Old Line Bancshares, Inc. Reports Record Quarterly Results of $4.3 Million in Net Income, Loan Growth of 5.32%, Return on Average Assets of 1.03% and Operating Efficiency of 55.63% for the Quarter Ended December 31, 2016

BOWIE, MD / ACCESSWIRE / January 17, 2017 / Old Line Bancshares, Inc. ("Company") (NASDAQ: OLBK), the parent company of Old Line Bank, reports net income available to common stockholders increased $788 thousand, or 22.24%, and $2.3 million, or 116.35%, respectively, to $4.3 million for the three months ended December 31, 2016, compared to $3.5 million for the three month period ended September 30, 2016 and $2.0 million for the three month period ended December 31, 2015. Earnings were $0.40 per basic and $0.39 per diluted common share for the three months ended December 31, 2016, compared to $0.33 per basic and $0.32 per diluted common share for the three months ended September 30, 2016 and $0.19 per basic and diluted common share for the three months ended December 31, 2015. The increase in net income for the fourth quarter of 2016, as compared to the same 2015 period, is primarily the result of a $1.8 million increase in net interest income, a decrease of $1.5 million in non-interest expenses, and a decrease of $200 thousand in the provision for loan losses

Net loans held-for-investment at December 31, 2016 increased $68.7 million, or 5.32%, compared to September 30, 2016 and $214.1 million, or 18.67%, compared to December 31, 2015. Total assets increased $66.6 million to $1.72 billion at December 31, 2016, as compared to $1.65 billion at September 30, 2016. Non-interest income decreased $567 thousand, as compared to third quarter of 2016, primarily as a result of a reduction on the gain on investment securities and marketable loans, and $23 thousand compared to the fourth quarter of 2015. Non-interest expense decreased $1.1 million, or 11.52%, and $1.5 million, or 15.60%, respectively, for the three month period ending December 31, 2016, compared to the three month periods ending September 30, 2016 and December 31, 2015. This decrease is the result of a reduction in salaries and benefits and occupancy expense associated with the staff reduction and branch closures implemented in the second and third quarters of 2016.

Net income available to common stockholders was $13.2 million for the twelve months ended December 31, 2016, compared to $10.5 million for the same period of 2015, an increase of $2.7 million, or 25.66%. Earnings were $1.21 per basic and $1.20 per diluted common share for the twelve months ended December 31, 2016, compared to $0.98 per basic and $0.97 per diluted common share for the same period of 2015. The increase in net income is primarily the result of increases of $6.4 million, or 13.63%, in net interest income and an increase of $1.4 million, or 20.61%, in non-interest income, partially offset by increases of $3.4 million in non-interest expenses and $274 thousand in the provision for loan losses. Included in net income for 2016 was $443 thousand for severance payments and $285 thousand in occupancy and equipment expense resulting from the previously announced strategic staff reductions and branch closures, as well as $661 thousand in merger related expense associated with the acquisition of Regal Bancorp, Inc., the parent company of Regal Bank & Trust ("Regal Bank") during the fourth quarter of 2015.

James W. Cornelsen, President and Chief Executive Officer of Old Line Bancshares, Inc., stated: "Robust loan growth of 5.32%, along with improving operating efficiency to 55.63%, resulted in record earnings for the quarter. Achieving Return on Average Assets of 1.03% in conjunction with increased earnings per share is significant for our shareholders. We are proud of our 2016 results with loan growth at a rate of 18.67% and an increase to income of $2.7 million over 2015. Looking forward to 2017, our focus is to continue to enhance our profitability, build on our solid foundation by growing our loan and non-maturity deposit portfolios, and maintain our operating efficiency while investing in new growth opportunities."

