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Press Release

Old Line Bancshares, Inc. Reports $8.3 Million in Net Income Available to Common Stockholders for the Quarter Ended September 30, 2018

Company Release - 10/17/2018 4:05 PM ET

BOWIE, Md., Oct. 17, 2018 (GLOBE NEWSWIRE) -- Old Line Bancshares, Inc. (“Old Line Bancshares” or the “Company”) (Nasdaq: OLBK), the parent company of Old Line Bank (the “Bank”), reports net income available to common stockholders increased $6.1 million, or 282.07%, to $8.3 million for the three months ended September 30, 2018, compared to $2.2 million for the three month period ended September 30, 2017.  Earnings were $0.49 per basic and $0.48 per diluted common share for the three months ended September 30, 2018, compared to $0.18 per basic and diluted common share for the three months ended September 30, 2017.  The increase in net income for the third quarter of 2018 as compared to the same 2017 period is primarily the result of increases of $8.4 million in net interest income and $654 thousand in non-interest income, partially offset by a $2.0 million increase in non-interest expense.  Net income included $2.3 million ($1.5 million net of taxes) in merger-related expenses (or $0.09 per basic and diluted common share) in connection with the Company’s acquisition of Bay Bancorp, Inc. (“BYBK”), the former parent company of Bay Bank, FSB, in April 2018. 

The Company incurred merger expenses during the periods ended both September 30, 2018 and 2017; excluding the merger-related expenses, adjusted operating earnings, which is a non-GAAP financial measure, would have been $9.7 million, or $0.58 per basic and $0.57 diluted common share, for the three months ended September 30, 2018, compared to $5.1 million or $0.42 per basic and diluted common share for the three months ended September 30, 2017, a 92.25% increase over the same three month period last year.

Our efficiency ratio was 60.17% for the three months ended September 30, 2018 compared to 78.52% for the same three month period last year.  Excluding the merger-related expenses incurred during the three month periods ended September 30, 2018 and 2017, the adjusted efficiency ratio (a non-GAAP financial measure) improved to 51.93% for the 2018 period compared to 57.21% for the 2017 period.

Net income available to common stockholders was $17.1 million for the nine months ended September 30, 2018, compared to $10.1 million for the same period last year, an increase of $6.9 million, or 68.76%.  Earnings were $1.12 per basic and $1.10 per diluted common share for the nine months ended September 30, 2018, compared to $0.90 per basic and $0.88 per diluted common share for the same period last year.  The increase in net income is primarily the result of increases of $21.0 million, or 46.76%, in net interest income and $1.8 million in non-interest income, partially offset by a $14.6 million increase in non-interest expenses.  Included in net income for the 2018 period was $9.4 million ($7.6 million net of taxes, or $0.50 per basic and common share) for merger-related expenses associated with the acquisition of BYBK as discussed above.  

Excluding the merger-related expenses incurred during the nine month periods ended September 30, 2018 and 2017, adjusted operating earnings (which is a non-GAAP financial measure) for the nine months ended September 30, 2018 would have been $24.7 million or $1.62 per basic and $1.60 per diluted common share, compared to adjusted operating earnings of $13.0 million or $1.15 per basic and $1.13 per diluted common share for the nine months ended September 30, 2017, a 89.86% increase for the 2018 period over the same nine month period last year.

Our efficiency ratio was 66.15% and 66.81%, respectively, for the nine months ended September 30, 2018 and 2017.  Excluding the merger-related expenses incurred during the nine month periods ended September 30, 2018 and 2017, the adjusted efficiency ratio (a non-GAAP financial measure) improved to 53.39% for the nine months ended September 30, 2018 from 59.18% for the same nine month period last year.

Net interest income increased during each of the three and nine month periods ended September 30, 2018 compared to the same periods last year primarily as a result of increases in interest income on loans, partially offset by increases in interest expense.  Non-interest expense increased for the three month periods ended September 30, 2018 compared to the same period of 2017 primarily due to increases in salaries and benefits and occupancy and equipment expense.  Non-interest expense increased for the nine month period ended September 30, 2018 primarily as a result of a $5.4 million increase in merger-related expenses as well as increases in salaries and benefits and occupancy and equipment expense.  Salaries and benefits and occupancy and equipment expenses increased as a result of the additional staff and the new branches that we acquired upon our acquisitions of DCB Bancshares, Inc. (“DCBB”), the former parent company of Damascus Community Bank, in July 2017 and BYBK in April 2018.

As of September 30, 2018, the Company had total assets of approximately $2.9 billion, net loans of approximately $2.4 billion and deposits of approximately $2.2 billion.

Net loans held for investment at September 30, 2018 increased $688.2 million, or 40.57%, compared to December 31, 2017.  Net loans held for investment includes loans that were acquired in the BYBK acquisition of approximately $494 million at September 30, 2018. 

