UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2018
OR
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 000-50345
Old Line Bancshares, Inc.
(Exact name of registrant as specified in its charter)
| Maryland | 20-0154352 | |
| (State or other jurisdiction | (I.R.S. Employer | |
| of incorporation or organization) | Identification No.) |
| 1525 Pointer Ridge Place | ||
| Bowie, Maryland | 20716 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (301) 430-2500
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer o | Accelerated filer x |
| Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
| Emerging growth company o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
As of April 30, 2018, the registrant had 16,974,783 shares of common stock outstanding.
OLD LINE BANCSHARES, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
| 2 |
Old Line Bancshares, Inc. & Subsidiaries
| March 31, 2018 | December 31, 2017 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Cash and due from banks | $ | 85,617,226 | $ | 33,562,652 | ||||
| Interest bearing accounts | 2,687,988 | 1,354,870 | ||||||
| Federal funds sold | 200,366 | 256,589 | ||||||
| Total cash and cash equivalents | 88,505,580 | 35,174,111 | ||||||
| Investment securities available for sale-at fair value | 210,353,788 | 218,352,558 | ||||||
| Loans held for sale, fair value of $4,073,887 and $4,557,722 | 3,934,086 | 4,404,294 | ||||||
| Loans held for investment (net of allowance for loan losses of $6,257,519 and $5,920,586, respectively) | 1,756,576,833 | 1,696,361,431 | ||||||
| Equity securities at cost | 7,782,847 | 8,977,747 | ||||||
| Premises and equipment | 40,991,968 | 41,173,810 | ||||||
| Accrued interest receivable | 5,310,151 | 5,476,230 | ||||||
| Deferred income taxes | 8,547,392 | 7,317,096 | ||||||
| Bank owned life insurance | 41,849,569 | 41,612,496 | ||||||
| Annuity Plan | 5,981,809 | 5,981,809 | ||||||
| Other real estate owned | 1,799,598 | 2,003,998 | ||||||
| Goodwill | 25,083,675 | 25,083,675 | ||||||
| Core deposit intangible | 5,985,657 | 6,297,970 | ||||||
| Other assets | 8,008,664 | 7,396,227 | ||||||
| Total assets | $ | 2,210,711,617 | $ | 2,105,613,452 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Deposits | ||||||||
| Non-interest bearing | $ | 572,119,981 | $ | 451,803,052 | ||||
| Interest bearing | 1,213,584,463 | 1,201,100,317 | ||||||
| Total deposits | 1,785,704,444 | 1,652,903,369 | ||||||
| Short term borrowings | 161,477,872 | 192,611,971 | ||||||
| Long term borrowings | 38,172,653 | 38,106,930 | ||||||
| Accrued interest payable | 1,105,830 | 1,471,954 | ||||||
| Supplemental executive retirement plan | 5,975,159 | 5,893,255 | ||||||
| Income taxes payable | 4,182,749 | 2,157,375 | ||||||
| Other liabilities | 3,700,120 | 4,741,412 | ||||||
| Total liabilities | 2,000,318,827 | 1,897,886,266 | ||||||
| Stockholders’ equity | ||||||||
| Common stock, par value $0.01 per share; 25,000,000 shares authorized; 12,566,696 and 12,508,332 shares issued and outstanding in 2018 and 2017, respectively | 125,667 | 125,083 | ||||||
| Additional paid-in capital | 149,691,736 | 148,882,865 | ||||||
| Retained earnings | 66,573,919 | 61,054,487 | ||||||
| Accumulated other comprehensive loss | (5,998,532 | ) | (2,335,249 | ) | ||||
| Total stockholders’ equity | 210,392,790 | 207,727,186 | ||||||
| Total liabilities and stockholders’ equity | $ | 2,210,711,617 | $ | 2,105,613,452 | ||||
The accompanying notes are an integral part of these consolidated financial statements
| 3 |
Old Line Bancshares, Inc. & Subsidiaries
Consolidated Statements of Income
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2018 | 2017 | |||||||
| Interest Income | ||||||||
| Loans, including fees | $ | 19,700,762 | $ | 15,365,654 | ||||
| U.S. treasury securities | 10,029 | 5,067 | ||||||
| U.S. government agency securities | 81,542 | 48,504 | ||||||
| Corporate bonds | 200,469 | 117,837 | ||||||
| Mortgage backed securities | 575,018 | 554,429 | ||||||
| Municipal securities | 500,620 | 435,554 | ||||||
| Federal funds sold | 665 | 612 | ||||||
| Other | 255,234 | 107,677 | ||||||
| Total interest income | 21,324,339 | 16,635,334 | ||||||
| Interest expense | ||||||||
| Deposits | 2,306,733 | 1,541,058 | ||||||
| Borrowed funds | 1,334,831 | 932,887 | ||||||
| Total interest expense | 3,641,564 | 2,473,945 | ||||||
| Net interest income | 17,682,775 | 14,161,389 | ||||||
| Provision for loan losses | 394,896 | 440,491 | ||||||
| Net interest income after provision for loan losses | 17,287,879 | 13,720,898 | ||||||
| Non-interest income | ||||||||
| Service charges on deposit accounts | 576,584 | 412,159 | ||||||
| Gain on sales or calls of investment securities | — | 15,677 | ||||||
| Earnings on bank owned life insurance | 292,936 | 281,356 | ||||||
| Gain on disposal of assets | 14,366 | 112,594 | ||||||
| Rental Income | 198,444 | 140,593 | ||||||
| Income on marketable loans | 418,472 | 630,930 | ||||||
| Other fees and commissions | 294,219 | 261,425 | ||||||
| Total non-interest income | 1,795,021 | 1,854,734 | ||||||
| Non-interest expense | ||||||||
| Salaries and benefits | 5,485,450 | 4,867,531 | ||||||
| Occupancy and equipment | 1,980,401 | 1,653,413 | ||||||
| Data processing | 609,639 | 356,648 | ||||||
| FDIC insurance and State of Maryland assessments | 188,071 | 261,600 | ||||||
| Core deposit premium amortization | 312,313 | 197,901 | ||||||
| Loss (gain) on sales of other real estate owned | 12,516 | (17,689 | ) | |||||
| OREO expense | 184,994 | 27,577 | ||||||
| Directors Fees | 170,550 | 177,200 | ||||||
| Network services | 79,205 | 139,607 | ||||||
| Telephone | 204,424 | 194,142 | ||||||
| Other operating | 1,764,396 | 1,674,200 | ||||||
| Total non-interest expense | 10,991,959 | 9,532,130 | ||||||
| Income before income taxes | 8,090,941 | 6,043,502 | ||||||
| Income tax expense | 2,025,759 | 2,069,720 | ||||||
| Net income available to common stockholders | 6,065,182 | 3,973,782 | ||||||
| Basic earnings per common share | $ | 0.48 | $ | 0.36 | ||||
| Diluted earnings per common share | $ | 0.48 | $ | 0.36 | ||||
| Dividend per common share | $ | 0.08 | $ | 0.08 | ||||
The accompanying notes are an integral part of these consolidated financial statements
| 4 |
Old Line Bancshares, Inc. & Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
| Three Months Ended March 31, | 2018 | 2017 | ||||||
| Net income | $ | 6,065,182 | $ | 3,973,782 | ||||
| Other comprehensive income: | ||||||||
| Unrealized gain/(loss) on securities available for sale, net of taxes of ($1,216,115), and $715,030, respectively | (3,203,310 | ) | 1,097,727 | |||||
| Reclassification adjustment for realized gain on securities available for sale included in net income, net of taxes of $0 and $6,184, respectively | — | (9,493 | ) | |||||
| Other comprehensive income (loss) | (3,203,310 | ) | 1,088,234 | |||||
| Comprehensive income | $ | 2,861,872 | $ | 5,062,016 | ||||
The accompanying notes are an integral part of these consolidated financial statements
| 5 |
Old Line Bancshares, Inc. & Subsidiaries
Consolidated Statement of Changes in Stockholders’ Equity
(Unaudited)
| Accumulated | ||||||||||||||||||||||||
| Additional | other | Total | ||||||||||||||||||||||
| Common stock | paid-in | Retained | comprehensive | Stockholders’ | ||||||||||||||||||||
| Shares | Par value | capital | earnings | loss | Equity | |||||||||||||||||||
| Balance December 31, 2017 | 12,508,332 | $ | 125,083 | $ | 148,882,865 | $ | 61,054,487 | $ | (2,335,249 | ) | $ | 207,727,186 | ||||||||||||
| Net income attributable to Old Line Bancshares, Inc. | — | — | — | 6,065,182 | — | 6,065,182 | ||||||||||||||||||
| Other comprehensive loss, net of income tax of $1,216,115 | — | — | — | — | (3,203,310 | ) | (3,203,310 | ) | ||||||||||||||||
| Reclassification of stranded tax effect resulting from the Tax Cuts and Jobs Act | 459,973 | (459,973 | ) | — | ||||||||||||||||||||
| Stock based compensation awards | — | — | 288,559 | — | — | 288,559 | ||||||||||||||||||
| Stock options exercised | 38,921 | 389 | 520,507 | — | — | 520,896 | ||||||||||||||||||
| Restricted stock issued | 19,443 | 195 | (195 | ) | — | — | — | |||||||||||||||||
| Common stock cash dividends $0.08 per share | — | — | — | (1,005,723 | ) | — | (1,005,723 | ) | ||||||||||||||||
| Balance March 31, 2018 | 12,566,696 | $ | 125,667 | $ | 149,691,736 | $ | 66,573,919 | $ | (5,998,532 | ) | $ | 210,392,790 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
| 6 |
Old Line Bancshares, Inc. & Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2018 | 2017 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 6,065,182 | $ | 3,973,782 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
| Depreciation and amortization | 725,225 | 588,966 | ||||||
| Provision for loan losses | 394,896 | 440,491 | ||||||
| Change in deferred loan fees net of costs | (360,813 | ) | 84,001 | |||||
| Gain on sales or calls of securities | — | (15,677 | ) | |||||
| Amortization of premiums and discounts | 205,833 | 265,593 | ||||||
| Origination of loans held for sale | (19,299,766 | ) | (20,356,369 | ) | ||||
| Proceeds from sale of loans held for sale | 19,769,974 | 25,270,536 | ||||||
| Income on marketable loans | (418,472 | ) | (630,930 | ) | ||||
| (Gain)/loss on sales of other real estate owned | 12,516 | (17,689 | ) | |||||
| Gain on sale of fixed assets | (14,366 | ) | (112,594 | ) | ||||
| Amortization of intangible assets | 312,313 | 197,901 | ||||||
| Deferred income taxes | (14,181 | ) | (28,358 | ) | ||||
| Stock based compensation awards | 288,559 | 115,113 | ||||||
| Increase (decrease) in | ||||||||
| Accrued interest payable | (366,124 | ) | (487,144 | ) | ||||
| Income tax payable | 2,025,374 | 2,042,421 | ||||||
| Supplemental executive retirement plan | 81,904 | 69,864 | ||||||
| Other liabilities | (1,041,292 | ) | (333,095 | ) | ||||
| Decrease (increase) in | ||||||||
| Accrued interest receivable | 166,079 | 233,959 | ||||||
| Bank owned life insurance | (237,073 | ) | (233,925 | ) | ||||
| Other assets | (612,437 | ) | 1,052,881 | |||||
| Net cash provided by operating activities | $ | 7,683,331 | $ | 12,119,727 | ||||
| Cash flows from investing activities | ||||||||
| Purchase of investment securities available for sale | (2,875,007 | ) | (7,027,916 | ) | ||||
| Proceeds from disposal of investment securities | ||||||||
| Available for sale at maturity, call or paydowns | 6,248,518 | 8,339,200 | ||||||
| Loans made, net of principal collected | (59,831,012 | ) | (55,381,656 | ) | ||||
| Proceeds from sale of other real estate owned | 191,884 | (555,052 | ) | |||||
| Change in equity securities | 1,194,900 | (1,031,900 | ) | |||||
| Purchase of premises and equipment | (529,017 | ) | (1,786,466 | ) | ||||
| Proceeds from the sale of premises and equipment | — | 112,594 | ||||||
| Net cash used in investing activities | (55,599,734 | ) | (57,331,196 | ) | ||||
| Cash flows from financing activities | ||||||||
| Net increase (decrease) in | ||||||||
| Time deposits | 21,502,593 | 8,074,049 | ||||||
| Other deposits | 111,298,482 | 34,924,175 | ||||||
| Short term borrowings | (31,134,099 | ) | 7,961,724 | |||||
| Long term borrowings | 65,723 | 65,723 | ||||||
| Proceeds from stock options exercised | 520,896 | 148,382 | ||||||
| Cash dividends paid-common stock | (1,005,723 | ) | (875,758 | ) | ||||
| Net cash provided by financing activities | 101,247,872 | 50,298,295 | ||||||
| Net increase (decrease) in cash and cash equivalents | 53,331,469 | 5,086,826 | ||||||
| Cash and cash equivalents at beginning of period | 35,174,111 | 23,463,171 | ||||||
| Cash and cash equivalents at end of period | $ | 88,505,580 | $ | 28,549,997 | ||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | 4,007,688 | $ | 2,961,089 | ||||
| Income taxes | $ | — | $ | — | ||||
| Supplemental Disclosure of Non-Cash Flow Operating Activities: | ||||||||
| Loans transferred to other real estate owned | $ | — | $ | 422,848 | ||||
The accompanying notes are an integral part of these consolidated financial statements
| 7 |
OLD LINE BANCSHARES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Organization and Description of Business - Old Line Bancshares, Inc. (“Old Line Bancshares”) was incorporated under the laws of the State of Maryland on April 11, 2003 to serve as the holding company of Old Line Bank. The primary business of Old Line Bancshares is to own all of the capital stock of Old Line Bank. We provide a full range of banking services to customers located in Anne Arundel, Baltimore, Calvert, Carroll, Charles, Frederick, Montgomery, Prince George’s, and St. Mary’s Counties in Maryland and surrounding areas.
As previously announced, on September 27, 2017, Old Line Bancshares entered into an Agreement and Plan of Merger with Bay Bancorp, Inc. (“BYBK”), the parent company of Bay Bank, FSB (“Bay Bank”), pursuant to which BYBK merged with and into Old Line Bancshares (the “Merger”) on April 13, 2018. Please see Note 11 to our consolidated financial statements, “Subsequent Event,” for more information.
Basis of Presentation and Consolidation - The accompanying condensed consolidated financial statements include the activity of Old Line Bancshares and its wholly owned subsidiary, Old Line Bank, and its wholly-owned subsidiary Pointer Ridge Office Investments, LLC (“Pointer Ridge”), a real estate investment company. We have eliminated all significant intercompany transactions and balances.
The foregoing consolidated financial statements for the periods ended March 31, 2018 and 2017 are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), however, in the opinion of management we have included all adjustments necessary for a fair presentation of the results of the interim period. We derived the balances as of December 31, 2017 from audited financial statements. These statements should be read in conjunction with Old Line Bancshares’ financial statements and accompanying notes included in Old Line Bancshares’ Form 10-K for the year ended December 31, 2017. We have made no significant changes to Old Line Bancshares’ accounting policies as disclosed in the Form 10-K, except as described in the Recent Accounting Pronoucements section below.
Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. These estimates and assumptions may affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. A material estimate that is particularly susceptible to significant change in the near term relates to the determination of the allowance for loan losses.
Revenue from Contracts with Customers - Old Line Bancshares records revenue from contracts with customers in accordance with Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“Topic 606”). Under Topic 606, we must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) we satisfy a performance obligation. Significant revenue has not been recognized in the current reporting period that results from performance obligations satisfied in previous periods.
Our primary sources of revenue are derived from interest and dividends earned on loans, investment securities, and other financial instruments that are not within the scope of Topic 606. We have evaluated the nature of Old Line Bancshares’ contracts with customers and determined that further disaggregation of revenue from contracts with customers into more granular categories beyond what is presented in the Consolidated Statements of Income was not necessary. Old Line Bancshares generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers.
| 8 |
Reclassifications - We have made certain reclassifications to the 2017 financial presentation to conform to the 2018 presentation. These reclassifications did not change net income or stockholders’ equity.
Recent Accounting Pronouncements – In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 – Revenue from Contracts with Customers, which will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principal of this ASU is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The ASU allows for either full retrospective or modified retrospective adoption. The ASU does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under U.S. GAAP. Our revenue is comprised of net interest income on financial assets and liabilities, which is explicitly excluded from the scope of the new guidance, and non-interest income. The contracts that are within scope of the guidance are primarily related to service charges on deposit accounts, cardholder and merchant income, wealth advisory services income, other service charges and fees, sales of other real estate owned, insurance commissions and miscellaneous fees. Old Line Bancshares adopted the ASU on January 1, 2018, utilizing the modified retrospective approach. Based on our overall assessment of revenue streams and review of related contracts affected by the ASU, it did not have a material impact on our consolidated financial position or consolidated results of operations as a result of the adoption of this ASU.
In January 2016, FASB issued ASU No. 2016-01, Financial Instruments – Recognition and Measurement of Financial Assets and Liabilities, which is intended to improve the recognition and measurement of financial instruments by: requiring equity investments (other than equity method or consolidation) to be measured at fair value with changes in fair value recognized in net income; requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities; eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. This ASU is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We adopted this ASU effective January 1, 2018. With the adoption of this ASU, equity securities can no longer be classified as available for sale, and as such marketable equity securities are disclosed as a separate line item on the balance sheet with changes in the fair value of equity securities reflected in net income. During the first quarter of 2018, we began using an exit price notion when measuring the fair value of our loan portfolio, excluding loans held for sale, for disclosure purposes. The adoption of this ASU did not have a significant impact on our consolidated financial statements.
In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). FASB issued this ASU to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet by lessees for those leases classified as operating leases under current U.S. GAAP and disclosing key information about leasing arrangements. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early application of this ASU is permitted for all entities. This ASU will be effective for us in our first quarter of 2019. Old Line Bancshares is currently assessing the impact that the adoption of this standard will have on its financial condition and results of operations and will closely monitor any new developments or additional guidance to determine the potential impact the new standard will have on our consolidated financial statements.
| 9 |
In June 2016, FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which sets forth a “current expected credit loss” (“CECL”) model requiring Old Line Bancshares to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. For public business entities that are U.S. Securities and Exchange Commission filers, the amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Old Line Bancshares has constituted a committee that has the responsibility to gather loan information and consider acceptable methodologies to comply with this ASU. The committee meets periodically to discuss the latest developments and committee members keep themselves updated on such developments via webcasts, publications, and conferences. We have also evaluated and selected a third party vendor solution to assist us in the application of ASU 2016-13. The adoption of ASU 2016-13 is likely to result in an increase in the allowance for loan losses as a result of changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. Furthermore, ASU 2016-13 will necessitate that we establish an allowance for expected credit losses on debt securities. Old Line Bancshares’ evaluation indicates that the provisions of ASU No. 2016-13 will impact its consolidated financial statements, in particular the level of the reserve for loan losses. We are, however, continuing to evaluate the extent of the potential impact.
In August 2016, FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments provide guidance on the following nine specific cash flow issues: 1) debt prepayment or debt extinguishment costs; 2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; 3) contingent consideration payments made after a business combination; 4) proceeds from the settlement of insurance claims; 5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned; 6) life insurance policies; 7) distributions received from equity method investees; 8) beneficial interests in securitization transactions; and 9) separately identifiable cash flows and application of the predominance principle. The ASU is effective for all annual and interim periods beginning January 1, 2018 and is required to be applied retrospectively to all periods presented. We adopted this guidance January 1, 2018, which did not result in a change in the classification in the statement of cash flows and did not have a material impact on our consolidated financial statements or on our financial position or results of operations.
In January 2017, FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the definition of a business, which clarifies the definition of a business and assists entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under this guidance, when substantially all of the fair value of gross assets acquired is concentrated in a single asset (or group of similar assets), the assets acquired would not represent a business. In addition, in order to be considered a business, an acquisition would have to include at a minimum an input and a substantive process that together significantly contribute to the ability to create an output. The guidance also narrows the definition of outputs by more closely aligning it with how outputs are described in FASB guidance for revenue recognition. We adopted this guidance effective January 1, 2018. The adoption of this ASU did not have a material impact on our consolidated financial statements.
In January 2017, FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under the ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Old Line Bancshares does not expect the adoption of ASU 2017-04 to have a material impact on its consolidated financial statements.
| 10 |
In March 2017, FASB issued ASU No. 2017-08, Premium Amortization on Purchased Callable Debt Securities. This ASU shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. Today, entities generally amortize the premium over the contractual life of the security. The new guidance does not change the accounting for purchased callable debt securities held at a discount; the discount continues to be amortized to maturity. ASU No. 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2018; early adoption is permitted. The guidance calls for a modified retrospective transition approach under which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. We do not expect the adoption of this guidance to have a material impact on Old Line Bancshares’ consolidated financial statements.
In August 2017, FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities. This ASU’s objectives are to: (1) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities; and (2) reduce the complexity of and simplify the application of hedge accounting by preparers. ASU No. 2017-12 is effective for interim and annual reporting periods beginning after December 15, 2018; early adoption is permitted. Old Line Bancshares currently does not designate any derivative financial instruments as formal hedging relationships, and therefore, does not utilize hedge accounting. However, Old Line Bancshares is currently evaluating this ASU to determine whether its provisions will enhance its ability to employ risk management strategies, while improving the transparency and understanding of those strategies for financial statement users.
In February 2018, FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220). This ASU allows an entity to elect a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act that changed our income tax rate from 35% to 21%. The amount of that reclassification should include the effect of changes of tax rate on the deferred tax amount, any related valuation allowance and other income tax effects on the items in AOCI. The ASU requires an entity to state if an election to reclassify the tax effect to retained earnings is made along with the description of other income tax effects that are reclassified from AOCI. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years with early adoption permitted. Old Line Bancshares adopted ASU 2018-02 in the first quarter of 2018. The change in accounting principal was accounted for as a cumulative effect adjustment to the balance sheet resulting in a reclass of $459,973 thousand from AOCI to retained earnings during the first quarter of 2018.
| 2. | ACQUISITION OF DCB BANCSHARES, INC. |
On July 28, 2017, Old Line Bancshares acquired DCB Bancshares, Inc. (“DCB”), the parent company of Damascus Community Bank (“Damascus”). Upon the consummation of the merger, each share of common stock of DCB outstanding immediately before the merger was converted into the right to receive 0.9269 shares of Old Line Bancshares’ common stock, provided that cash was paid in lieu of any fractional shares of Old Line Bancshares common stock. As a result, Old Line Bancshares issued 1,495,090 shares of its common stock in exchange for the shares of DCB common stock in the merger. The aggregate merger consideration was approximately $40.9 million based on the closing sales price of Old Line Bancshares’ common stock on July 28, 2017.
In connection with the merger, Damascus merged with and into Old Line Bank, with Old Line Bank the surviving bank.
| 11 |
At July 28, 2017, DCB had consolidated assets of approximately $311 million. This merger added six banking locations located in Montgomery, Frederick and Carroll Counties in Maryland.
The acquired assets and assumed liabilities of DCB were measured at estimated fair value. Management made significant estimates and exercised significant judgment in accounting for the acquisition of DCB. Management judgmentally assigned risk ratings to loans based on appraisals and estimated collateral values, expected cash flows, prepayment speeds and estimated loss factors to measure fair value for loans. Management used quoted or current market prices to determine the fair value of DCB’s investment securities.
The following table provides the purchase price as of the acquisition date and the identifiable assets acquired and liabilities assumed at their estimated fair values.
| Purchase Price Consideration | ||||
| Cash consideration | $ | 4,534 | ||
| Purchase price assigned to shares exchanged for stock | 40,845,876 | |||
| Total purchase price for DCB acquisition | 40,850,410 | |||
| Fair Value of Assets Acquired | ||||
| Cash and due from banks | $ | 35,571,479 | ||
| Investment securities available for sale | 42,349,201 | |||
| Loans, net | 216,172,008 | |||
| Premises and equipment | 5,214,193 | |||
| Accrued interest receivable | 585,195 | |||
| Deferred income taxes | 599,336 | |||
| Bank owned life insurance | 3,085,783 | |||
| Core deposit intangible | 3,746,430 | |||
| Other assets | 3,650,800 | |||
| Total assets acquired | $ | 310,974,425 | ||
| Fair Value of Liabilities assumed | ||||
| Deposits | $ | 277,867,449 | ||
| Short term borrowings | 4,753,521 | |||
| Other liabilities | 2,800,363 | |||
| Total liabilities assumed | $ | 285,421,333 | ||
| Fair Value of net assets acquired | 25,553,092 | |||
| Total Purchase Price | 40,850,410 | |||
| Goodwill recorded for DCB | $ | 15,297,318 | ||
| 12 |
| 3. | INVESTMENT SECURITIES |
Presented below is a summary of the amortized cost and estimated fair value of securities.
| Amortized cost | Gross unrealized gains | Gross unrealized losses | Estimated fair value | |||||||||||||
| March 31, 2018 | ||||||||||||||||
| Available for sale | ||||||||||||||||
| U.S. treasury | $ | 2,999,500 | $ | — | $ | (6,062 | ) | $ | 2,993,438 | |||||||
| U.S. government agency | 19,164,818 | — | (529,629 | ) | 18,635,189 | |||||||||||
| Corporate bonds | 14,619,949 | 99,785 | (5,625 | ) | 14,714,109 | |||||||||||
| Municipal securities | 79,351,920 | 30,292 | (2,963,996 | ) | 76,418,216 | |||||||||||
| Mortgage backed securities: | ||||||||||||||||
| FHLMC certificates | 19,303,154 | 1,405 | (950,058 | ) | 18,354,501 | |||||||||||
| FNMA certificates | 62,459,780 | — | (3,018,401 | ) | 59,441,379 | |||||||||||
| GNMA certificates | 20,730,502 | — | (933,546 | ) | 19,796,956 | |||||||||||
| Total available for sale securities | $ | 218,629,623 | $ | 131,482 | $ | (8,407,317 | ) | $ | 210,353,788 | |||||||
| December 31, 2017 | ||||||||||||||||
| Available for sale | ||||||||||||||||
| U.S. treasury | $ | 3,007,728 | $ | — | $ | (2,337 | ) | $ | 3,005,391 | |||||||
| U.S. government agency | 18,001,200 | — | (267,434 | ) | 17,733,766 | |||||||||||
| Corporate bonds | 14,621,378 | 144,574 | (107,893 | ) | 14,658,059 | |||||||||||
| Municipal securities | 80,791,431 | 126,566 | (1,362,709 | ) | 79,555,288 | |||||||||||
| Mortgage backed securities | ||||||||||||||||
| FHLMC certificates | 19,907,299 | 2,516 | (455,580 | ) | 19,454,235 | |||||||||||
| FNMA certificates | 64,476,038 | — | (1,530,121 | ) | 62,945,917 | |||||||||||
| GNMA certificates | 21,403,894 | — | (403,992 | ) | 20,999,902 | |||||||||||
| Total available for sale securities | $ | 222,208,968 | $ | 273,656 | $ | (4,130,066 | ) | $ | 218,352,558 | |||||||
At March 31, 2018 and December 31, 2017, securities with unrealized losses segregated by length of impairment were as follows:
| March 31, 2018 | ||||||||||||||||||||||||
| Less than 12 months | 12 Months or More | Total | ||||||||||||||||||||||
| Fair value | Unrealized losses | Fair value | Unrealized losses | Fair value | Unrealized losses | |||||||||||||||||||
| U.S. treasury | $ | 1,492,266 | $ | 5,348 | $ | 1,501,172 | $ | 714 | $ | 2,993,438 | $ | 6,062 | ||||||||||||
| U.S. government agency | 13,266,132 | 241,263 | 5,369,055 | 288,366 | 18,635,187 | 529,629 | ||||||||||||||||||
| Corporate bonds | 4,494,375 | 5,625 | — | — | 4,494,375 | 5,625 | ||||||||||||||||||
| Municipal securities | 37,388,243 | 964,608 | 30,504,642 | 1,999,388 | 67,892,885 | 2,963,996 | ||||||||||||||||||
| Mortgage backed securities | ||||||||||||||||||||||||
| FHLMC certificates | — | — | 18,237,727 | 950,058 | 18,237,727 | 950,058 | ||||||||||||||||||
| FNMA certificates | 2,405,187 | 80,910 | 57,036,192 | 2,937,491 | 59,441,379 | 3,018,401 | ||||||||||||||||||
| GNMA certificates | 8,529,852 | 358,923 | 11,267,104 | 574,623 | 19,796,957 | 933,546 | ||||||||||||||||||
| Total | $ | 67,576,055 | $ | 1,656,677 | $ | 123,915,892 | $ | 6,750,640 | $ | 191,491,948 | $ | 8,407,317 | ||||||||||||
| 13 |
| December 31, 2017 | ||||||||||||||||||||||||
| Less than 12 months | 12 Months or More | Total | ||||||||||||||||||||||
| Fair value | Unrealized losses | Fair value | Unrealized losses | Fair value | Unrealized losses | |||||||||||||||||||
| U.S. treasury | $ | 1,506,328 | $ | 1,422 | $ | 1,499,063 | $ | 915 | $ | 3,005,391 | $ | 2,337 | ||||||||||||
| U.S. government agency | 12,266,502 | 93,043 | 5,467,264 | 174,391 | 17,733,766 | 267,434 | ||||||||||||||||||
| Corporate bonds | 9,407,810 | 107,893 | — | — | 9,407,810 | 107,893 | ||||||||||||||||||
| Municipal securities | 25,548,751 | 189,668 | 31,343,394 | 1,173,041 | 56,892,145 | 1,362,709 | ||||||||||||||||||
| Mortgage backed securities | ||||||||||||||||||||||||
| FHLMC certificates | — | — | 19,314,957 | 455,580 | 19,314,957 | 455,580 | ||||||||||||||||||
| FNMA certificates | 2,516,080 | 19,937 | 60,429,837 | 1,510,184 | 62,945,917 | 1,530,121 | ||||||||||||||||||
| GNMA certificates | 8,822,021 | 114,278 | 12,177,882 | 289,714 | 20,999,904 | 403,992 | ||||||||||||||||||
| Total | $ | 60,067,492 | $ | 526,241 | $ | 130,232,397 | $ | 3,603,825 | $ | 190,299,890 | $ | 4,130,066 | ||||||||||||
At March 31, 2018 and December 31, 2017, we had 116 and 56 investment securities, respectively, in an unrealized loss position for 12 months or more and 76 and 56 securities, respectively, in an unrealized loss position for less than 12 months. We consider all unrealized losses on securities as of March 31, 2018 to be temporary losses because we will redeem each security at face value at or prior to maturity. We have the ability and intent to hold these securities until recovery or maturity. As of March 31, 2018, we do not have the intent to sell any of the securities classified as available for sale and believe that it is more likely than not that we will not have to sell any such securities before a recovery of cost. In most cases, market interest rate fluctuations cause a temporary impairment in value. We expect the fair value to recover as the investments approach their maturity date or re-pricing date or if market yields for these investments decline. We do not believe that credit quality caused the impairment in any of these securities. Because we believe these impairments are temporary, we have not realized any loss in our consolidated statement of income.
During the three months ended March 31, 2018, we received $6.2 million in proceeds from maturities or calls and principal pay-downs on investment securities. All the net proceeds of these transactions were used to purchase new investment securities. We received $8.3 million in proceeds from maturities or calls and principal pay-downs on investment securities and realized gains of $16 thousand from the remaining discount on one called security for the three months ended March 31, 2017. The net proceeds of these transactions and the proceeds of principal paydowns in the first quarter of 2017 were used to purchase new investment securities.
Contractual maturities and pledged securities at March 31, 2018 are shown below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties. We classify mortgage-backed securities (“MBS”) based on maturity date. However, we receive payments on a monthly basis.
| Available for Sale | ||||||||
| March 31, 2018 | Amortized cost | Fair value | ||||||
| Maturing | ||||||||
| Within one year | $ | 3,307,089 | $ | 3,296,591 | ||||
| Over one to five years | 2,095,597 | 2,091,156 | ||||||
| Over five to ten years | 53,449,035 | 52,128,458 | ||||||
| Over ten years | 159,777,902 | 152,837,583 | ||||||
| Total | $ | 218,629,623 | $ | 210,353,788 | ||||
| Pledged securities | $ | 64,300,151 | $ | 61,506,128 | ||||
| 14 |
| 4. | LOANS |
Major classifications of loans held for investment are as follows:
| March 31, 2018 | December 31, 2017 | |||||||||||||||||||||||
| Legacy (1) | Acquired | Total | Legacy (1) | Acquired | Total | |||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||
| Owner Occupied | $ | 260,238,291 | $ | 80,868,601 | $ | 341,106,892 | $ | 268,128,087 | $ | 87,658,855 | $ | 355,786,942 | ||||||||||||
| Investment | 536,823,023 | 50,040,491 | 586,863,514 | 485,536,921 | 52,926,739 | 538,463,660 | ||||||||||||||||||
| Hospitality | 164,411,156 | 6,711,774 | 171,122,930 | 164,193,228 | 7,395,186 | 171,588,414 | ||||||||||||||||||
| Land and A&D | 78,199,476 | 9,162,901 | 87,362,377 | 67,310,660 | 9,230,771 | 76,541,431 | ||||||||||||||||||
| Residential Real Estate | ||||||||||||||||||||||||
| First Lien-Investment | 79,549,169 | 20,987,672 | 100,536,841 | 79,762,682 | 21,220,518 | 100,983,200 | ||||||||||||||||||
| First Lien-Owner Occupied | 75,114,741 | 60,957,548 | 136,072,289 | 67,237,699 | 62,524,794 | 129,762,493 | ||||||||||||||||||
| Residential Land and A&D | 36,633,466 | 6,542,940 | 43,176,406 | 35,879,853 | 6,536,160 | 42,416,013 | ||||||||||||||||||
| HELOC and Jr. Liens | 20,896,736 | 14,954,499 | 35,851,235 | 21,520,339 | 16,019,418 | 37,539,757 | ||||||||||||||||||
| Commercial and Industrial | 168,101,599 | 31,609,023 | 199,710,622 | 154,244,645 | 33,100,688 | 187,345,333 | ||||||||||||||||||
| Consumer | 14,407,498 | 44,249,501 | 58,656,999 | 10,758,589 | 49,082,751 | 59,841,340 | ||||||||||||||||||
| Total loans | 1,434,375,155 | 326,084,950 | 1,760,460,105 | 1,354,572,703 | 345,695,880 | 1,700,268,583 | ||||||||||||||||||
| Allowance for loan losses | (6,075,467 | ) | (182,052 | ) | (6,257,519 | ) | (5,738,534 | ) | (182,052 | ) | (5,920,586 | ) | ||||||||||||
| Deferred loan costs, net | 2,374,247 | — | 2,374,247 | 2,013,434 | — | 2,013,434 | ||||||||||||||||||
| Net loans | $ | 1,430,673,935 | $ | 325,902,898 | $ | 1,756,576,833 | $ | 1,350,847,603 | $ | 345,513,828 | $ | 1,696,361,431 | ||||||||||||
____________________________
| (1) | As a result of the acquisitions of Maryland Bankcorp, Inc. (“Maryland Bankcorp”), the parent company of Maryland Bank & Trust Company, N.A. (“MB&T”), in April 2011, WSB Holdings Inc., the parent company of The Washington Savings Bank (“WSB”), in May 2013, Regal Bancorp, Inc. (“Regal”), the parent company of Regal Bank & Trust (“Regal Bank”), in December 2015 and DCB, the parent company of Damascus, in July 2017, we have segmented the portfolio into two components, “Legacy” loans originated by Old Line Bank and “Acquired” loans acquired from MB&T, WSB, Regal Bank and Damascus. |
Credit Policies and Administration
We have adopted a comprehensive lending policy, which includes stringent underwriting standards for all types of loans. We have designed our underwriting standards to promote a complete banking relationship rather than a transactional relationship. In an effort to manage risk, prior to funding, the loan committee consisting of the Executive Officers and seven members of the board of directors must approve by a majority vote all credit decisions in excess of a lending officer’s lending authority.
