	%			—	%		$	38,998				17	%			—	%
Interest-bearing checking			17,687				7				0.43				17,152				7				0.42				15,901				6				0.46
Money market accounts			61,267				23				0.70				64,637				27				0.76				44,759				20				1.01
Savings			10,644				4				0.65				13,608				6				1.29				15,644				7				1.77
Certificates of deposit $100,000 and over			79,718				30				1.21				68,118				29				1.76				65,340				29				3.01
Certificates of deposit under $100,000			31,282				12				1.06				27,120				11				1.70				48,101				21				2.82
Total deposits		$	262,642				100%				0.91%			$	239,314				100	%			1.31	%		$	228,743				100	%			2.14	%

As of December 31, 2011 and 2010, the aggregate amount of outstanding certificates of deposit in amounts greater than or equal to $100,000 was $79.7 million and $68.1 million, respectively. The following table sets forth the maturity of those certificates as of December 31, 2011.

(in thousands)		December 31, 2011
Three months or less		$	18,400
Over three to six months			6,026
Over six to twelve months			25,568
Over one year			29,724
		$	79,718

Borrowings

Customer deposits remain the primary source we use to meet funding needs. Borrowings consist of overnight unsecured master notes, overnight securities sold under agreement to repurchase (“repurchase agreements”) and FHLB advances. Our borrowings totaled $23.0 million at December 31, 2011 and $31.0 million and $28.5 million at December 31, 2010 and 2009, respectively. Short-term borrowings are summarized on the following table:

		December 31,
		2011								2010								2009
(dollars in thousands)		Amount				Rate				Amount				Rate				Amount				Rate
Securities Sold Under Agreement to Repurchase & Master Notes
At period end		$	6,984				0.62	%		$	11,024				0.59	%		$	14,459				0.84	%
Average for the year		$	12,211				0.39	%		$	14,983				0.62	%		$	10,374				0.90	%
Maximum month-end balance		$	17,379							$	17,424							$	15,774
Federal Funds Purchased and Short-term Borrowed Funds
At period end		$	6,000				0.59	%		$	14,000				0.96	%		$	6,000				0.49	%
Average for the year		$	9,629				0.98	%		$	8,203				1.49	%		$	11,368				0.89	%
Maximum month-end balance		$	12,500							$	14,000							$	19,000

Short-term borrowings totaled $13.0 million at December 31, 2011 and $25.0 million at December 31, 2010. Short-term borrowing consist of overnight electronic sweep products that move customer excess funds from non-interest bearing account to interest bearing ones. Master notes sweep funds from the Bank customer accounts to Howard Bancorp. Repurchase agreements sweep funds within the Bank and are secured by pledges of U.S. Government Agency securities, based upon their fair value, as collateral for 100% of the principal and accrued interest of its repurchase agreements. At December 31, 2011and 2010 there were

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$5.8 million and $9.0 million, respectively in borrowings under these agreements. Finally we did not utilize any Federal funds purchased at December 31, 2011 and used $4.0 million at December 31, 2010. At December 31, 2011 we had three advances outstanding totaling $6.0 million and at December 31, 2010 had five advances outstanding totaling $10 million in FHLB advances with a final remaining maturity of less than one year.

Total Shareholders’ Equity

Total shareholders’ equity increased by $7.3 million or 25.1% from $29.3 million at December 31, 2010 to $36.6 million at December 31, 2011. Over $6.0 million of the increase represented the net proceeds of our issuance to Treasury of our Series AA Preferred Stock pursuant to the SBLF Program. The remainder of the capital growth represents retention of the previous four quarters of earnings.

Total shareholders’ equity at December 31, 2011 represents a capital to asset ratio of 11.34%, while the total shareholders’ equity of at December 31, 2010 represents a capital to asset ratio of 9.76%.

Average Balance and Yields

The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, and have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.

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		For the year ended December 31,
		2011												2010												2009
(dollars in thousands)		Average Balance				Income/ Expense				Yield/ Rate				Average Balance				Income/ Expense				Yield/ Rate				Average Balance				Income/ Expense				Yield/ Rate
Earning assets
Loans and leases:(1)
Commercial loans and leases		$	84,384			$	4,758				5.64%			$	90,787			$	4,927				5.43	%		$	89,285			$	4,643				5.20	%
Commercial real estate			108,073				6,318				5.85				101,284				5,805				5.73				73,737				4,368				5.92
Construction and land			34,252				1,732				5.06				33,581				1,640				4.88				34,950				1,489				4.26
Residential real estate			32,880				1,646				5.01				31,640				1,664				5.26				30,119				1,614				5.36
Consumer			1,250				62				4.97				1,390				67				4.82				1,327				65				4.87
Total loans			260,839				14,516				5.57				258,682				14,103				5.45				229,418				12,179				5.31
Federal funds sold			11,891				22				0.19				6,508				28				0.43				3,968				71				1.79
Securities:(2)
U.S Gov agencies			13,845				45				0.32				14,448				49				0.34				8,051				51				0.63
Mortgage-backed			816				40				4.86				1,364				69				5.06				2,317				120				5.18
Other investments			1,459				17				1.19				1,642				6				0.37				1,696				5				0.29
Total securities			16,120				102				0.63				17,454				124				0.71				12,064				176				1.46
Total earning assets			288,850				14,640				5.07				282,644				14,255				5.04				245,450				12,426				5.06
Cash and due from banks			3,209												11,200												6,728
Bank premises and equipment, net			9,264												5,526												2,486
Other assets			9,136												6,427												5,537
Less: allowance for credit losses			(3,890)												(3,702	)											(2,952	)
Total assets		$	306,569											$	302,095											$	257,249
Interest-bearing liabilities Deposits:
Interest-bearing demand accounts		$	15,859				68				0.43			$	16,348				69				0.42			$	15,854				72				0.45
Money market			62,448				438				0.70				56,818				434				0.76				39,900				404				1.01
Savings			11,974				78				0.65				17,020				219				1.29				5,947				105				1.77
Time deposits $100,000 and over			58,845				714				1.21				58,240				1,023				1.76				40,769				1,226				3.01
Other time deposits			42,322				449				1.06				48,649				827				1.70				58,096				1,636				2.82
Total interest-bearing deposits			191,448				1,748				0.91				197,075				2,572				1.31				160,566				3,443				2.14
Short-term borrowings			21,840				168				0.77				22,337				215				0.96				21,820				195				0.89
Long-term borrowings			7,666				101				1.31				8,225				120				1.46				4,696				106				2.26
Total interest-bearing funds			220,954				2,017				0.91				227,637				2,907				1.28				187,082				3,744				2.00
Noninterest-bearing deposits			53,040												44,658												39,300
Other liabilities and accrued expenses			826												796												798
Total liabilities			274,820												273,091												227,180
Shareholders' equity			31,749												29,004												30,069
Total liabilities & shareholders' equity		$	306,569											$	302,095											$	257,249
Net interest rate spread(3)						$	12,623				4.16%							$	11,348				3.77	%						$	8,682				3.06	%
Effect of noninterest-bearing funds											0.21												0.25												0.48
Net interest margin on earning assets(4)											4.37%												4.01	%											3.54	%