Loans held for sale decreased approximately $25.2 million during the third quarter as we sold $21.6 million in loans that we previously identified as troubled loans acquired in the BYBK acquisition. This disposal was accomplished through brokered sale transactions. Due to the sale of these loans shortly after acquisition, no gain or loss was recorded.

James W. Cornelsen, President and Chief Executive Officer of Old Line Bancshares, stated: “Our quarterly results signify forward momentum indicating positive trends in our balance sheet, revenue growth and operating efficiency.  Excluding the $2.3 million in merger-related expenses, net income would have been $9.8 million, the return on average assets would have been 1.32% and the efficiency ratio would have been 51.93% for the quarter.  We are confident in our ability to improve our performance ratios by continuing to build our loan portfolio while managing expenses.” 

HIGHLIGHTS:

  • Net loans held for investment increased $36.8 million and $688.2 million, respectively, during the three and nine month periods ended September 30, 2018, to $2.4 billion at September 30, 2018 from $1.7 billion at December 31, 2017 and $2.3 billion at June 30, 2018. 

  • Average gross loans increased $796.6 million, or 49.78%, and $653.9 million, or 44.33%, respectively, during the three and nine month periods ended September 30, 2018, to $2.4 billion and $2.1 billion, respectively, from $1.6 billion and $1.5 billion, respectively, during the three and nine month periods ended September 30, 2017. 

  • The net interest margin during the three months ended September 30, 2018 was 3.81% compared to 3.71% for the same period in 2017.  Total yield on interest earning assets increased to 4.69% for the three months ended September 30, 2018, compared to 4.37% for the same period last year. 
  • The net interest margin during the nine months ended September 30, 2018 was 3.79% compared to 3.68% for the same period in 2017.  Total yield on interest earning assets increased to 4.60% for the nine months ended September 30, 2018, compared to 4.34% for the same period last year. 
  • The third quarter return on average assets (“ROAA”) and return on average equity (“ROAE”) were 1.12% and 8.89%, respectively, compared to ROAA and ROAE of 0.43% and 4.26%, respectively, for the third quarter of 2017.  Excluding the merger-related expenses (non-GAAP), ROAA and ROAE would have been 1.32% and 10.47%, respectively, for the third quarter of 2018 and 1.01% and 9.98% for the third quarter of 2017.
  • ROAA and ROAE were 0.87% and 7.31%, respectively, for the nine months ended September 30, 2018, compared to ROAA and ROAE of 0.73% and 7.52%, respectively, for the nine months ended September 30, 2017.  Excluding the merger-related expenses (non-GAAP), ROAA and ROAE would have been 1.26% and 10.59%, respectively, for the nine months ended September 30, 2018 and 0.94% and 9.68% for the nine months ended September 30, 2017.
  • The adjusted (non-GAAP) efficiency ratio was 51.93% and 53.39%, respectively, for the three and nine months ended September 30, 2018 compared to 57.21% and 59.18% for the same periods of 2017.
  • Total assets increased $825.4 million, or 39.20%, since December 31, 2017, primarily due to increases of $688.2 million in loans held for investment, $69.3 million in goodwill, $15.1 million in cash and cash equivalents, and $25.9 million in bank owned life insurance. 
  • Total deposits grew by $589.3 million, or 35.65%, since December 31, 2017.  

  • We ended the third quarter of 2018 with a book value of $21.20 per common share and a tangible book value of $14.70 per common share compared to $16.61 and $14.10, respectively, at December 31, 2017.

  • We maintained appropriate levels of liquidity and by all regulatory measures remained “well capitalized.”

Results of Operations for the Three Months Ended September 30, 2018 Compared to September 30, 2017

Average interest earning assets increased $808.0 million for the three month period ended September 30, 2018 compared to the same period of 2017.  The average yield on such assets was 4.69% for the three months ended September 30, 2018 compared to 4.37% for the comparable 2017 period.  The increase in the average yield is primarily the result of higher yields on our loans held for investment.  Average interest bearing liabilities increased $591.5 million for the three month period ended September 30, 2018 compared to the same period of 2017, primarily as a result of the deposits we acquired in the BYBK acquisition.  The average rate paid on such liabilities increased to 1.20% for the three month period ended September 30, 2018 compared to 0.89% for the same period in 2017 due to higher rates paid on both interest bearing deposits and borrowings.

The net interest margin for the three months ended September 30, 2018 increased to 3.81% from 3.71% the third quarter of 2017.  The net interest margin increased due to an improvement in asset yields in addition to an increase in non-interest bearing deposits as a source of funding, partially offset by the increase in interest expense, primarily due to the interest paid on our borrowed funds.  The net interest margin during the third quarter of 2018 was also affected by the amount of accretion on acquired loans.  Accretion increased due to a higher amount of early payoffs on acquired loans with fair value marks during the three months ended September 30, 2018 compared to the same period of 2017.  The fair value accretion/amortization is recorded on pay-downs recognized during the quarter, which contributed 14 basis points for the three months ended September 30, 2018 compared to seven basis points for the three months ended September 30, 2017.  