4th QUARTER HIGHLIGHTS:

• Net income available to common stockholders increased 22.24% to $4.3 million, or $0.40 per basic and $0.39 per diluted share, for the three month period ending December 31, 2016, from $3.5 million, or $0.33 per basic and $0.32 per diluted share, for the prior quarter ending September 30, 2016.
• Net loans held-for-investment increased $68.7 million, or 5.32% during the three months ended December 31, 2016, to $1.4 billion at December 31, 2016, compared to $1.3 billion at September 30, 2016, as a result of organic growth within our market area.
• Non-performing assets decreased to 0.58% of total assets at December 31, 2016, compared to 0.63% at September 30, 2016.
• The fourth quarter 2016 Return on Average Assets (ROAA) and Return on Average Equity (ROAE) were 1.03% and 11.10%, respectively, compared to ROAA and ROAE of 0.56% and 5.59%, respectively, for the fourth quarter of 2015.
• Operating efficiency improved to 55.63% during the quarter ended December 31, 2016, compared to 63.30% during the three months ended September 30, 2016 and 73.34% during the three months ended December 31, 2015.
• The net interest margin during the three months ended December 31, 2016 was 3.75%, compared to 3.73% for the three months ended September 30, 2016 and 3.98% for the three months ended December 31, 2015. Total yield on interest earning assets increased to 4.36% for the three months ending December 31, 2016, from 4.27% for the three months ended September 30, 2016 and decreased from 4.41% for the three month period ended December 31, 2015. Interest expense as a percentage of total interest-bearing liabilities was 0.79% for the three months ended December 31, 2016, compared to 0.56% for the same three month period of 2015, with the increase being driven by the issuance of $35 million in aggregate principal amount of the Company's 5.625% Fixed-to-Floating Rate Subordinated Notes due in 2026 (the "Notes").

2016 FULL YEAR HIGHLIGHTS:

• Net income available to common stockholders increased $2.7 million, or 25.66% to $13.2 million, or $1.21 per basic and $1.20 per diluted share, for the twelve month period ending December 31, 2016, from $10.5 million, or $0.98 per basic and $0.97 per diluted share, for the twelve months ending December 31, 2015.
• Net loans held-for-investment grew $214.1 million, or 18.67%, during the twelve months ended December 31, 2016, to $1.4 billion at December 31, 2016, compared to $1.1 billion at December 31, 2015, as a result of organic growth within our market area.
• The growth in average loans outstanding for the twelve month period ending December 31, 2016 as compared to the same period of 2015 includes approximately $91.0 million in loans from the acquisition of Regal Bank in December 2015. Average gross loans increased $242.8 million, or 22.33% to $1.3 billion for the three month period ending December 31, 2016 compared to $1.1 billion during the three months ended December 31, 2015
• Non-performing assets decreased to 0.58% of total assets at December 31, 2016 compared to 0.60% at December 31, 2015.
• ROAA and ROAE were 0.83% and 8.83%, respectively, for the twelve months ended December 31, 2016 compared to ROAA and ROAE of 0.79% and 7.54%, respectively, for the twelve months ending December 31, 2015.
• Total assets increased $206.6 million, or 13.68%, since December 31, 2015.
• Total deposits increased $90.0 million, or 7.28%, since December 31, 2015.
• The net interest margin during the year ended December 31, 2016 was 3.79%, compared to 4.08% for 2015. Total yield on interest earning assets decreased to 4.31% for the year ending December 31, 2016, compared to 4.49% for 2015. Interest expense as a percentage of total interest-bearing liabilities was 0.68% for the year ended December 31, 2016, compared to 0.54% for 2015.
• The Company ended 2016 with a book value of $13.81 per common share and a tangible book value of $12.59 per common share, compared to $13.31 and $12.02, respectively, at December 31, 2015.
• We maintained appropriate levels of liquidity and by all regulatory measures remained "well capitalized."
• On August 15, 2016, the Company completed the sale of the Notes.
• On August 19, 2016, Old Line Bank purchased the aggregate 37.5% interest in Pointer Ridge Office Investment, LLC ("Pointer Ridge") not held by the Company for an aggregate of $280,139 pursuant to Agreements of Purchase and Sale of Membership Interests that the Bank entered into with each of the prior owners of the remaining (in aggregate) 37.5% interest in Pointer Ridge. Pointer Ridge owns our headquarters building, which we lease from Pointer Ridge.