Management believes that it employs experienced lending officers, secures appropriate collateral and carefully monitors the financial condition of its borrowers and loan concentrations.
In addition to the internal business processes employed in the credit administration area, Old Line Bank retains an outside independent firm to review the loan portfolio. This firm performs a detailed annual review and an interim update. We use the results of the firm’s report to validate our internal ratings and we review the commentary on specific loans and on our loan administration activities in order to improve our operations.
Commercial Real Estate Loans
We finance commercial real estate for our clients, for owner occupied and investment properties, hospitality and land acquisition and development. Commercial real estate loans totaled $1.2 billion and $1.1 billion at March 31, 2018 and December 31, 2017, respectively. This lending has involved loans secured by owner-occupied commercial buildings for office, storage and warehouse space, as well as non-owner occupied commercial buildings. Our underwriting criteria for commercial real estate loans include maximum loan-to-value ratios, debt coverage ratios, secondary sources of repayments, guarantor requirements, net worth requirements and quality of cash flows. Loans secured by commercial real estate may be large in size and may involve a greater degree of risk than one-to-four family residential mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties. We will generally finance owner occupied commercial real estate that does not exceed loan to value of 80% and investor real estate at a maximum loan to value of 75%.
| 15 |
Commercial real estate lending entails significant risks. Risks inherent in managing our commercial real estate portfolio relate to sudden or gradual drops in property values as well as changes in the economic climate that may detrimentally impact the borrower’s ability to repay. We monitor the financial condition and operating performance of the borrower through a review of annual tax returns and updated financial statements. In addition, we meet with the borrower and/or perform site visits as required.
At March 31 2018, we had approximately $171.1 million of commercial real estate loans outstanding to the hospitality industry. An individual review of these loans indicates that they generally have a low loan to value, more than acceptable existing or projected cash flow, are to experienced operators and are generally dispersed throughout the region.
Residential Real Estate Loans
We offer a variety of consumer oriented residential real estate loans including home equity lines of credit, home improvement loans and first or second mortgages on owner occupied and investment properties. Our residential loan portfolio amounted to $315.6 million and $310.7 million at March 31, 2018 and December 31, 2017, respectively. Although most of these loans are in our market area, the diversity of the individual loans in the portfolio reduces our potential risk. Usually, we secure our residential real estate loans with a security interest in the borrower’s primary or secondary residence with a loan to value not exceeding 85%. Our initial underwriting includes an analysis of the borrower’s debt/income ratio which generally may not exceed 43%, collateral value, length of employment and prior credit history. A credit score of 640 is required. We do not originate any subprime residential real estate loans.
This segment of our portfolio also consists of funds advanced for construction of custom single family residences homes (where the home buyer is the borrower) and financing to builders for the construction of pre-sold homes and multi-family housing. These loans generally have short durations, meaning maturities typically of twelve months or less. Old Line Bank limits its construction lending risk through adherence to established underwriting procedures. These loans generally have short durations, meaning maturities typically of twelve months or less. Residential houses, multi-family dwellings and commercial buildings under construction and the underlying land for which the loan was obtained secure the construction loans. The vast majority of these loans are concentrated in our market area.
Construction lending also entails significant risk. These risks generally involve larger loan balances concentrated with single borrowers with funds advanced upon the security of the land or the project under construction. An appraisal of the property estimates the value of the project “as is and as if” completed. An appraisal of the property estimates the value of the project prior to completion of construction. Thus, initial funds are advanced based on the current value of the property with the remaining construction funds advanced under a budget sufficient to successfully complete the project within the “as completed” loan to value. To further mitigate the risks, we generally limit loan amounts to 80% or less of appraised values and obtain first lien positions on the property.
We generally only offer real estate construction financing only to experienced builders, commercial entities or individuals who have demonstrated the ability to obtain a permanent loan “take-out” (conversion to a permanent mortgage upon completion of the project). We also perform a complete analysis of the borrower and the project under construction. This analysis includes a review of the cost to construct, the borrower’s ability to obtain a permanent “take-out” the cash flow available to support the debt payments and construction costs in excess of loan proceeds, and the value of the collateral. During construction, we advance funds on these loans on a percentage of completion basis. We inspect each project as needed prior to advancing funds during the term of the construction loan. We may provide permanent financing on the same projects for which we have provided the construction financing.
We also offer fixed rate home improvement loans. Our home equity and home improvement loan portfolio gives us a diverse client base. Although most of these loans are in our market area, the diversity of the individual loans in the portfolio reduces our potential risk. Usually, we secure our home equity loans and lines of credit with a security interest in the borrower’s primary or secondary residence.
| 16 |
Under our loan approval policy, all residential real estate loans approved must comply with federal regulations. Generally, we will make residential mortgage loans in amounts up to the limits established by Fannie Mae and Freddie Mac for secondary market resale purposes. Currently this amount for single-family residential loans currently varies from $453,100 up to a maximum of $679,650 for certain high-cost designated areas. We also make residential mortgage loans up to limits established by the Federal Housing Administration, which currently is $679,650. The Washington, D.C. and Baltimore areas are both considered high-cost designated areas. We will, however, make loans in excess of these amounts if we believe that we can sell the loans in the secondary market or that the loans should be held in our portfolio. For loans we originate for sale in the secondary market, we typically require a credit score or 620 or higher, with some exceptions provided we receive an approval recommendation from FannieMae, FreddieMac or the Federal Housing Administration’s automated underwriting approval system. Loans sold in the secondary market are sold to investors on a servicing released basis and recorded as loans as held for sale. The premium is recorded in income on marketable loans in non-interest income, net of commissions paid to the loan officers.
Commercial and Industrial Lending
Our commercial and industrial lending consists of lines of credit, revolving credit facilities, accounts receivable financing, term loans, equipment loans, Small Business Administration loans, standby letters of credit and unsecured loans. We originate commercial loans for any business purpose including the financing of leasehold improvements and equipment, the carrying of accounts receivable, general working capital, and acquisition activities. We have a diverse client base and we do not have a concentration of these types of loans in any specific industry segment. We generally secure commercial business loans with accounts receivable, equipment, deeds of trust and other collateral such as marketable securities, cash value of life insurance and time deposits at Old Line Bank.
Commercial business loans have a higher degree of risk than residential mortgage loans because the availability of funds for repayment generally depends on the success of the business. They may also involve high average balances, increased difficulty monitoring and a high risk of default. To help manage this risk, we typically limit these loans to proven businesses and we generally obtain appropriate collateral and personal guarantees from the borrower’s principal owners and monitor the financial condition of the business. For loans in excess of $250,000, monitoring generally includes a review of the borrower’s annual tax returns and updated financial statements.
Consumer Installment Lending
We offer various types of secured and unsecured consumer loans. We make consumer loans for personal, family or household purposes as a convenience to our customer base. Consumer loans, however, are not a focus of our lending activities. The underwriting standards for consumer loans include a determination of the applicant’s payment history on other debts and an assessment of his or her ability to meet existing obligations and payments on the proposed loan. As a general guideline, a consumer’s total debt service should not exceed 40% of his or her gross income.
Our consumer loan portfolio, includes indirect loans, which consists primarily of auto and RV loans. These loans are financed through dealers and the dealers receive a percentage of the finance charge, which varies depending on the terms of each loan. We use the same underwriting standards in originating these indirect loans as we do for consumer loans generally.
Consumer loans may present greater credit risk than residential mortgage loans because many consumer loans are unsecured or rapidly depreciating assets secure these loans. Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance because of the greater likelihood of damage, loss or depreciation. Consumer loan collections depend on the borrower’s continuing financial stability. If a borrower suffers personal financial difficulties, the consumer may not repay the loan. Also, various federal and state laws, including bankruptcy and insolvency laws, may limit the amount we can recover on such loans.
| 17 |
Concentrations of Credit
Most of our lending activity occurs within the state of Maryland within the suburban Washington, D.C.and Baltimore market areas in Anne Arundel, Baltimore, Calvert, Carroll, Charles, Frederick, Montgomery, Prince George’s and St. Mary’s Counties. The majority of our loan portfolio consists of commercial real estate loans and residential real estate loans.
Non-Accrual and Past Due Loans
We consider loans past due if the borrower has not paid the required principal and interest payments when due under the original or modified terms of the promissory note and place a loan on non-accrual status when the payment of principal or interest has become 90 days past due. When we classify a loan as non-accrual, we no longer accrue interest on such loan and we reverse any interest previously accrued but not collected. We will generally restore a non-accrual loan to accrual status when the borrower brings delinquent principal and interest payments current and we expect to collect future monthly principal and interest payments. We recognize interest on non-accrual legacy loans only when received. We originally recorded purchased, credit-impaired loans at fair value upon acquisition, and an accretable yield is established and recognized as interest income on purchased loans to the extent subsequent cash flows support the estimated accretable yield. Purchased, credit-impaired loans that perform consistently with the accretable yield expectations are not reported as non-accrual or nonperforming. However, purchased, credit-impaired loans that do not continue to perform according to accretable yield expectations are considered impaired, and presented as non-accrual and nonperforming. Currently, management expects to fully collect the carrying value of acquired, credit-impaired loans.
| 18 |
The table below presents an age analysis of the loans held for investment portfolio at March 31, 2018 and December 31, 2017.
Age Analysis of Past Due Loans
| March 31, 2018 | December 31, 2017 | |||||||||||||||||||||||
| Legacy | Acquired | Total | Legacy | Acquired | Total | |||||||||||||||||||
| Current | $ | 1,429,320,233 | $ | 319,524,653 | $ | 1,748,844,886 | $ | 1,352,406,852 | $ | 338,913,557 | $ | 1,691,320,409 | ||||||||||||
| Accruing past due loans: | ||||||||||||||||||||||||
| 30-89 days past due | ||||||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||||||
| Owner Occupied | — | 585,036 | 585,036 | — | — | — | ||||||||||||||||||
| Investment | 71,397 | 829,819 | 901,216 | 1,089,022 | 843,706 | 1,932,728 | ||||||||||||||||||
| Hospitality | 1,174,349 | 293,497 | 1,467,846 | — | — | — | ||||||||||||||||||
| Land and A&D | 2,610,890 | 158,899 | 2,769,789 | 254,925 | 158,899 | 413,824 | ||||||||||||||||||
| Residential Real Estate: | ||||||||||||||||||||||||
| First Lien-Investment | 268,430 | 502,557 | 770,987 | 270,822 | 506,600 | 777,422 | ||||||||||||||||||
| First Lien-Owner Occupied | — | 1,624,416 | 1,624,416 | 229 | 2,457,299 | 2,457,528 | ||||||||||||||||||
| HELOC and Jr. Liens | — | — | — | — | 130,556 | 130,556 | ||||||||||||||||||
| Commercial and Industrial | 403,453 | 50,432 | 453,885 | 51,088 | 261,081 | 312,169 | ||||||||||||||||||
| Consumer | 58,469 | 887,465 | 945,934 | 26,134 | 1,017,195 | 1,043,329 | ||||||||||||||||||
| Total 30-89 days past due | 4,586,988 | 4,932,121 | 9,519,109 | 1,692,220 | 5,375,336 | 7,067,556 | ||||||||||||||||||
| 90 or more days past due | ||||||||||||||||||||||||
| Residential Real Estate: | ||||||||||||||||||||||||
| First Lien-Owner Occupied | — | 221,828 | 221,828 | — | 37,560 | 37,560 | ||||||||||||||||||
| Consumer | — | 108,031 | 108,031 | — | 78,407 | 78,407 | ||||||||||||||||||
| Total 90 or more days past due | — | 329,859 | 329,859 | — | 115,967 | 115,967 | ||||||||||||||||||
| Total accruing past due loans | 4,586,988 | 5,261,980 | 9,848,968 | 1,692,220 | 5,491,303 | 7,183,523 | ||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||||||
| Owner Occupied | — | 230,082 | 230,082 | — | 228,555 | 228,555 | ||||||||||||||||||
| Land and A&D | — | 196,171 | 196,171 | — | 190,193 | 190,193 | ||||||||||||||||||
| Residential Real Estate: | ||||||||||||||||||||||||
| First Lien-Investment | 192,501 | — | 192,501 | 192,501 | — | 192,501 | ||||||||||||||||||
| First Lien-Owner Occupied | 275,433 | 872,064 | 1,147,497 | 281,130 | 872,272 | 1,153,402 | ||||||||||||||||||
| Commercial and Industrial | — | — | — | — | — | — | ||||||||||||||||||
| Non-accruing loans: | 467,934 | 1,298,317 | 1,766,251 | 473,631 | 1,291,020 | 1,764,651 | ||||||||||||||||||
| Total Loans | $ | 1,434,375,155 | $ | 326,084,950 | $ | 1,760,460,105 | $ | 1,354,572,703 | $ | 345,695,880 | $ | 1,700,268,583 | ||||||||||||
We consider all nonperforming loans and troubled debt restructurings (“TDRs”) to be impaired. We do not recognize interest income on nonperforming loans during the time period that the loans are nonperforming. We only recognize interest income on nonperforming loans when we receive payment in full for all amounts due of all contractually required principle and interest, and the loan is current with its contractual terms. The tables below present our impaired loans at and for the periods ended March 31, 2018 and December 31, 2017.
| 19 |
| Impaired Loans at March 31, 2018 | ||||||||||||||||||||
| Three months March 31, 2018 | ||||||||||||||||||||
| Unpaid Principal Balance | Recorded Investment | Related Allowance | Average Recorded Investment | Interest Income Recognized | ||||||||||||||||
| Legacy | ||||||||||||||||||||
| With no related allowance recorded: | ||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||
| Owner Occupied | $ | 1,782,165 | $ | 1,782,165 | $ | — | $ | 1,782,165 | $ | 18,595 | ||||||||||
| Investment | 1,143,826 | 1,143,826 | — | 1,143,826 | 15,341 | |||||||||||||||
| Residential Real Estate: | ||||||||||||||||||||
| First Lien-Owner Occupied | 224,092 | 224,092 | — | 230,786 | 2,188 | |||||||||||||||
| Commercial and Industrial | 377,936 | 377,936 | — | 377,936 | 3,365 | |||||||||||||||
| With an allowance recorded: | ||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||
| Investment | 587,663 | 587,663 | 69,903 | 587,663 | 7,388 | |||||||||||||||
| Residential Real Estate: | ||||||||||||||||||||
| First Lien-Investment | 192,501 | 192,501 | 39,420 | 192,501 | — | |||||||||||||||
| First Lien-Owner Occupied | 51,341 | 51,341 | 37,076 | 55,830 | 1,134 | |||||||||||||||
| Commercial and Industrial | 95,431 | 95,431 | 95,431 | 95,231 | 1,611 | |||||||||||||||
| Total legacy impaired | 4,454,955 | 4,454,955 | 241,830 | 4,465,938 | 49,622 | |||||||||||||||
| Acquired(1) | ||||||||||||||||||||
| With no related allowance recorded: | ||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||
| Owner Occupied | 254,445 | 254,445 | — | 254,445 | — | |||||||||||||||
| Land and A&D | 328,851 | 45,000 | — | 328,851 | — | |||||||||||||||
| Residential Real Estate: | ||||||||||||||||||||
| First Lien-Owner Occupied | 1,377,804 | 1,265,545 | — | 1,374,804 | 4,870 | |||||||||||||||
| With an allowance recorded: | ||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||
| Land and A&D | 154,297 | 154,297 | 80,072 | 161,153 | — | |||||||||||||||
| Residential Real Estate: | ||||||||||||||||||||
| First Lien-Owner Occupied | 250,194 | 250,194 | 77,464 | 273,618 | ||||||||||||||||
| Commercial and Industrial | 71,049 | 71,049 | 24,516 | 70,869 | 1,194 | |||||||||||||||
| Total acquired impaired | 2,436,640 | 2,040,530 | 182,052 | 2,463,740 | 6,064 | |||||||||||||||
| Total impaired | $ | 6,891,595 | $ | 6,495,485 | $ | 423,882 | $ | 6,929,678 | $ | 55,686 | ||||||||||
_________________________
| (1) | Generally accepted accounting principles require that we record acquired loans at fair value at acquisition, which includes a discount for loans with credit impairment. These purchased credit impaired loans are not performing according to their contractual terms and meet the definition of an impaired loan. Although we do not accrue interest income at the contractual rate on these loans, we do recognize an accretable yield as interest income to the extent such yield is supported by cash flow analysis of the underlying loans. |
| 20 |
| Impaired Loans December 31, 2017 |
||||||||||||||||||||
| Unpaid | Average | Interest | ||||||||||||||||||
| Principal | Recorded | Related | Recorded | Income | ||||||||||||||||
| Balance | Investment | Allowance | Investment | Recognized | ||||||||||||||||
| Legacy | ||||||||||||||||||||
| With no related allowance recorded: | ||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||
| Owner Occupied | $ | 1,797,030 | $ | 1,797,030 | $ | — | $ | 1,913,873 | $ | 70,623 | ||||||||||
| Investment | 1,155,595 | 1,155,595 | — | 1,183,738 | 51,806 | |||||||||||||||
| Residential Real Estate: | ||||||||||||||||||||
| First Lien-Owner Occupied | 226,554 | 226,554 | — | 233,618 | 10,536 | |||||||||||||||
| Commercial and Industrial | 387,208 | 387,208 | — | 379,983 | 30,245 | |||||||||||||||
| With an allowance recorded: | ||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||
| Investment | 592,432 | 592,432 | 69,903 | 601,959 | 30,576 | |||||||||||||||
| Residential Real Estate: | ||||||||||||||||||||
| First Lien-Owner Occupied | 54,576 | 54,576 | 37,075 | 217,673 | — | |||||||||||||||
| First Lien-Investment | 192,501 | 192,501 | 39,420 | 192,501 | — | |||||||||||||||
| Commercial and Industrial | 96,212 | 96,212 | 96,212 | 97,923 | 4,960 | |||||||||||||||
| Total legacy impaired | 4,502,108 | 4,502,108 | 242,610 | 4,821,268 | 198,746 | |||||||||||||||
| Acquired(1) | ||||||||||||||||||||
| With no related allowance recorded: | ||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||
| Owner Occupied | 253,865 | 253,865 | — | 252,988 | 2,155 | |||||||||||||||
| Land and A&D | 334,271 | 45,000 | — | 334,271 | — | |||||||||||||||
| Residential Real Estate: | ||||||||||||||||||||
| First Lien-Owner Occupied | 1,382,055 | 1,269,796 | — | 1,390,037 | 31,601 | |||||||||||||||
| First Lien-Investment | 131,294 | 74,066 | — | 132,812 | 4,378 | |||||||||||||||
| With an allowance recorded: | ||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||
| Land and A&D | 148,196 | 148,196 | 80,072 | 155,621 | 2,498 | |||||||||||||||
| Residential Real Estate: | ||||||||||||||||||||
| First Lien-Owner Occupied | 250,194 | 250,194 | 77,464 | 273,596 | 23,424 | |||||||||||||||
| Commercial and Industrial | 72,125 | 72,125 | 24,517 | 74,279 | 3,775 | |||||||||||||||
| Total acquired impaired | 2,572,000 | 2,113,242 | 182,053 | 2,613,604 | 67,831 | |||||||||||||||
| Total impaired | $ | 7,074,108 | $ | 6,615,350 | $ | 424,663 | $ | 7,434,872 | $ | 266,577 | ||||||||||
______________________
| (1) | Generally accepted accounting principles require that we record acquired loans at fair value at acquisition, which includes a discount for loans with credit impairment. These purchased credit impaired loans are not performing according to their contractual terms and meet the definition of an impaired loan. Although we do not accrue interest income at the contractual rate on these loans, we do recognize an accretable yield as interest income to the extent such yield is supported by cash flow analysis of the underlying loans. |
We consider a loan a TDR when we conclude that both of the following conditions exist: the restructuring constitutes a concession and the debtor is experiencing financial difficulties. Restructured loans at March 31, 2018 consisted of seven loans for $2.6 million compared to seven loans at December 31, 2017 for $2.7 million.
| 21 |
The following table includes the recorded investment in and number of modifications of TDRs for the three months ended March 31, 2018 and 2017. We report the recorded investment in loans prior to a modification and also the recorded investment in the loans after the loans were restructured. Reductions in the recorded investment are primarily due to the partial charge-off of the principal balance prior to the modification. We had no loans that were modified as a TDR that defaulted within three months of the modification date during the three month periods ended March 31, 2018 and 2017.
| Loans Modified as a TDR for the three months ended | ||||||||||||||||||||||||
| March 31, 2018 | March 31, 2017 | |||||||||||||||||||||||
| Pre- | Post | Pre- | Post | |||||||||||||||||||||
| Modification | Modification | Modification | Modification | |||||||||||||||||||||
| Outstanding | Outstanding | Outstanding | Outstanding | |||||||||||||||||||||
| TroubledDebtRestructurings— | # of | Recorded | Recorded | # of | Recorded | Recorded | ||||||||||||||||||
| (Dollarsinthousands) | Contracts | Investment | Investment | Contracts | Investment | Investment | ||||||||||||||||||
| Legacy | ||||||||||||||||||||||||
| Commercial Real Estate | — | — | — | 1 | 1,596,740 | 1,596,740 | ||||||||||||||||||
| Commercial and Industrial | — | — | — | 1 | 414,324 | 414,324 | ||||||||||||||||||
| Total legacy TDR's | — | $ | — | $ | — | 2 | $ | 2,011,064 | $ | 2,011,064 | ||||||||||||||
Acquired impaired loans
The following table documents changes in the accretable (premium) discount on acquired impaired loans during the three months ended March 31, 2018 and 2017, along with the outstanding balances and related carrying amounts for the beginning and end of those respective periods.
| March 31, 2018 | March 31, 2017 | |||||||
| Balance at beginning of period | $ | 115,066 | $ | (22,980 | ) | |||
| Accretion of fair value discounts | (27,770 | ) | (41,601 | ) | ||||
| Reclassification from non-accretable discount | 23,195 | 42,146 | ||||||
| Balance at end of period | $ | 110,491 | $ | (22,435 | ) | |||
| Contractually | ||||||||
| Required Payments | ||||||||
| Receivable | Carrying Amount | |||||||
| At March 31, 2018 | $ | 8,421,446 | $ | 6,799,657 | ||||
| At December 31, 2017 | 8,277,731 | 6,617,774 | ||||||
| At March 31, 2017 | 8,857,375 | 7,078,918 | ||||||
| At December 31, 2016 | 9,597,703 | 7,558,415 | ||||||
Credit Quality Indicators
We review the adequacy of the allowance for loan losses at least quarterly. We base the evaluation of the adequacy of the allowance for loan losses upon loan categories. We categorize loans as residential real estate loans, commercial real estate loans, commercial loans and consumer loans. We further divide commercial real estate loans by owner occupied, investment, hospitality and land acquisition and development. We also divide residential real estate by owner occupied, investment, land acquisition and development and junior liens. All categories are divided by risk rating and loss factors and weighed by risk rating to determine estimated loss amounts. We evaluate delinquent loans and loans for which management has knowledge about possible credit problems of the borrower or knowledge of problems with collateral separately and assign loss amounts based upon the evaluation.
| 22 |
We determine loss ratios for all loans based upon a review of the three year loss ratio for the category and qualitative factors.
We charge off loans that management has identified as losses. We consider suggestions from our external loan review firm and bank examiners when determining which loans to charge off. We automatically charge off consumer loan accounts based on regulatory requirements. We partially charge off real estate loans that are collateral dependent based on the value of the collateral.
If a loan that was previously rated a pass performing loan, from our acquisitions, deteriorates subsequent to the acquisition, the subject loan will be assessed for risk and, if necessary, evaluated for impairment. If the risk assessment rating is adversely changed and the loan is determined to not be impaired, the loan will be placed in a migration category and the credit mark established for the loan will be compared to the general reserve allocation that would be applied using the current allowance for loan losses formula for General Reserves. If the credit mark exceeds the allowance for loan losses formula for General Reserves, there will be no change to the allowance for loan losses. If the credit mark is less than the current allowance for loan losses formula for General Reserves, the allowance for loan losses will be increased by the amount of the shortfall by a provision recorded in the income statement. If the loan is deemed impaired, the loan will be subject to evaluation for loss exposure and a specific reserve. If the estimate of loss exposure exceeds the credit mark, the allowance for loan losses will be increased by the amount of the excess loss exposure through a provision. If the credit mark exceeds the estimate of loss exposure there will be no change to the allowance for loan losses. If a loan from the acquired loan portfolio is carrying a specific credit mark and a current evaluation determines that there has been an increase in loss exposure, the allowance for loan losses will be increased by the amount of the current loss exposure in excess of the credit mark.
| 23 |
The following tables outline the class of loans by risk rating at March 31, 2018 and December 31, 2017:
| At March 31, 2018 | Legacy | Acquired | Total | |||||||||
| Risk Rating | ||||||||||||
| Pass(1 - 5) | ||||||||||||
| Commercial Real Estate: | ||||||||||||
| Owner Occupied | $ | 254,527,556 | $ | 76,329,072 | $ | 330,856,628 | ||||||
| Investment | 534,711,778 | 48,194,797 | 582,906,575 | |||||||||
| Hospitality | 164,411,156 | 6,418,277 | 170,829,433 | |||||||||
| Land and A&D | 76,107,752 | 9,009,609 | 85,117,361 | |||||||||
| Residential Real Estate: | ||||||||||||
| First Lien-Investment | 78,607,349 | 19,413,443 | 98,020,792 | |||||||||
| First Lien-Owner Occupied | 74,773,041 | 56,353,386 | 131,126,427 | |||||||||
| Land and A&D | 34,485,110 | 5,737,907 | 40,223,017 | |||||||||
| HELOC and Jr. Liens | 20,896,735 | 14,954,499 | 35,851,234 | |||||||||
| Commercial and Industrial | 164,571,909 | 31,479,248 | 196,051,157 | |||||||||
| Consumer | 14,407,498 | 44,188,529 | 58,596,027 | |||||||||
| Total pass | 1,417,499,884 | 312,078,767 | 1,729,578,651 | |||||||||
| Special Mention(6) | ||||||||||||
| Commercial Real Estate: | ||||||||||||
| Owner Occupied | 431,911 | 2,776,523 | 3,208,434 | |||||||||
| Investment | 379,756 | 1,026,752 | 1,406,508 | |||||||||
| Hospitality | — | 293,497 | 293,497 | |||||||||
| Land and A&D | 2,091,724 | 108,292 | 2,200,016 | |||||||||
| Residential Real Estate: | ||||||||||||
| First Lien-Investment | 298,030 | 1,349,598 | 1,647,628 | |||||||||
| First Lien-Owner Occupied | 66,267 | 1,828,225 | 1,894,492 | |||||||||
| Land and A&D | 2,148,357 | 653,862 | 2,802,219 | |||||||||
| Commercial and Industrial | 1,518,258 | 56,988 | 1,575,246 | |||||||||
| Consumer | — | 60,972 | 60,972 | |||||||||
| Total special mention | 6,934,303 | 8,154,709 | 15,089,012 | |||||||||
| Substandard(7) | ||||||||||||
| Commercial Real Estate: | ||||||||||||
| Owner Occupied | 5,278,824 | 1,763,006 | 7,041,830 | |||||||||
| Investment | 1,731,489 | 818,942 | 2,550,431 | |||||||||
| Hospitality | — | — | — | |||||||||
| Land and A&D | — | 45,000 | 45,000 | |||||||||
| Residential Real Estate: | ||||||||||||
| First Lien-Investment | 643,790 | 224,631 | 868,421 | |||||||||
| First Lien-Owner Occupied | 275,433 | 2,775,937 | 3,051,370 | |||||||||
| Land and A&D | — | 151,171 | 151,171 | |||||||||
| Commercial and Industrial | 2,011,432 | 72,787 | 2,084,219 | |||||||||
| Consumer | — | — | — | |||||||||
| Total substandard | 9,940,968 | 5,851,474 | 15,792,442 | |||||||||
| Doubtful(8) | — | — | — | |||||||||
| Loss(9) | — | — | — | |||||||||
| Total | $ | 1,434,375,155 | $ | 326,084,950 | $ | 1,760,460,105 | ||||||
| 24 |
| At December 31, 2017 | Legacy | Acquired | Total | |||||||||
| Risk Rating | ||||||||||||
| Pass(1 - 5) | ||||||||||||
| Commercial Real Estate: | ||||||||||||
| Owner Occupied | $ | 262,377,665 | $ | 83,069,390 | $ | 345,447,055 | ||||||
| Investment | 483,404,883 | 51,064,247 | 534,469,130 | |||||||||
| Hospitality | 164,193,228 | 7,395,186 | 171,588,414 | |||||||||
| Land and A&D | 65,184,837 | 9,065,405 | 74,250,242 | |||||||||
| Residential Real Estate: | ||||||||||||
| First Lien-Investment | 78,814,931 | 19,846,749 | 98,661,680 | |||||||||
| First Lien-Owner Occupied | 66,888,943 | 57,895,058 | 124,784,001 | |||||||||
| Land and A&D | 33,712,187 | 5,727,719 | 39,439,906 | |||||||||
| HELOC and Jr. Liens | 21,520,339 | 16,019,418 | 37,539,757 | |||||||||
| Commercial and Industrial | 150,881,948 | 32,738,715 | 183,620,663 | |||||||||
| Consumer | 10,758,589 | 49,017,427 | 59,776,016 | |||||||||
| Total pass | 1,337,737,550 | 331,839,314 | 1,669,576,864 | |||||||||
| Special Mention(6) | ||||||||||||
| Commercial Real Estate: | ||||||||||||
| Owner Occupied | 435,751 | 2,816,057 | 3,251,808 | |||||||||
| Investment | 384,011 | 1,037,254 | 1,421,265 | |||||||||
| Hospitality | — | — | — | |||||||||
| Land and A&D | 2,125,823 | 120,366 | 2,246,189 | |||||||||
| Residential Real Estate: | ||||||||||||
| First Lien-Investment | 300,824 | 1,034,942 | 1,335,766 | |||||||||
| First Lien-Owner Occupied | 67,626 | 1,848,385 | 1,916,011 | |||||||||
| Land and A&D | 2,167,666 | 663,248 | 2,830,914 | |||||||||
| Commercial and Industrial | 1,519,394 | 59,902 | 1,579,296 | |||||||||
| Consumer | — | 65,324 | 65,324 | |||||||||
| Total special mention | 7,001,095 | 7,645,478 | 14,646,573 | |||||||||
| Substandard(7) | ||||||||||||
| Commercial Real Estate: | ||||||||||||
| Owner Occupied | 5,314,671 | 1,773,408 | 7,088,079 | |||||||||
| Investment | 1,748,027 | 825,238 | 2,573,265 | |||||||||
| Hospitality | — | — | — | |||||||||
| Land and A&D | — | 45,000 | 45,000 | |||||||||
| Residential Real Estate: | ||||||||||||
| First Lien-Investment | 646,927 | 338,827 | 985,754 | |||||||||
| First Lien-Owner Occupied | 281,130 | 2,781,351 | 3,062,481 | |||||||||
| Land and A&D | — | 145,193 | 145,193 | |||||||||
| Commercial and Industrial | 1,843,303 | 302,071 | 2,145,374 | |||||||||
| Consumer | — | — | — | |||||||||
| Total substandard | 9,834,058 | 6,211,088 | 16,045,146 | |||||||||
| Doubtful(8) | — | — | — | |||||||||
| Loss(9) | — | — | — | |||||||||
| Total | $ | 1,354,572,703 | $ | 345,695,880 | $ | 1,700,268,583 | ||||||
| 25 |
The following table details activity in the allowance for loan losses by portfolio segment for the three month periods ended March 31, 2018 and 2017. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
| March 31, 2018 | Commercial and Industrial | Commercial Real Estate | Residential Real Estate | Consumer | Total | |||||||||||||||
| Beginning balance | $ | 1,262,030 | $ | 3,783,735 | $ | 844,355 | $ | 30,466 | $ | 5,920,586 | ||||||||||
| Provision for loan losses | (50,372 | ) | 527,631 | (148,161 | ) | 65,798 | 394,896 | |||||||||||||
| Recoveries | 300 | 139 | 32 | 3,645 | 4,116 | |||||||||||||||
| Total | 1,211,958 | 4,311,505 | 696,226 | 99,909 | 6,319,598 | |||||||||||||||
| Loans charged off | — | — | — | (62,079 | ) | (62,079 | ) | |||||||||||||
| Ending Balance | $ | 1,211,958 | $ | 4,311,505 | $ | 696,226 | $ | 37,830 | $ | 6,257,519 | ||||||||||
| Amount allocated to: | ||||||||||||||||||||
| Legacy Loans: | ||||||||||||||||||||
| Individually evaluated for impairment | $ | 95,431 | $ | 69,903 | $ | 76,496 | $ | — | $ | 241,830 | ||||||||||
| Other loans not individually evaluated | 1,092,011 | 4,161,530 | 542,266 | 37,830 | 5,833,637 | |||||||||||||||
| Acquired Loans: | ||||||||||||||||||||
| Individually evaluated for impairment | 24,516 | 80,072 | 77,464 | — | 182,052 | |||||||||||||||
| Ending balance | $ | 1,211,958 | $ | 4,311,505 | $ | 696,226 | $ | 37,830 | $ | 6,257,519 | ||||||||||
| March 31, 2017 | Commercial and Industrial | Commercial Real Estate | Residential Real Estate | Consumer | Total | |||||||||||||||
| Beginning balance | $ | 1,372,235 | $ | 3,990,152 | $ | 823,520 | $ | 9,562 | $ | 6,195,469 | ||||||||||
| Provision for loan losses | 430,390 | 132,613 | (137,611 | ) | 15,099 | 440,491 | ||||||||||||||
| Recoveries | 1,050 | 417 | 900 | 3,324 | 5,691 | |||||||||||||||
| Total | 1,803,675 | 4,123,182 | 686,809 | 27,985 | 6,641,651 | |||||||||||||||
| Loans charged off | (570,523 | ) | (439,922 | ) | (2,268 | ) | (19,149 | ) | (1,031,862 | ) | ||||||||||
| Ending Balance | $ | 1,233,152 | $ | 3,683,260 | $ | 684,541 | $ | 8,836 | $ | 5,609,789 | ||||||||||
| Amount allocated to: | ||||||||||||||||||||
| Legacy Loans: | ||||||||||||||||||||
| Individually evaluated for impairment | $ | 300,960 | $ | 30,177 | $ | 20,262 | $ | — | $ | 351,399 | ||||||||||
| Other loans not individually evaluated | 906,658 | 3,653,083 | 583,711 | 8,836 | 5,152,288 | |||||||||||||||
| Acquired Loans: | ||||||||||||||||||||
| Individually evaluated for impairment | 25,534 | — | 80,568 | — | 106,102 | |||||||||||||||
| Ending balance | $ | 1,233,152 | $ | 3,683,260 | $ | 684,541 | $ | 8,836 | $ | 5,609,789 | ||||||||||
| 26 |
Our recorded investment in loans at March 31, 2018 and 2017 related to each balance in the allowance for probable loan losses by portfolio segment and disaggregated on the basis of our impairment methodology was as follows:
| March 31, 2018 | Commercial and Industrial | Commercial Real Estate | Residential Real Estate | Consumer | Total | |||||||||||||||
| Legacy loans: | ||||||||||||||||||||
| Individually evaluated for impairment with specific reserve | $ | 95,431 | $ | 587,663 | $ | 243,842 | $ | — | $ | 926,936 | ||||||||||
| Individually evaluated for impairment without specific reserve | 377,936 | 2,925,991 | 224,092 | — | 3,528,019 | |||||||||||||||
| Other loans not individually evaluated | 167,628,232 | 1,036,158,293 | 211,726,177 | 14,407,498 | 1,429,920,200 | |||||||||||||||
| Acquired loans: | ||||||||||||||||||||
| Individually evaluated for impairment with specific reserve subsequent to acquisition (ASC 310-20 at acquisition) | 71,049 | 154,297 | 250,194 | — | 475,540 | |||||||||||||||
| Individually evaluated for impairment without specific reserve (ASC 310-20 at acquisition) | — | 299,445 | 1,265,545 | — | 1,564,990 | |||||||||||||||
| Individually evaluated for impairment without specific reserve (ASC 310-30 at acquisition) | — | 3,434,002 | 3,351,654 | 14,000 | 6,799,656 | |||||||||||||||
| Collectively evaluated for impairment without reserve (ASC 310-20 at acquisition) | 31,537,974 | 142,896,022 | 98,575,266 | 44,235,502 | 317,244,764 | |||||||||||||||
| Ending balance | $ | 199,710,622 | $ | 1,186,455,713 | $ | 315,636,770 | $ | 58,657,000 | $ | 1,760,460,105 | ||||||||||
| March 31, 2017 | Commercial and Industrial | Commercial Real Estate | Residential Real Estate | Consumer | Total | |||||||||||||||
| Legacy loans: | ||||||||||||||||||||
| Individually evaluated for impairment with specific reserve | $ | 300,960 | $ | 607,327 | $ | 192,501 | $ | — | $ | 1,100,788 | ||||||||||
| Individually evaluated for impairment without specific reserve | 414,324 | 3,033,353 | 263,495 | — | 3,711,172 | |||||||||||||||
| Other loans not individually evaluated | 142,496,583 | 888,876,611 | 200,565,837 | 4,915,505 | 1,236,854,536 | |||||||||||||||
| Acquired loans: | ||||||||||||||||||||
| Individually evaluated for impairment with specific reserve subsequent to acquisition (ASC 310-20 at acquisition) | 75,221 | 150,430 | — | — | 225,651 | |||||||||||||||
| Individually evaluated for impairment without specific reserve (ASC 310-20 at acquisition) | — | — | 1,048,310 | — | 1,048,310 | |||||||||||||||
| Individually evaluated for impairment without specific reserve (ASC 310-30 at acquisition) | — | 3,934,823 | 3,144,095 | — | 7,078,918 | |||||||||||||||
| Collectively evaluated for impairment without reserve (ASC 310-20 at acquisition) | 5,251,269 | 97,414,215 | 68,369,950 | 121,018 | 171,156,452 | |||||||||||||||
| Ending balance | $ | 148,538,357 | $ | 994,016,759 | $ | 273,584,188 | $ | 5,036,523 | $ | 1,421,175,827 | ||||||||||
| 5. | OTHER REAL ESTATE OWNED |
At March 31, 2018 and December 31, 2017, the fair value of other real estate owned was $1.8 million and $2.0 million, respectively. As a result of the acquisitions of Maryland Bankcorp , WSB Holdings and Regal , we have segmented the other real estate owned (“OREO”) into two components, real estate obtained as a result of loans originated by Old Line Bank (legacy) and other real estate acquired from MB&T, WSB and Regal Bank or obtained as a result of loans originated by MB&T, WSB and Regal Bank (acquired); we did not acquire any OREO properties in the Damascus acquisition. We are currently aggressively either marketing these properties for sale or improving them in preparation for sale.