Net interest income increased $8.4 million, or 51.08%, for the three months ended September 30, 2018 compared to the same period of 2017, almost entirely due to an increase in loan interest income resulting from increases in both the average balance of and yields on loans, partially offset by an increase in interest expense.  Interest expense increased due to increases in both the average balance of and average interest rates on our deposits and borrowings. 

The provision for loan losses increased $172 thousand for the three month period ended September 30, 2018 compared to the same period of 2017 due to the organic growth in the loan portfolio.

Non-interest income increased $654 thousand, or 30.40%, for the three month period ended September 30, 2018 compared to the same period of 2017, primarily as a result of income of $712 thousand from our new point of sale (“POS”) sponsorship program and increases of $223 thousand in earnings on bank owned life insurance (“BOLI”) partially offset by a decrease of $296 thousand in other fees and commissions. The increase in earnings on BOLI is due to the $16.3 million of BOLI acquired in the BYBK acquisition and $8.5 million in new BOLI policies purchased since September 30, 2017.

Non-interest expense increased $2.0 million, or 13.81%, for the three month period ended September 30, 2018 compared to the same period of 2017, primarily as a result of increases in salaries and benefits, occupancy and equipment, data processing, core deposit amortization and other operating expenses, partially offset by a decrease in merger and integration expense.  We incurred $2.3 million in merger and integration expenses during the 2018 period due to the BYBK acquisition compared to $4.0 million in merger and integration expenses for the 2017 period as a result of the DCBB acquisition.  Salaries and benefits increased $2.1 million primarily as a result of the additional staff, and occupancy and equipment expenses increased $521 thousand primarily as a result of the new branches, that we acquired in the DCBB and BYBK acquisitions.  The $216 thousand increase in data processing expenses resulted from additional customer transactions due to growth.  Core deposit amortization increased $391 thousand as a result of the higher premiums resulting from the deposits we acquired in the DCBB and BYBK acquisitions. Other operating expenses increased $749 thousand due to increases in standard operating costs, such as telephone, office supplies, software expense, and marketing and advertising.

Results of Operations for the Nine Months Ended September 30, 2018 Compared to September 30, 2017

Average interest earning assets increased $672.2 million for the nine month period ended September 30, 2018 compared to the same period of 2017.  The average yield on such assets was 4.60% for the nine months ended September 30, 2018 compared to 4.34% for the comparable 2017 period.  The increase in the yield on interest earning assets is the result of a higher yield on our loans held for investment and our investment portfolio.  Average interest-bearing liabilities increased $456.8 million for the nine month period ended September 30, 2018 compared to the same period of 2017.  The average rate paid on such liabilities increased to 1.11% for the nine month period ended September 30, 2018 compared to 0.87% for the same period in 2017, due to higher rates paid on both interest earning deposits and borrowings.

The net interest margin for the nine months ended September 30, 2018 increased to 3.79% from 3.68% in the same period last year.  The net interest margin increased due to an improvement in asset yields in addition to an increase in non-interest bearing deposits as a source of funding, partially offset by the increase in interest expense, primarily due to the interest paid on our borrowed funds.  The net interest margin during 2018 was also affected by the amount of accretion on acquired loans.  Accretion increased due to a higher amount of early payoffs on acquired loans with fair value marks during the nine months ended September 30, 2018 compared to the same period of 2017.  The fair value accretion/amortization is recorded on pay-downs recognized during the periods, which contributed 13 basis points for the nine months ended September 30, 2018 compared to eight basis points for same nine month period last year.                                                                  

Net interest income increased $21.0 million, or 46.76%, for the nine month period ended September 30, 2018 compared to the same period of 2017, almost entirely due to an increase in loan interest income resulting from increases in both the average balance of and yields on loans, partially offset by an increase in interest expense.  Interest expense increased due to increases in both the average balance of and average interest rates on our deposits and borrowings. 
               
The provision for loan losses increased $380 thousand for the nine month period ended September 30, 2018 compared to the same period of 2017 due to organic growth in the loan portfolio.

Non-interest income increased $1.8 million, or 29.77%, for the nine month period ended September 30, 2018 compared to the same period of 2017, primarily as a result of income of $1.4 million from our new POS sponsorship program and increases of $414 thousand in earnings on BOLI and $639 thousand in service charges on deposit accounts, partially offset by a decrease of $498 thousand in income on marketable loans.  The increase in earnings on BOLI is due to the $16.3 million of BOLI acquired in the BYBK acquisition and $8.5 million in new BOLI policies purchased since September 30, 2017.  The increase in service charges on deposit accounts is the result of increased income on bank debit cards due to the higher deposit base primarily as a result of the DCBB and BYBK acquisitions.  The decrease in income on marketable loans is the result of a decrease in the volume of residential mortgage loans that we sold in the secondary market compared to the same period of 2017. 