Total assets at December 31, 2016 increased $206.6 million from December 31, 2015, primarily due to increases of $214.1 million in loans held-for-investment and $4.8 million in investment securities available-for-sale, partially offset by a decrease of $20.2 million in cash and cash equivalents. Deposits increased $90.0 million during the twelve months ended December 31, 2016, almost all of which is attributable to an increase in our interest bearing deposits.

Average interest earning assets increased $268.8 million and $260.4 million, respectively, during the three and twelve month periods ending December 31, 2016, compared to the same periods of 2015. The average yield on such assets was 4.36% and 4.31%, respectively, for the three and twelve months ending December 31, 2016, compared to 4.41% and 4.49% for the comparable 2015 periods. The decreases in the yield on interest earning assets is the result of re-pricing in the loan portfolio and lower yields on new loans, causing the average loan yield to decline. Average interest bearing liabilities increased $202.5 million and $200.4 million, respectively, during the three and twelve month periods ending December 31, 2016, compared to the same periods of 2015. The average rate paid on such liabilities increased to 0.79% and 0.68%, respectively, for the three and twelve months ending December 31, 2016, compared to 0.56% and 0.54% for the same periods in 2015, primarily due to higher rates paid on our borrowings, which includes the interest paid on the Notes and our trust preferred securities and, to a lesser extent, higher rates on the deposits acquired in the Regal Bank acquisition.

The net interest margin for the three and twelve months ended December 31, 2016 decreased to 3.75% and 3.79%, respectively, from 3.98% and 4.08%, respectively, for the three and twelve months ending December 31, 2015. The net interest margin during the 2016 periods was affected by the increase in the interest expense, primarily due to the interest due on the Notes and our trust preferred securities, for which there was no comparable expense during 2015. The net interest margin during 2016 was also affected by a lower amount of accretion on acquired loans due to a lower amount of early payoffs on acquired loans with credit marks during the twelve months ending December 31, 2016, compared to the same periods of 2015. The fair value accretion/amortization is recorded on pay-downs recognized during the period, which contributed to a five basis point decrease for the twelve months ended December 31, 2016 as compared to the same twelve month period of 2015.

Net interest income increased $1.8 million, or 14.43%, and $6.4 million, or 13.63%, for the three and twelve month periods ending December 31, 2016, compared to the same periods of 2015, primarily due to increases in the interest recognized on loans, partially offset by the increases in interest expense. Loan interest income increased for the three and twelve month periods ending December 31, 2016 due to organic growth as well as the loans we acquired in the Regal Bank acquisition. Interest expense during these periods increased due to increases in both our deposits and borrowings. Borrowings include the Notes issued during the third quarter of 2016 as discussed above.

The provision for loan losses decreased $200 thousand for the three months ending December 31, 2016, compared to the same period of 2015, due to an improvement in our historical loss trend, and increased $274 thousand for the twelve months ending December 31, 2016, compared to the same period of 2015 due to an increase in our loans held-for-investment portfolio as the result of organic growth and reserves on specific loans. The reserves on specific loans increased primarily due to one large commercial borrower, consisting of two commercial real estate loans totaling $2.4 million, and 21 commercial and industrial loans totaling $1.0 million. These loans are classified as impaired and have been adequately reserved for at December 31, 2016.

Non-interest income decreased $23 thousand, or 1.44%, for the three month period ending December 31, 2016, compared to the same period of 2015, primarily as a result of a decrease of $155 thousand in other fee and commissions, partially offset by the increases of $96 thousand in gain on sale of loans and $22 thousand in earnings on bank owned life insurance, compared to the same period of 2015. The increase in the gain on the sale of loans is a result of an increase in the number of residential mortgage loans sold in the secondary market, compared to the same period of 2015. The increase in earnings on bank owned life insurance is due to the bank owned life insurance we acquired in the Regal Bank acquisition. The decrease in other fees and commissions is primarily related to a decrease in other loan fees, primarily due to a prepayment penalty of $78 thousand received during the fourth quarter of 2015.