| 27 |
The following outlines the transactions in OREO during the period.
| Three months ended March 31, 2018 | Legacy | Acquired | Total | |||||||||
| Beginning balance | $ | 425,000 | $ | 1,578,998 | $ | 2,003,998 | ||||||
| Real estate acquired through foreclosure of loans | — | — | — | |||||||||
| Addiitonal valuation adjustment of real estate owned | — | — | — | |||||||||
| Sales/deposits on sales | — | (191,884 | ) | (191,884 | ) | |||||||
| Net realized gain/(loss) | — | (12,516 | ) | (12,516 | ) | |||||||
| Total end of period | $ | 425,000 | $ | 1,374,598 | $ | 1,799,598 | ||||||
Residential Foreclosures and Repossessed Assets — Once all potential alternatives for reinstatement are exhausted, past due loans collateralized by residential real estate are referred for foreclosure proceedings in accordance with local requirements of the applicable jurisdiction. Once possession of the property collateralizing the loan is obtained, the repossessed property will be recorded within other assets either as other real estate owned or, where management has both the intent and ability to recover its losses through a government guarantee, as a foreclosure claim receivable. At March 31, 2018, residential foreclosures classified as other real estate owned totaled $966 thousand. We had two loans for an aggregate of $529 thousand secured by residential real estate in process of foreclosure at March 31, 2018 compared to one loan for $277 thousand at December 31, 2017.
| 6. | EARNINGS PER COMMON SHARE |
We determine basic earnings per common share by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding giving retroactive effect to stock dividends.
We calculate diluted earnings per common share by including the average dilutive common stock equivalents outstanding during the period. Dilutive common equivalent shares consist of stock options, calculated using the treasury stock method.
| Three Months Ended March 31, | ||||||||
| 2018 | 2017 | |||||||
| Weighted average number of shares | 12,544,266 | 10,926,181 | ||||||
| Dilutive average number of shares | 12,743,282 | 11,139,802 | ||||||
| 7. | STOCK-BASED COMPENSATION |
For the three months ended March 31, 2018 and 2017, we recorded stock-based compensation expense of $288,559 and $115,113, respectively. At March 31, 2018, there was total unrecognized compensation cost of $1.5 million related to non-vested stock options and $4.1 million related to restricted stock awards that we expect to realize over the next 2.2 years. As of March 31, 2018, there were 232,005 shares remaining available for future issuance under the 2010 equity incentive plan. The officers exercised 36,951 options during the three month period ended March 31, 2018 compared to 8,500 options during the three month period ended March 31, 2017.
For purposes of determining estimated fair value of stock options and restricted stock awards, we have computed the estimated fair values of all stock-based compensation using the Black-Scholes option pricing model and, for stock options and restricted stock awards granted prior to March 31, 2018, have applied the assumptions set forth in Old Line Bancshares’ Annual Report on Form 10-K for the year ended December 31, 2017. During the three months ended March 31, 2018, there were 40,000 stock options granted compared to no stock options issued during the three months ended March 31, 2017. The weighted average grant date fair value of the 2018 stock options is $8.63 and was computed using the Black-Scholes option pricing model under similar assumptions.
| 28 |
During the three months ended March 31, 2018 and 2017, we granted 19,443 and 24,415 restricted common stock awards, respectively. The weighted average grant date fair value of these restricted stock awards is $32.00 at March 31, 2018. There were no restricted shares forfeited during the three month periods ended March 31, 2018 and 2017.
| 8. | FAIR VALUE MEASUREMENT |
The fair value of an asset or liability is the price that participants would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability, or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.
The fair value hierarchy established by accounting standards defines three input levels for fair value measurement. The applicable standard describes three levels of inputs that may be used to measure fair value: Level 1 is based on quoted market prices in active markets for identical assets. Level 2 is based on significant observable inputs other than Level 1 prices. Level 3 is based on significant unobservable inputs that reflect a company’s own assumptions about the assumption that market participants would use in pricing an asset or liability. We evaluate fair value measurement inputs on an ongoing basis in order to determine if there is a change of sufficient significance to warrant a transfer between levels. For the three months ended March 31, 2018 and year ended December 31, 2017, there were no transfers between levels.
At March 31, 2018, we hold, as part of our investment portfolio, available for sale securities reported at fair value consisting of municipal securities, U.S. government sponsored entities, corporate bonds, mortgage-backed securities. The fair value of the majority of these securities is determined using widely accepted valuation techniques including matrix pricing and broker-quote based applications. Inputs include benchmark yields, reported trades, issuer spreads, prepayments speeds and other relevant items. These are inputs used by a third-party pricing service used by us.
To validate the appropriateness of the valuations provided by the third party, we regularly update the understanding of the inputs used and compare valuations to an additional third party source. We classify all our investment securities available for sale in Level 2 of the fair value hierarchy, with the exception of treasury securities that fall into Level 1 and our corporate bonds, which fall into Level 3.
| 29 |
Assets and Liabilities Measured at Fair Value on a Recurring Basis
| At March 31, 2018 (In thousands) | ||||||||||||||||||||
| Carrying Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Changes in Fair Values Included in Period Earnings | ||||||||||||||||
| Available-for-sale: | ||||||||||||||||||||
| Treasury securities | $ | 2,994 | $ | 2,994 | $ | — | $ | — | $ | — | ||||||||||
| U.S. government agency | 18,635 | — | 18,635 | — | — | |||||||||||||||
| Corporate bonds | 14,714 | — | — | 14,714 | — | |||||||||||||||
| Municipal securities | 76,418 | — | 76,418 | — | — | |||||||||||||||
| FHLMC MBS | 18,355 | — | 18,355 | — | — | |||||||||||||||
| FNMA MBS | 59,441 | — | 59,441 | — | — | |||||||||||||||
| GNMA MBS | 19,797 | — | 19,797 | — | — | |||||||||||||||
| Total recurring assets at fair value | $ | 210,354 | $ | 2,994 | $ | 192,646 | $ | 14,714 | $ | — | ||||||||||
| At December 31, 2017 (In thousands) | ||||||||||||||||||||
| Carrying Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Changes in Fair Values Included in Period Earnings | ||||||||||||||||
| Available-for-sale: | ||||||||||||||||||||
| Treasury securities | $ | 3,005 | $ | 3,005 | $ | — | $ | — | $ | — | ||||||||||
| U.S. government agency | 17,734 | — | 17,734 | — | — | |||||||||||||||
| Corporate bonds | 14,658 | — | — | 14,658 | — | |||||||||||||||
| Municipal securities | 79,555 | — | 79,555 | — | — | |||||||||||||||
| FHLMC MBS | 19,455 | — | 19,455 | — | — | |||||||||||||||
| FNMA MBS | 62,946 | — | 62,946 | — | — | |||||||||||||||
| GNMA MBS | 21,000 | — | 21,000 | — | — | |||||||||||||||
| Total recurring assets at fair value | $ | 218,353 | $ | 3,005 | $ | 200,690 | $ | 14,658 | $ | — | ||||||||||
Our valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes our methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value. Furthermore, we have not comprehensively revalued the fair value amounts since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the above presented amounts.
The fair value of the majority of the securities in significant unobservable inputs (Level 3) is determined using widely accepted valuation techniques including matrix pricing and broker-quote based applications. Inputs include benchmark yields, reported trades, issuer spreads, prepayments speeds and other relevant items. These are inputs used by a third-party pricing service used by us.
The following table provides a reconciliation of changes in fair value included in assets measured in the Consolidated Balance Sheet using inputs classified as level 3 in the fair value for the period indicated:
| 30 |
| (in thousands) | Level 3 | |||
| Investment available-for-sale | ||||
| Balance as of January 1, 2018 | $ | 14,658 | ||
| Realized and unrealized gains (losses) | ||||
| Included in earnings | — | |||
| Included in other comprehensive income | 56 | |||
| Purchases, issuances, sales and settlements | — | |||
| Transfers into or out of level 3 | — | |||
| Balance at March 31, 2018 | $ | 14,714 | ||
The fair value calculated may not be indicative of net realized value or reflective of future fair values.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
We may be required, from time to time, to measure certain assets at fair value on a non-recurring basis in accordance with U.S. generally accepted accounting principles. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis at March 31, 2018 and December 31, 2017 are included in the tables below.
We also measure certain non-financial assets such as other real estate owned, TDRs, and repossessed or foreclosed property at fair value on a non-recurring basis. Generally, we estimate the fair value of these items using Level 2 inputs based on observable market data or Level 3 inputs based on discounting criteria.
| At March 31, 2018 (In thousands) | ||||||||||||||||
| Carrying Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| Impaired Loans | ||||||||||||||||
| Legacy: | $ | 4,213 | — | — | $ | 4,213 | ||||||||||
| Acquired: | 1,858 | — | — | 1,858 | ||||||||||||
| Total Impaired Loans | 6,071 | — | — | 6,071 | ||||||||||||
| Other real estate owned: | ||||||||||||||||
| Legacy: | $ | 425 | — | — | $ | 425 | ||||||||||
| Acquired: | 1,375 | — | — | 1,375 | ||||||||||||
| Total other real estate owned: | 1,800 | — | — | 1,800 | ||||||||||||
| Total | $ | 7,871 | $ | — | $ | — | $ | 7,871 | ||||||||
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| At December 31, 2017 (In thousands) | ||||||||||||||||
| Carrying Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| Impaired Loans | ||||||||||||||||
| Legacy: | $ | 4,260 | — | — | $ | 4,260 | ||||||||||
| Acquired: | 1,931 | — | — | 1,931 | ||||||||||||
| Total Impaired Loans | 6,191 | — | — | 6,191 | ||||||||||||
| Other real estate owned: | ||||||||||||||||
| Legacy: | $ | 425 | — | — | $ | 425 | ||||||||||
| Acquired: | 1,579 | — | — | 1,579 | ||||||||||||
| Total other real estate owned: | 2,004 | — | — | 2,004 | ||||||||||||
| Total | $ | 8,195 | $ | — | $ | — | $ | 8,195 | ||||||||
As of March 31, 2018 and December 31, 2017, we estimated the fair value of impaired assets using Level 3 inputs to be $7.9 million and $8.2 million, respectively. We determined these Level 3 inputs based on appraisal evaluations, offers to purchase and/or appraisals that we obtained from an outside third party during the preceding twelve months less costs to sell. Discounts have predominantly been in the range of 0% to 50%. As a result of the acquisitions of Maryland Bankcorp, WSB Holdings and Regal, we have segmented the OREO into two components, real estate obtained as a result of loans originated by Old Line Bank (legacy) and other real estate acquired from MB&T, WSB and Regal Bank or obtained as a result of loans originated by MB&T, WSB and Regal Bank (acquired).
The following presents the carrying amount, fair value, and placement in the fair value hierarchy of Old Line Bancshares’ financial instruments not recorded at fair value on a recurring or non-recurring basis as of March 31, 2018 and December 31, 2017. For short term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For non-marketable equity securities the carrying amount is a reasonable estimate of fair value as these securities can only be redeemed or sold at their par value and only to the respective issuing government-supported institution or to another member institution. For net loans recievable, an exit price notion was used consistant with ASC Topic 820, Fair Value Measurement. Prior to adoption, loans were calculated using an entry price notion. For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.
| 32 |
| March 31,2018 (in thousands) | ||||||||||||||||||||
| Carrying Amount (000’s) | Total Estimated Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | ||||||||||||||||
| Assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 88,506 | $ | 88,506 | $ | 88,506 | $ | — | $ | — | ||||||||||
| Loans receivable, net | 1,756,577 | 1,722,797 | — | — | 1,722,797 | |||||||||||||||
| Loans held for sale | 3,934 | 4,074 | — | 4,074 | — | |||||||||||||||
| Investment securities available for sale | 210,354 | 210,354 | 2,993 | 192,647 | 14,714 | |||||||||||||||
| Equity Securities at cost | 7,783 | 7,783 | — | 7,783 | — | |||||||||||||||
| Bank Owned Life Insurance | 41,850 | 41,850 | — | 41,850 | — | |||||||||||||||
| Accrued interest receivable | 5,310 | 5,310 | — | 1,152 | 4,158 | |||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Deposits: | ||||||||||||||||||||
| Non-interest-bearing | 572,120 | 572,120 | — | 572,120 | — | |||||||||||||||
| Interest bearing | 1,213,584 | 1,219,276 | — | 1,219,276 | — | |||||||||||||||
| Short term borrowings | 161,478 | 161,478 | — | 161,478 | — | |||||||||||||||
| Long term borrowings | 38,173 | 38,173 | — | 38,173 | — | |||||||||||||||
| Accrued Interest payable | 1,106 | 1,106 | — | 1,106 | — | |||||||||||||||
| December 31,2017 (in thousands) | ||||||||||||||||||||
| Carrying Amount (000’s) | Total Estimated Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | ||||||||||||||||
| Assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 35,174 | $ | 35,174 | $ | 35,174 | $ | — | $ | — | ||||||||||
| Loans receivable, net | 1,696,361 | 1,692,018 | — | — | 1,692,018 | |||||||||||||||
| Loans held for sale | 4,404 | 4,558 | — | 4,558 | — | |||||||||||||||
| Investment securities available for sale | 218,353 | 218,353 | 3,005 | 200,690 | 14,658 | |||||||||||||||
| Equity Securities at cost | 8,978 | 8,978 | — | 8,978 | — | |||||||||||||||
| Bank Owned Life Insurance | 41,612 | 41,612 | — | 41,612 | — | |||||||||||||||
| Accrued interest receivable | 5,476 | 5,476 | — | 1,215 | 4,261 | |||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Deposits: | ||||||||||||||||||||
| Non-interest-bearing | 451,803 | 451,803 | — | 451,803 | — | |||||||||||||||
| Interest bearing | 1,201,100 | 1,205,936 | — | 1,205,936 | — | |||||||||||||||
| Short term borrowings | 192,612 | 192,612 | — | 192,612 | — | |||||||||||||||
| Long term borrowings | 38,107 | 38,107 | — | 38,107 | — | |||||||||||||||
| Accrued Interest payable | 1,472 | 1,472 | — | 1,472 | — | |||||||||||||||
| 9. | SHORT TERM BORROWINGS |
Short term borrowings consist of promissory notes or overnight repurchase agreements sold to Old Line Bank’s customers, federal funds purchased and advances from the Federal Home Loan Bank of Atlanta (“FHLB”). At March 31, 2018, we had $125.0 million outstanding in short term FHLB borrowings, compared to $155.0 million at December 31, 2017. At March 31, 2018 and December 31, 2017, we had no unsecured promissory notes and $36.5 million and $37.6 million, respectively, in secured promissory notes.
| 33 |
Securities Sold Under Agreements to Repurchase
To support the $36.5 million in repurchase agreements at March 31, 2018, we have provided collateral in the form of investment securities. At March 31, 2018 we have pledged $61.5 million in U.S. government agency securities and mortgage-backed securities to customers who require collateral for overnight repurchase agreements and deposits. Securities sold under agreements to repurchase are stated at the amount of cash received in connection with the transaction. As a result, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. We monitor collateral levels on a continuous basis. We may be required to provide additional collateral based on the fair value of the underlying securities in the event the collateral fair value falls below stipulated levels. We closely monitor the collateral levels to ensure adequate levels are maintained. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agents. We have the right to sell or re-pledge the investment securities. For government entity repurchase agreements, the collateral is held by Old Line Bank in a segregated custodial account under a tri-party agreement. The repurchase agreements totaling $36.5 million mature daily and will remain fully collateralized until the account has been closed or terminated.
| 10. | LONG TERM BORROWINGS |
Long term borrowings consist of $35 million in aggregate principal amount of Old Line Bancshares 5.625% Fixed-to-Floating Rate Subordinated Notes due 2026 (the “Notes”). The Notes were issued pursuant to an indenture and a supplemental indenture, each dated as of August 15, 2016, between Old Line Bancshares and U.S. Bank National Association as Trustee. The Notes are unsecured subordinated obligations of Old Line Bancshares and rank equally with all other unsecured subordinated indebtedness currently outstanding or issued in the future. The Notes are subordinated in right of payment of all senior indebtedness. The fair value of the Notes is $34.1 million.
Also included in long term borrowings are trust preferred subordinated debentures totaling $4.1 million (net of $2.6 million fair value adjustment) at March 31, 2018 acquired in the Regal acquisition. The trust preferred subordinated debentures consists of two trusts – Trust 1 in the amount of $4.0 million (fair value adjustment of $1.4 million) maturing on March 17, 2034 and Trust 2 in the amount of $2.5 million (fair value adjustment $1.2 million) maturing on December 14, 2035.
| 11. | SUBSEQUENT EVENT |
On April 13, 2018, Old Line Bancshares BYBK, the parent company of Bay Bank. Upon the consummation of the Merger, all outstanding shares of BYBK common stock were exchanged for shares of common stock of Old Line Bancshares. As a result of the merger, each share of common stock of BYBK was converted into the right to receive 0.4088 shares of Old Line Bancshares’ common stock, provided that cash was paid in lieu of any fractional shares of Old Line Bancshares common stock. As a result, Old Line Bancshares issued approximately 4,408,087 shares of its common stock in exchange for the shares of common stock of BYBK in the merger. The aggregate merger consideration was approximately $143.6 million, consisting of approximately 4,408,087 shares of Old Line Bancshares common stock, valued at approximately $142.6 million based on the closing sales price of Old Line Bancshares’ common stock on April 13, 2018, and approximately $968,805 in cash in exchange for unexercised options to purchase BYBK common stock that were outstanding immediately before the Merger.
In connection with the merger, the parties have caused Bay Bank to merge with and into Old Line Bank, with Old Line Bank the surviving bank.
At December 31, 2017, BYBK had consolidated assets of approximately $659 million. This merger adds 11 banking locations located in market areas of Baltimore City and Baltimore, Howard and Harford Counties in Maryland.
The initial accounting for the business combination is incomplete as of the date of this report due to the timing of the closing date for the acquisition. The required information is not yet available for Old Line Bancshares to perform the necessary financial reporting and fair values of the related acquisition.
| 34 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
Some of the matters discussed below include forward-looking statements. Forward-looking statements often use words such as “believe,” “expect,” “plan,” “may,” “will,” “should,” “project,” “contemplate,” “anticipate,” “forecast,” “intend” or other words of similar meaning. You can also identify them by the fact that they do not relate strictly to historical or current facts. Our actual results and the actual outcome of our expectations and strategies could be different from those anticipated or estimated for the reasons discussed below and under the heading “Information Regarding Forward Looking Statements.”
In this report, references to the “Company,” “we,” “us,” and “ours” refer to Old Line Bancshares, Inc. and its subsidiaries, collectively, and references to the “Bank” refer to Old Line Bank.
Overview
Old Line Bancshares was incorporated under the laws of the State of Maryland on April 11, 2003 to serve as the holding company of Old Line Bank.
On April 1, 2011, we acquired Maryland Bankcorp, Inc. (“Maryland Bankcorp”), the parent company of Maryland Bank & Trust Company, N.A (“MB&T”), on May 10, 2013, we acquired WSB Holdings, Inc. (“WSB Holdings”), the parent company of The Washington Savings Bank, F.S.B. (“WSB”), on December 4, 2015, we acquired Regal Bancorp, Inc. (“Regal”), the parent company of Regal Bank & Trust (“Regal Bank”), and on July 28, 2017, we acquired DCB Bancshares, Inc. (“DCB”), the parent company of Damascus Community Bank (“Damascus”). On April 13, 2018, we acquired Bay Bancorp, Inc. (“BYBK”), the parent company of Bay Bank, FSB. This acquisition brought our assets to approximately $2.8 billion and we now operate 39 full service branches serving 11 counties and Baltimore City.
Summary of Recent Performance and Other Activities
Net income available to common stockholders increased $2.1 million, or 52.63%, to $6.1 million for the three months ended March 31, 2018, compared to $4.0 million for the three month period ended March 31, 2017. Earnings were $0.48 per basic and diluted common share for the three months ended March 31, 2018, compared to $0.36 per basic and diluted common share for the three months ended March 31, 2017. The increase in net income for the first quarter of 2018 as compared to the same 2017 period is primarily the result of a $3.5 million increase in net interest income, partially offset by an increase of $1.5 million in non-interest expenses.
| • | Net loans held for investment increased $60.2 million, or 3.55% during the three month period ended March 31, 2018 from the December 31, 2017 balance as a result of organic growth. Average gross loans increased $338.4 million, or 24.47%, during the three month period ended March 31, 2018, to $1.7 billion from $1.4 billion for the three months ended March 31, 2017. $192.1 million of the increase in average loans is due to the July 2017 acquisition of DCB and the remaining $146.3 million increase is due to organic loan growth. |
| • | Nonperforming assets remained consistent at our 10 year historical low of 0.18% of total assets at March 31, 2018 and December 31, 2017. |
| • | Total yield on interest earning assets increased to 4.52% for the three months ended March 31, 2018, compared to 4.37% for the same period of 2017. |
| • | Return on average assets (“ROAA”) and return on average equity (“ROAE”) were 1.16% and 11.36%, respectively, for the three months ended March 31, 2018, compared to ROAA and ROAE of 0.93% and 9.63%, respectively, for the three months ended March 31, 2017. |
| 35 |
| • | Net income available to common stockholders increased 52.63% to $6.1 million, or $0.48 per basic and diluted share, for the three month period ended March 31, 2018, from $4.0 million, or $0.36 per basic and diluted share, for the first quarter of 2017. |
| • | Total assets increased $105.1 million, or 4.99%, since December 31, 2017. |
| • | Total deposits grew by $132.8 million, or 8.03%, since December 31, 2017. |
| • | We ended the first quarter of 2018 with a book value of $16.74 per common share and a tangible book value of $14.27 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.” |
The following summarizes the highlights of our financial performance for the three month period ended March 31, 2018 compared to same period in 2017 (figures in the table may not match those discussed in the balance of this section due to rounding).
| Three months ended March 31, | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| 2018 | 2017 | $ Change | % Change | |||||||||||||
| Net income available to common stockholders | $ | 6,065 | $ | 3,974 | $ | 2,091 | 52.62 | % | ||||||||
| Interest income | 21,324 | 16,635 | 4,689 | 28.19 | ||||||||||||
| Interest expense | 3,642 | 2,474 | 1,168 | 47.21 | ||||||||||||
| Net interest income before provision for loan losses | 17,683 | 14,161 | 3,522 | 24.87 | ||||||||||||
| Provision for loan losses | 395 | 440 | (45 | ) | (10.23 | ) | ||||||||||
| Non-interest income | 1,795 | 1,855 | (60 | ) | (3.23 | ) | ||||||||||
| Non-interest expense | 10,992 | 9,532 | 1,460 | 15.32 | ||||||||||||
| Average total loans | 1,720,721 | 1,382,344 | 338,377 | 24.48 | ||||||||||||
| Average interest earning assets | 1,946,208 | 1,593,510 | 352,698 | 22.13 | ||||||||||||
| Average total interest bearing deposits | 1,200,932 | 988,719 | 212,213 | 21.46 | ||||||||||||
| Average non-interest bearing deposits | 457,851 | 336,646 | 121,205 | 36.00 | ||||||||||||
| Net interest margin | 3.76 | % | 3.74 | % | 0.53 | |||||||||||
| Return on average equity | 11.36 | % | 9.63 | % | 17.96 | |||||||||||
| Basic earnings per common share | $ | 0.48 | $ | 0.36 | $ | 0.12 | 33.33 | |||||||||
| Diluted earnings per common share | 0.48 | 0.36 | 0.12 | 33.33 | ||||||||||||
Recent Acquisitions
DCB Bancshares, Inc. On July 28, 2017, Old Line Bancshares acquired DCB, the parent company of Damascus. The aggregate merger consideration was approximately $40.9 million based on the closing sales price of Old Line Bancshares’ common stock on July 28, 2017.
In connection with the merger, Damascus merged with and into Old Line Bank, with Old Line Bank the surviving bank.
At July 28, 2017, DCB had consolidated assets of approximately $311 million. This merger added six banking locations located in Montgomery, Frederick and Carroll Counties in Maryland.
The acquired assets and assumed liabilities of DCB were measured at estimated fair value. Management made significant estimates and exercised significant judgment in accounting for the acquisition of DCB. Management judgmentally assigned risk ratings to loans based on appraisals and estimated collateral values, expected cash flows, prepayment speeds and estimated loss factors to measure fair value for loans. Management used quoted or current market prices to determine the fair value of Damascus’ investment securities.
Bay Bancorp, Inc. Also, as discussed, above, on April 13, 2018, we acquired BYBK, the parent company of Bay Bank.
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Strategic Plan
We have based our strategic plan on the premise of enhancing stockholder value and growth through branching and operating profits. Our short term goals include continuing our strong pattern of organic loan and deposit growth, enhancing and maintaining credit quality, collecting payments on non-accrual and past due loans, profitably disposing of certain acquired loans and other real estate owned, maintaining an attractive branch network, expanding fee income, generating extensions of core banking services, and using technology to maximize stockholder value. During the past few years, we have expanded by acquisition into Baltimore, Carroll, Howard, Harford and Frederick Counties and Baltimore City, Maryland, organically and through acquisitions in Montgomery and Anne Arundel Counties, Maryland, by acquisition in Carroll and Baltimore Counties, Maryland, and organically in Prince George’s County, Maryland.
We use the Internet and technology to augment our growth plans. Currently, we offer our customers image technology, Internet banking with online account access and bill pay service and mobile banking. We provide selected commercial customers the ability to remotely capture their deposits and electronically transmit them to us. We will continue to evaluate cost effective ways that technology can enhance our management capabilities, products and services.
We may continue to take advantage of strategic opportunities presented to us via mergers occurring in our marketplace. For example, we may purchase branches that other banks close or lease branch space from other banks or hire additional loan officers. We also continually evaluate and consider opportunities with financial services companies or institutions with which we may become a strategic partner, merge or acquire such as we have done with Maryland Bankcorp, WSB Holdings, Regal, DCB and BYBK. We believe the BYBK acquisition will generate increased earnings and increased returns for our stockholders, including the former stockholders of BYBK.
Although the current interest rate climate continues to present challenges for our industry, we have worked diligently towards our goal of becoming the premier community bank in Maryland. While we are uncertain about the continued pace of economic growth or the impact of the current political environment and the growing national debt, we remain cautiously optimistic that we have identified any problem assets, that our remaining borrowers will stay current on their loans and that we can continue to grow our balance sheet and earnings.
Although the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) has been slowly increasing the federal funds rate since December 2015, interest rates are still at historically low levels, and if the economy remains stable, we believe that we can continue to grow total loans during 2018 even with the additional expected incremental increases in the federal funds rate, which will increase market interest rates, and that we can continue to grow total deposits during 2018 even with interest rates that are, and are expected to remain during 2018, low by historical levels. As a result of this expected growth, we expect that net interest income will continue to increase during 2018, although there can be no guarantee that this will be the case.