Non-interest expense increased $14.6 million, or 42.90%, for the nine month period ended September 30, 2018 compared to the same period of 2017, primarily as a result of increases in merger and integration expense, salaries and benefits, occupancy and equipment, data processing, core deposit amortization and other operating expenses.  We incurred $9.4 million in merger and integration expenses during the nine month period ended September 30, 2018 due to the BYBK acquisition compared to $4.0 million in merger and integration expenses due to the DCBB acquisition during the nine month period last year.  Salaries and benefits increased $4.9 million primarily as a result of the additional staff, and occupancy and equipment expenses increased $1.4 million primarily as a result of the new branches, that we acquired in the DCBB and BYBK acquisitions.  The $810 thousand increase in data processing expenses resulted from additional customer transactions due to growth.  Core deposit amortization increased $865 thousand as a result of the higher premiums resulting from the deposits we acquired in the DCBB and BYBK acquisitions. Other operating expenses increased $1.4 million during the 2018 period due to increases in standard operating costs.  

Old Line Bancshares is the parent company of Old Line Bank, a Maryland chartered commercial bank headquartered in Bowie, Maryland, approximately 10 miles east of Andrews Air Force Base and 20 miles east of Washington, D.C. The Bank has 37 branches located in its primary market area of the suburban Maryland (Washington, D.C. suburbs, Southern Maryland and Baltimore suburbs) counties of Anne Arundel, Baltimore, Calvert, Carroll, Charles, Harford, Howard, Frederick, Montgomery, Prince George's and St. Mary's, and Baltimore City.  It also targets customers throughout the greater Washington, D.C. and Baltimore metropolitan areas. 

Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures.  The Company’s management uses these non-GAAP financial measures, and believes that non-GAAP financial measures provide additional useful information that allows readers; to evaluate the ongoing performance of the Company and provide meaningful comparison to its peers.  Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company.  Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

      
 Old Line Bancshares, Inc. & Subsidiaries 
 Consolidated Balance Sheets 
      
 September 30,
2018
June 30,
2018
March 31,
2018
December 31,
2017 (1)
September 30,
2017
 (Unaudited)(Unaudited)(Unaudited) (Unaudited)
Cash and due from banks$45,774,719  $61,684,888  $85,617,226  $33,562,652  $33,063,210 
Interest bearing accounts 3,522,685   3,845,419   2,687,988   1,354,870   1,017,257 
Federal funds sold 1,008,801   928,337   200,366   256,589   383,737 
Total cash and cash equivalents 50,306,205   66,458,644   88,505,580   35,174,111   34,464,204 
Investment securities available for sale 216,358,059   209,941,534   210,353,788   218,352,558   213,664,342 
Loans held for sale 8,829,777   34,037,532   3,934,086   4,404,294   2,729,060 
Loans held for invesment, less allowance for loan losses of $6,980,050     
and $5,920,586 for September 30, 2018 and December 31, 2017 2,384,579,814   2,347,821,496   1,756,576,833   1,696,361,431   1,666,505,168 
Equity securities at cost 13,063,250   14,854,746   7,782,847   8,977,747   7,277,746 
Premises and equipment 43,060,727   43,719,013   40,991,968   41,173,810   42,074,857 
Accrued interest receivable 8,072,826   7,715,123   5,310,151   5,476,230   4,946,823 
Deferred income taxes 11,385,296   10,978,998   8,547,392   7,317,096   7,774,629 
Bank owned life insurance 67,490,846   67,062,920   41,849,569   41,612,496   41,360,871 
Annuity plan 6,298,627   6,276,320   5,981,809   5,981,809   - 
Other real estate owned 1,469,166   2,357,947   1,799,598   2,003,998   2,003,998 
Goodwill 94,403,635   94,403,635   25,083,675   25,083,675   25,083,675 
Core deposit intangible 16,024,950   16,688,635   5,985,657   6,297,970   6,615,238 
Other assets 9,675,019   11,059,118   8,008,664   7,396,227   6,738,435 
Total assets$2,931,018,197  $2,933,375,661  $2,210,711,617  $2,105,613,452  $2,061,239,046 
                    
Deposits     
Non-interest bearing$581,339,177  $603,257,708  $572,119,981  $451,803,052  $436,645,881 
Interest bearing 1,660,902,293   1,604,420,214   1,213,584,463   1,201,100,317   1,217,988,749 
Total deposits 2,242,241,470   2,207,677,922   1,785,704,444   1,652,903,369   1,654,634,630 
Short term borrowings 272,534,890   314,676,164   161,477,872   192,611,971   152,179,112 
Long term borrowings 38,304,981   38,238,670   38,172,653   38,106,930   38,040,618 
Accrued interest payable 1,643,666   1,827,605   1,105,830   1,471,954   867,884 
Supplemental executive retirement plan 6,123,518   6,057,063   5,975,159   5,893,255   5,823,391 
Income taxes payable -   -   4,182,749   2,157,375   864,260 
Other liabilities 9,989,481   10,553,800   3,700,120   4,741,412   5,489,031 
Total liabilities 2,570,838,006   2,579,031,224   2,000,318,827   1,897,886,266   1,857,898,926 
                    