Non-interest income increased $1.4 million, or 20.61%, for the twelve month period ending December 31, 2016, compared to the same period of 2015. The increase is primarily the result of increases of $1.2 million in gain on sales or calls of investment securities, $298 thousand in gain on sale of loans and $123 thousand in earnings on bank owned life insurance, partially offset by decreases of $130 thousand in other fees and commissions and $41 thousand in gains or losses on disposal of assets. The increase in gain on sales of investment securities is the result of re-positioning our investment portfolio during 2016, pursuant to which we sold approximately $108 million of our lowest yielding, longer duration investments, resulting in a gain on investments. The decrease in other fees and commissions is primarily related to other loan fees that were included in 2015 for a prepayment penalty and the gain of $153 thousand received during the third quarter of 2015 as a result of selling our credit card portfolio in 2015, partially offset by a one-time incentive fee received for our debit card program during 2016. The increase in earnings on bank owned life insurance is due to the bank owned life insurance we acquired in the Regal Bank acquisition. The increase in gain on sale of loans is the result of an increase in the premiums received on residential mortgage loans sold in the secondary market during the twelve months period ending December 31, 2016 as compared to the same period last year.

Non-interest expense decreased $1.5 million, or 14.60%, for the three month period ending December 31, 2016, compared to the same period of 2015, primarily as a result of decreases in merger and integration and other real estate owned ("OREO") expenses, partially offset by increases in occupancy and equipment and data processing expenses. There were no merger and integration expenses during the 2016 period, whereas we incurred $661 thousand of merger and integration expenses during the fourth quarter of 2015 in connection with the Regal Bancorp acquisition that consummated that quarter. OREO expenses decreased for the 2016 period as a result of a reduction on our expenses associated with properties in our OREO portfolio. Occupancy and equipment expense increased as a result of the addition of the former Regal Bank branches and the addition of our new Rockville branches in November 2015 and June 2016.

Non-interest expenses increased $3.4 million, or 9.28%, for the twelve month period ending December 31, 2016, compared to the same period of 2015, primarily as a result of increases in salaries and benefits, severance payments, occupancy and equipment data processing, and other operating expenses, partially offset by a reduction in merger and integration expenses, a gain on sales of OREO properties, and a decrease in OREO expenses. Salaries and benefits increased $2.4 million, primarily as a result of additional staff due to our acquisition of Regal Bank and the additional staff for our two new Rockville locations. Severance payments of $443 thousand were associated with the previously discussed reductions in our operating staff. Occupancy and equipment increased $1.0 million as a result of the additional branches acquired in the Regal Bank acquisition and the additional opening of our two new Rockville locations, as well as the costs associated with the branch closures during the third quarter of 2016. Data processing increased as a result of the additional branches acquired through Regal Bank and the new Rockville locations. Merger and integration expenses decreased due to the majority of such expenses associated with the acquisition of Regal Bancorp being incurred during the year that the merger was consummated - 2015. Gain on sales of OREO properties increased $128 thousand as a result of recording a net gain of $78 thousand for seven properties that sold during the twelve months ending December 31, 2016, compared to a net loss of $50 thousand during the same period last year. OREO expenses decreased as a result of a reduction in our expenses on the properties in our OREO portfolio.

Old Line Bancshares, Inc. 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. Old Line Bank has 21 branches located in its primary market area of suburban Maryland (Washington, D.C. suburbs, Southern Maryland, and Baltimore suburbs) counties of Anne Arundel, Baltimore, Calvert, Carroll, Charles, Montgomery, Prince George's, and St. Mary's. 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 non-GAAP financial measures, Management 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.

(1) Financial information at December 31, 2015 has been derived from audited financial statements.

(1) Financial information at December 31, 2015 has been derived from audited financial statements.
(2) Operating efficiency is derived by dividing non-interest expense by the total of net interest income and non-interest income.

(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 ending December 31, 2016 and 2015. Fair value accretion for the current quarter and prior four quarters are as follows:

(1) Negative accretion on commercial 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 report:

(1) Legacy loans represent total loans excluding loans acquired on April 1, 2011, May 10, 2013 and December 4, 2015.
(2) Acquired loans represent all loans acquired on April 1, 2011 from MB&T on May 10, 2013 from WSB and on December 4, 2015 for Regal. 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.

OLD LINE BANCSHARES, INC.

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

SOURCE: Old Line Bancshares, Inc.