We also expect that salaries and benefits expenses and occupancy and equipment expenses will continue to be higher in 2018 and going forward generally than they were in 2017 as a result of including the expenses related to the former Damascus employees and the staff associated with our new branch in Riverdale, Maryland, which opened in June 2017, and the occupancy costs associated with the new Damascus and Riverdale branches, for the full year, as well as the addition of Bay Bank employees and branches as of April 13, 2018; such expenses may increase even further if we selectively take the opportunity to add more business development talent. We will continue to look for opportunities to reduce expenses as we did with the closing of three branches in 2016 and the planned July 2018 closure of two legacy Old Line Bank branches that will be consolidated with former Bay Bank locations within close proximity. We believe with our existing branches, our lending staff, our corporate infrastructure and our solid balance sheet and strong capital position, we can continue to focus our efforts on improving earnings per share and enhancing stockholder value.
Critical Accounting Policies
Critical accounting policies are those that involve significant judgments and assessments by management, and which could potentially result in materially different results under different assumptions and conditions. As discussed in Old Line Bancshares’ Form 10-K for the fiscal year ended December 31, 2017, we consider our critical accounting policies to be the allowance for loan losses, other-than-temporary impairment of investment securities, goodwill and other intangible assets, income taxes, business combinations and accounting for acquired loans. There have been no material changes in our critical accounting policies during the three months ended March 31, 2018.
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Results of Operations for the Three Months Ended March 31, 2018 Compared to Three Months Ended March 31, 2017.
Net Interest Income. Net interest income is the difference between income on interest earning assets and the cost of funds supporting those assets. Earning assets are comprised primarily of loans, investments, interest bearing deposits and federal funds sold. Cost of funds consists of interest paid on interest bearing deposits and other borrowings. Non-interest bearing deposits and capital are also funding sources. Changes in the volume and mix of earning assets and funding sources along with changes in associated interest rates determine changes in net interest income.
Net interest income before the provision for loan losses for the three months ended March 31, 2018 increased $3.5 million, or 24.87%, to $17.7 million from $14.2 million for the same period in 2017. As outlined in detail in the Rate/Volume Variance Analysis, this increase was the result of an increase in total interest income, resulting from an increase in the average balance of and, to a much lesser extent, the average yield on, our loans, partially offset by an increase in interest expense resulting primarily from an increase in the average rate on our interest-bearing liabilities, all as discussed further below. We continue to adjust the mix and volume of interest earning assets and liabilities on the balance sheet to maintain a relatively strong net interest margin.
Total interest income increased $4.7 million, or 28.19%, to $21.3 million during the three months ended March 31, 2018 compared to $16.6 million during the three months ended March 31, 2017, primarily as a result of a $4.3 million increase in interest and fees on loans, which consisted of $2.7 million in interest recognized on acquired DCB loans and an increase of $1.6 million recognized on organic loans. The increase in interest and fees on loans is primarily the result of a $338.4 million increase in the average balance of our loans, primarily mortgage loans, for the three months ended March 31, 2018 compared to the same period last year.. The average yield on the loan portfolio increased to 4.69% for the three months ended March 31, 2018 from 4.58% during the three months ended March 31, 2017 due to higher yields on new commercial and consumer loans. The fair value accretion/amortization on acquired loans affects interest income, primarily due to payoffs on such acquired loans. Payoffs during the three months ended March 31, 2018 contributed a five basis point increase in interest income, compared to seven basis points for the three months ended March 31, 2017.
In addition, interest income on our securities portfolio increased $206 thousand or 17.7% for the three months ended March 31, 2018 compared to the same period last year as a result of an increase in the average balance of and, to a lesser extent, the average yield on, our investment securities. The average balance of our investment portfolio increased $13.6 million, or 6.28%, for the three months ended March 31, 2018 compared to for the three months ended March 31, 2017, primarily due to increases in the average balance of our municipal and U.S. government agency securities and our corporate bonds, partially offset by a decrease in our MBS. The average yield on the investment portfolio increased to 3.15% for the three months ended March 31, 2018 from 2.86% during the three months ended March 31, 2017, primarily due to higher yields on our corporate bonds, MBS and other investment securities, partially offset by a decrease in the average yield on our municipal securities.
Total interest expense increased $1.2 million, or 47.20%, to $3.6 million during the three months ended March 31, 2018 from $2.5 million for the same period in 2017, as a result of increases in the average rate paid on and, to a lesser extent, the average balance of, our interest bearing liabilities. The average interest rate paid on all interest bearing liabilities increased to 1.03% during the three months ended March 31, 2018 from 0.82% during the three months ended March 31, 2017, due to higher rates paid on our borrowings, primarily our FHLB borrowings, and, to a lesser extent, an increase in the rate paid on our money market and NOW accounts and our time deposits. The increase in the average rate paid on FHLB borrowings, money market and NOW accounts is the result of us paying slightly higher rates as a result of recent Federal Reserve Board rate increases. The fair value accretion recorded on acquired deposits also affects interest expense. The benefit from accretion on such deposits slightly increased to two basis points for the three months ended March 31, 2018, compared to one basis point for the three months ended March 31, 2017.
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The average balance of our interest bearing liabilities increased $215.8 million, or 17.68%, to $1.4 billion for the three months ended March 31, 2018 from $1.2 billion for the three months ended March 31, 2017, as a result of increases of $212.2 million, or 21.46%, in our average interest bearing deposits and $3.6 million, or 1.57%, in our average borrowings quarter over quarter. The increase in our average interest bearing deposits is due to the deposits acquired in the DCB merger and, to a lesser extent, organic deposit growth The increase in our average borrowings is primarily due to the use of short term FHLB advances to fund new loan originations.
Non-interest bearing deposits allow us to fund growth in interest earning assets at minimal cost. Average non-interest bearing deposits increased $121.2 million to $457.9 million for the three months ended March 31, 2018, compared to $336.6 million for the three months ended March 31, 2017, primarily as a result of the deposits we acquired in the DCB merger.
Our net interest margin increased to 3.76% for the three months ended March 31, 2018 from 3.74% for the three months ended March 31, 2017. The yield on average interest earning assets increased 15 basis points for the period from 4.37% for the quarter ended March 31, 2017 to 4.52% for the quarter ended March 31, 2018 due primarily due to an improvement in asset yields in addition to an increase in non-interest bearing deposits as a source of funding. The net interest margin during the 2018 period was affected primarily by the increase in interest expense. The increase was partially offset by a reduction in the tax equivalent yield as a result of the tax rate change that was enacted in December 2017 in accordance with the Tax Cut and Jobs Act. The change in the tax rate contributed to a reduction of six basis points for the three months ended March 31, 2018 as compared to the three month period ended March 31, 2017.
During the three months ended March 31, 2018 and 2017, we continued to successfully collect payments on acquired loans that we had recorded at fair value at the acquisition date, which resulted in a positive impact in interest income. Total accretion remained relatively stable, slightly decreasing by $31 thousand for the three months ended March 31, 2018, compared to the same period last year. The payments received were a direct result of our efforts to negotiate payments, sell notes or foreclose on and sell collateral after the acquisition date.
The accretion positively impacted the yield on loans and increased the net interest margin during these periods as follows:
| Three months ended March 31, | ||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| % Impact on | % Impact on | |||||||||||||||
| Accretion | Net Interest | Accretion | Net Interest | |||||||||||||
| Dollars | Margin | Dollars | Margin | |||||||||||||
| Commercial loans | $ | 47,705 | 0.01 | % | $ | 9,727 | — | % | ||||||||
| Mortgage loans | 78,188 | 0.02 | 285,482 | 0.07 | ||||||||||||
| Consumer loans | 97,544 | 0.02 | 5,277 | — | ||||||||||||
| Interest bearing deposits | 80,886 | 0.02 | 35,036 | 0.01 | ||||||||||||
| Total accretion (amortization) | $ | 304,323 | 0.07 | % | $ | 335,522 | 0.08 | % | ||||||||
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Average Balances, Yields and Accretion of Fair Value Adjustments Impact. The following table illustrates average balances of total interest earning assets and total interest bearing liabilities for the three months ended March 31, 2018 and 2017, showing the average distribution of assets, liabilities, stockholders’ equity and related income, expense and corresponding weighted average yields and rates. Non-accrual loans are included in total loan balances lowering the effective yield for the portfolio in the aggregate. The average balances used in this table and other statistical data were calculated using average daily balances.
| Average Balances, Interest and Yields | ||||||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||||||
| Average | Yield/ | Average | Yield/ | |||||||||||||||||||||
| Three months ended March 31, | balance | Interest | Rate | balance | Interest | Rate | ||||||||||||||||||
| Assets: | ||||||||||||||||||||||||
| Federal funds sold (1) | $ | 193,669 | $ | 701 | 1.47 | % | $ | 250,829 | $ | 623 | 1.01 | % | ||||||||||||
| Interest bearing deposits (1) | 1,809,700 | 4 | — | 1,147,711 | 5 | — | ||||||||||||||||||
| Investment securities (1)(2) | ||||||||||||||||||||||||
| U.S. Treasury | 3,003,977 | 10,945 | 1.48 | 3,033,779 | 5,370 | 0.72 | ||||||||||||||||||
| U.S. government agency | 13,144,333 | 86,325 | 2.66 | 8,341,787 | 51,300 | 2.49 | ||||||||||||||||||
| Corporate bonds | 14,620,840 | 200,469 | 5.56 | 8,888,889 | 117,837 | 5.38 | ||||||||||||||||||
| Mortgage backed securities | 109,516,824 | 575,018 | 2.13 | 116,903,217 | 554,429 | 1.92 | ||||||||||||||||||
| Municipal securities | 80,023,423 | 644,411 | 3.27 | 69,970,377 | 683,084 | 3.96 | ||||||||||||||||||
| Other equity securities | 9,147,367 | 266,651 | 11.82 | 8,762,570 | 112,263 | 5.20 | ||||||||||||||||||
| Total investment securities | 229,456,764 | 1,783,819 | 3.15 | 215,900,619 | 1,524,283 | 2.86 | ||||||||||||||||||
| Loans(1) | ||||||||||||||||||||||||
| Commercial | 211,783,107 | 2,263,192 | 4.33 | 167,545,585 | 1,634,120 | 3.96 | ||||||||||||||||||
| Mortgage real estate | 1,450,874,975 | 16,648,703 | 4.65 | 1,209,541,468 | 13,928,482 | 4.67 | ||||||||||||||||||
| Consumer | 58,063,394 | 978,903 | 6.84 | 5,256,771 | 64,054 | 4.94 | ||||||||||||||||||
| Total loans | 1,720,721,476 | 19,890,798 | 4.69 | 1,382,343,824 | 15,626,656 | 4.58 | ||||||||||||||||||
| Allowance for loan losses | 5,973,556 | — | 6,132,653 | — | ||||||||||||||||||||
| Total loans, net of allowance | 1,714,747,920 | 19,890,798 | 4.70 | 1,376,211,171 | 15,626,656 | 4.61 | ||||||||||||||||||
| Total interest earning assets(1) | 1,946,208,053 | 21,675,322 | 4.52 | 1,593,510,330 | 17,151,567 | 4.37 | ||||||||||||||||||
| Non-interest bearing cash | 36,844,268 | 28,795,542 | ||||||||||||||||||||||
| Goodwill and intangibles | 31,272,865 | |||||||||||||||||||||||
| Premises and equipment | 41,088,624 | 35,256,270 | ||||||||||||||||||||||
| Other assets | 69,837,318 | 78,339,425 | ||||||||||||||||||||||
| Total assets(1) | 2,125,251,128 | 1,735,901,567 | ||||||||||||||||||||||
| Liabilities and Stockholders’ Equity: | ||||||||||||||||||||||||
| Interest bearing deposits | ||||||||||||||||||||||||
| Savings | 133,091,341 | 34,791 | 0.11 | 101,690,536 | 30,350 | 0.12 | ||||||||||||||||||
| Money market and NOW | 527,497,875 | 649,317 | 0.50 | 428,869,458 | 343,552 | 0.32 | ||||||||||||||||||
| Time deposits | 540,342,764 | 1,622,625 | 1.22 | 458,159,400 | 1,167,156 | 1.03 | ||||||||||||||||||
| Total interest bearing deposits | 1,200,931,980 | 2,306,733 | 0.78 | 988,719,394 | 1,541,058 | 0.63 | ||||||||||||||||||
| Borrowed funds | 235,924,800 | 1,334,831 | 2.29 | 232,287,588 | 932,887 | 1.63 | ||||||||||||||||||
| Total interest bearing liabilities | 1,436,856,780 | 3,641,564 | 1.03 | 1,221,006,982 | 2,473,945 | 0.82 | ||||||||||||||||||
| Non-interest bearing deposits | 457,850,993 | 336,645,712 | ||||||||||||||||||||||
| 1,894,707,773 | 1,557,652,694 | |||||||||||||||||||||||
| Other liabilities | 13,931,983 | 10,884,384 | ||||||||||||||||||||||
| Stockholders’ equity | 216,611,372 | 167,364,489 | ||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 2,125,251,128 | $ | 1,735,901,567 | ||||||||||||||||||||
| Net interest spread(1) | 3.49 | 3.55 | ||||||||||||||||||||||
| Net interest margin(1) | $ | 18,033,758 | 3.76 | % | $ | 14,677,622 | 3.74 | % | ||||||||||||||||
____________________
| (1) | Interest income 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. See “Reconciliation of Non-GAAP Measures.” |
| (2) | Available for sale investment securities are presented at amortized cost. |
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The following table describes the impact on our interest income and expense resulting from changes in average balances and average rates for the three months ended March 31, 2018 and 2017. We have allocated the change in interest income, interest expense and net interest income due to both volume and rate proportionately to the rate and volume variances.
Rate/Volume Variance Analysis
| Three months ended March 31, 2018 compared to 2017 Variance due to: | ||||||||||||
| Total | Rate | Volume | ||||||||||
| Interest earning assets: | ||||||||||||
| Federal funds sold(1) | $ | 78 | $ | 322 | $ | (244 | ) | |||||
| Interest bearing deposits | (1 | ) | (5 | ) | 4 | |||||||
| Investment Securities(1) | ||||||||||||
| U.S. treasury | 5,575 | 5,668 | (93 | ) | ||||||||
| U.S. government agency | 35,025 | 11,335 | 23,690 | |||||||||
| Corporate bond | 82,632 | 14,658 | 67,974 | |||||||||
| Mortgage backed securities | 20,589 | 79,137 | (58,548 | ) | ||||||||
| Municipal securities | (38,673 | ) | (195,426 | ) | 156,753 | |||||||
| Other | 154,388 | 153,088 | 1,300 | |||||||||
| Loans:(1) | ||||||||||||
| Commercial | 629,072 | 374,332 | 254,740 | |||||||||
| Mortgage | 2,720,221 | (189,628 | ) | 2,909,849 | ||||||||
| Consumer | 914,849 | 122,680 | 792,169 | |||||||||
| Total interest income (1) | 4,523,755 | 376,161 | 4,147,594 | |||||||||
| Interest bearing liabilities | ||||||||||||
| Savings | 4,441 | (8,865 | ) | 13,306 | ||||||||
| Money market and NOW | 305,765 | 276,543 | 29,222 | |||||||||
| Time deposits | 455,469 | 365,139 | 90,330 | |||||||||
| Borrowed funds | 401,944 | 398,183 | 3,761 | |||||||||
| Total interest expense | 1,167,619 | 1,031,000 | 136,619 | |||||||||
| Net interest income(1) | $ | 3,356,136 | $ | (654,839 | ) | $ | 4,010,975 | |||||
__________________________
| (1) | Interest income is presented on a 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. See “Reconciliation of Non-GAAP Measures.” |
Provision for Loan Losses. The provision for loan losses for the three months ended March 31, 2018 was $395 thousand, a decrease of $46 thousand, or 10.35%, compared to $440 thousand for the three months ended March 31, 2017. This decrease was due to our continued strong credit quality trends and a slight decrease in our reserves on specific loans.
Management identified additional probable losses in the loan portfolio and recorded $62 thousand in charge-offs during the three month period ended March 31, 2018, compared to charge-offs of $1.0 million for the three months ended March 31, 2017. We recognized recoveries of $4 thousand during the three months ended March 31, 2018 compared to recoveries of $7 thousand during the same period in 2017.
The allowance for loan losses to gross loans held for investment was 0.36% and 0.35%, and the allowance for loan losses to non-accrual loans was 354.28% and 335.51%, at March 31, 2018 and December 31, 2017, respectively. The increase in the allowance for loan losses as a percentage of gross loans held for investment was primarily the result of growth in the loan portfolio. The increase in the allowance for loan losses to non-accrual loans is primarily the result of the increase in our allowance while non-accrual loans remained flat.
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Non-interest Income. Non-interest income totaled $1.8 million for the three months ended March 31, 2018, a decrease of $60 thousand, or 3.22%, from the corresponding period of 2017 amount of $1.9 million.
The following table outlines the amounts of and changes in non-interest income for the three month periods.
| Three months ended March 31, | ||||||||||||||||
| 2018 | 2017 | $ Change | % Change | |||||||||||||
| Service charges on deposit accounts | $ | 265,912 | $ | 86,505 | $ | 179,407 | 207.39 | % | ||||||||
| Wire transfer fees | 26,965 | 28,301 | (1,336 | ) | (4.72 | ) | ||||||||||
| ATM Income | 283,707 | 297,353 | (13,646 | ) | (4.59 | ) | ||||||||||
| Gain on sales or calls of investment securities | — | 15,677 | (15,677 | ) | (100.00 | ) | ||||||||||
| Earnings on bank owned life insurance | 292,936 | 281,356 | 11,580 | 4.12 | ||||||||||||
| Loss (gain) on disposal of assets | 14,366 | 112,594 | (98,228 | ) | (87.24 | ) | ||||||||||
| Rental income | 198,444 | 140,593 | 57,851 | 41.15 | ||||||||||||
| Income on marketable loans | 418,472 | 630,930 | (212,458 | ) | (33.67 | ) | ||||||||||
| Other fees and commissions | 294,219 | 261,425 | 32,794 | 12.54 | ||||||||||||
| Total non-interest income | $ | 1,795,021 | $ | 1,854,734 | $ | (59,713 | ) | (3.22 | )% | |||||||
Non-interest income decreased during the 2018 period primarily as a result of decreases in income on marketable loans and gain on disposal of assets, partially offset by increases in service charges on deposits accounts and rental income.
Income on marketable loans consists of gain on the sale of residential mortgage loans originated for sale and any fees we receive in connection with such sales. Income on marketable loans decreased $212 thousand during the three months ended March 31, 2018, compared to the same period last year primarily due to a decrease in gains recorded on the sale of residential mortgage loans as a result of a decrease in the volume of mortgage loans originated and sold in the secondary market; a decrease in the premiums received on such loans also contributed to the decline. The residential mortgage division originated loans aggregating $19.3 million for sale in the secondary market during the first quarter of 2018 compared to $20.4 million for the same period last year.
The decrease in gain on disposal of assets is due to the sale during the first quarter of 2017 of our previously owned branch, the Accokeek branch, that we closed in the third quarter of 2016.
The increase in service charges on deposits accounts is the result of increased income on bank debit cards due to the increased deposit base primarily as a result of the DCB merger.
The increase in rental income is a result of formerly vacant space that is now occupied at our building located on Mitchellville Road in Bowie, MD.
Non-interest Expense. Non-interest expense increased $1.5 million, or 15.31%, for the three months ended March 31, 2018 compared to the three months ended March 31, 2017.
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The following table outlines the amounts of and changes in non-interest expenses for the periods.
| Three months ended March 31, | ||||||||||||||||
| 2016 | 2017 | $ Change | % Change | |||||||||||||
| Salaries and benefits | $ | 5,485,450 | $ | 4,867,531 | $ | 617,919 | 12.69 | % | ||||||||
| Occupancy and equipment | 1,980,401 | 1,653,413 | 326,988 | 19.78 | ||||||||||||
| Data processing | 609,639 | 356,648 | 252,991 | 70.94 | ||||||||||||
| FDIC insurance and State of Maryland assessments | 188,071 | 261,600 | (73,529 | ) | (28.11 | ) | ||||||||||
| Core deposit premium amortization | 312,313 | 197,901 | 114,412 | 57.81 | ||||||||||||
| Loss (gain) on sale of other real estate owned | 12,516 | (17,689 | ) | 30,205 | (170.76 | ) | ||||||||||
| OREO expense | 184,994 | 27,577 | 157,417 | 570.83 | ||||||||||||
| Director fees | 170,550 | 177,200 | (6,650 | ) | (3.75 | ) | ||||||||||
| Network services | 79,205 | 139,607 | (60,402 | ) | (43.27 | ) | ||||||||||
| Telephone | 204,424 | 194,142 | 10,282 | 5.30 | ||||||||||||
| Other operating | 1,764,396 | 1,674,200 | 90,196 | 5.39 | ||||||||||||
| Total non-interest expenses | $ | 10,991,959 | $ | 9,532,130 | $ | 1,459,829 | 15.31 | % | ||||||||
Non-interest expenses increased quarter over quarter primarily as a result of increases in salaries and benefits, data processing, occupancy and equipment expense and OREO expense for the three months ended March 31, 2018 compared to the same period of 2017.
The increases in salaries and benefits and occupancy and equipment expenses are primarily due to the additional staff and new branches, respectively, that we acquired in the DCB merger.
Data processing increased for the 2018 period due to additional customer transactions due to growth as well as new and enhanced products in connection with our core processer.
OREO expenses increased primarily due to a $137 thousand real estate tax payment that we made on one property during the 2018 period.
Income Taxes. We had an income tax expense of $2.0 million (25.04% of pre-tax income) for the three months ended March 31, 2018 compared to an income tax expense of $2.1 million (34.25% of pre-tax income) for the same period in 2017. The effective tax rate decreased for the 2018 period primarily as a result of the decrease in the federal corporate tax income rate from 35% to 21% enacted as part of the Tax Cuts and Jobs Act.
Analysis of Financial Condition
Investment Securities. Our portfolio consists primarily of investment grade securities including U.S. Treasury securities, U.S. government agency securities, U.S. government sponsored entity securities, corporate bonds, securities issued by states, counties and municipalities, MBS, certain equity securities (recorded at cost), Federal Home Loan Bank stock, Maryland Financial Bank stock, and Atlantic Community Bankers Bank stock.
We have prudently managed our investment portfolio to maintain liquidity and safety. The portfolio provides a source of liquidity, collateral for borrowings as well as a means of diversifying our earning asset portfolio. While we usually intend to hold the investment securities until maturity, currently we classify all of our investment securities as available for sale. This classification provides us the opportunity to divest of securities that may no longer meet our liquidity objectives. We account for investment securities at fair value and report the unrealized appreciation and depreciation as a separate component of stockholders’ equity, net of income tax effects. Although we may sell securities to reposition the portfolio, generally, we invest in securities for the yield they produce and not to profit from trading the securities. We continually evaluate our investment portfolio to ensure it is adequately diversified, provides sufficient cash flow and does not subject us to undue interest rate risk. There are no trading securities in our portfolio.
The investment securities at March 31, 2018 amounted to $210.4 million, a decrease of $8.0 million, or 3.66%, from the December 31, 2017 amount of $218.4 million. As outlined above, at March 31, 2018, all securities are classified as available for sale.
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The fair value of available for sale securities included net unrealized losses of $8.3 million at March 31, 2018 (reflected as $6.0 million net of taxes) compared to net unrealized losses of $3.9 million (reflected as $2.3 million net of taxes) at December 31, 2017. The decline in the value of the investment securities is due to the increase in market interest rates, which resulted in a decrease in bond values. We have evaluated securities with unrealized losses for an extended period of time and determined that all such losses are temporary because, at this point in time, we expect to hold them until maturity. We have no intent or plan to sell these securities, it is not likely that we will have to sell these securities and we have not identified any portion of the loss that is a result of credit deterioration in the issuer of the security. As the maturity date moves closer and/or interest rates decline, any unrealized losses in the portfolio will decline or dissipate.
Loan Portfolio. Net of allowance, unearned fees and origination costs, loans held for investment increased $60.2 million, or 3.55%, during the three months ended March 31, 2018, bringing the balance to $1.8 billion at March 31, 2018 compared to $1.7 billion at December 31, 2017. The loan growth during 2018 was primarily due to new commercial real estate originations resulting from our enhanced presence in our market area. Commercial real estate loans increased by $44.1 million, residential real estate loans increased by $4.9 million, commercial and industrial loans increased by $12.4 million and consumer loans decreased by $1.2 million from their respective balances at December 31, 2017.
Most of our lending activity occurs within the state of Maryland in the suburban Washington, D.C. and Baltimore market areas in Anne Arundel, Baltimore, Calvert, Carroll, Charles, Montgomery, Frederick, Prince George’s and St. Mary’s Counties. The majority of our loan portfolio consists of commercial real estate loans and residential real estate loans.
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The following table summarizes the composition of the loan portfolio held for investment by dollar amount at the dates indicated:
| March 31, 2018 | December 31, 2017 | |||||||||||||||||||||||
| Legacy (1) | Acquired | Total | Legacy (1) | Acquired | Total | |||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||
| Owner Occupied | $ | 260,238,291 | $ | 80,868,601 | $ | 341,106,892 | $ | 268,128,087 | $ | 87,658,855 | $ | 355,786,942 | ||||||||||||
| Investment | 536,823,023 | 50,040,491 | 586,863,514 | 485,536,921 | 52,926,739 | 538,463,660 | ||||||||||||||||||
| Hospitality | 164,411,156 | 6,711,774 | 171,122,930 | 164,193,228 | 7,395,186 | 171,588,414 | ||||||||||||||||||
| Land and A&D | 78,199,476 | 9,162,901 | 87,362,377 | 67,310,660 | 9,230,771 | 76,541,431 | ||||||||||||||||||
| Residential Real Estate | ||||||||||||||||||||||||
| First Lien-Investment | 79,549,169 | 20,987,672 | 100,536,841 | 79,762,682 | 21,220,518 | 100,983,200 | ||||||||||||||||||
| First Lien-Owner Occupied | 75,114,741 | 60,957,548 | 136,072,289 | 67,237,699 | 62,524,794 | 129,762,493 | ||||||||||||||||||
| Residential Land and A&D | 36,633,466 | 6,542,940 | 43,176,406 | 35,879,853 | 6,536,160 | 42,416,013 | ||||||||||||||||||
| HELOC and Jr. Liens | 20,896,736 | 14,954,499 | 35,851,235 | 21,520,339 | 16,019,418 | 37,539,757 | ||||||||||||||||||
| Commercial and Industrial | 168,101,599 | 31,609,023 | 199,710,622 | 154,244,645 | 33,100,688 | 187,345,333 | ||||||||||||||||||
| Consumer | 14,407,498 | 44,249,501 | 58,656,999 | 10,758,589 | 49,082,751 | 59,841,340 | ||||||||||||||||||
| Total loans | 1,434,375,155 | 326,084,950 | 1,760,460,105 | 1,354,572,703 | 345,695,880 | 1,700,268,583 | ||||||||||||||||||
| Allowance for loan losses | (6,075,467 | ) | (182,052 | ) | (6,257,519 | ) | (5,738,534 | ) | (182,052 | ) | (5,920,586 | ) | ||||||||||||
| Deferred loan costs, net | 2,374,247 | — | 2,374,247 | 2,013,434 | — | 2,013,434 | ||||||||||||||||||
| Net loans | $ | 1,430,673,935 | $ | 325,902,898 | $ | 1,756,576,833 | $ | 1,350,847,603 | $ | 345,513,828 | $ | 1,696,361,431 | ||||||||||||
______________________
| (1) | As a result of the acquisitions of Maryland Bankcorp, WSB Holdings, Regal Bancorp and DCB, we have segmented the portfolio into two components, “Legacy” loans originated by Old Line Bank and “Acquired” loans acquired from MB&T, WSB, Regal Bank and Damascus. |
Bank Owned Life Insurance (“BOLI”). At March 31, 2018, we have invested $41.9 million in life insurance policies on our executive officers, other officers of Old Line Bank, retired officers of MB&T and former officers of WSB, Regal Bank and Damascus. Gross earnings on BOLI were $293 thousand during the three months ended March 31, 2018, which earnings were partially offset by $56 thousand in expenses associated with the policies, for total net earnings of $237 thousand in 2018. We anticipate that the earnings on these policies will continue to help offset our employee benefit expenses as well as our obligations under our salary continuation agreements and supplemental life insurance agreements that we have entered into with our executive officers as well as that MB&T and WSB had entered into with their executive officers. There are no post-retirement death benefits associated with the BOLI policies owned by Old Line Bank prior to the acquisition of MB&T. We have accrued a $203 thousand liability associated with the post-retirement death benefits of the BOLI policies acquired from MB&T and there are no such benefits related to the BOLI policies acquired from WSB, Regal Bank or Damascus.
Annuity Plan. Our new annuity plan is an interest earning investment that we purchased to fund a new supplemental retirement plan and amendments to existing retirement plans that will provide lifetime payments to two of our executive officers. See Part II, Item 5 of this report for a description of this new benefit. We invested $6.0 million during the fourth quarter of 2017 and the annuity plan was effective January 1, 2018.
Deposits. Deposits increased $132.8 million during the three months ended March 31, 2018 to $1.8 billion, compared to $1.7 billion at December 31, 2017. The increase is comprised of a $120.3 million increase in our non-interest bearing deposits and a $12.5 million increase in our interest bearing deposits. Deposits at March 31, 2018 included approximately $99.8 million that one commercial customer deposited on March 29, 2018, following the customer’s sale of properties. The customer has since withdrawn approximately $97.5 million of the $99.8 million deposited on March 29. Excluding this deposit, deposits increased $33.0 million or 2.0% during the three month period ended March 31, 2018.
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The following table outlines the changes in interest bearing deposits:
| March 31, | December 31, | |||||||||||||||
| 2018 | 2017 | $ Change | % Change | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| Certificates of deposit | $ | 551,529 | $ | 530,027 | $ | 21,502 | 4.06 | % | ||||||||
| Interest bearing checking | 526,501 | 538,102 | (11,601 | ) | (2.16 | ) | ||||||||||
| Savings | 135,554 | 132,971 | 2,583 | 1.94 | ||||||||||||
| Total | $ | 1,213,584 | $ | 1,201,100 | $ | 12,484 | 1.04 | % | ||||||||
We acquire brokered certificates of deposit and money market accounts through the Promontory Interfinancial Network (“Promontory”). Through this deposit matching network and its certificate of deposit account registry service (CDARS) and money market account service, we have the ability to offer our customers access to Federal Deposit Insurance Corporation (the “FDIC”) insured deposit products in aggregate amounts exceeding current insurance limits. When we place funds through Promontory on behalf of a customer, we receive matching deposits through the network’s reciprocal deposit program. We can also place deposits through this network without receiving matching deposits. At March 31, 2018, we had $47.5 million in CDARS and $146.4 million in money market accounts through Promontory’s reciprocal deposit program compared to $49.2 million and $144.9 million, respectively, at December 31, 2017.
We do not currently have any brokered certificates of deposits other than CDARS. Old Line Bank did not obtain any brokered certificates of deposit during the three months ended March 31, 2018. We may, however, use brokered deposits in the future as an element of our funding strategy if and when required to maintain an acceptable loan to deposit ratio.
Borrowings. Short term borrowings consist of short term borrowings with the FHLB and short term promissory notes issued to Old Line Bank’s commercial customers as an enhancement to the basic non-interest bearing demand deposit account. This service electronically sweeps excess funds from the customer’s account into a short term promissory note with Old Line Bank. These obligations are payable on demand and are secured by investments. At March 31, 2018, we had $125.0 million outstanding in short term FHLB borrowings, compared to $155.0 million at December 31, 2017. At March 31, 2018 and December 31, 2017, we had no unsecured promissory notes and $36.5 million and $37.6 million, respectively, in secured promissory notes.
Long term borrowings at March 31, 2018 consist primarily of the Notes in the amount of $35.0 million (fair value of $34.1 million) due in 2026. The initial interest rate on the Notes is 5.625% per annum from August 15, 2016 to August 14, 2021, payable semi-annually on each February 15 and August 15. Beginning August 15, 2021, the interest rate will reset quarterly to an interest rate per annum equal to the then current three-month LIBOR rate plus 450.2 basis points, payable quarterly on each February 15, May 15, August 15 and November 15 through maturity or early redemption. Also included in long term borrowings are trust preferred subordinated debentures totaling $4.1 million (net of $2.6 million fair value adjustment) we acquired in the Regal acquisition. The trust preferred subordinated debentures consists of two trusts – Trust 1 in the amount of $4.0 million (fair value adjustment of $1.4 million) with an interest rate of floating 90-day LIBOR plus 2.85%, maturing in 2034 and Trust 2 in the amount of $2.5 million (fair value adjustment $1.2 million) with an interest rate of floating 90-day LIBOR plus 1.60%, maturing in 2035.
Liquidity and Capital Resources. Our overall asset/liability strategy takes into account our need to maintain adequate liquidity to fund asset growth and deposit runoff. Our management monitors the liquidity position daily in conjunction with regulatory guidelines. As further discussed below, we have credit lines, unsecured and secured, available from several correspondent banks totaling $43.5 million. Additionally, we may borrow funds from the FHLB and the Federal Reserve Bank of Richmond. We can use these credit facilities in conjunction with the normal deposit strategies, which include pricing changes to increase deposits as necessary. We can also sell available for sale investment securities or pledge investment securities as collateral to create additional liquidity. From time to time we may sell or participate out loans to create additional liquidity as required. Additional sources of liquidity include funds held in time deposits and cash flow from the investment and loan portfolios.
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Our immediate sources of liquidity are cash and due from banks, federal funds sold and deposits in other banks. On March 31, 2018, we had $85.6 million in cash and due from banks, $2.7 million in interest bearing accounts, and $200 thousand in federal funds sold. As of December 31, 2017, we had $33.6 million in cash and due from banks, $1.4 million in interest bearing accounts, and $257 thousand in federal funds sold.
Old Line Bank has sufficient liquidity to meet its loan commitments as well as fluctuations in deposits. We usually retain maturing certificates of deposit as we offer competitive rates on certificates of deposit. Management is not aware of any demands, trends, commitments, or events that would result in Old Line Bank’s inability to meet anticipated or unexpected liquidity needs.
We did not have any unusual liquidity requirements during the three months ended March 31, 2018. Although we plan for various liquidity scenarios, if turmoil in the financial markets occurs and our depositors lose confidence in us, we could experience liquidity issues.