Stockholders' equity     
Common stock 169,889   169,889   125,667   125,083   124,675 
Additional paid-in capital 293,139,653   292,836,679   149,691,736   148,882,865   148,351,881 
Retained earnings 74,167,389   67,601,752   66,573,919   61,054,487   56,198,108 
Accumulated other comprehensive loss (7,296,740)  (6,263,883)  (5,998,532)  (2,335,249)  (1,334,544)
Total stockholders' equity 360,180,191   354,344,437   210,392,790   207,727,186   203,340,120 
                    
Total liabilities and stockholders' equity$2,931,018,197  $2,933,375,661  $2,210,711,617  $2,105,613,452  $2,061,239,046 
Shares of basic common stock outstanding 16,988,883   16,988,883   12,566,696   12,508,332   12,467,518 
                    
(1) Financial information at December 31, 2017 has been derived from audited financial statements.
      


Old Line Bancshares, Inc. & Subsidiaries
Consolidated Statements of Income
        
 Three Months
Ended
September 30,
Three Months
Ended
June 30,
Three Months
Ended
March 31,
Three Months
Ended
December 31,
Three Months
Ended
September 30,
Nine Months
Ended
September 30,
Nine Months
Ended
September 30,
  2018  2018  2018  2017  2017  2018  2017 
 (Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Interest income       
Loans, including fees$29,056,813  $26,448,728  $19,700,762  $18,979,170  $18,022,324  $75,206,303  $49,153,228  
Investment securities and other 1,696,512   1,719,989   1,623,577   1,452,644   1,469,478   5,040,078   4,027,679  
Total interest income 30,753,325   28,168,717   21,324,339   20,431,814   19,491,802   80,246,381   53,180,907  
Interest expense                            
Deposits 4,098,787   3,146,235   2,306,733   2,146,390   1,926,590   9,551,755   5,174,641  
Borrowed funds 1,768,532   1,714,250   1,334,831   1,057,846   1,092,736   4,817,613   3,119,756  
Total interest expense 5,867,319   4,860,485   3,641,564   3,204,236   3,019,326   14,369,368   8,294,397  
Net interest income 24,886,006   23,308,232   17,682,775   17,227,578   16,472,476   65,877,013   44,886,510  
Provision for loan losses 307,870   532,257   394,896   100,000   135,701   1,235,023   855,108  
Net interest income after provision for loan losses 24,578,136   22,775,975   17,287,879   17,127,578   16,336,775   64,641,990   44,031,402  
Non-interest income                            
Service charges on deposit accounts 728,550   722,879   576,584   593,641   542,909   2,028,013   1,389,340  
POS sponsorship program 711,577   673,502   -   -   -   1,385,079   -  
Gain on sales or calls of investment securities -   -   -   -   -   -   35,258  
Earnings on bank owned life insurance 520,785   461,056   292,936   306,355   297,656   1,274,777   861,112  
Gains (losses) on disposal of assets (1,100)  -   14,366   (46,400)  7,469   13,266   120,063  
Loss on write down of stock (91,498)  (60,998)  -   -   -   (152,496)  -  
Gain on sale of loans -   -   -   -   -   -   94,714  
Income on marketable loans 411,850   511,879   418,472   479,588   482,641   1,342,201   1,840,218  
Other fees and commissions 525,171   879,733   492,663   465,697   820,696   1,897,567   1,661,019  
Total non-interest income 2,805,335   3,188,051   1,795,021   1,798,881   2,151,371   7,788,407   6,001,724  
Non-interest expense       
Salaries & employee benefits 7,491,736   7,201,335   5,485,450   5,267,469   5,365,890   20,178,521   15,284,056  
Severance expense -   -   -   -   -   -   -  
Occupancy & equipment 2,349,691   2,242,640   1,980,401   1,936,420   1,828,593   6,572,732   5,137,276  
Data processing 659,926   702,182   609,639   510,073   443,453   1,971,747   1,161,647  
Merger and integration 2,282,705   7,121,802   -   -   3,985,514   9,404,507   3,985,514  
Core deposit amortization 663,685   540,737   312,313   317,268   272,354   1,516,735   651,612  
(Gains) losses on sales of other real estate owned 26,266   41,956   12,516   -   4,100   80,738   (13,589) 
OREO expense (99,957)  27,995   184,994   45,224   200,959   113,032   256,170  
Other operating 3,288,286   3,198,759   2,406,646   2,664,559   2,539,590   8,893,691   7,639,348  
Total non-interest expense 16,662,338   21,077,406   10,991,959   10,741,013   14,640,453   48,731,703   34,102,034  
                             
Income before income taxes 10,721,133   4,886,620   8,090,941   8,185,446   3,847,693   23,698,694   15,931,092  
Income tax expense 2,456,304   2,160,787   2,025,759   2,328,011   1,684,505   6,642,850   5,824,713  
Net income available to common stockholders$8,264,829  $2,725,833  $6,065,182  $5,857,435  $2,163,188  $17,055,844  $10,106,379  
Earnings per basic share$0.49  $0.17  $0.48  $0.47  $0.18  $1.12  $0.90  
Earnings per diluted share$0.48  $0.17  $0.48  $0.46  $0.18  $1.10  $0.88  
Adjusted per basic share (non-GAAP)$0.58  $0.55  $-  $-  $0.42  $1.62  $1.15  
Adjusted per diluted share (non-GAAP)$0.57  $0.54  $-  $-  $0.42  $1.60  $1.13  
Dividend per common share$0.10  $0.10  $0.08  $0.08  $0.08  $0.28  $0.24  
Average number of basic shares 16,988,883   16,249,625   12,544,266   12,483,692   11,969,536   15,277,219   11,286,215  
Average number of dilutive shares 17,187,837   16,464,580   12,743,282   12,696,087   12,172,868   15,485,452   11,496,659  
Return on Average Assets 1.12%  0.39%  1.16%  1.12%  0.43%  0.87%  0.73% 
Return on Average Equity 8.89%  3.13%  11.36%  11.09%  4.26%  7.31%  7.52% 
Operating Efficiency (1) 60.17%  79.55%  56.43%  56.45%  78.52%  66.15%  66.81% 
        
        
(1) Operating efficiency is derived by dividing non-interest expense by the total of net interest income and non-interest income.

RECONCILIATION OF NON-GAAP MEASURES

As the magnitude of merger-related expenses during the periods set forth below distorts the operational results of the Company, we present in the GAAP reconciliation below and in the accompanying text certain performance measures excluding the effect of the merger-related expenses during the three and nine month periods ended September 30, 2018 and 2017.  We believe this information is important to enable stockholders and other interested parties to assess the adjusted operational performance of the Company.

        
Reconciliation of Non-GAAP measures (Unaudited)Three Months ended
September 30, 2018
 Nine Months ended
September 30, 2018
 Three Months ended
September 30, 2017
 Nine Months ended
September 30, 2017
Net Income (GAAP)$  8,264,829  $  17,055,844  $  2,163,187  $  10,106,379 
Merger-related expenses, net of tax   1,474,623     7,643,988     2,902,912     2,902,912 
Operating net income (non-GAAP)$  9,739,452  $  24,699,832  $  5,066,099  $  13,009,291 
                
Net income available to common shareholders$  8,264,829  $  17,055,844  $  2,163,187  $  10,106,379 
Merger-related expenses, net of tax   1,474,623     7,643,988     2,902,912     2,902,912 
Operating earnings (non-GAAP)$  9,739,452  $  24,699,832  $  5,066,099  $  13,009,291 
                
                
Earnings per weighted average common shares, basic (GAAP)$0.49  $1.12  $0.18  $0.90 
Merger-related expenses, net of tax 0.09   0.50   0.24   0.25 
Operating earnings per weighted average common share basic (non GAAP)$0.58  $1.62  $0.42  $1.15 
                
                
Earnings per weighted average common shares, diluted (GAAP)$0.48  $1.10  $0.18  $0.88 
Meger-related expenses, net of tax 0.09   0.50   0.24   0.25 
Operating earnings per weighted average common share basic (non-GAAP)$0.57  $1.60  $0.42  $1.13 
                
Summary Operating Results (non-GAAP)               
Noninterest expense (GAAP)$16,662,338  $48,731,703  $14,640,453  $34,102,034 
Merger-related expenses, gross 2,282,705   9,404,507   3,985,514   3,985,514 
Operating noninterest expense (non-GAAP) 18,945,043  $58,136,210   10,654,939   30,116,520 
                
Operating efficiency ratio (non-GAAP) 51.93%  53.39%  57.21%  59.18%
                
Operating noninterest expense as a % of average assets (annualized) 1.94%  2.01%  2.12
%  2.19
%
                
Return on average assets               
Net income$  8,264,829  $17,055,844  $  2,163,187  $  10,106,379 
Merger-related expenses, net of tax   1,474,623     7,643,988     2,902,912     2,902,912 
Operating net income (non-GAAP)$  9,739,452  $  24,699,832  $  5,066,099  $  13,009,291 
                
Adjusted Return of Average Assets               
Return on average assets (GAAP) 1.12   0.87   0.43   0.73 
Effect to adjust for merger-related expenses, net of tax 0.20   0.39   0.58   0.21 
Adjusted return on average assets 1.32%  1.26%  1.01%  0.94%
                