Old Line Bancshares has available a $5.0 million unsecured line of credit at March 31, 2018. In addition, Old Line Bank has $38.5 million in available lines of credit at March 31, 2018, consisting of overnight federal funds of $33.5 million and repurchase agreements of $5.0 million from its correspondent banks. Old Line Bank has an additional secured line of credit from the FHLB of $506.5 million at March 31, 2018. As a condition of obtaining the line of credit from the FHLB, the FHLB requires that Old Line Bank purchase shares of capital stock in the FHLB. Prior to allowing Old Line Bank to borrow under the line of credit, the FHLB also requires that Old Line Bank provide collateral to support borrowings. Therefore, we have provided collateral to support up to $369.6 million in lendable collateral value for FHLB borrowings. We may increase availability by providing additional collateral. Additionally, we have overnight repurchase agreements sold to Old Line Bank’s customers and have provided collateral in the form of investment securities to support the $36.5 million in repurchase agreements.
In July 2013, the Federal Reserve Board and the FDIC adopted rules implementing Basel III. Under the rules, which became effective January 1, 2015, minimum requirements increased for both the quantity and quality of capital held by Old Line Bancshares and Old Line Bank. Among other things, the rules established a new minimum common equity Tier 1 capital for risk-weighted assets ratio of 4.5%, a minimum Tier 1 risk-based capital ratio of 6.0%, a minimum total risk-based capital ratio requirement of 8.0% and a minimum Tier 1 leverage ratio of 4.0%. These capital requirements also included changes in the risk-weights of certain assets to better reflect credit risk and other risk exposures. Additionally, subject to a transition schedule, the rule limits a banking organization’s ability to make capital distributions, engage in share repurchases and pay certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements. Implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and will increase ratably each subsequent January 1, until it reaches 2.5% on January 1, 2019. Old Line Bank has elected to permanently opt out of the inclusion of accumulated other comprehensive income in our capital calculations, as permitted by the regulations. This opt-out will reduce the impact of market volatility on our regulatory capital levels.
As of March 31, 2018, Old Line Bancshares’ capital levels remained characterized as “well-capitalized” under the rules.
Current regulations require subsidiaries of a financial institution to be separately capitalized and require investments in and extensions of credit to any subsidiary engaged in activities not permissible for a bank to be deducted in the computation of the institution’s regulatory capital. Regulatory capital and regulatory assets below also reflect increases of $8.3 million and $6.0 million, respectively, which represents unrealized losses (after-tax for capital additions and pre-tax for asset additions, respectively) on mortgage-backed securities and investment securities classified as available for sale. In addition, the risk-based capital reflects an increase of $6.3 million for the general loan loss reserve during the three months ended March 31, 2018.
As of March 31, 2018, Old Line Bank met all capital adequacy requirements to be considered well capitalized. There were no conditions or events since the end of the first quarter of 2018 that management believes have changed Old Line Bank’s classification as well capitalized.
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The following table shows Old Line Bank’s regulatory capital ratios and the minimum capital ratios currently required by its banking regulator to be “well capitalized” at March 31, 2018.
| Minimum capital | To be well | |||||||||||||||||||||||
| Actual | adequacy | capitalized | ||||||||||||||||||||||
| March 31, 2018 | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||
| (Dollars in 000’s) | ||||||||||||||||||||||||
| Common equity tier 1 (to risk-weighted assets) | $ | 211,838 | 10.95 | % | $ | 87,030 | 4.5 | % | $ | 125,709 | 6.5 | % | ||||||||||||
| Total capital (to risk weighted assets) | $ | 218,180 | 11.28 | % | $ | 154,719 | 8 | % | $ | 193,399 | 10 | % | ||||||||||||
| Tier 1 capital (to risk weighted assets) | $ | 211,838 | 10.95 | % | $ | 116,039 | 6 | % | $ | 154,719 | 8 | % | ||||||||||||
| Tier 1 leverage (to average assets) | $ | 211,838 | 10.14 | % | $ | 83,597 | 4 | % | $ | 104,496 | 5 | % | ||||||||||||
Our management believes that, under current regulations, and eliminating the assets of Old Line Bancshares, Old Line Bank remains well capitalized and will continue to meet its minimum capital requirements in the foreseeable future. However, events beyond our control, such as a shift in interest rates or an economic downturn in areas where we extend credit, could adversely affect future earnings and, consequently, our ability to meet minimum capital requirements in the future.
Asset Quality
Overview. Management performs reviews of all delinquent loans and foreclosed assets and directs relationship officers to work with customers to resolve potential credit issues in a timely manner. Management reports to the Loan Committee for their approval and recommendation to the board of directors on a monthly basis. The reports presented include information on delinquent loans and foreclosed real estate. We have formal action plans on criticized assets and provide status reports on OREO on a quarterly basis. These action plans include our actions and plans to cure the delinquent status of the loans and to dispose of the foreclosed properties. The Loan Committee consists of three executive officers and four non-employee members of the board of directors.
We classify any property acquired as a result of foreclosure on a mortgage loan as “other real estate owned” and record it at the lower of the unpaid principal balance or fair value at the date of acquisition and subsequently carry the property at the lower of cost or net realizable value. We charge any required write down of the loan to its net realizable value against the allowance for loan losses at the time of foreclosure. We charge to expense any subsequent adjustments to net realizable value. Upon foreclosure, Old Line Bank generally requires an appraisal of the property and, thereafter, appraisals of the property generally on an annual basis and external inspections on at least a quarterly basis.
As required by ASC Topic 310-Receivables and ASC Topic 450-Contingencies, we measure all impaired loans, which consist of all modified loans (TDRs) and other loans for which collection of all contractual principal and interest is not probable, based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. If the measure of the impaired loan is less than the recorded investment in the loan, we recognize impairment through a valuation allowance and corresponding provision for loan losses. Old Line Bank considers consumer loans as homogenous loans and thus does not apply the impairment test to these loans. We write off impaired loans when collection of the loan is doubtful.
Potential problem loans represent those loans with a well-defined weakness and where information about possible credit problems of a borrower has caused management to have serious doubts about the borrower’s ability to comply with present repayment terms. These loans do not meet the criteria for, and are therefore not included in, nonperforming assets. Management, however, classifies potential problem loans as either special mention, watch, or substandard. These loans were considered in determining the adequacy of the allowance for loan losses and are closely and regularly monitored to protect our interests. Potential problem loans, which are not included in nonperforming assets, amounted to $29.1 million at March 31, 2018 compared to $28.9 million at December 31, 2017. At March 31, 2018, we had $16.4 million and $12.7 million, respectively, of potential problem loans attributable to our legacy and acquired loan portfolios, compared to $16.4 million and $12.5 million, respectively, at December 31, 2017.
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Acquired Loans. Loans acquired in mergers are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan losses. Generally accepted accounting principles require that we record acquired loans at fair value, which includes a discount for loans with credit impairment. These loans are not performing according to their contractual terms and meet our definition of a nonperforming loan. The discounts that arise from recording these loans at fair value were due to credit quality. Although we do not accrue interest income at the contractual rate on these loans, we may accrete these discounts to interest income as a result of pre-payments that exceed our expectations or payment in full of amounts due. Purchased, credit-impaired loans that perform consistent with the accretable yield expectations are not reported as non-accrual or nonperforming.
We recorded at fair value all acquired loans from MB&T, WSB, Regal Bank and Damascus. The fair value of the acquired loans includes expected loan losses, and as a result there was no allowance for loan losses recorded for acquired loans at the time of acquisition. Accordingly, the existence of the acquired loans reduces the ratios of the allowance for loan losses to total gross loans and the allowance for loan losses to non-accrual loans, and this measure is not directly comparable to prior periods. Similarly, net loan charge-offs are normally lower for acquired loans since we recorded these loans net of expected loan losses. Therefore, the ratio of net charge-offs during the period to average loans outstanding is reduced as a result of the existence of acquired loans, and the measures are not directly comparable to prior periods. Other institutions may not have acquired loans, and therefore there may be no direct comparability of these ratios between and among other institutions when compared in total.
The accounting guidance also requires that if we experience a decrease in the expected cash flows of a loan subsequent to the acquisition date, we establish an allowance for loan losses for those acquired loans with decreased cash flows. At March 31, 2018, there was $182 thousand of allowance reserved for potential loan losses on acquired loans compared to $182 thousand at December 31, 2017.
Nonperforming Assets. As of March 31, 2018, our nonperforming assets totaled $3.9 million and consisted of $1.8 million of nonaccrual loans, $330 thousand of loans past due 90 days and still accruing and other real estate owned of $1.8 million.
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The table below sets forth the amounts and categories of our nonperforming assets at the dates indicated.
| Nonperforming Assets | ||||||||||||||||||||||||
| March 31, 2018 | December 31, 2017 | |||||||||||||||||||||||
| Legacy | Acquired | Total | Legacy | Acquired | Total | |||||||||||||||||||
| Accruing loans 90 or more days past due | ||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||
| Owner Occupied | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
| Residential Real Estate: | ||||||||||||||||||||||||
| First Lien-Owner Occupied | — | 221,828 | 221,828 | — | 37,560 | 37,560 | ||||||||||||||||||
| Consumer | — | 108,031 | 108,031 | — | 78,406 | 78,406 | ||||||||||||||||||
| Total accruing loans 90 or more days past due | — | 329,859 | 329,859 | — | 115,966 | 115,966 | ||||||||||||||||||
| Non-accrued loans: | ||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||
| Owner Occupied | — | 230,082 | 230,082 | — | 228,555 | 228,555 | ||||||||||||||||||
| Hospitality | — | — | — | — | — | — | ||||||||||||||||||
| Land and A&D | — | 196,171 | 196,171 | — | 190,193 | 190,193 | ||||||||||||||||||
| Residential Real Estate: | ||||||||||||||||||||||||
| First Lien-Investment | 192,501 | — | 192,501 | 192,501 | — | 192,501 | ||||||||||||||||||
| First Lien-Owner Occupied | 275,433 | 872,064 | 1,147,497 | 281,130 | 872,272 | 1,153,402 | ||||||||||||||||||
| Commercial | — | — | — | — | — | — | ||||||||||||||||||
| Consumer | — | — | — | — | — | — | ||||||||||||||||||
| Total non-accrued past due loans: | 467,934 | 1,298,317 | 1,766,251 | 473,631 | 1,291,020 | 1,764,651 | ||||||||||||||||||
| Other real estate owned (“OREO”) | 425,000 | 1,374,598 | 1,799,598 | 425,000 | 1,578,998 | 2,003,998 | ||||||||||||||||||
| Total non performing assets | $ | 892,934 | $ | 3,002,774 | $ | 3,895,708 | $ | 898,631 | $ | 2,985,984 | $ | 3,884,615 | ||||||||||||
| Accruing Troubled Debt Restructurings | ||||||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||||||
| Owner Occupied | $ | 1,548,176 | $ | — | $ | 1,548,176 | $ | 1,560,726 | $ | — | $ | 1,560,726 | ||||||||||||
| Residential Real Estate: | ||||||||||||||||||||||||
| First Lien-Owner Occupied | — | 640,493 | 640,493 | — | 644,744 | 644,744 | ||||||||||||||||||
| First Lien-Investment | — | — | — | — | — | — | ||||||||||||||||||
| Land and A&D | — | — | — | — | — | — | ||||||||||||||||||
| Commercial | 377,936 | 71,049 | 448,985 | 459,333 | — | 459,333 | ||||||||||||||||||
| Total Accruing Troubled Debt Restructurings | $ | 1,926,112 | $ | 711,542 | $ | 2,637,654 | $ | 2,020,059 | $ | 644,744 | $ | 2,664,803 | ||||||||||||
The table below reflects our ratios of our nonperforming assets at March 31, 2018 and December 31, 2017.
| March 31, | December 31, | |||||||
| 2018 | 2017 | |||||||
| Ratios, Excluding Acquired Assets | ||||||||
| Total nonperforming assets as a percentage of total loans held for investment and OREO | 0.06 | % | 0.07 | % | ||||
| Total nonperforming assets as a percentage of total assets | 0.05 | % | 0.05 | % | ||||
| Total nonperforming assets as a percentage of total loans held for investment | 0.06 | % | 0.07 | % | ||||
| Ratios, Including Acquired Assets | ||||||||
| Total nonperforming assets as a percentage of total loans held for investment and OREO | 0.22 | % | 0.23 | % | ||||
| Total nonperforming assets as a percentage of total assets | 0.18 | % | 0.18 | % | ||||
| Total nonperforming assets as a percentage of total loans held for investment | 0.22 | % | 0.23 | % | ||||
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The table below presents a breakdown of the recorded book balance of non-accruing loans at March 31, 2018 and December 31, 2017.
| March 31, 2018 | December 31, 2017 | |||||||||||||||||||||||||||||||
| Unpaid | Interest | Unpaid | ||||||||||||||||||||||||||||||
| # of | Principal | Recorded | Not | # of | Principal | Recorded | Interest Not | |||||||||||||||||||||||||
| Contracts | Balance | Investment | Accrued | Contracts | Balance | Investment | Accrued | |||||||||||||||||||||||||
| Legacy | ||||||||||||||||||||||||||||||||
| Residential Real Estate | ||||||||||||||||||||||||||||||||
| First Lien-Investment | 1 | $ | 192,501 | $ | 192,501 | $ | 25,030 | 1 | $ | 192,501 | $ | 192,501 | $ | 21,901 | ||||||||||||||||||
| First Lien-Owner Occupied | 2 | 275,433 | 275,433 | 1,263 | 2 | 281,130 | 281,130 | 13,303 | ||||||||||||||||||||||||
| Commercial | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Total non-accrual loans | 3 | 467,934 | 467,934 | 26,293 | 3 | 473,631 | 473,631 | 35,204 | ||||||||||||||||||||||||
| Acquired(1) | ||||||||||||||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||||||||||||||
| Owner Occupied | 1 | 254,445 | 230,082 | 15,512 | 1 | 253,865 | 228,555 | 12,334 | ||||||||||||||||||||||||
| Land and A & D | 2 | 483,148 | 196,171 | 176,334 | 2 | 482,467 | 190,193 | 169,657 | ||||||||||||||||||||||||
| Residential Real Estate | ||||||||||||||||||||||||||||||||
| Owner Occupied | 5 | 987,505 | 872,064 | 98,976 | 5 | 987,505 | 872,272 | 82,452 | ||||||||||||||||||||||||
| Total non-accrual loans | 8 | $ | 1,725,098 | $ | 1,298,317 | $ | 290,822 | 8 | $ | 1,723,837 | $ | 1,291,020 | $ | 264,443 | ||||||||||||||||||
| Total all non-accrual loans | 11 | $ | 2,193,032 | $ | 1,766,251 | $ | 317,115 | 11 | $ | 2,197,468 | $ | 1,764,651 | $ | 299,647 | ||||||||||||||||||
_____________________
| (1) | Generally accepted accounting principles require that we record acquired loans at fair value, which includes a discount for loans with credit impairment. These loans are not performing according to their contractual terms and meet our definition of a non-performing loan. The discounts that arise from recording these loans at fair value were due to credit quality. Although we do not accrue interest income at the contractual rate on these loans, we may accrete these discounts to interest income as a result of pre-payments that exceed our cash flow expectations or payment in full of amounts due even though we classify them as 90 or more days past due. |
Non-accrual legacy loans at March 31, 2018 decreased $6 thousand from December 31, 2017, due to principal reduction on residential owner occupied loans.
Non-accrual acquired loans at March 31, 2018 increased $8 thousand from December 31, 2017.
At March 31, 2018, legacy OREO stands at $425 thousand.
Acquired OREO at March 31, 2018, decreased $204 thousand from December 31, 2017, as a result of the sale of one property.
Allowance for Loan Losses. We review the adequacy of the allowance for loan losses at least quarterly. Our review includes evaluation of impaired loans as required by ASC Topic 310-Receivables, and ASC Topic 450-Contingencies. Also incorporated in determining the adequacy of the allowance is guidance contained in the Securities and Exchange Commission’s Staff Accounting Bulletin No. 102, Loan Loss Allowance Methodology and Documentation, the Federal Financial Institutions Examination Council’s Policy Statement on Allowance for Loan and Lease Losses Methodologies and Documentation for Banks and Savings Institutions and the Interagency Policy Statement on the Allowance for Loan and Lease Losses. We also continue to measure the credit impairment at each period end on all loans that have been classified as a TDR using the guidance in ASC 310-10-35.
We have risk management practices designed to ensure timely identification of changes in loan risk profiles. Undetected losses, however, inherently exist within the portfolio. Although we may allocate specific portions of the allowance for specific loans or other factors, the entire allowance is available for any loans that we should charge off. We will not create a specific valuation allowance unless we consider a loan impaired.
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The following tables provide an analysis of the allowance for loan losses for the periods indicated:
| Commercial | Commercial | Residential | ||||||||||||||||||
| March 31, 2018 | and Industrial | Real Estate | Real Estate | Consumer | Total | |||||||||||||||
| Beginning balance | $ | 1,262,030 | $ | 3,783,735 | $ | 844,355 | $ | 30,466 | $ | 5,920,586 | ||||||||||
| Provision for loan losses | (50,372 | ) | 527,631 | (148,161 | ) | 65,798 | 394,896 | |||||||||||||
| Recoveries | 300 | 139 | 32 | 3,645 | 4,116 | |||||||||||||||
| Total | 1,211,958 | 4,311,505 | 696,226 | 99,909 | 6,319,598 | |||||||||||||||
| Loans charged off | — | — | — | (62,079 | ) | (62,079 | ) | |||||||||||||
| Ending Balance | $ | 1,211,958 | $ | 4,311,505 | $ | 696,226 | $ | 37,830 | $ | 6,257,519 | ||||||||||
| Amount allocated to: | ||||||||||||||||||||
| Legacy Loans: | ||||||||||||||||||||
| Individually evaluated for impairment | $ | 95,431 | $ | 69,903 | $ | 76,496 | $ | — | $ | 241,830 | ||||||||||
| Other loans not individually evaluated | 1,092,011 | 4,161,530 | 542,266 | 37,830 | 5,833,637 | |||||||||||||||
| Acquired Loans: | ||||||||||||||||||||
| Individually evaluated for impairment | 24,516 | 80,072 | 77,464 | — | 182,052 | |||||||||||||||
| Ending balance | $ | 1,211,958 | $ | 4,311,505 | $ | 696,226 | $ | 37,830 | $ | 6,257,519 | ||||||||||
| Commercial | Residential | |||||||||||||||||||
| December 31, 2017 | Commercial | Real Estate | Real Estate | Consumer | Total | |||||||||||||||
| Beginning balance | $ | 1,372,235 | $ | 3,990,152 | $ | 823,520 | $ | 9,562 | $ | 6,195,469 | ||||||||||
| Provision for loan losses | 660,497 | 231,488 | 22,203 | 40,920 | 955,108 | |||||||||||||||
| Recoveries | 2,350 | 2,017 | 900 | 35,525 | 40,792 | |||||||||||||||
| Total | 2,035,082 | 4,223,657 | 846,623 | 86,007 | 7,191,369 | |||||||||||||||
| Loans charged off | (773,052 | ) | (439,922 | ) | (2,268 | ) | (55,541 | ) | (1,270,783 | ) | ||||||||||
| Ending Balance | $ | 1,262,030 | $ | 3,783,735 | $ | 844,355 | $ | 30,466 | $ | 5,920,586 | ||||||||||
| Amount allocated to: | ||||||||||||||||||||
| Legacy Loans: | ||||||||||||||||||||
| Individually evaluated for impairment | $ | 96,212 | $ | 69,903 | $ | 76,496 | $ | — | $ | 242,611 | ||||||||||
| Other loans not individually evaluated | 1,141,301 | 3,633,760 | 690,396 | 30,466 | 5,495,923 | |||||||||||||||
| Acquired Loans: | ||||||||||||||||||||
| Individually evaluated for impairment | 24,517 | 80,072 | 77,463 | — | 182,052 | |||||||||||||||
| Ending balance | $ | 1,262,030 | $ | 3,783,735 | $ | 844,355 | $ | 30,466 | $ | 5,920,586 | ||||||||||
The ratios of the allowance for loan losses are as follows:
| March 31, 2018 | December 31, 2017 | |||||||
| Ratio of allowance for loan losses to: | ||||||||
| Total gross loans held for investment | 0.36 | % | 0.35 | % | ||||
| Non-accrual loans | 354.28 | % | 335.51 | % | ||||
| Net charge-offs to average loans | 0.00 | % | 0.08 | % | ||||
During the three months ended March 31, 2018, we charged off $62 thousand in loans through the allowance for loan losses.
The allowance for loan losses represented 0.36% and 0.35% of gross loans held for investment at March 31, 2018 and December 31, 2017, respectively and 0.42% and 0.42% of legacy loans at March 31, 2018 and December 31, 2017, respectively. We have no exposure to foreign countries or foreign borrowers. Based on our analysis and the satisfactory historical performance of the loan portfolio, we believe this allowance appropriately reflects the inherent risk of loss in our portfolio.
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Overall, we continue to believe that the loan portfolio remains manageable in terms of charge-offs and nonperforming assets as a percentage of total loans. We remain diligent and aware of our credit costs and the impact that these can have on our financial institution, and we have taken proactive measures to identify problem loans, including in-house and independent review of larger transactions. Our policy for evaluating problem loans includes obtaining new certified real estate appraisals as needed. We continue to monitor and review frequently the overall asset quality within the loan portfolio.
Contractual Obligations, Commitments, Contingent Liabilities, and Off-balance Sheet Arrangements
Old Line Bancshares is a party to financial instruments with off-balance sheet risk in the normal course of business. These financial instruments primarily include commitments to extend credit, lines of credit and standby letters of credit. Old Line Bancshares uses these financial instruments to meet the financing needs of its customers. These financial instruments involve, to varying degrees, elements of credit, interest rate, and liquidity risk. These commitments do not represent unusual risks and management does not anticipate any losses that would have a material effect on Old Line Bancshares. Old Line Bancshares also has operating lease obligations.
Outstanding loan commitments and lines and letters of credit at March 31, 2018 and December 31, 2017, are as follows:
| March 31, 2018 | December 31, 2017 | |||||||
| (Dollars in thousands) | ||||||||
| Commitments to extend credit and available credit lines: | ||||||||
| Commercial | $ | 139,711 | $ | 132,246 | ||||
| Real estate-undisbursed development and construction | 117,051 | 132,855 | ||||||
| Consumer | 44,000 | 41,151 | ||||||
| Total | $ | 300,762 | $ | 306,252 | ||||
| Standby letters of credit | $ | 12,618 | $ | 12,362 | ||||
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Old Line Bancshares generally requires collateral to support financial instruments with credit risk on the same basis as it does for on balance sheet instruments. The collateral is based on management’s credit evaluation of the counterparty. Commitments generally have interest rates fixed at current market rates, expiration dates or other termination clauses and may require payment of a fee. Available credit lines represent the unused portion of lines of credit previously extended and available to the customer so long as there is no violation of any contractual condition. These lines generally have variable interest rates. Since many of the commitments are expected to expire without being drawn upon, and since it is unlikely that all customers will draw upon their lines of credit in full at any time, the total commitment amount or line of credit amount does not necessarily represent future cash requirements. We evaluate each customer’s credit worthiness on a case by case basis. We regularly reevaluate many of our commitments to extend credit. Because we conservatively underwrite these facilities at inception, we generally do not have to withdraw any commitments. We are not aware of any loss that we would incur by funding our commitments or lines of credit.
Commitments for real estate development and construction, which totaled $117.1 million, or 38.92% of the $300.8 million of outstanding commitments at March 31, 2018, are generally short term and turn over rapidly with principal repayment from permanent financing arrangements upon completion of construction or from sales of the properties financed.
Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Our exposure to credit loss in the event of non-performance by the customer is the contract amount of the commitment. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. In general, loan commitments, credit lines and letters of credit are made on the same terms, including with respect to collateral, as outstanding loans. We evaluate each customer’s credit worthiness and the collateral required on a case by case basis.
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Reconciliation of Non-GAAP Measures
Below is a reconciliation of the fully tax equivalent adjustments and the U.S. GAAP basis information presented in this report:
Three months ended March 31, 2018
| Net | ||||||||||||
| Net Interest | Interest | |||||||||||
| Income | Yield | Spread | ||||||||||
| GAAP net interest income | $ | 17,682,775 | 3.68 | % | 3.41 | % | ||||||
| Tax equivalent adjustment | ||||||||||||
| Federal funds sold | 36 | — | — | |||||||||
| Investment securities | 160,911 | 0.04 | 0.04 | |||||||||
| Loans | 190,036 | 0.04 | 0.04 | |||||||||
| Total tax equivalent adjustment | 350,983 | 0.08 | 0.08 | |||||||||
| Tax equivalent interest yield | $ | 18,033,758 | 3.76 | % | 3.49 | % | ||||||
Three months ended March 31, 2017
| Net | ||||||||||||
| Net Interest | Interest | |||||||||||
| Income | Yield | Spread | ||||||||||
| GAAP net interest income | $ | 14,161,389 | 3.60 | % | 3.40 | % | ||||||
| Tax equivalent adjustment | ||||||||||||
| Federal funds sold | 11 | — | — | |||||||||
| Investment securities | 255,220 | 0.07 | 0.07 | |||||||||
| Loans | 261,002 | 0.07 | 0.07 | |||||||||
| Total tax equivalent adjustment | 516,233 | 0.14 | 0.14 | |||||||||
| Tax equivalent interest yield | $ | 14,677,622 | 3.74 | % | 3.54 | % | ||||||
Non-GAAP financial measures included in this quarterly report should be read along with these tables providing a reconciliation of non-GAAP financial measures to U.S. GAAP financial measures. The Company’s management believes that the 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 consider as an alternative to any measure of performance or financial condition as promulgated under U.S. GAAP, and investors should consider the Company’s performance and financial condition as reported under U.S. 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 U.S. GAAP.
Impact of Inflation and Changing Prices
Management has prepared the financial statements and related data presented herein in accordance with U.S. GAAP, which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation.
Unlike industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution’s performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the price of goods and services, and may frequently reflect government policy initiatives or economic factors not measured by a price index. As discussed above, we strive to manage our interest sensitive assets and liabilities in order to offset the effects of rate changes and inflation.
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Information Regarding Forward-Looking Statements
This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We may also include forward-looking statements in other statements that we make. All statements that are not descriptions of historical facts are forward-looking statements. Forward-looking statements often use words such as “believe,” “expect,” “plan,” “may,” “will,” “should,” “project,” “contemplate,” “anticipate,” “forecast,” “intend” or other words of similar meaning. You can also identify them by the fact that they do not relate strictly to historical or current facts.
The forward-looking statements presented herein with respect to, among other things: (a) our objectives, expectations and intentions, including (i) that the recent BYBK acquisition will generate increased earnings and increased returns for our stockholders and the impact of the Merger on non-interest expenses, , (ii) anticipated increases in certain non-interest expenses and that net interest income will continue to increase during 2018, (iii) the amount of potential problem loans, (iv) our belief that we have identified any problem assets and that our borrowers will continue to remain current on their loans, (v) expected losses on and our intentions with respect to our investment securities, (vi) earnings on bank owned life insurance, (vii) expanding fee income and generating extensions of core banking services, and (viii) hiring and acquisition possibilities; (b) sources of and sufficiency of liquidity; (c) the impact of outstanding off-balance sheet commitments; (d) the adequacy of the allowance for loan losses; (e) expected loan, deposit, balance sheet and earnings growth; (f) expectations with respect to the impact of pending legal proceedings; (g) the anticipated impact of recent accounting pronouncements; (h) continuing to meet regulatory capital requirements; (i) improving earnings per share and stockholder value; and (j) financial and other goals and plans.
Old Line Bancshares bases these statements on our beliefs, assumptions and on information available to us as of the date of this filing, which involves risks and uncertainties. These risks and uncertainties include, among others: those discussed in this report; our ability to retain key personnel; our ability to successfully implement our growth and expansion strategy; risk of loan losses; that the allowance for loan losses may not be sufficient; that changes in interest rates and monetary policy could adversely affect Old Line Bancshares; that changes in regulatory requirements and/or restrictive banking legislation may adversely affect Old Line Bancshares; that the market value of our investments could negatively impact stockholders’ equity; risks associated with our lending limit; expenses associated with operating as a public company; potential conflicts of interest associated with our interest in Pointer Ridge; deterioration in general economic conditions or a return to recessionary conditions; and changes in competitive, governmental, regulatory, technological and other factors that may affect us specifically or the banking industry generally; and other risks otherwise discussed in this report, including under “Item 1A. Risk Factors.”
In addition, our statements with respect to the anticipated effects of the BYBK acquisition are subject to the following additional risks and uncertainties: BYBK’s business may not be integrated successfully with ours or such integration may be more difficult, time consuming or costly than expected; expected revenue synergies and cost savings from the Merger may not be fully realized or realized within the expected timeframe; revenues following the Merger may be lower than expected; and customer and employee relationships and business operations may be disrupted by the Merger.
For a more complete discussion of some of these risks and uncertainties referred to above, see “Risk Factors” in Old Line Bancshares’ Annual Report on Form 10-K for the year ended December 31, 2017.
Old Line Bancshares’ actual results and the actual outcome of our expectations and strategies could differ materially from those anticipated or estimated because of these risks and uncertainties and you should not put undue reliance on any forward-looking statements. All forward-looking statements speak only as of the date of this filing, and Old Line Bancshares undertakes no obligation to update the forward-looking statements to reflect factual assumptions, circumstances or events that have changed after we have made the forward-looking statements.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the exposure to economic loss that arises from changes in the values of certain financial instruments. Various factors, including interest rates, foreign exchange rates, commodity prices, or equity prices, may cause these changes. We are subject to market risk primarily through the effect of changes in interest rates on our portfolio of assets and liabilities. Foreign exchange rates, commodity prices, or equity prices do not pose significant market risk to us. Due to the nature of our operations, only interest rate risk is significant to our consolidated results of operations or financial position. We have no material changes in our quantitative and qualitative disclosures about market risk as of March 31, 2018 from that presented in our Annual Report on Form 10-K for the year ended December 31, 2017.
Interest Rate Sensitivity Analysis and Interest Rate Risk Management
A principal objective of Old Line Bank’s asset/liability management policy is to minimize exposure to changes in interest rates by an ongoing review of the maturity and re-pricing of interest earning assets and interest bearing liabilities.
The tables below present Old Line Bank’s interest rate sensitivity at March 31, 2018 and December 31, 2017. Because certain categories of securities and loans are prepaid before their maturity date even without regard to interest rate fluctuations, we have made certain assumptions to calculate the expected maturity of securities and loans.
| Interest Sensitivity Analysis | ||||||||||||||||||||
| March 31, 2018 | ||||||||||||||||||||
| Maturing or Repricing | ||||||||||||||||||||
| Within | 4 - 12 | 1 - 5 | Over | |||||||||||||||||
| 3 Months | Months | Years | 5 Years | Total | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Interest Earning Assets: | ||||||||||||||||||||
| Interest bearing accounts | $ | 30 | $ | — | $ | — | $ | — | $ | 30 | ||||||||||
| Time deposits in other banks | — | — | — | — | — | |||||||||||||||
| Federal funds sold | 200 | — | — | — | 200 | |||||||||||||||
| Investment securities | 1,501 | 1,795 | 2,091 | 204,967 | 210,354 | |||||||||||||||
| Loans | 294,828 | 112,173 | 794,442 | 559,018 | 1,760,461 | |||||||||||||||
| Total interest earning assets | 296,559 | 113,968 | 796,533 | 763,985 | 1,971,045 | |||||||||||||||
| Interest Bearing Liabilities: | ||||||||||||||||||||
| Interest-bearing transaction deposits | 348,367 | 178,134 | — | — | 526,501 | |||||||||||||||
| Savings accounts | 45,185 | 45,185 | 45,185 | — | 135,555 | |||||||||||||||
| Time deposits | 86,267 | 197,967 | 267,296 | — | 551,530 | |||||||||||||||
| Total interest-bearing deposits | 479,819 | 421,286 | 312,481 | — | 1,213,586 | |||||||||||||||
| FHLB advances | 125,000 | — | — | — | 125,000 | |||||||||||||||
| Other borrowings | 36,478 | — | — | 38,173 | 74,651 | |||||||||||||||
| Total interest-bearing liabilities | 641,297 | 421,286 | 312,481 | 38,173 | 1,413,237 | |||||||||||||||
| Period Gap | $ | (344,738 | ) | $ | (307,318 | ) | $ | 484,052 | $ | 725,812 | $ | 557,808 | ||||||||
| Cumulative Gap | $ | (344,738 | ) | $ | (652,056 | ) | $ | (168,004 | ) | $ | 557,808 | |||||||||
| Cumulative Gap/Total Assets | (15.59 | )% | (29.50 | )% | (7.60 | )% | 25.23 | % | ||||||||||||
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| Interest Sensitivity Analysis | ||||||||||||||||||||
| December 31, 2017 | ||||||||||||||||||||
| Maturing or Repricing | ||||||||||||||||||||
| Within | 4 - 12 | 1 - 5 | Over | |||||||||||||||||
| 3 Months | Months | Years | 5 Years | Total | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Interest Earning Assets: | ||||||||||||||||||||
| Interest bearing accounts | $ | 30 | $ | — | $ | — | $ | — | $ | 30 | ||||||||||
| Time deposits in other banks | — | — | — | — | — | |||||||||||||||
| Federal funds sold | 257 | — | — | — | 257 | |||||||||||||||
| Investment securities | 1,499 | 3,304 | 623 | 212,927 | 218,353 | |||||||||||||||
| Loans | 291,403 | 115,769 | 771,105 | 521,991 | 1,700,268 | |||||||||||||||
| Total interest earning assets | 293,189 | 119,073 | 771,728 | 734,918 | 1,918,908 | |||||||||||||||
| Interest Bearing Liabilities: | ||||||||||||||||||||
| Interest-bearing transaction deposits | 355,498 | 182,605 | — | — | 538,103 | |||||||||||||||
| Savings accounts | 44,323 | 44,324 | 44,324 | — | 132,971 | |||||||||||||||
| Time deposits | 98,292 | 183,750 | 247,984 | — | 530,026 | |||||||||||||||
| Total interest-bearing deposits | 498,113 | 410,679 | 292,308 | — | 1,201,100 | |||||||||||||||
| FHLB advances | 155,000 | — | — | — | 155,000 | |||||||||||||||
| Other borrowings | 37,612 | — | — | 38,107 | 75,719 | |||||||||||||||
| Total interest-bearing liabilities | 690,725 | 410,679 | 292,308 | 38,107 | 1,431,819 | |||||||||||||||
| Period Gap | $ | (397,536 | ) | $ | (291,606 | ) | $ | 479,420 | $ | 696,811 | $ | 487,089 | ||||||||
| Cumulative Gap | $ | (397,536 | ) | $ | (689,142 | ) | $ | (209,722 | ) | $ | 487,089 | |||||||||
| Cumulative Gap/Total Assets | (18.88 | )% | (32.73 | )% | (9.96 | )% | 23.13 | % | ||||||||||||
Item 4. Controls and Procedures
As of the end of the period covered by this quarterly report on Form 10-Q, Old Line Bancshares’ Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of Old Line Bancshares’ disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based upon that evaluation, Old Line Bancshares’ Chief Executive Officer and Chief Financial Officer concluded that Old Line Bancshares’ disclosure controls and procedures are effective as of March 31, 2018. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by Old Line Bancshares in the reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
In addition, there were no changes in Old Line Bancshares’ internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended March 31, 2018, that have materially affected, or are reasonably likely to materially affect, Old Line Bancshares’ internal control over financial reporting.