Return on average common equity               
Net income available to common shareholders$8,264,829  $17,055,844  $2,163,187  $10,106,379 
Merger-related expenses, net of tax 1,474,623   7,643,988   2,902,912   2,902,912 
Operating earnings (non-GAAP)$9,739,452  $24,699,832  $5,066,099  $13,009,291 
                
Adjusted Return on Average Equity               
Return on average equity (GAAP) 8.89   7.31   4.26   7.52 
Effect to adjust for merger-related expenses, net of tax 1.58   3.28   5.72   2.16 
Adjusted return on average common equity (non-GAAP) 10.47%  10.59%  9.98%  9.68%
                


Old Line Bancshares, Inc. & Subsidiaries
Average Balances, Interest and Yields
            
  9/30/2018
  6/30/2018
  3/31/2018
  12/31/2017
  9/30/2017
  
            
  Average
Balance
 Yield/
Rate
Average
Balance
 Yield/
Rate
Average
Balance
 Yield/
Rate
Average
Balance
 Yield/
Rate
Average
Balance
 Yield/
Rate
Assets:          
Int. Bearing Deposits $4,765,138 1.52%$8,795,004 1.53%$2,003,369 1.47%$1,751,234 1.30%  $2,388,171 1.25%
Investment Securities (2) 233,633,128 3.09% 235,854,989 3.19% 229,456,764 3.15% 225,504,844 3.04% 223,733,565 3.07%
Loans 2,397,054,094 4.84% 2,261,479,332 4.72% 1,720,721,476 4.69% 1,674,725,155 4.56% 1,600,429,497 4.54%
Allowance for Loan Losses (6,885,911)  (6,363,239)  (5,973,556)  (5,893,906)  (5,956,956 
Total Loans
Net of allowance
 2,390,168,183 4.85% 2,255,116,093 4.74% 1,714,747,920 4.70% 1,668,831,249 4.58% 1,594,472,541 4.56%
Total interest-earning assets 2,628,566,449 4.69% 2,499,766,086 4.58% 1,946,208,053 4.52% 1,896,087,327 4.39% 1,820,594,277 4.37%
Noninterest bearing cash 48,035,416   47,014,071   36,844,268   36,504,676   38,671,275  
Goodwill and Intangibles 110,861,142   100,901,255   31,272,865   31,587,482   26,317,526  
Premises and Equipment 43,626,501   43,592,991   41,088,624   41,956,286   40,923,913  
Other Assets 103,995,121   98,152,802   69,837,318   63,412,181   67,286,798  
Total Assets $2,935,084,629  $2,789,427,205  $2,125,251,128  $2,069,547,952  $1,993,793,789  
            
Liabilities and Stockholders' Equity          
            
Interest-bearing Deposits$1,658,060,302 0.98%$1,522,249,880 0.83%$1,200,931,980 0.78%$1,209,362,167 0.70%$1,142,438,456 0.67%
Borrowed Funds 283,169,572 2.48% 288,666,185 2.38% 235,924,800 2.29% 186,472,353 2.25% 207,268,687 2.09%
Total interest-bearing liabilities 1,941,229,874 1.20% 1,810,916,065 1.08% 1,436,856,780 1.03% 1,395,834,520 0.91% 1,349,707,143 0.89%
Noninterest bearing deposits 601,558,786   615,780,315   457,850,993   450,655,820   430,325,956  
   2,542,788,660   2,426,696,380   1,894,707,773   1,846,490,340   1,780,033,099  
            
Other Liabilities 23,355,099   13,536,574   13,931,983   13,450,844   12,465,862  
Stockholder's Equity 368,940,870   349,194,251   216,611,372   209,606,768   201,294,828  
Total Liabilities and Stockholder's Equity$2,935,084,629  $2,789,427,205  $2,125,251,128  $2,069,547,952  $1,993,793,789  
            
Net interest spread 3.49% 3.50% 3.49% 3.48% 3.48%
Net interest income and Net interest margin(1)$25,227,248 3.81 $23,659,244 3.80 $18,033,758 3.76 $17,793,020 3.72%$17,025,836   3.71%

(1) Interest revenue is presented on a fully taxable equivalent (FTE) basis.  The FTE basis adjusts for the tax favored status of these types of assets.  Management believes providing this information on a FTE basis provides investors with a more accurate picture of our net interest spread and net interest income and we believe it to be the preferred industry measurement of these calculations.
(2) Available for sale investment securities are presented at amortized cost.