From time to time, we may be involved in litigation relating to claims arising out of our normal course of business. Currently, we are not involved in any legal proceedings the outcome of which, in management’s opinion, would be material to our financial condition or results of operations.
There have been no material changes in the risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017.
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| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
As reflected in the following table there were no share repurchases by the Company during the quarter ended March 31, 2018:
| Shares Purchased during the period: | Total number of shares repurchased | Average Price paid per share | Total number of share purchased as part of publicly announced program(1) | Maximum number of shares that may yet be purchased under the program (1) | ||||||||||||
| January 1 - March 31, 2018 | — | — | 339,237 | 160,763 | ||||||||||||
________________________________
| (1) | On February 25, 2015, Old Line Bancshares’ board of directors approved the repurchase of up to 500,000 shares of our outstanding common stock. As of March 31, 2018, 339,237 shares have been repurchased at an average price of $15.77 per share or a total cost of approximately $5.3 million. |
| Item 3. | Defaults Upon Senior Securities |
None
| Item 4. | Mine Safety Disclosures |
Not applicable
| Item 5. | Other Information |
Entry into New Employment Agreements
On May 7, 2018, Old Line Bank entered into an amended and restated employment agreement with Mark A. Semanie, our Executive Vice President and Chief Operating Officer, and M. John Miller, our Executive Vice President and Chief Credit Officer, and entered into employment agreements with Elise Hubbard, our Executive Vice President and Chief Financial Officer, and Jack Welborn, our Executive Vice President and Chief Lending Officer.
Mr. Semanie’s amended and restated employment agreement provides that he will serve as an Executive Vice President of Old Line Bank. The agreement provides for an initial term ending on March 31, 2020 and, unless either party notifies the other that the agreement will not be renewed, is renewed for an additional six months on each September 30 and March 31 beginning on September 30, 2018, such that the remaining term at each renewal will be two years.
Mr. Semanie’s amended and restated employment agreement provides for an initial annual base salary of $315,000, which is subject to annual review and increase as may be determined by the Board of Directors. Mr. Semanie is also entitled to receive health, dental, life, and insurance benefits consistent with what Old Line Bank provides for its employees generally.
Mr. Semanie’s amended and restated employment agreement terminates upon Mr. Semanie’s death or physical or mental incapacitation that has left him unable to perform his duties for a period of 60 consecutive days. In addition, Mr. Semanie may terminate his employment for good reason, as defined in the agreement, or without good reason, and Old Line Bank may terminate Mr. Semanie’s employment for certain events constituting cause as defined in the agreement, or without cause.
If Mr. Semanie terminates his employment for Good Reason or Old Line Bank terminates Mr. Semanie’s employment without cause, Mr. Semanie is entitled to receive, within ten business days of the effective date of termination or resignation, a lump sum payment equal to his salary (at the amount of such salary on the date of resignation or termination) over the remaining term of the agreement. In addition, all unvested stock options previously granted to Mr. Semanie will immediately vest, and he will be entitled to payment of any unpaid salary and Retirement Benefits, as defined in the agreement, as of the effective date of his resignation or termination.
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The agreement also contains non-compete, non-solicitation and confidentiality provisions.
Mr. Miller’s amended and restated employment agreement provides that he will serve as an Executive Vice President of Old Line Bank at an initial annual base salary of $242,700. The other substantive provisions of Mr. Miller’s employment agreement are identical to those of Mr. Semanie’s amended and restated employment agreement as described above.
Ms. Hubbard’s employment agreement provides that she will serve as the Chief Financial Officer of Old Line Bank at an initial annual base salary of $225,000 per year. Further, if Ms. Hubbard terminates her employment for Good Reason or Old Line Bank terminates her employment without cause, Ms. Hubbard is entitled to receive her salary, as of the date of her resignation or termination, for the remaining term of the agreement. The other substantive provisions of Ms. Hubbard’s employment agreement are identical to those of Mr. Semanie’s amended and restated employment agreement as described above.
Mr. Welborn’s employment agreement provides that he will serve as the Chief Lending Officer of Old Line Bank at an initial annual base salary of $250,000 per year. The other substantive provisions of Mr. Welborn’s employment agreement are identical to those of Mr. Semanie’s amended and restated employment agreement as described above.
Salary Continuation Agreements and Supplemental Executive Retirement Plan
Also on May 7, 2018, Old Line Bank entered into a new supplemental executive retirement plan, and amendments to its existing salary continuation plan agreements, with James W. Cornelsen, its President and Chief Executive Officer, and an amendment to its existing salary continuation agreement with Mark A. Semanie, its Executive Vice President and Chief Operating Officer. Together, this new agreement and the amendments to the existing agreements have the effect of extending certain payment benefits the executives are eligible for thereunder from a 15-year period into lifetime payments.
As noted above, we invested $6.0 million during the fourth quarter of 2017 to fund the additional benefits under these new or amended plans (collectively, the “Annuity Contracts”).
James W. Cornelsen
As amended, the salary continuation agreement we entered into with Mr. Cornelsen in January 2006 provides that, if still employed with Old Line Bank upon reaching age 65, Mr. Cornelsen will be paid an annual amount of $131,607 (in monthly installments) beginning upon the termination of his employment and continuing until his death. Further, if Mr. Cornelsen becomes no longer employed by Old Line Bank (voluntarily or involuntarily) prior to age 65 as a result of his disability, as defined in the agreement, he will be paid an annual amount ranging from $116,378 to $126,076, depending on the date his employment is terminated, beginning on the first day of the month following his 65th birthday and continuing through his death. In either case, if Mr. Cornelsen dies before 15 years’ worth of payments have been made under this agreement, the payments due under the agreement will continue to be paid to his beneficiary until 15 years’ worth of payments have been made.
The amendment to the 2006 salary continuation agreement did not amend the other benefits payable thereunder. Therefore, if Mr. Cornelsen becomes no longer employed by Old Line Bank (voluntarily or involuntarily) prior to age 65 other than due to his death, Disability or following a change in control, he will be paid an annual amount ranging from $116,378 to $126,076, depending on the date his employment is terminated, beginning on the first day of the month following his 65th birthday. If Mr. Cornelsen dies prior to age 65 and while employed by Old Line Bank, his beneficiary will receive annual payments of $131,607. This agreement also provides that if Mr. Cornelsen’s employment is terminated following a change in control of Old Line Bank, as defined in the agreement, then in lieu of the payments discussed above he will be entitled to an annual payment of $122,818. All of these payments will be paid in monthly installments for a 15-year period, and if Mr. Cornelsen dies while receiving these payments, but prior to receiving all the payments due, the balance of these payments due under the agreement will continue to be paid to his beneficiary.
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Effective February 26, 2010, Old Line Bank entered into an additional salary continuation plan agreement with Mr. Cornelsen. Under the 2010 salary continuation plan agreement, as amended by the May 7, 2018 amendment, upon reaching the age of 65, Mr. Cornelsen will be paid an annual amount of $28,131 (in monthly installments) for the rest of his life. Under this agreement, as amended, if Mr. Cornelsen becomes disabled, as defined in the agreement, while employed by Old Line Bank, he will be paid an annual amount ranging from $23,722 to $26,687, depending on the date of the event, in monthly installments beginning on the first day of the second month following the earlier of the date Mr. Cornelsen reaches age 65 or dies. If Mr. Cornelsen dies before 15 years’ worth of payments have been made under this agreement, the payments due under the agreement will be made to, or continue to be paid to, as applicable, his beneficiary until 15 years’ worth of payments have been made.
The amendment to the 2010 salary continuation agreement did not amend the other benefits payable thereunder. Therefore, if Mr. Cornelsen dies before reaching age 65 while employed by Old Line Bank, or he otherwise becomes no longer employed by Old Line Bank (voluntarily or involuntarily) other than due to his death or following a change in control (as defined in the agreement), he or his beneficiary will be paid an annual amount ranging from $23,722 to $26,687 (payable in monthly installments), depending on the date of the event. Such payments begin on the first day of the second month following the earlier of the date Mr. Cornelsen reaches age 65 or dies and continue for 15 years. This agreement also provides for change in control payments to be paid to Mr. Cornelsen if he is employed with Old Line Bank upon a change in control of Old Line Bank that occurs prior to his normal retirement age or any termination of his employment. The change in control payments range from $26,040 to $27,342 annually (payable in monthly installments), depending on the date of the change in control, and will be paid to Mr. Cornelsen or his beneficiary, as applicable, beginning (in most cases) the second month following the month in which his employment is terminated and continuing for a period of 15 years. If, however, Mr. Cornelsen’s employment with Old Line Bank is terminated for any reason (whether voluntarily or involuntarily) within 24 months following a change in control, he may instead opt to be paid the change in control payments in (i) a lump sum, (ii) monthly installments over two years, or (iii) monthly installments over five years.
Effective October 1, 2012, Old Line Bank entered into two additional salary continuation plan agreements with Mr. Cornelsen pursuant to which he is entitled additional benefits. The first 2012 salary continuation plan agreement, as amended, provides that if Mr. Cornelsen remains employed by Old Line Bank until he reaches the age of 65, he will be entitled to receive, beginning on the first day of the second month following his 65th birthday, an annual payment of $63,991. Such payments will continue for the rest of his life, provided that, if Mr. Cornelsen dies before 15 years’ worth of payments have been made under this agreement, the payments due under the agreement will continue to be paid to his beneficiary until 15 years’ worth of payments have been made. In addition, if Mr. Cornelsen becomes disabled, as defined in the agreement, while employed by Old Line Bank, he will be paid an annual amount ranging from $40,680 to $51,745, depending on the date of the event. Such benefits are payable monthly generally beginning on the first day of the second month following the earlier of Mr. Cornelsen’s 65th birthday or death, and will continue for the rest of his life or, if Mr. Cornelsen dies before 15 years’ worth of payments have been made, will continue to be paid to his beneficiary until 15 years’ worth of payments have been made.
The amendment to the first 2012 salary continuation agreement did not amend the other benefits payable thereunder. Therefore, if Mr. Cornelsen dies before reaching age 65 while employed by Old Line Bank, or he otherwise becomes no longer employed by Old Line Bank (voluntarily or involuntarily) other than because of his disability or following a change in control, he or his beneficiary will be paid an annual amount ranging from $40,680 to $51,745, depending on the date of the event, for a period of 15 years. Such benefits are payable monthly generally beginning on the first day of the second month following the earlier of Mr. Cornelsen’s 65th birthday or death. The agreement also provides for change in control payments to be paid to Mr. Cornelsen if he is employed with Old Line Bank upon a change in control (as defined in the agreement) of Old Line Bank that occurs prior to his 65th birthday. The change in control payments range from $59,416 to $62,386 annually, depending on the date of the change in control, and will be paid on a monthly basis to Mr. Cornelsen or his beneficiary, as applicable, for a period of 15 years beginning (in most cases) on the first day of the second month following the date of termination of Mr. Cornelsen’s employment with Old Line Bank. If, however, Mr. Cornelsen’s employment with Old Line Bank is terminated for any reason (whether voluntarily or involuntarily) within 24 months following a change in control, he may instead opt to be paid the change in control payments in (i) a lump sum, (ii) monthly installments over two years, or (iii) monthly installments over five years.
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The second 2012 salary continuation plan agreement, prior to the May 7 amendment, provided, among other things, that if Mr. Cornelsen remains employed by Old Line Bank until he reaches the age of 65, he will be entitled to receive, beginning on the first day of the second month following his 80th birthday, an annual payment of $223,729 for life, but with five years of payments guaranteed. The amendment provides that if this benefit becomes payable, the benefit amount will be offset by the benefit payments made by Old Line Bank under the salary continuation agreements discussed above, including any amendments to such agreements. The amendment did not otherwise alter the terms of the second 2012 salary continuation plan agreement or the benefits Mr. Cornelsen is entitled to thereunder.
Finally, on May 7, 2018, Old Line Bank entered into a new supplemental executive retirement plan agreement with Mr. Cornelsen. This agreement provides that upon Mr. Cornelsen’s termination of employment with Old Line Bank after he has reached the age of 67 for any reason other than his death or disability, as defined in the agreement, he will be entitled to receive, beginning on the first day of the second month following the termination of his employment and continuing for his lifetime, an annual benefit equal to $50,000 (the “Normal Retirement Benefit”). If instead Mr. Cornelsen’s employment is terminated before he reaches age 67 but after reaching age 64 for any reason other than his death, he will be entitled to receive, beginning on the first day of the second month following the termination of his employment and continuing for his lifetime, an annual payment that ranges from $976 to $27,404, depending on the date of termination. If in either case Mr. Cornelsen dies while receiving payments under this agreement, but before 15 years’ of payments have been made, the monthly payments will continue to be paid to his beneficiary until 15 years’ worth of payments have been made.
If instead Mr. Cornelsen dies while employed by Old Line Bank, his beneficiary will be entitled to a lump sum payment that ranges from $141,258 to $476,152 depending on the date of death. Finally, upon a change in control, as defined in the agreement, Mr. Cornelsen will be entitled to receive the Normal Retirement Benefit beginning on the first day of the second month following the later of the date Mr. Cornelsen reaches age 65 or his employment is terminated.
Mark A. Semanie
As amended, Mr. Semanie’s salary continuation plan agreement provides that if Mr. Semanie remains employed by Old Line Bank until he reaches the age of 65, he will be entitled to receive, beginning on the first day of the second month following his 65th birthday and until his death, an annual payment of $154,435. If Mr. Semanie dies prior to receiving 15 years of benefits under the plan, the payments due under the agreement will continue to be paid to his beneficiary until such time as 15 years of benefits have been paid. If Mr. Semanie becomes disabled, as defined in the agreement, while employed by Old Line Bank, or becomes no longer employed by Old Line Bank other than following a change in control, he or his beneficiary will be paid an annual amount ranging from $43,350 and $151,726, depending on the date of the event. Such benefits are payable monthly and generally to Mr. Semanie or his beneficiary beginning on the first day of the second month following the earlier of Mr. Semanie’s 65th birthday or his death and will be paid until his death or, if he dies prior to receiving 15 years of benefits under the plan, until such time as 15 years of benefits have been paid.
The amended agreement also provides for change in control payments to be paid to Mr. Semanie if he is employed with Old Line Bank upon a change in control (as defined in the agreement) of Old Line Bank that occurs prior to his 65th birthday. The change in control payments range from $93,660 to $152,563 annually, depending on the date of the change in control, and will be paid on a monthly basis to Mr. Semanie or his beneficiary, as applicable, for a period of 15 years beginning (in most cases) on the first day of the second month following the date of termination of Mr. Semanie’s employment with Old Line Bank. If, however, Mr. Semanie’s employment with Old Line Bank is terminated for any reason (whether voluntarily or involuntarily) within 24 months following a change in control, then in lieu of such payments Old Line Bank will transfer ownership of the Annuity Contracts purchased by Old Line Bank to satisfy its obligations to Mr. Semanie under his salary continuation plan agreement, which will constitute payment in full for Mr. Semanie’s change in control benefit under the agreement. The amount of such Annuity Contracts will vary depending on the date of Mr. Semanie’s termination.
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General
The salary continuation plan agreements and supplemental executive retirement plan agreement described above all provide, however, that the executive is not entitled to any benefits under the agreement if he is terminated for cause, as described in the applicable agreement.
The following charts show the annual amount of payments that will be made to Messrs. Cornelsen and Semanie pursuant to the salary continuation agreements:
James W. Cornelsen
2006 Plan
End of Year |
Plan Year |
End of Year Age | Normal Retirement Benefit | Early Termination Benefit |
Disability Benefit | Pre-Retirement Death Benefit | Change in Control Benefit | |||||||||||||||||||||||
| 1/1/2018 | 1 | 64 | 0 | 116,378 | 116,378 | 131,607 | 122,818 | |||||||||||||||||||||||
| 1/1/2019 | 2 | 65 | 0 | 126,076 | 126,076 | 131,607 | 128,959 | |||||||||||||||||||||||
| 7/1/2019 | 2 | 66 | 131,607 | |||||||||||||||||||||||||||
James W. Cornelsen
2010 Plan
End of Year |
Plan Year |
End of Year Age | Normal Retirement Benefit | Early Termination Benefit |
Disability Benefit | Pre-Retirement Death Benefit | Change in Control Benefit | |||||||||||||||||||||||
| 1/1/2018 | 1 | 64 | 0 | 23,722 | 23,722 | 0 | 26,040 | |||||||||||||||||||||||
| 1/1/2019 | 2 | 65 | 0 | 26,687 | 26,687 | 0 | 27,342 | |||||||||||||||||||||||
| 7/1/2019 | 3 | 66 | 28,131 | |||||||||||||||||||||||||||
James W. Cornelsen
2012 Plan
End of Year |
Plan Year |
End of Year Age | Normal Retirement Benefit | Early Termination Benefit |
Disability Benefit | Pre-Retirement Death Benefit | Change in Control Benefit | |||||||||||||||||||||||
| 1/1/2018 | 1 | 64 | 0 | 40,680 | 40,680 | 0 | 59,416 | |||||||||||||||||||||||
| 1/1/2019 | 2 | 65 | 0 | 56,405 | 56,405 | 0 | 62,386 | |||||||||||||||||||||||
| 7/1/2019 | 3 | 66 | 63,991 | |||||||||||||||||||||||||||
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James W. Cornelsen
2018 Plan
End of Year |
Plan Year |
End of Year Age |
Disc. Rate | Normal Retirement Accrued Balance | Normal Retirement Benefit | Early Termination Benefit |
Pre-Retirement Death Benefit |
Post-Retirement Death Benefit | Change in Control Benefit | |||||||||||||||||||||||||||||
| 12/31/2018 | 1 | 64 | 6.00 | % | 141,258 | 0 | 976 | 141,258 | 42,217 | |||||||||||||||||||||||||||||
| 12/31/2019 | 2 | 65 | 6.00 | % | 299,467 | 0 | 13,443 | 299,467 | 47,832 | |||||||||||||||||||||||||||||
| 12/31/2020 | 3 | 66 | 6.00 | % | 476,152 | 0 | 27,404 | 476,152 | 49,266 | |||||||||||||||||||||||||||||
| 7/1/2021 | 4 | 67 | 6.00 | % | 570,531 | 50,000 | 0 | 0 | 570,531 | 50,000 | ||||||||||||||||||||||||||||
| 12/31/2021 | 4 | 67 | 6.00 | % | 563,412 | 50,000 | 563,412 | |||||||||||||||||||||||||||||||
| 12/31/2022 | 5 | 68 | 6.00 | % | 545,607 | 50,000 | 545,607 | |||||||||||||||||||||||||||||||
| 12/31/2023 | 6 | 69 | 6.00 | % | 526,732 | 50,000 | 526,732 | |||||||||||||||||||||||||||||||
| 12/31/2024 | 7 | 70 | 6.00 | % | 506,726 | 50,000 | 506,726 | |||||||||||||||||||||||||||||||
| 12/31/2025 | 8 | 71 | 6.00 | % | 485,519 | 50,000 | 485,519 | |||||||||||||||||||||||||||||||
| 12/31/2026 | 9 | 72 | 6.00 | % | 463,039 | 50,000 | 463,039 | |||||||||||||||||||||||||||||||
| 12/31/2027 | 10 | 73 | 6.00 | % | 439,211 | 50,000 | 439,211 | |||||||||||||||||||||||||||||||
| 12/31/2028 | 11 | 74 | 6.00 | % | 413,953 | 50,000 | 413,953 | |||||||||||||||||||||||||||||||
| 12/31/2029 | 12 | 75 | 6.00 | % | 387,180 | 50,000 | 387,180 | |||||||||||||||||||||||||||||||
| 12/31/2030 | 13 | 76 | 6.00 | % | 358,800 | 50,000 | 358,800 | |||||||||||||||||||||||||||||||
| 12/31/2031 | 14 | 77 | 6.00 | % | 328,718 | 50,000 | 328,718 | |||||||||||||||||||||||||||||||
| 12/31/2032 | 15 | 78 | 6.00 | % | 296,830 | 50,000 | 296,830 | |||||||||||||||||||||||||||||||
| 12/31/2033 | 16 | 79 | 6.00 | % | 263,030 | 50,000 | 263,030 | |||||||||||||||||||||||||||||||
| 12/31/2034 | 17 | 80 | 6.00 | % | 227,201 | 50,000 | 227,201 | |||||||||||||||||||||||||||||||
| 12/31/2035 | 18 | 81 | 6.00 | % | 189,222 | 50,000 | 189,222 | |||||||||||||||||||||||||||||||
| 12/31/2036 | 19 | 82 | 6.00 | % | 148,965 | 50,000 | 0 | |||||||||||||||||||||||||||||||
| 12/31/2037 | 20 | 83 | 6.00 | % | 106,293 | 50,000 | ||||||||||||||||||||||||||||||||
| 12/31/2038 | 21 | 84 | 6.00 | % | 61,060 | 50,000 | ||||||||||||||||||||||||||||||||
| 12/31/2039 | 22 | 85 | 6.00 | % | 13,113 | 50,000 | ||||||||||||||||||||||||||||||||
| 12/31/2040 | 23 | 86 | 6.00 | % | (0) | 50,000 | ||||||||||||||||||||||||||||||||
| 12/31/2041 | 24 | 87 | 6.00 | % | (0) | 50,000 | ||||||||||||||||||||||||||||||||
Mark A. Semanie
End of Year |
Plan Year |
End of Year Age |
Disc. Rate | Normal Retirement Accrued Balance | Normal Retirement Benefit | Early Termination Benefit |
Pre-Retirement Death Benefit |
Post-Retirement Death Benefit | Change in Control Benefit | |||||||||||||||||||||||||||||
| 12/31/2018 | 1 | 64 | 6.00 | % | 141,258 | 0 | 976 | 141,258 | 42,217 | |||||||||||||||||||||||||||||
| 12/31/2019 | 2 | 65 | 6.00 | % | 299,467 | 0 | 13,443 | 299,467 | 47,832 | |||||||||||||||||||||||||||||
| 12/31/2020 | 3 | 66 | 6.00 | % | 476,152 | 0 | 27,404 | 476,152 | 49,266 | |||||||||||||||||||||||||||||
| 7/1/2021 | 4 | 67 | 6.00 | % | 570,531 | 50,000 | 0 | 0 | 570,531 | 50,000 | ||||||||||||||||||||||||||||
| 12/31/2021 | 4 | 67 | 6.00 | % | 563,412 | 50,000 | 563,412 | |||||||||||||||||||||||||||||||
| 12/31/2022 | 5 | 68 | 6.00 | % | 545,607 | 50,000 | 545,607 | |||||||||||||||||||||||||||||||
| 12/31/2023 | 6 | 69 | 6.00 | % | 526,732 | 50,000 | 526,732 | |||||||||||||||||||||||||||||||
| 12/31/2024 | 7 | 70 | 6.00 | % | 506,726 | 50,000 | 506,726 | |||||||||||||||||||||||||||||||
| 12/31/2025 | 8 | 71 | 6.00 | % | 485,519 | 50,000 | 485,519 | |||||||||||||||||||||||||||||||
| 12/31/2026 | 9 | 72 | 6.00 | % | 463,039 | 50,000 | 463,039 | |||||||||||||||||||||||||||||||
| 12/31/2027 | 10 | 73 | 6.00 | % | 439,211 | 50,000 | 439,211 | |||||||||||||||||||||||||||||||
| 12/31/2028 | 11 | 74 | 6.00 | % | 413,953 | 50,000 | 413,953 | |||||||||||||||||||||||||||||||
| 12/31/2029 | 12 | 75 | 6.00 | % | 387,180 | 50,000 | 387,180 | |||||||||||||||||||||||||||||||
| 12/31/2030 | 13 | 76 | 6.00 | % | 358,800 | 50,000 | 358,800 | |||||||||||||||||||||||||||||||
| 12/31/2031 | 14 | 77 | 6.00 | % | 328,718 | 50,000 | 328,718 | |||||||||||||||||||||||||||||||
| 12/31/2032 | 15 | 78 | 6.00 | % | 296,830 | 50,000 | 296,830 | |||||||||||||||||||||||||||||||
| 12/31/2033 | 16 | 79 | 6.00 | % | 263,030 | 50,000 | 263,030 | |||||||||||||||||||||||||||||||
| 12/31/2034 | 17 | 80 | 6.00 | % | 227,201 | 50,000 | 227,201 | |||||||||||||||||||||||||||||||
| 12/31/2035 | 18 | 81 | 6.00 | % | 189,222 | 50,000 | 189,222 | |||||||||||||||||||||||||||||||
| 12/31/2036 | 19 | 82 | 6.00 | % | 148,965 | 50,000 | 0 | |||||||||||||||||||||||||||||||
| 12/31/2037 | 20 | 83 | 6.00 | % | 106,293 | 50,000 | ||||||||||||||||||||||||||||||||
| 12/31/2038 | 21 | 84 | 6.00 | % | 61,060 | 50,000 | ||||||||||||||||||||||||||||||||
| 12/31/2039 | 22 | 85 | 6.00 | % | 13,113 | 50,000 | ||||||||||||||||||||||||||||||||
| 12/31/2040 | 23 | 86 | 6.00 | % | (0) | 50,000 | ||||||||||||||||||||||||||||||||
| 12/31/2041 | 24 | 87 | 6.00 | % | (0) | 50,000 | ||||||||||||||||||||||||||||||||
| 63 |
| Item 6. | Exhibits |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Old Line Bancshares, Inc. | ||
| Date: May 9, 2018 | By: | /s/ James W. Cornelsen |
| James W. Cornelsen, President and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: May 9, 2018 | By: | /s/ Elise M. Hubbard |
| Elise M. Hubbard, Executive Vice President and Chief Financial Officer | ||
| (Principal Accounting and Financial Officer) | ||
65
Exhibit 10.1
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made as of this 7th day of May, 2018, by and between OLD LINE BANK, a Maryland-chartered trust company exercising the powers of a commercial bank (the “Bank” or “Employer”), and Mark A. Semanie, a resident of the State of Maryland (the “Employee”).
WHEREAS on May 13, 2013, the Employer and the Employee entered into an Executive Employment Agreement, as amended by the Fourth Amendment to Executive Employment Agreement by and between the Bank and the Employee dated as of February 23, 2017 (together, the “Original Agreement”); and
WHEREAS the Employer and the Employee desire to amend and restate the Original Agreement as provided herein.
NOW THEREFORE, in consideration of the premises, the benefits provided to each party hereunder and the mutual promises made herein, the adequacy and sufficiency of such consideration being hereby acknowledged by the parties, the parties agree as follows:
1. Employment. The Bank hereby employs the Employee as an Executive Vice President and agrees to continue to employ the Employee in that position (or in any other position approved by the Bank) during the term of this Agreement, except as otherwise provided below.
2. Term. The initial term and any extensions thereof are referred to herein as the “Term.” The initial Term of this Agreement expires on March 31, 2020. The Term of this Agreement is two years. On September 30, 2018 and on each succeeding consecutive March 31st and September 30th (each an “Anniversary Date”) while this Agreement is in effect, the Term shall be automatically extended for a period of six months unless the Employer or the Employee informs the other at least 60 days prior to such Anniversary Date of their decision to not renew.
3. Compensation. The Employee’s salary under this Agreement shall be $330,750.00 per annum, payable on a bi-weekly basis (“Base Salary”). The Employee’s Base Salary will be reviewed by the Board of Directors annually, and the Employee will be entitled to receive annually an increase in such amount, if any, as may be determined by the Board of Directors.
4. Duties.
A. During the term of this Agreement, the Employee shall serve as an Executive Vice President. He shall have such powers and shall perform such duties that are incident and customary to this office, and as granted and assigned to him by the Chief Executive Officer (“CEO”) and/or the Board of Directors.
B. The Employee shall devote his full time, attention, skill, and energy to the performance of his duties under this Agreement, and shall comply with all reasonable professional requests of the Bank; provided, however, that the Employee will be permitted to engage in and manage personal investments and to participate in community and charitable affairs, so long as such activities in the judgment of the Bank’s CEO do not create a conflict of interest or interfere with the performance of his duties under this Agreement. In furtherance of this commitment, the Employee shall disclose all positions he holds with other organizations and any ownership interests he has in other business entities where he may influence or control management decisions. Such disclosures shall be made at the commencement of the Employee’s employment and from time-to-time throughout his employment where his circumstances have changed to make such a disclosure appropriate.
C. The Employee shall immediately notify the Company of (i) his own illness and consequent absence from work or (ii) any intended significant change in his plans to work for the Company.
5. Vacation, Sick and Personal Leave.
A. The Employee shall be entitled to a total of 20 days of paid vacation each calendar year, which he may use in accordance with the Bank’s announced policy that is in effect from time-to-time. The Employee may take his vacation at such times that do not interfere with the performance of his duties under this Agreement.
B. The Employee shall be entitled to paid sick leave and paid personal leave as is provided in the Employer’s policies then in effect.
6. Expenses. The Bank shall reimburse the Employee for all reasonable expenses incurred in connection with his duties on behalf of the Bank, provided that the Employee shall keep and present to the Bank records and receipts relating to reimbursable expenses incurred by him. Such records and receipts shall be maintained and presented in a format, and with such regularity, as the Bank reasonably may require in order to substantiate the Bank’s right to claim income tax deductions for such expenses. For any expenditure in excess of $500.00, the Employee must obtain written approval from the CEO if he is to be reimbursed for the expense. Without limiting the generality of the foregoing, the Employee shall be entitled to reimbursement for any business-related travel, business-related entertainment and other costs and expenses reasonably incident to the performance of his duties on behalf of the Bank.
7. Fringe Benefits.
A. Insurance. The Employee shall receive health insurance, consistent with the terms set forth in the plan established by the Bank for its employees. The Bank shall also pay the premiums for Employee to receive the following insurance, consistent with the terms set forth in the plans established by the Bank for its employees: dental; life; short-term disability; and long-term disability.
| 2 |
B. Banking. The Bank shall not charge the Employee for use of a savings account, checking account or debit card issued by the Bank. The Employee is eligible to have his paychecks deposited directly in any account he has with the Bank or elsewhere.
8. Termination of Employment.
A. This Agreement shall terminate prior to the expiration of its Term only upon and on the occurrence of the following:
(i) on the death of the Employee in which event all unvested stock options previously granted to the Employee shall immediately vest and the Employer shall have no further obligation to the Employee other than payment of any unpaid salary and any contractually committed obligations to provide the Employee with vested benefits pursuant to a salary continuation agreement, supplemental life insurance agreement, or other form of retirement plan (“Retirement Benefits”) in effect as of the date of death;
(ii) on the date the Employee becomes physically or mentally incapacitated to the extent he has been unable to perform his duties under this Agreement for a period of 60 consecutive days and, in order to assist the Bank in making such determination, the Employee agrees to make himself available for medical examination by one or more physicians chosen by the Bank and grants to the Bank and such physicians access to all relevant medical information, including copies of the Employee’s medical records and access to the Employee’s own physicians, in which event Employer will have no further obligation to the Employee other than payment of any unpaid salary and Retirement Benefits as of the date of disability;
(iii) on the effective date of the Employee’s voluntary resignation for Good Reason (which for purposes of this Agreement is defined as “a change in location of the Employer’s principal office that results in the Employee’s commuting distance being at least 50 miles greater than the Employee’s commuting distance on the date of this Agreement” and which shall not occur unless (a) Employee notified the Employer of such condition within 90 days of its occurrence, (b) the Employer did not remedy such condition within 30 days, and (c) Employee resigned for Good Reason within 12 months of the condition) in which event (a) the Employer shall pay to the Employee a lump sum payment equal to the Employee’s salary (at the amount of such salary on the date of resignation) over the remaining Term, and the Employer shall pay such lump sum payment within ten business days of the effective date of termination of the Employee’s employment, (b) all unvested stock options previously granted to the Employee shall immediately vest, and (c) the Employee shall be entitled to payment of any unpaid salary and Retirement Benefits as of the effective date of termination of the Employee’s employment pursuant to such resignation;
(iv) on the effective date of the Employee’s voluntary resignation without Good Reason in which event the Employer will have no further obligation to the Employee other than payment of any unpaid salary and Retirement Benefits as of the date of voluntary resignation;
| 3 |
(v) on the date the Employer terminates the Employee for “cause” as defined below in which event the Employee will have no further obligation to the Employee other than payment of any unpaid salary and Retirement Benefits as of the date of termination; or
(vi) on the date the Employer terminates the Employee other than for cause in which event (a) the Employer shall pay to the Employee a lump sum payment equal to the Employee’s salary (at the amount of such salary on the date of termination) over the remaining Term, and the Employer shall pay such lump sum payment within ten business days of the effective date of termination of the Employee’s employment, (b) all unvested stock options previously granted to the Employee shall immediately vest, and (c) the Employee shall be entitled to payment of any unpaid salary and Retirement Benefits as of the effective date of termination of the Employee’s employment.
B. Termination for Cause. Notwithstanding the provisions of Section 2 above, the Employee’s employment (and all of his rights and benefits under this Agreement) shall terminate immediately after written notice upon the happening of any one or more of the following events, which constitute “cause”: (i) the Employee has breached, in any material respect, a provision of this Agreement; (ii) the Employee refuses to perform the duties of his employment under this Agreement in any material respect; (iii) the Employee has committed any act or omission materially and adversely affecting his reputation or that of the Bank or any of its affiliates or materially and adversely affecting any product, policy, program or service offered through or developed by the Bank or any of its affiliates; (iv) the Employee is convicted of or pleads guilty to a charge of any felony or of any lesser crime involving fraud or moral turpitude or directed against the Bank, its affiliates or any of their shareholders, employees, agents or contractors; (v) the Employee commits any other act which is inconsistent with the good faith fulfillment of his responsibilities as an employee of the Bank or is done with the intent to harm the Bank, its affiliates or any of their shareholders, employees, agents or contractors; (vi) the Employee violates any material statute, rule or regulation of any federal, state or local governmental authority pertaining to the marketing, sale, solicitation or offer of any product, policy or program of the Bank or its affiliates; and (vii) the Employee commits any other act or omission which an arbitrator or a court of competent jurisdiction justifies as grounds for dismissal for cause.
C. Unused Vacation, Sick and Personal Leave. The Employee shall be eligible to receive the remaining balance of his unused vacation and personal leave at the termination of his employment only if he is not terminated for “cause” as defined above and he returns all Bank property to the Bank prior to his final day of employment. Employee shall have no right to receive any unused sick leave. If the Employee fails to return any Bank property prior to his last day of employment, the Employee authorizes the Bank to deduct from his final paycheck the reasonable cost (not value) of that item. In the event that the Employee elects to terminate his employment, he must provide the Company with 60 days’ notice as provided above in order to receive the remaining balance of his unused vacation and personal leave.
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9. Non-Competition Agreement.
A. The Employee agrees that, for one year following termination from the Bank, regardless of reason, he will not, as an individual, stockholder, officer, director, partner, agent, employee, consultant, or representative, act for or on behalf of or have any interest, direct or indirect, in any business similar to or competitive with the Bank’s business within a 25-mile radius of the main office of the Bank exclusive of the State of Virginia or Washington, D.C.
B. The Employee agrees, during the period of employment and for one year following the termination of employment, not to solicit or sell or attempt to solicit or sell, for his own account or on behalf of any person or corporation other than the Bank, services or products that are competitive with the services or products of the Bank to any customer or client to which the Employee (or employees under her managerial control) has solicited or sold any services or products on behalf of the Bank during any part of the two years immediately preceding the termination of his employment. This restriction shall, in the case of a multi-location customer or client, apply to the location or locations where the Employee (or employees under his managerial control) solicited or sold services or products, as well as any offices of that customer or client within a 25-mile radius of the main office of the Bank.
C. The Employee agrees, during the period of employment and for one year following termination, not to perform or render services or attempt to perform or render services, for his own account or on behalf of any person or corporation other than the Bank, for any customer or client of the Bank for which the Employee (or employees under his managerial control) has performed any services, during any part of the two years immediately preceding the termination of his employment. This restriction shall, in the case of a multi-location customer or client, apply to the location or locations where the Employee (or employees under her managerial control) performed or rendered services, as well as any offices of that customer or client within a 25-mile radius of the main office of the Bank.
D. The Employee agrees, during the period of employment and for one year following termination, not to solicit or hire, either directly or indirectly, any current employee of the Bank to work or perform services for his own account or on behalf of any person or corporation other than the Bank, or attempt to induce any employee to leave the employ of the Bank to work for the Employee or any other person, firm or corporation.
E. The Employee acknowledges that any breach of these provisions will cause irreparable harm to the Bank and entitle the Bank to injunctive or other equitable relief, as well as damages. In the event of a breach of Paragraphs A through C of this Section, the Employee shall pay to the Bank liquidated damages equal to any money received by the Employee due to violation of these Paragraphs, as well as court costs and reasonable attorneys’ fees incurred by the Bank to enforce this Agreement. In the event of a breach of Paragraph D of this Section, the Employee shall pay to the Bank liquidated damages equal to any money received by the Employee due to violation of this Paragraph or the equivalent of the most recent one year’s salary (at the company) of the hired solicited employee, whichever is greater. Additionally, the Employee agrees to pay the Bank court costs and reasonable attorneys’ fees incurred by the Bank to enforce this Agreement.
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10. Trade Secrets, Confidential Information and Intellectual Property. The Employee acknowledges that and as a result of his employment with the Bank, the Employee has, is and will be making use of, acquiring, and adding to information of a special and unique nature and value relating to the Bank’s intellectual property, trade secrets and other confidential information. In that regard, the Employee agrees to the following:
A. The Employee shall not, at any time during or following his employment with the Bank, divulge or disclose, or employ for any purpose whatsoever, any of the Bank’s trade secrets or other confidential information that have been obtained by or disclosed to the Employee as a result of the Employee’s employment by the Bank. For purposes of this Agreement, “trade secrets or other confidential information” shall mean all information which is used in the Bank’s business and which gives the Bank the opportunity to obtain advantage over its competitors who do not know or use such information, regardless of whether written or otherwise, including, but not limited to, trade secrets, business methods, business plans, financial data, customer lists and contracts, pricing plans, marketing plans or strategies, security devices, product information, billing procedures, employee lists, salaries and other personnel information, and other business arrangements. The term “trade secrets or other confidential information” is not meant to include any information which, at the time of disclosure, is generally known by the public or any competitors of the Bank. If the Employee has any questions regarding the confidential status of information, he should contact the CEO.
B. All notes, data, reference items, sketches, drawings, memoranda, records, and other materials in any way relating to any of the information referred to in the Paragraph above or to the Bank’s business shall belong exclusively to the Bank and the Employee agrees to turn over to the Bank all copies of such materials in the Employee’s possession or control (whether hard copy or electronic) at the Bank’s request or upon the termination of the Employee’s employment.
C. All intellectual property, including, but not limited to, all software (including, without limitation, computer programs, object code, source code, documentation, notes, records, work papers, and all other materials associated therewith), and all copyrights, trademarks, patents, trade secrets and other proprietary rights related thereto shall be deemed (i) the sole and exclusive property of the Bank (and/or the Bank’s clients or customers if the Bank so determines), and (ii) “trade secrets or other confidential information.” The Employee also agrees that any work prepared for the Bank or its customers or clients that are susceptible of copyright protection shall be a work-made-for-hire for the Bank. If any such work is deemed for any reason not to be a work-made-for-hire, the Employee hereby agrees to irrevocably assign to the Bank all of the Employee’s right, title and interest in and to the copyright in such work and the Employee further agrees to execute all such documents and assurances, and to take all such action, as the Bank shall request, in order to cause the rights assigned hereby fully to vest in the Bank. The Employee hereby waives all so-called “moral rights” relating to all work developed or produced by the Employee hereunder, including, without limitation, any and all rights of attribution, rights of approval, restriction or limitation of use or subsequent modifications. In furtherance of the foregoing, and not in limitation thereof, the Employee agrees to assign the Bank all of the Employee’s right, title and interest in and to any and all ideas, concepts, know-how, techniques, processes, methods, inventions, discoveries, developments, innovations and improvements conceived or made by the Employee, whether alone or with others, during the Employee’s employment with the Bank, and which either (i) involve or are reasonably related to the Bank’s business or (ii) incorporate or are based on, in whole or in part, any of the Bank’s trade secrets or other confidential information. (all of the aforesaid sometimes referred to herein as the “Inventions”). The Employee agrees to disclose all Inventions to the Bank promptly, and to provide all assistance reasonably requested by the Bank in the preservation of the Bank’s interest in the Inventions, such as by executing documents, testifying and the like, which assistance shall be provided at the Bank’s expense but without any additional compensation to the Employee. The Employee shall, at the Bank’s expense, assist the Bank or its nominee to obtain patent protection for such Inventions in any countries the Bank may elect in its sole discretion throughout the world. All Inventions shall be the property of the Bank or its nominees, whether patentable or not. The Employee hereby assigns and agrees to assign to the Bank, all of the Employee’s right title and interest in and to all patent applications, patents and reissues related to any Inventions. The Employee agrees to execute, acknowledge and deliver all documents, and to provide other assistance, at the Bank’s request and expense, during and subsequent to the Employee’s employment by the Bank, confirming the complete ownership by the Bank of any and all Inventions, enabling the Bank or its nominees to apply for and maintain patent protection (if applicable), and/or any other legal protection that may then be available for the Inventions.
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D. The Employee acknowledges that any breach of this Section will cause irreparable harm to the Bank and entitle the Bank to injunctive or other equitable relief, as well as damages. Damages shall include, but are not limited to, the Employee’s payment of the court costs and reasonable attorneys’ fees incurred by the Bank to enforce this Agreement.
E. Protected Rights. The Employee understands that nothing contained in this Agreement limits the Employee’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”). The Employee further understands that this Agreement does not limit the Employee’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. This Agreement does not limit the Employee’s right to receive an award for information provided to any Government Agencies.
11. Code Section 409A Exemption. It is the parties’ intent that to the maximum extent possible, the payments contemplated under Sections 8(A)(iii) and (vi) be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (“Code”) under the “short-term deferral” exemption as described under Treas. Reg. § 1.409A-1(b)(4) and/or the “separation pay” exemption under Treas. Reg. §1.409-1(b)(9) such that the payments shall not be deemed “deferred compensation” within the meaning of Code Section 409A. To the extent that any amount payable under this Agreement shall not fall within an exception but shall instead be “deferred compensation” subject to Code Section 409A, the following terms shall apply.
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A. Termination of Employment. Any payments due under this Agreement that are contingent upon the Employee’s “termination of employment” will not be paid unless and until the Employee incurs a “separation from service” as set forth under Code Section 409A and the regulations promulgated thereunder.
B. Restriction on Timing of Distributions. Notwithstanding any provision of this Agreement to the contrary, if the Employee is considered a Specified Employee at termination of employment under such procedures as established by the Employer in accordance with Section 409A of the Code, distributions of “deferred compensation” that are made upon termination of employment may not commence earlier than six months after the date of such termination. Therefore, in the event this Subsection (B) is applicable to the Employee, any distribution of deferred compensation that would otherwise be paid to the Employee within the first six months following the termination of employment shall be accumulated and paid to the Employee in a lump sum on the first day of the seventh month following the termination. All subsequent distributions shall be paid in the manner specified. “Specified Employee” shall mean a key employee (as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) of the Employer if any stock of the Employer is publicly traded on an established securities market or otherwise.
C. Non-Transferability. The Employee may not sell, assign, or transfer any deferred compensation or any of the benefits hereunder, and the deferred compensation shall not be subject in any manner to alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by the Employee’s creditors.
D. Change in Form or Timing of Payments. All changes in the form or timing of payments hereunder must comply with the following requirements. The changes:
i. may not accelerate the time or schedule of any payment, except as provided in Section 409A of the Code and the regulations thereunder;
ii. must be made at least 12 months prior to the termination of employment;
iii. must delay the commencement of payment for a minimum of five years from the date the first payment was originally scheduled to be made; and
iv. must take effect not less than 12 months after the election is made.
E. Compliance with Section 409A. This Agreement shall at all times be administered and the provisions of this Section 11 shall be interpreted consistent with the requirements of Section 409A of the Code and any and all regulations thereunder, including such regulations as may be promulgated after the effective date of this Agreement.
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12. Code Section 280G.
A. Notwithstanding any other provision of this Agreement or any other plan, arrangement or agreement to the contrary, if any of the payments or benefits provided or to be provided by the Bank or its affiliates to the Employee or for the Employee’s benefit pursuant to the terms of this Agreement or otherwise (“Covered Payments”) constitute parachute payments (“Parachute Payments”) within the meaning of Section 280G of the Code and would, but for this Section 12, be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes (collectively, the “Excise Tax”), then prior to making the Covered Payments, a calculation shall be made comparing (i) the Net Benefit (as defined below) to the Employee of the Covered Payments after payment of the Excise Tax to (ii) the Net Benefit payable to the Employee if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the Covered Payments be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax (that amount, the “Reduced Amount”). “Net Benefit” shall mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment and excise taxes.
B. The Covered Payments shall be reduced in a manner that maximizes the Employee’s economic position. In applying this principle, the reduction shall be made in a manner consistent with the requirements of Section 409A of the Code, and where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero.
C. Any determination required under this Section 12, including whether any payments or benefits are parachute payments, shall be made by the Bank in its sole discretion. The Employee shall provide the Bank with such information and documents as the Bank may reasonably request in order to make a determination under this Section 12. The Bank’s determination shall be final and binding on the Employee.
D. It is possible that after the determinations and selections made pursuant to this Section 12 the Employee will receive Covered Payments that are in the aggregate more than the amount provided under this Section 12 (“Overpayment”) or less than the amount provided under this Section 12 (“Underpayment”).
i. In the event that it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved that an Overpayment has been made, then the Employee shall pay any such Overpayment to the Bank together with interest at the applicable federal rate (as defined in Section 7872(f)(2)(A) of the Code) from the date of the Employee’s receipt of the Overpayment until the date of repayment.
ii. In the event that a court of competent jurisdiction determines that an Underpayment has occurred, any such Underpayment will be paid promptly by the Bank to or for the benefit of the Employee together with interest at the applicable federal rate (as defined in Section 7872(f)(2)(A) of the Code) from the date the amount would have otherwise been paid to the Employee until the payment date.
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13. Withholding. The Employer may withhold from any amounts payable hereunder such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
14. Applicable Law. This Agreement will be construed and enforced under and in accordance with the laws of the State of Maryland. The parties agree that any appropriate state court located in Prince George’s County, Maryland, will have jurisdiction of any case or controversy arising under or in connection with this Agreement and will be a proper forum in which to adjudicate such case or controversy. The parties consent to the jurisdiction of such courts.
15. Entire Agreement. This Agreement embodies the entire and final agreement of the parties on the subject matter stated in the Agreement. No amendment or modification of this Agreement will be valid or binding upon the Employer or the Employee unless made in writing and signed by both parties. All prior understandings and agreements relating to the subject matter of this Agreement are hereby expressly terminated.
16. Severability. The parties agree that each of the provisions included in this Agreement is separate, distinct and severable from the other provisions of this Agreement and that the invalidity or unenforceability of any Agreement provision will not affect the validity or enforceability of any other provision of this Agreement. Further, if any provision of this Agreement is ruled invalid or unenforceable by a court of competent jurisdiction because of a conflict between the provision and any applicable law or public policy, the provision will be redrawn to make the provision consistent with and valid and enforceable under the law or public policy.
17. No Set-off by the Employee. The existence of any claim, demand, action or cause of action by the Employee against the Employer, or any affiliate of the Employer, whether predicated upon this Agreement or otherwise, will not constitute a defense to the enforcement by the Employer of any of its rights hereunder.
18. Notice. All notices and other communications required or permitted under this Agreement will be in writing and, if mailed by prepaid first-class mail or certified mail, return receipt requested, will be deemed to have been received on the earlier of the date shown on the receipt or three business days after the postmarked date thereof. In addition, notices hereunder may be delivered by hand, facsimile transmission or overnight courier, in which event the notice will be deemed effective when delivered or transmitted. All notices and other communications under this Agreement must be given to the parties hereto at the following addresses:
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| (i) | If to the Employer, to it at: | |
| 1525 Pointer Ridge Road | ||
| Bowie, Maryland 20716 | ||
| Attn: President | ||
| (ii) | If to the Employee, to the Employee at: | |
| 1200 Corinthian Court | ||
| Bel Air, Maryland 21014 |
19. Assignment. Neither party hereto may assign or delegate this Agreement or any of its rights and obligations hereunder without the written consent of the other party hereto.
20. Waiver. A waiver by the Employer of any breach of this Agreement by the Employee will not be effective unless in writing, and no waiver will operate or be construed as a waiver of the same or another breach on a subsequent occasion.
21. Interpretation. Words importing the singular form shall include the plural and vice versa. The terms “herein,” “hereunder,” “hereby,” “hereto,” “hereof” and any similar terms refer to this Agreement. Any captions, titles or headings preceding the text of any article, section or subsection herein are solely for convenience of reference and will not constitute part of this Agreement or affect its meaning, construction or effect.
22. Rights of Third Parties. Nothing herein expressed is intended to or will be construed to confer upon or give to any person, firm or other entity, other than the parties hereto and their permitted assigns, any rights or remedies under or by reason of this Agreement.
23. Survival. The obligations of the Employee pursuant to Sections 5, 6, 7, 8 and 9 will survive the termination of the employment of the Employee hereunder for the period designated under each of those respective sections.
24. This Agreement shall extend to, and be binding upon the Employee, and upon the Bank and its successors and assigns and the term “Bank” as used herein shall include its successors and assigns whether by merger, consolidation, combination or otherwise.
[signatures appear on following page]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement to be executed as of the date first set forth above.
| WITNESS/ATTEST: | THE EMPLOYER: | ||
| OLD LINE BANK | |||
| By: | |||
| Name: | Name: | James W. Cornelsen | |
| Title: | President and Chief Executive Officer | ||
| WITNESS: | THE EMPLOYEE: | ||
| Name: | Mark A. Semanie | ||
12
Exhibit 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made as of this 7th day of May, 2018, by and between OLD LINE BANK, a Maryland-chartered trust company exercising the powers of a commercial bank (the “Bank” or “Employer”), and Elise Hubbard, a resident of the State of Maryland (the “Employee”).
WHEREAS Employee has been employed by Employer since April 17, 2006; and
WHEREAS the Employer and the Employee desire memorialize the terms of Employee’s employment herein.
NOW THEREFORE, in consideration of the premises, the benefits provided to each party hereunder and the mutual promises made herein, the adequacy and sufficiency of such consideration being hereby acknowledged by the parties, the parties agree as follows:
1. Employment. The Bank hereby employs the Employee as the Chief Financial Officer and agrees to continue to employ the Employee in that position (or in any other position approved by the Bank) during the term of this Agreement, except as otherwise provided below.
2. Term. The initial term and any extensions thereof are referred to herein as the “Term.” The initial Term of this Agreement expires on March 31, 2020. The Term of this Agreement is two years. On September 30, 2018 and on each succeeding consecutive March 31st and September 30th (each an “Anniversary Date”) while this Agreement is in effect, the Term shall be automatically extended for a period of six months unless the Employer or the Employee informs the other at least 60 days prior to such Anniversary Date of their decision to not renew.
3. Compensation. The Employee’s salary under this Agreement shall be $225,000.00 per annum, payable on a bi-weekly basis (“Base Salary”). The Employee’s Base Salary will be reviewed by the Board of Directors annually, and the Employee will be entitled to receive annually an increase in such amount, if any, as may be determined by the Board of Directors.
4. Duties.
A. During the term of this Agreement, the Employee shall serve as the Chief Financial Officer. She shall have such powers and shall perform such duties that are incident and customary to this office, and as granted and assigned to her by the Chief Executive Officer (“CEO”) and/or the Board of Directors.
B. The Employee shall devote her full time, attention, skill, and energy to the performance of her duties under this Agreement, and shall comply with all reasonable professional requests of the Bank; provided, however, that the Employee will be permitted to engage in and manage personal investments and to participate in community and charitable affairs, so long as such activities in the judgment of the Bank’s CEO do not create a conflict of interest or interfere with the performance of her duties under this Agreement. In furtherance of this commitment, the Employee shall disclose all positions she holds with other organizations and any ownership interests she has in other business entities where she may influence or control management decisions. Such disclosures shall be made at the commencement of the Employee’s employment and from time-to-time throughout her employment where her circumstances have changed to make such a disclosure appropriate.
C. The Employee shall immediately notify the Company of (i) her own illness and consequent absence from work or (ii) any intended significant change in her plans to work for the Company.
5. Vacation, Sick and Personal Leave.
A. The Employee shall be entitled to a total of 20 days of paid vacation each calendar year, which she may use in accordance with the Bank’s announced policy that is in effect from time-to-time. The Employee may take her vacation at such times that do not interfere with the performance of her duties under this Agreement.
B. The Employee shall be entitled to paid sick leave and paid personal leave as is provided in the Employer’s policies then in effect.
6. Expenses. The Bank shall reimburse the Employee for all reasonable expenses incurred in connection with her duties on behalf of the Bank, provided that the Employee shall keep and present to the Bank records and receipts relating to reimbursable expenses incurred by her. Such records and receipts shall be maintained and presented in a format, and with such regularity, as the Bank reasonably may require in order to substantiate the Bank’s right to claim income tax deductions for such expenses. For any expenditure in excess of $500.00, the Employee must obtain written approval from the CEO if she is to be reimbursed for the expense. Without limiting the generality of the foregoing, the Employee shall be entitled to reimbursement for any business-related travel, business-related entertainment and other costs and expenses reasonably incident to the performance of her duties on behalf of the Bank.
7. Fringe Benefits.
A. Insurance. The Employee shall receive health insurance, consistent with the terms set forth in the plan established by the Bank for its employees. The Bank shall also pay the premiums for Employee to receive the following insurance, consistent with the terms set forth in the plans established by the Bank for its employees: dental; life; short-term disability; and long-term disability.
B. Banking. The Bank shall not charge the Employee for use of a savings account, checking account or debit card issued by the Bank. The Employee is eligible to have her paychecks deposited directly in any account she has with the Bank or elsewhere.
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8. Termination of Employment.
A. This Agreement shall terminate prior to the expiration of its Term only upon and on the occurrence of the following:
(i) on the death of the Employee in which event all unvested stock options previously granted to the Employee shall immediately vest and the Employer shall have no further obligation to the Employee other than payment of any unpaid salary and any contractually committed obligations to provide the Employee with vested benefits pursuant to a salary continuation agreement, supplemental life insurance agreement, or other form of retirement plan (“Retirement Benefits”) in effect as of the date of death;
(ii) on the date the Employee becomes physically or mentally incapacitated to the extent she has been unable to perform her duties under this Agreement for a period of 60 consecutive days and, in order to assist the Bank in making such determination, the Employee agrees to make herself available for medical examination by one or more physicians chosen by the Bank and grants to the Bank and such physicians access to all relevant medical information, including copies of the Employee’s medical records and access to the Employee’s own physicians, in which event Employer will have no further obligation to the Employee other than payment of any unpaid salary and Retirement Benefits as of the date of disability;
(iii) on the effective date of the Employee’s voluntary resignation for Good Reason (which for purposes of this Agreement is defined as “a change in location of the Employer’s principal office that results in the Employee’s commuting distance being at least 50 miles greater than the Employee’s commuting distance on the date of this Agreement” and which shall not occur unless (a) Employee notified the Employer of such condition within 90 days of its occurrence, (b) the Employer did not remedy such condition within 30 days, and (c) Employee resigned for Good Reason within 12 months of the condition) in which event (a) the Employer, for the remaining Term, shall pay the Employee the Employee’s salary at the amount of such salary on the date of resignation, (b) all unvested stock options previously granted to the Employee shall immediately vest, and (c) the Employee shall be entitled to payment of any unpaid salary and Retirement Benefits as of the effective date of termination of the Employee’s employment pursuant to such resignation;
(iv) on the effective date of the Employee’s voluntary resignation without Good Reason in which event the Employer will have no further obligation to the Employee other than payment of any unpaid salary and Retirement Benefits as of the date of voluntary resignation;
(v) on the date the Employer terminates the Employee for “cause” as defined below in which event the Employee will have no further obligation to the Employee other than payment of any unpaid salary and Retirement Benefits as of the date of termination; or
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(vi) on the date the Employer terminates the Employee other than for cause in which event (a) the Employer, for the remaining Term, shall pay the Employee the Employee’s salary at the amount of such salary on the date of termination, (b) all unvested stock options previously granted to the Employee shall immediately vest, and (c) the Employee shall be entitled to payment of any unpaid salary and Retirement Benefits as of the effective date of termination of the Employee’s employment.
B. Termination for Cause. Notwithstanding the provisions of Section 2 above, the Employee’s employment (and all of her rights and benefits under this Agreement) shall terminate immediately after written notice upon the happening of any one or more of the following events, which constitute “cause”: (i) the Employee has breached, in any material respect, a provision of this Agreement; (ii) the Employee refuses to perform the duties of her employment under this Agreement in any material respect; (iii) the Employee has committed any act or omission materially and adversely affecting her reputation or that of the Bank or any of its affiliates or materially and adversely affecting any product, policy, program or service offered through or developed by the Bank or any of its affiliates; (iv) the Employee is convicted of or pleads guilty to a charge of any felony or of any lesser crime involving fraud or moral turpitude or directed against the Bank, its affiliates or any of their shareholders, employees, agents or contractors; (v) the Employee commits any other act which is inconsistent with the good faith fulfillment of her responsibilities as an employee of the Bank or is done with the intent to harm the Bank, its affiliates or any of their shareholders, employees, agents or contractors; (vi) the Employee violates any material statute, rule or regulation of any federal, state or local governmental authority pertaining to the marketing, sale, solicitation or offer of any product, policy or program of the Bank or its affiliates; and (vii) the Employee commits any other act or omission which an arbitrator or a court of competent jurisdiction justifies as grounds for dismissal for cause.
C. Unused Vacation, Sick and Personal Leave. The Employee shall be eligible to receive the remaining balance of her unused vacation and personal leave at the termination of her employment only if she is not terminated for “cause” as defined above and she returns all Bank property to the Bank prior to her final day of employment. Employee shall have no right to receive any unused sick leave. If the Employee fails to return any Bank property prior to her last day of employment, the Employee authorizes the Bank to deduct from her final paycheck the reasonable cost (not value) of that item. In the event that the Employee elects to terminate her employment, she must provide the Company with 60 days’ notice as provided above in order to receive the remaining balance of her unused vacation and personal leave.
9. Non-Competition Agreement.
A. The Employee agrees that, for one year following termination from the Bank, regardless of reason, she will not, as an individual, stockholder, officer, director, partner, agent, employee, consultant, or representative, act for or on behalf of or have any interest, direct or indirect, in any business similar to or competitive with the Bank’s business within a 25-mile radius of the main office of the Bank exclusive of the State of Virginia or Washington, D.C.
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B. The Employee agrees, during the period of employment and for one year following the termination of employment, not to solicit or sell or attempt to solicit or sell, for her own account or on behalf of any person or corporation other than the Bank, services or products that are competitive with the services or products of the Bank to any customer or client to which the Employee (or employees under her managerial control) has solicited or sold any services or products on behalf of the Bank during any part of the two years immediately preceding the termination of her employment. This restriction shall, in the case of a multi-location customer or client, apply to the location or locations where the Employee (or employees under her managerial control) solicited or sold services or products, as well as any offices of that customer or client within a 25-mile radius of the main office of the Bank.
C. The Employee agrees, during the period of employment and for one year following termination, not to perform or render services or attempt to perform or render services, for her own account or on behalf of any person or corporation other than the Bank, for any customer or client of the Bank for which the Employee (or employees under her managerial control) has performed any services, during any part of the two years immediately preceding the termination of her employment. This restriction shall, in the case of a multi-location customer or client, apply to the location or locations where the Employee (or employees under her managerial control) performed or rendered services, as well as any offices of that customer or client within a 25-mile radius of the main office of the Bank.
D. The Employee agrees, during the period of employment and for one year following termination, not to solicit or hire, either directly or indirectly, any current employee of the Bank to work or perform services for her own account or on behalf of any person or corporation other than the Bank, or attempt to induce any employee to leave the employ of the Bank to work for the Employee or any other person, firm or corporation.
E. The Employee acknowledges that any breach of these provisions will cause irreparable harm to the Bank and entitle the Bank to injunctive or other equitable relief, as well as damages. In the event of a breach of Paragraphs A through C of this Section, the Employee shall pay to the Bank liquidated damages equal to any money received by the Employee due to violation of these Paragraphs, as well as court costs and reasonable attorneys’ fees incurred by the Bank to enforce this Agreement. In the event of a breach of Paragraph D of this Section, the Employee shall pay to the Bank liquidated damages equal to any money received by the Employee due to violation of this Paragraph or the equivalent of the most recent one year’s salary (at the company) of the hired solicited employee, whichever is greater. Additionally, the Employee agrees to pay the Bank court costs and reasonable attorneys’ fees incurred by the Bank to enforce this Agreement.
10. Trade Secrets, Confidential Information and Intellectual Property. The Employee acknowledges that and as a result of her employment with the Bank, the Employee has, is and will be making use of, acquiring, and adding to information of a special and unique nature and value relating to the Bank’s intellectual property, trade secrets and other confidential information. In that regard, the Employee agrees to the following:
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A. The Employee shall not, at any time during or following her employment with the Bank, divulge or disclose, or employ for any purpose whatsoever, any of the Bank’s trade secrets or other confidential information that have been obtained by or disclosed to the Employee as a result of the Employee’s employment by the Bank. For purposes of this Agreement, “trade secrets or other confidential information” shall mean all information which is used in the Bank’s business and which gives the Bank the opportunity to obtain advantage over its competitors who do not know or use such information, regardless of whether written or otherwise, including, but not limited to, trade secrets, business methods, business plans, financial data, customer lists and contracts, pricing plans, marketing plans or strategies, security devices, product information, billing procedures, employee lists, salaries and other personnel information, and other business arrangements. The term “trade secrets or other confidential information” is not meant to include any information which, at the time of disclosure, is generally known by the public or any competitors of the Bank. If the Employee has any questions regarding the confidential status of information, she should contact the CEO.
B. All notes, data, reference items, sketches, drawings, memoranda, records, and other materials in any way relating to any of the information referred to in the Paragraph above or to the Bank’s business shall belong exclusively to the Bank and the Employee agrees to turn over to the Bank all copies of such materials in the Employee’s possession or control (whether hard copy or electronic) at the Bank’s request or upon the termination of the Employee’s employment.
C. All intellectual property, including, but not limited to, all software (including, without limitation, computer programs, object code, source code, documentation, notes, records, work papers, and all other materials associated therewith), and all copyrights, trademarks, patents, trade secrets and other proprietary rights related thereto shall be deemed (i) the sole and exclusive property of the Bank (and/or the Bank’s clients or customers if the Bank so determines), and (ii) “trade secrets or other confidential information.” The Employee also agrees that any work prepared for the Bank or its customers or clients that are susceptible of copyright protection shall be a work-made-for-hire for the Bank. If any such work is deemed for any reason not to be a work-made-for-hire, the Employee hereby agrees to irrevocably assign to the Bank all of the Employee’s right, title and interest in and to the copyright in such work and the Employee further agrees to execute all such documents and assurances, and to take all such action, as the Bank shall request, in order to cause the rights assigned hereby fully to vest in the Bank. The Employee hereby waives all so-called “moral rights” relating to all work developed or produced by the Employee hereunder, including, without limitation, any and all rights of attribution, rights of approval, restriction or limitation of use or subsequent modifications. In furtherance of the foregoing, and not in limitation thereof, the Employee agrees to assign the Bank all of the Employee’s right, title and interest in and to any and all ideas, concepts, know-how, techniques, processes, methods, inventions, discoveries, developments, innovations and improvements conceived or made by the Employee, whether alone or with others, during the Employee’s employment with the Bank, and which either (i) involve or are reasonably related to the Bank’s business or (ii) incorporate or are based on, in whole or in part, any of the Bank’s trade secrets or other confidential information. (all of the aforesaid sometimes referred to herein as the “Inventions”). The Employee agrees to disclose all Inventions to the Bank promptly, and to provide all assistance reasonably requested by the Bank in the preservation of the Bank’s interest in the Inventions, such as by executing documents, testifying and the like, which assistance shall be provided at the Bank’s expense but without any additional compensation to the Employee. The Employee shall, at the Bank’s expense, assist the Bank or its nominee to obtain patent protection for such Inventions in any countries the Bank may elect in its sole discretion throughout the world. All Inventions shall be the property of the Bank or its nominees, whether patentable or not. The Employee hereby assigns and agrees to assign to the Bank, all of the Employee’s right title and interest in and to all patent applications, patents and reissues related to any Inventions. The Employee agrees to execute, acknowledge and deliver all documents, and to provide other assistance, at the Bank’s request and expense, during and subsequent to the Employee’s employment by the Bank, confirming the complete ownership by the Bank of any and all Inventions, enabling the Bank or its nominees to apply for and maintain patent protection (if applicable), and/or any other legal protection that may then be available for the Inventions.
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D. The Employee acknowledges that any breach of this Section will cause irreparable harm to the Bank and entitle the Bank to injunctive or other equitable relief, as well as damages. Damages shall include, but are not limited to, the Employee’s payment of the court costs and reasonable attorneys’ fees incurred by the Bank to enforce this Agreement.
E. Protected Rights. The Employee understands that nothing contained in this Agreement limits the Employee’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”). The Employee further understands that this Agreement does not limit the Employee’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. This Agreement does not limit the Employee’s right to receive an award for information provided to any Government Agencies.
11. Code Section 409A Exemption. It is the parties’ intent that to the maximum extent possible, the payments contemplated under Sections 8(A)(iii) and (vi) be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (“Code”) under the “short-term deferral” exemption as described under Treas. Reg. § 1.409A-1(b)(4) and/or the “separation pay” exemption under Treas. Reg. §1.409-1(b)(9) such that the payments shall not be deemed “deferred compensation” within the meaning of Code Section 409A. To the extent that any amount payable under this Agreement shall not fall within an exception but shall instead be “deferred compensation” subject to Code Section 409A, the following terms shall apply.
A. Termination of Employment. Any payments due under this Agreement that are contingent upon the Employee’s “termination of employment” will not be paid unless and until the Employee incurs a “separation from service” as set forth under Code Section 409A and the regulations promulgated thereunder.