The accretion of the fair value adjustments resulted in a positive impact in the yield on loans for the three months ended September 30, 2018 and 2017.    Fair value accretion for the current quarter and prior four quarters are as follows: 

 9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017 
 Fair Value
Accretion
Dollars
 % Impact on Net Interest
Margin
 Fair Value
Accretion
Dollars
 % Impact on Net Interest
Margin
 Fair Value
Accretion
Dollars
 % Impact on Net Interest
Margin
 Fair Value
Accretion
Dollars
 % Impact
on Net Interest
Margin
 Fair Value
Accretion
Dollars
 % Impact on Net Interest
Margin
 
Commercial loans (1)$  113,378   0.02%$  209,819   0.03%$  47,705   0.01%$  43,318    0.01 %$  28,420   0.01%
Mortgage loans (1)   620,664   0.09    752,461   0.12    78,188   0.02    (10,675)   (0.00)    159,941   0.03 
Consumer loans   110,220   0.02    126,575   0.02    97,544   0.02    106,269    0.02     57,514   0.01 
Interest bearing deposits   70,157   0.01    70,178   0.01    80,886   0.02    95,755    0.02     88,766   0.02 
                            
Total Fair Value Accretion $  914,419   0.14%$1,159,033   0.18%$  304,323   0.07%$  234,667    0.05 %$  334,641   0.07%

(1) Negative accretion on commercial and mortgage loans is due to the early payoff of loans which caused a reduction in fair value income on acquired loan portfolio.

Below is a reconciliation of the fully tax equivalent adjustments and the GAAP basis information presented in this release:

 9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017 
 Net Interest
Income
 Yield Net Interest
Income
 Yield Net Interest
Income
 Yield Net Interest
Income
 Yield Net Interest
Income
 Yield 
GAAP net interest income$24,886,006 3.76%$23,308,232 3.74%$17,682,775 3.68%$17,227,578 3.60%$16,472,476 3.59%
Tax equivalent adjustment                    
Federal funds sold 92 0.00  80 0.00  36 0.00  31 0.00  177 0.00 
Investment securities 159,520 0.02  161,340 0.03  160,911 0.04  275,685 0.06  267,376 0.06 
Loans 181,630 0.03  189,592 0.03  190,036 0.04  289,726 0.06  285,807 0.06 
Total tax equivalent adjustment 341,242 0.05  351,012 0.06  350,983 0.08  565,442 0.12  553,360 0.12 
Tax equivalent interest yield$25,227,248 3.81%$23,659,244 3.80%$18,033,758 3.76%$17,793,020 3.72%$17,025,836 3.71%
                     


Old Line Bancshares, Inc. & Subsidiaries
Selected Loan Information
(Dollars in thousands)
 September 30,
2018
June 30,
2018
March 31,
2018
December 31,
2017
September 30,
2017
      
Legacy Loans(1)     
Period End Loan Balance$  1,609,695 $  1,543,113 $  1,434,375 $  1,354,573 $  1,304,530 
Deferred Costs   2,805    2,364    2,374    2,013    1,807 
Accruing 1,608,808  1,542,371  1,433,907  1,352,407  1,299,139 
Non-accrual   887    742    468    474    686 
Accruing 30-89 days past due   6,352    4,565    4,587    1,692    4,705 
Accruing 90 or more days past due   1,785    178    -     -     -  
Allowance for loan losses   6,699    6,444    6,075    5,739    5,634 
Other real estate owned   -     -     425    425    425 
Net charge offs (recoveries)   (1)   (3)   (2)   (2)   198 
      
Acquired Loans(2)     
Period End Loan Balance$  779,060 $  809,049 $  326,085 $  345,696 $  365,984 
Accruing 775,438  807,241  324,787  338,914  360,858 
Non-accrual(3)   3,622    1,808    1,298    1,291    1,214 
Accruing 30-89 days past due   8,120    13,770    4,932    5,375    3,900 
Accruing 90 or more days past due   733    361    330    116    107 
Allowance for loan losses   281    260    182    182    182 
Other real estate owned   1,469    2,358    1,375    1,579    1,579 
Net charge offs (recoveries)   33    88    60    (2)   33 
      
Allowance for loan losses as % of held for investment loans 0.29% 0.29% 0.36% 0.35% 0.35%
Allowance for loan losses as % of legacy held for investment loans 0.42% 0.43% 0.42% 0.42% 0.43%
Allowance for loan losses as % of acquired held for investment loans 0.04% 0.03% 0.06% 0.05% 0.05%
Total non-performing loans as a % of held for investment loans 0.30% 0.13% 0.12% 0.11% 0.12%
Total non-performing assets as a % of total assets 0.29% 0.19% 0.18% 0.18% 0.19%

(1) Legacy loans represent total loans excluding loans acquired on April 1, 2011, May 10, 2013, December 4, 2015, July 28, 2017 and April 13, 2018.
(2) Acquired loans represent all loans acquired on April 1, 2011 from Maryland Bank & Trust Company, N.A., on May 10, 2013 from The Washington Savings Bank, on December 4, 2015, from Regal Bank & Trust, on July 28, 2017 from DCB, and on April 13, 2018 from Bay.  We originally recorded these loans at fair value upon acquisition.
(3) These loans are loans that are considered non-accrual because they are not paying in conformance with the original contractual agreement.

CONTACT: ELISE HUBBARD
CHIEF FINANCIAL OFFICER
(301) 430-2560

Source: Old Line Bancshares, Inc.
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