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B. Restriction on Timing of Distributions. Notwithstanding any provision of this Agreement to the contrary, if the Employee is considered a Specified Employee at termination of employment under such procedures as established by the Employer in accordance with Section 409A of the Code, distributions of “deferred compensation” that are made upon termination of employment may not commence earlier than six months after the date of such termination. Therefore, in the event this Subsection (B) is applicable to the Employee, any distribution of deferred compensation that would otherwise be paid to the Employee within the first six months following the termination of employment shall be accumulated and paid to the Employee in a lump sum on the first day of the seventh month following the termination. All subsequent distributions shall be paid in the manner specified. “Specified Employee” shall mean a key employee (as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) of the Employer if any stock of the Employer is publicly traded on an established securities market or otherwise.
C. Non-Transferability. The Employee may not sell, assign, or transfer any deferred compensation or any of the benefits hereunder, and the deferred compensation shall not be subject in any manner to alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by the Employee’s creditors.
D. Change in Form or Timing of Payments. All changes in the form or timing of payments hereunder must comply with the following requirements. The changes:
i. may not accelerate the time or schedule of any payment, except as provided in Section 409A of the Code and the regulations thereunder;
ii. must be made at least 12 months prior to the termination of employment;
iii. must delay the commencement of payment for a minimum of five years from the date the first payment was originally scheduled to be made; and
iv. must take effect not less than 12 months after the election is made.
E. Compliance with Section 409A. This Agreement shall at all times be administered and the provisions of this Section 11 shall be interpreted consistent with the requirements of Section 409A of the Code and any and all regulations thereunder, including such regulations as may be promulgated after the effective date of this Agreement.
12. Code Section 280G.
A. Notwithstanding any other provision of this Agreement or any other plan, arrangement or agreement to the contrary, if any of the payments or benefits provided or to be provided by the Bank or its affiliates to the Employee or for the Employee’s benefit pursuant to the terms of this Agreement or otherwise (“Covered Payments”) constitute parachute payments (“Parachute Payments”) within the meaning of Section 280G of the Code and would, but for this Section 12, be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes (collectively, the “Excise Tax”), then prior to making the Covered Payments, a calculation shall be made comparing (i) the Net Benefit (as defined below) to the Employee of the Covered Payments after payment of the Excise Tax to (ii) the Net Benefit payable to the Employee if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the Covered Payments be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax (that amount, the “Reduced Amount”). “Net Benefit” shall mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment and excise taxes.
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B. The Covered Payments shall be reduced in a manner that maximizes the Employee’s economic position. In applying this principle, the reduction shall be made in a manner consistent with the requirements of Section 409A of the Code, and where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero.
C. Any determination required under this Section 12, including whether any payments or benefits are parachute payments, shall be made by the Bank in its sole discretion. The Employee shall provide the Bank with such information and documents as the Bank may reasonably request in order to make a determination under this Section 12. The Bank’s determination shall be final and binding on the Employee.
D. It is possible that after the determinations and selections made pursuant to this Section 12 the Employee will receive Covered Payments that are in the aggregate more than the amount provided under this Section 12 (“Overpayment”) or less than the amount provided under this Section 12 (“Underpayment”).
i. In the event that it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved that an Overpayment has been made, then the Employee shall pay any such Overpayment to the Bank together with interest at the applicable federal rate (as defined in Section 7872(f)(2)(A) of the Code) from the date of the Employee’s receipt of the Overpayment until the date of repayment.
ii. In the event that a court of competent jurisdiction determines that an Underpayment has occurred, any such Underpayment will be paid promptly by the Bank to or for the benefit of the Employee together with interest at the applicable federal rate (as defined in Section 7872(f)(2)(A) of the Code) from the date the amount would have otherwise been paid to the Employee until the payment date.
13. Withholding. The Employer may withhold from any amounts payable hereunder such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
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14. Applicable Law. This Agreement will be construed and enforced under and in accordance with the laws of the State of Maryland. The parties agree that any appropriate state court located in Prince George’s County, Maryland, will have jurisdiction of any case or controversy arising under or in connection with this Agreement and will be a proper forum in which to adjudicate such case or controversy. The parties consent to the jurisdiction of such courts.
15. Entire Agreement. This Agreement embodies the entire and final agreement of the parties on the subject matter stated in the Agreement. No amendment or modification of this Agreement will be valid or binding upon the Employer or the Employee unless made in writing and signed by both parties. All prior understandings and agreements relating to the subject matter of this Agreement are hereby expressly terminated.
16. Severability. The parties agree that each of the provisions included in this Agreement is separate, distinct and severable from the other provisions of this Agreement and that the invalidity or unenforceability of any Agreement provision will not affect the validity or enforceability of any other provision of this Agreement. Further, if any provision of this Agreement is ruled invalid or unenforceable by a court of competent jurisdiction because of a conflict between the provision and any applicable law or public policy, the provision will be redrawn to make the provision consistent with and valid and enforceable under the law or public policy.
17. No Set-off by the Employee. The existence of any claim, demand, action or cause of action by the Employee against the Employer, or any affiliate of the Employer, whether predicated upon this Agreement or otherwise, will not constitute a defense to the enforcement by the Employer of any of its rights hereunder.
18. Notice. All notices and other communications required or permitted under this Agreement will be in writing and, if mailed by prepaid first-class mail or certified mail, return receipt requested, will be deemed to have been received on the earlier of the date shown on the receipt or three business days after the postmarked date thereof. In addition, notices hereunder may be delivered by hand, facsimile transmission or overnight courier, in which event the notice will be deemed effective when delivered or transmitted. All notices and other communications under this Agreement must be given to the parties hereto at the following addresses:
| (i) | If to the Employer, to it at: | |
| 1525 Pointer Ridge Road | ||
| Bowie, Maryland 20716 | ||
| Attn: President | ||
| (ii) | If to the Employee, to the Employee at: |
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19. Assignment. Neither party hereto may assign or delegate this Agreement or any of its rights and obligations hereunder without the written consent of the other party hereto.
20. Waiver. A waiver by the Employer of any breach of this Agreement by the Employee will not be effective unless in writing, and no waiver will operate or be construed as a waiver of the same or another breach on a subsequent occasion.
21. Interpretation. Words importing the singular form shall include the plural and vice versa. The terms “herein,” “hereunder,” “hereby,” “hereto,” “hereof” and any similar terms refer to this Agreement. Any captions, titles or headings preceding the text of any article, section or subsection herein are solely for convenience of reference and will not constitute part of this Agreement or affect its meaning, construction or effect.
22. Rights of Third Parties. Nothing herein expressed is intended to or will be construed to confer upon or give to any person, firm or other entity, other than the parties hereto and their permitted assigns, any rights or remedies under or by reason of this Agreement.
23. Survival. The obligations of the Employee pursuant to Sections 5, 6, 7, 8 and 9 will survive the termination of the employment of the Employee hereunder for the period designated under each of those respective sections.
24. This Agreement shall extend to, and be binding upon the Employee, and upon the Bank and its successors and assigns and the term “Bank” as used herein shall include its successors and assigns whether by merger, consolidation, combination or otherwise.
[signatures appear on following page]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement to be executed as of the date first set forth above.
| WITNESS/ATTEST: | THE EMPLOYER: | |||
| OLD LINE BANK | ||||
| By: | ||||
| Name: | Mark A. Semanie | Name: | James W. Cornelsen | |
| Executive Vice President and | Title: | President and Chief Executive Officer | ||
| Chief Operating Officer | ||||
| WITNESS: | THE EMPLOYEE: | |||
| Name: | Elise Hubbard | |||
12
Exhibit 10.3
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made as of this 7th day of May, 2018, by and between OLD LINE BANK, a Maryland-chartered trust company exercising the powers of a commercial bank (the “Bank” or “Employer”), and Jack Welborn, a resident of the State of Maryland (the “Employee”).
WHEREAS Employee has been employed by Employer since August 1, 2005; and
WHEREAS the Employer and the Employee desire to memorialize the terms of Employee’s employment herein.
NOW THEREFORE, in consideration of the premises, the benefits provided to each party hereunder and the mutual promises made herein, the adequacy and sufficiency of such consideration being hereby acknowledged by the parties, the parties agree as follows:
1. Employment. The Bank hereby employs the Employee as the Chief Lending Officer and agrees to continue to employ the Employee in that position (or in any other position approved by the Bank) during the term of this Agreement, except as otherwise provided below.
2. Term. The initial term and any extensions thereof are referred to herein as the “Term.” The initial Term of this Agreement expires on March 31, 2020. The Term of this Agreement is two years. On September 30, 2018 and on each succeeding consecutive March 31st and September 30th (each an “Anniversary Date”) while this Agreement is in effect, the Term shall be automatically extended for a period of six months unless the Employer or the Employee informs the other at least 60 days prior to such Anniversary Date of their decision to not renew.
3. Compensation. The Employee’s salary under this Agreement shall be $250,000 per annum, payable on a bi-weekly basis (“Base Salary”). The Employee’s Base Salary will be reviewed by the Board of Directors annually, and the Employee will be entitled to receive annually an increase in such amount, if any, as may be determined by the Board of Directors.
4. Duties.
A. During the term of this Agreement, the Employee shall serve as the Chief Lending Officer. He shall have such powers and shall perform such duties that are incident and customary to this office, and as granted and assigned to him by the Chief Executive Officer (“CEO”) and/or the Board of Directors.
B. The Employee shall devote his full time, attention, skill, and energy to the performance of his duties under this Agreement, and shall comply with all reasonable professional requests of the Bank; provided, however, that the Employee will be permitted to engage in and manage personal investments and to participate in community and charitable affairs, so long as such activities in the judgment of the Bank’s CEO do not create a conflict of interest or interfere with the performance of his duties under this Agreement. In furtherance of this commitment, the Employee shall disclose all positions he holds with other organizations and any ownership interests he has in other business entities where he may influence or control management decisions. Such disclosures shall be made at the commencement of the Employee’s employment and from time-to-time throughout his employment where his circumstances have changed to make such a disclosure appropriate.
C. The Employee shall immediately notify the Company of (i) his own illness and consequent absence from work or (ii) any intended significant change in his plans to work for the Company.
5. Vacation, Sick and Personal Leave.
A. The Employee shall be entitled to a total of 20 days of paid vacation each calendar year, which he may use in accordance with the Bank’s announced policy that is in effect from time-to-time. The Employee may take his vacation at such times that do not interfere with the performance of his duties under this Agreement.
B. The Employee shall be entitled to paid sick leave and paid personal leave as is provided in the Employer’s policies then in effect.
6. Expenses. The Bank shall reimburse the Employee for all reasonable expenses incurred in connection with his duties on behalf of the Bank, provided that the Employee shall keep and present to the Bank records and receipts relating to reimbursable expenses incurred by him. Such records and receipts shall be maintained and presented in a format, and with such regularity, as the Bank reasonably may require in order to substantiate the Bank’s right to claim income tax deductions for such expenses. For any expenditure in excess of $500.00, the Employee must obtain written approval from the CEO if he is to be reimbursed for the expense. Without limiting the generality of the foregoing, the Employee shall be entitled to reimbursement for any business-related travel, business-related entertainment and other costs and expenses reasonably incident to the performance of his duties on behalf of the Bank.
7. Fringe Benefits.
A. Insurance. The Employee shall receive health insurance, consistent with the terms set forth in the plan established by the Bank for its employees. The Bank shall also pay the premiums for Employee to receive the following insurance, consistent with the terms set forth in the plans established by the Bank for its employees: dental; life; short-term disability; and long-term disability.
B. Banking. The Bank shall not charge the Employee for use of a savings account, checking account or debit card issued by the Bank. The Employee is eligible to have his paychecks deposited directly in any account he has with the Bank or elsewhere.
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8. Termination of Employment.
A. This Agreement shall terminate prior to the expiration of its Term only upon and on the occurrence of the following:
(i) on the death of the Employee in which event all unvested stock options previously granted to the Employee shall immediately vest and the Employer shall have no further obligation to the Employee other than payment of any unpaid salary and any contractually committed obligations to provide the Employee with vested benefits pursuant to a salary continuation agreement, supplemental life insurance agreement, or other form of retirement plan (“Retirement Benefits”) in effect as of the date of death;
(ii) on the date the Employee becomes physically or mentally incapacitated to the extent he has been unable to perform his duties under this Agreement for a period of 60 consecutive days and, in order to assist the Bank in making such determination, the Employee agrees to make himself available for medical examination by one or more physicians chosen by the Bank and grants to the Bank and such physicians access to all relevant medical information, including copies of the Employee’s medical records and access to the Employee’s own physicians, in which event Employer will have no further obligation to the Employee other than payment of any unpaid salary and Retirement Benefits as of the date of disability;
(iii) on the effective date of the Employee’s voluntary resignation for Good Reason (which for purposes of this Agreement is defined as “a change in location of the Employer’s principal office that results in the Employee’s commuting distance being at least 50 miles greater than the Employee’s commuting distance on the date of this Agreement” and which shall not occur unless (a) Employee notified the Employer of such condition within 90 days of its occurrence, (b) the Employer did not remedy such condition within 30 days, and (c) Employee resigned for Good Reason within 12 months of the condition) in which event (a) the Employer shall pay to the Employee a lump sum payment equal to the Employee’s salary (at the amount of such salary on the date of resignation) over the remaining Term, and the Employer shall pay such lump sum payment within ten business days of the effective date of termination of the Employee’s employment, (b) all unvested stock options previously granted to the Employee shall immediately vest, and (c) the Employee shall be entitled to payment of any unpaid salary and Retirement Benefits as of the effective date of termination of the Employee’s employment pursuant to such resignation;
(iv) on the effective date of the Employee’s voluntary resignation without Good Reason in which event the Employer will have no further obligation to the Employee other than payment of any unpaid salary and Retirement Benefits as of the date of voluntary resignation;
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(v) on the date the Employer terminates the Employee for “cause” as defined below in which event the Employee will have no further obligation to the Employee other than payment of any unpaid salary and Retirement Benefits as of the date of termination; or
(vi) on the date the Employer terminates the Employee other than for cause in which event (a) the Employer shall pay to the Employee a lump sum payment equal to the Employee’s salary (at the amount of such salary on the date of termination) over the remaining Term, and the Employer shall pay such lump sum payment within ten business days of the effective date of termination of the Employee’s employment, (b) all unvested stock options previously granted to the Employee shall immediately vest, and (c) the Employee shall be entitled to payment of any unpaid salary and Retirement Benefits as of the effective date of termination of the Employee’s employment.
B. Termination for Cause. Notwithstanding the provisions of Section 2 above, the Employee’s employment (and all of his rights and benefits under this Agreement) shall terminate immediately after written notice upon the happening of any one or more of the following events, which constitute “cause”: (i) the Employee has breached, in any material respect, a provision of this Agreement; (ii) the Employee refuses to perform the duties of his employment under this Agreement in any material respect; (iii) the Employee has committed any act or omission materially and adversely affecting his reputation or that of the Bank or any of its affiliates or materially and adversely affecting any product, policy, program or service offered through or developed by the Bank or any of its affiliates; (iv) the Employee is convicted of or pleads guilty to a charge of any felony or of any lesser crime involving fraud or moral turpitude or directed against the Bank, its affiliates or any of their shareholders, employees, agents or contractors; (v) the Employee commits any other act which is inconsistent with the good faith fulfillment of his responsibilities as an employee of the Bank or is done with the intent to harm the Bank, its affiliates or any of their shareholders, employees, agents or contractors; (vi) the Employee violates any material statute, rule or regulation of any federal, state or local governmental authority pertaining to the marketing, sale, solicitation or offer of any product, policy or program of the Bank or its affiliates; and (vii) the Employee commits any other act or omission which an arbitrator or a court of competent jurisdiction justifies as grounds for dismissal for cause.
C. Unused Vacation, Sick and Personal Leave. The Employee shall be eligible to receive the remaining balance of his unused vacation and personal leave at the termination of his employment only if he is not terminated for “cause” as defined above and he returns all Bank property to the Bank prior to his final day of employment. Employee shall have no right to receive any unused sick leave. If the Employee fails to return any Bank property prior to his last day of employment, the Employee authorizes the Bank to deduct from his final paycheck the reasonable cost (not value) of that item. In the event that the Employee elects to terminate his employment, he must provide the Company with 60 days’ notice as provided above in order to receive the remaining balance of his unused vacation and personal leave.
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9. Non-Competition Agreement.
A. The Employee agrees that, for one year following termination from the Bank, regardless of reason, he will not, as an individual, stockholder, officer, director, partner, agent, employee, consultant, or representative, act for or on behalf of or have any interest, direct or indirect, in any business similar to or competitive with the Bank’s business within a 25-mile radius of the main office of the Bank exclusive of the State of Virginia or Washington, D.C.
B. The Employee agrees, during the period of employment and for one year following the termination of employment, not to solicit or sell or attempt to solicit or sell, for his own account or on behalf of any person or corporation other than the Bank, services or products that are competitive with the services or products of the Bank to any customer or client to which the Employee (or employees under her managerial control) has solicited or sold any services or products on behalf of the Bank during any part of the two years immediately preceding the termination of his employment. This restriction shall, in the case of a multi-location customer or client, apply to the location or locations where the Employee (or employees under his managerial control) solicited or sold services or products, as well as any offices of that customer or client within a 25-mile radius of the main office of the Bank.
C. The Employee agrees, during the period of employment and for one year following termination, not to perform or render services or attempt to perform or render services, for his own account or on behalf of any person or corporation other than the Bank, for any customer or client of the Bank for which the Employee (or employees under his managerial control) has performed any services, during any part of the two years immediately preceding the termination of his employment. This restriction shall, in the case of a multi-location customer or client, apply to the location or locations where the Employee (or employees under her managerial control) performed or rendered services, as well as any offices of that customer or client within a 25-mile radius of the main office of the Bank.
D. The Employee agrees, during the period of employment and for one year following termination, not to solicit or hire, either directly or indirectly, any current employee of the Bank to work or perform services for his own account or on behalf of any person or corporation other than the Bank, or attempt to induce any employee to leave the employ of the Bank to work for the Employee or any other person, firm or corporation.
E. The Employee acknowledges that any breach of these provisions will cause irreparable harm to the Bank and entitle the Bank to injunctive or other equitable relief, as well as damages. In the event of a breach of Paragraphs A through C of this Section, the Employee shall pay to the Bank liquidated damages equal to any money received by the Employee due to violation of these Paragraphs, as well as court costs and reasonable attorneys’ fees incurred by the Bank to enforce this Agreement. In the event of a breach of Paragraph D of this Section, the Employee shall pay to the Bank liquidated damages equal to any money received by the Employee due to violation of this Paragraph or the equivalent of the most recent one year’s salary (at the company) of the hired solicited employee, whichever is greater. Additionally, the Employee agrees to pay the Bank court costs and reasonable attorneys’ fees incurred by the Bank to enforce this Agreement.
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10. Trade Secrets, Confidential Information and Intellectual Property. The Employee acknowledges that and as a result of his employment with the Bank, the Employee has, is and will be making use of, acquiring, and adding to information of a special and unique nature and value relating to the Bank’s intellectual property, trade secrets and other confidential information. In that regard, the Employee agrees to the following:
A. The Employee shall not, at any time during or following his employment with the Bank, divulge or disclose, or employ for any purpose whatsoever, any of the Bank’s trade secrets or other confidential information that have been obtained by or disclosed to the Employee as a result of the Employee’s employment by the Bank. For purposes of this Agreement, “trade secrets or other confidential information” shall mean all information which is used in the Bank’s business and which gives the Bank the opportunity to obtain advantage over its competitors who do not know or use such information, regardless of whether written or otherwise, including, but not limited to, trade secrets, business methods, business plans, financial data, customer lists and contracts, pricing plans, marketing plans or strategies, security devices, product information, billing procedures, employee lists, salaries and other personnel information, and other business arrangements. The term “trade secrets or other confidential information” is not meant to include any information which, at the time of disclosure, is generally known by the public or any competitors of the Bank. If the Employee has any questions regarding the confidential status of information, he should contact the CEO.
B. All notes, data, reference items, sketches, drawings, memoranda, records, and other materials in any way relating to any of the information referred to in the Paragraph above or to the Bank’s business shall belong exclusively to the Bank and the Employee agrees to turn over to the Bank all copies of such materials in the Employee’s possession or control (whether hard copy or electronic) at the Bank’s request or upon the termination of the Employee’s employment.
C. All intellectual property, including, but not limited to, all software (including, without limitation, computer programs, object code, source code, documentation, notes, records, work papers, and all other materials associated therewith), and all copyrights, trademarks, patents, trade secrets and other proprietary rights related thereto shall be deemed (i) the sole and exclusive property of the Bank (and/or the Bank’s clients or customers if the Bank so determines), and (ii) “trade secrets or other confidential information.” The Employee also agrees that any work prepared for the Bank or its customers or clients that are susceptible of copyright protection shall be a work-made-for-hire for the Bank. If any such work is deemed for any reason not to be a work-made-for-hire, the Employee hereby agrees to irrevocably assign to the Bank all of the Employee’s right, title and interest in and to the copyright in such work and the Employee further agrees to execute all such documents and assurances, and to take all such action, as the Bank shall request, in order to cause the rights assigned hereby fully to vest in the Bank. The Employee hereby waives all so-called “moral rights” relating to all work developed or produced by the Employee hereunder, including, without limitation, any and all rights of attribution, rights of approval, restriction or limitation of use or subsequent modifications. In furtherance of the foregoing, and not in limitation thereof, the Employee agrees to assign the Bank all of the Employee’s right, title and interest in and to any and all ideas, concepts, know-how, techniques, processes, methods, inventions, discoveries, developments, innovations and improvements conceived or made by the Employee, whether alone or with others, during the Employee’s employment with the Bank, and which either (i) involve or are reasonably related to the Bank’s business or (ii) incorporate or are based on, in whole or in part, any of the Bank’s trade secrets or other confidential information. (all of the aforesaid sometimes referred to herein as the “Inventions”). The Employee agrees to disclose all Inventions to the Bank promptly, and to provide all assistance reasonably requested by the Bank in the preservation of the Bank’s interest in the Inventions, such as by executing documents, testifying and the like, which assistance shall be provided at the Bank’s expense but without any additional compensation to the Employee. The Employee shall, at the Bank’s expense, assist the Bank or its nominee to obtain patent protection for such Inventions in any countries the Bank may elect in its sole discretion throughout the world. All Inventions shall be the property of the Bank or its nominees, whether patentable or not. The Employee hereby assigns and agrees to assign to the Bank, all of the Employee’s right title and interest in and to all patent applications, patents and reissues related to any Inventions. The Employee agrees to execute, acknowledge and deliver all documents, and to provide other assistance, at the Bank’s request and expense, during and subsequent to the Employee’s employment by the Bank, confirming the complete ownership by the Bank of any and all Inventions, enabling the Bank or its nominees to apply for and maintain patent protection (if applicable), and/or any other legal protection that may then be available for the Inventions.
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D. The Employee acknowledges that any breach of this Section will cause irreparable harm to the Bank and entitle the Bank to injunctive or other equitable relief, as well as damages. Damages shall include, but are not limited to, the Employee’s payment of the court costs and reasonable attorneys’ fees incurred by the Bank to enforce this Agreement.
E. Protected Rights. The Employee understands that nothing contained in this Agreement limits the Employee’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”). The Employee further understands that this Agreement does not limit the Employee’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. This Agreement does not limit the Employee’s right to receive an award for information provided to any Government Agencies.
11. Code Section 409A Exemption. It is the parties’ intent that to the maximum extent possible, the payments contemplated under Sections 8(A)(iii) and (vi) be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (“Code”) under the “short-term deferral” exemption as described under Treas. Reg. § 1.409A-1(b)(4) and/or the “separation pay” exemption under Treas. Reg. §1.409-1(b)(9) such that the payments shall not be deemed “deferred compensation” within the meaning of Code Section 409A. To the extent that any amount payable under this Agreement shall not fall within an exception but shall instead be “deferred compensation” subject to Code Section 409A, the following terms shall apply.
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A. Termination of Employment. Any payments due under this Agreement that are contingent upon the Employee’s “termination of employment” will not be paid unless and until the Employee incurs a “separation from service” as set forth under Code Section 409A and the regulations promulgated thereunder.
B. Restriction on Timing of Distributions. Notwithstanding any provision of this Agreement to the contrary, if the Employee is considered a Specified Employee at termination of employment under such procedures as established by the Employer in accordance with Section 409A of the Code, distributions of “deferred compensation” that are made upon termination of employment may not commence earlier than six months after the date of such termination. Therefore, in the event this Subsection (B) is applicable to the Employee, any distribution of deferred compensation that would otherwise be paid to the Employee within the first six months following the termination of employment shall be accumulated and paid to the Employee in a lump sum on the first day of the seventh month following the termination. All subsequent distributions shall be paid in the manner specified. “Specified Employee” shall mean a key employee (as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) of the Employer if any stock of the Employer is publicly traded on an established securities market or otherwise.
C. Non-Transferability. The Employee may not sell, assign, or transfer any deferred compensation or any of the benefits hereunder, and the deferred compensation shall not be subject in any manner to alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by the Employee’s creditors.
D. Change in Form or Timing of Payments. All changes in the form or timing of payments hereunder must comply with the following requirements. The changes:
i. may not accelerate the time or schedule of any payment, except as provided in Section 409A of the Code and the regulations thereunder;
ii. must be made at least 12 months prior to the termination of employment;
iii. must delay the commencement of payment for a minimum of five years from the date the first payment was originally scheduled to be made; and
iv. must take effect not less than 12 months after the election is made.
E. Compliance with Section 409A. This Agreement shall at all times be administered and the provisions of this Section 11 shall be interpreted consistent with the requirements of Section 409A of the Code and any and all regulations thereunder, including such regulations as may be promulgated after the effective date of this Agreement.
12. Code Section 280G.
A. Notwithstanding any other provision of this Agreement or any other plan, arrangement or agreement to the contrary, if any of the payments or benefits provided or to be provided by the Bank or its affiliates to the Employee or for the Employee’s benefit pursuant to the terms of this Agreement or otherwise (“Covered Payments”) constitute parachute payments (“Parachute Payments”) within the meaning of Section 280G of the Code and would, but for this Section 12, be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes (collectively, the “Excise Tax”), then prior to making the Covered Payments, a calculation shall be made comparing (i) the Net Benefit (as defined below) to the Employee of the Covered Payments after payment of the Excise Tax to (ii) the Net Benefit payable to the Employee if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the Covered Payments be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax (that amount, the “Reduced Amount”). “Net Benefit” shall mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment and excise taxes.
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B. The Covered Payments shall be reduced in a manner that maximizes the Employee’s economic position. In applying this principle, the reduction shall be made in a manner consistent with the requirements of Section 409A of the Code, and where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero.
C. Any determination required under this Section 12, including whether any payments or benefits are parachute payments, shall be made by the Bank in its sole discretion. The Employee shall provide the Bank with such information and documents as the Bank may reasonably request in order to make a determination under this Section 12. The Bank’s determination shall be final and binding on the Employee.
D. It is possible that after the determinations and selections made pursuant to this Section 12 the Employee will receive Covered Payments that are in the aggregate more than the amount provided under this Section 12 (“Overpayment”) or less than the amount provided under this Section 12 (“Underpayment”).
i. In the event that it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved that an Overpayment has been made, then the Employee shall pay any such Overpayment to the Bank together with interest at the applicable federal rate (as defined in Section 7872(f)(2)(A) of the Code) from the date of the Employee’s receipt of the Overpayment until the date of repayment.
ii. In the event that a court of competent jurisdiction determines that an Underpayment has occurred, any such Underpayment will be paid promptly by the Bank to or for the benefit of the Employee together with interest at the applicable federal rate (as defined in Section 7872(f)(2)(A) of the Code) from the date the amount would have otherwise been paid to the Employee until the payment date.
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13. Withholding. The Employer may withhold from any amounts payable hereunder such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
14. Applicable Law. This Agreement will be construed and enforced under and in accordance with the laws of the State of Maryland. The parties agree that any appropriate state court located in Prince George’s County, Maryland, will have jurisdiction of any case or controversy arising under or in connection with this Agreement and will be a proper forum in which to adjudicate such case or controversy. The parties consent to the jurisdiction of such courts.
15. Entire Agreement. This Agreement embodies the entire and final agreement of the parties on the subject matter stated in the Agreement. No amendment or modification of this Agreement will be valid or binding upon the Employer or the Employee unless made in writing and signed by both parties. All prior understandings and agreements relating to the subject matter of this Agreement are hereby expressly terminated.
16. Severability. The parties agree that each of the provisions included in this Agreement is separate, distinct and severable from the other provisions of this Agreement and that the invalidity or unenforceability of any Agreement provision will not affect the validity or enforceability of any other provision of this Agreement. Further, if any provision of this Agreement is ruled invalid or unenforceable by a court of competent jurisdiction because of a conflict between the provision and any applicable law or public policy, the provision will be redrawn to make the provision consistent with and valid and enforceable under the law or public policy.
17. No Set-off by the Employee. The existence of any claim, demand, action or cause of action by the Employee against the Employer, or any affiliate of the Employer, whether predicated upon this Agreement or otherwise, will not constitute a defense to the enforcement by the Employer of any of its rights hereunder.
18. Notice. All notices and other communications required or permitted under this Agreement will be in writing and, if mailed by prepaid first-class mail or certified mail, return receipt requested, will be deemed to have been received on the earlier of the date shown on the receipt or three business days after the postmarked date thereof. In addition, notices hereunder may be delivered by hand, facsimile transmission or overnight courier, in which event the notice will be deemed effective when delivered or transmitted. All notices and other communications under this Agreement must be given to the parties hereto at the following addresses:
| (i) | If to the Employer, to it at: | |
| 1525 Pointer Ridge Road | ||
| Bowie, Maryland 20716 | ||
| Attn: President |
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| (ii) | If to the Employee, to the Employee at: |
19. Assignment. Neither party hereto may assign or delegate this Agreement or any of its rights and obligations hereunder without the written consent of the other party hereto.
20. Waiver. A waiver by the Employer of any breach of this Agreement by the Employee will not be effective unless in writing, and no waiver will operate or be construed as a waiver of the same or another breach on a subsequent occasion.
21. Interpretation. Words importing the singular form shall include the plural and vice versa. The terms “herein,” “hereunder,” “hereby,” “hereto,” “hereof” and any similar terms refer to this Agreement. Any captions, titles or headings preceding the text of any article, section or subsection herein are solely for convenience of reference and will not constitute part of this Agreement or affect its meaning, construction or effect.
22. Rights of Third Parties. Nothing herein expressed is intended to or will be construed to confer upon or give to any person, firm or other entity, other than the parties hereto and their permitted assigns, any rights or remedies under or by reason of this Agreement.
23. Survival. The obligations of the Employee pursuant to Sections 5, 6, 7, 8 and 9 will survive the termination of the employment of the Employee hereunder for the period designated under each of those respective sections.
24. This Agreement shall extend to, and be binding upon the Employee, and upon the Bank and its successors and assigns and the term “Bank” as used herein shall include its successors and assigns whether by merger, consolidation, combination or otherwise.
[signatures appear on following page]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement to be executed as of the date first set forth above.
| WITNESS/ATTEST: | THE EMPLOYER: | |||
| OLD LINE BANK | ||||
| By: | ||||
| Name: | Mark A. Semanie | Name: | James W. Cornelsen | |
| Executive Vice President and | Title: | President and Chief Executive Officer | ||
| Chief Operating Officer | ||||
| WITNESS: | THE EMPLOYEE: | |||
| Name: | Jack Welborn | |||
12
Exhibit 10.4
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made as of this 7th day of May, 2018, by and between OLD LINE BANK, a Maryland-chartered trust company exercising the powers of a commercial bank (the “Bank” or “Employer”), and Martin John Miller, a resident of the State of Maryland (the “Employee”).
WHEREAS on February 26, 2014, the Employer and the Employee entered into an Executive Employment Agreement, as amended by the Third Amendment to Executive Employment Agreement by and between the Bank and the Employee dated as of February 23, 2017 (together, the “Original Agreement”); and
WHEREAS the Employer and the Employee desire to amend and restate the Original Agreement as provided herein.
NOW THEREFORE, in consideration of the premises, the benefits provided to each party hereunder and the mutual promises made herein, the adequacy and sufficiency of such consideration being hereby acknowledged by the parties, the parties agree as follows:
1. Employment. The Bank hereby employs the Employee as an Executive Vice President and agrees to continue to employ the Employee in that position (or in any other position approved by the Bank) during the term of this Agreement, except as otherwise provided below.
2. Term. The initial term and any extensions thereof are referred to herein as the “Term.” The initial Term of this Agreement expires on March 31, 2020. The Term of this Agreement is two years. On September 30, 2018 and on each succeeding consecutive March 31st and September 30th (each an “Anniversary Date”) while this Agreement is in effect, the Term shall be automatically extended for a period of six months unless the Employer or the Employee informs the other at least 60 days prior to such Anniversary Date of their decision to not renew.
3. Compensation. The Employee’s salary under this Agreement shall be $255,000.00 per annum, payable on a bi-weekly basis (“Base Salary”). The Employee’s Base Salary will be reviewed by the Board of Directors annually, and the Employee will be entitled to receive annually an increase in such amount, if any, as may be determined by the Board of Directors.
4. Duties.
A. During the term of this Agreement, the Employee shall serve as an Executive Vice President. He shall have such powers and shall perform such duties that are incident and customary to this office, and as granted and assigned to him by the Chief Executive Officer (“CEO”) and/or the Board of Directors.
B. The Employee shall devote his full time, attention, skill, and energy to the performance of his duties under this Agreement, and shall comply with all reasonable professional requests of the Bank; provided, however, that the Employee will be permitted to engage in and manage personal investments and to participate in community and charitable affairs, so long as such activities in the judgment of the Bank’s CEO do not create a conflict of interest or interfere with the performance of his duties under this Agreement. In furtherance of this commitment, the Employee shall disclose all positions he holds with other organizations and any ownership interests he has in other business entities where he may influence or control management decisions. Such disclosures shall be made at the commencement of the Employee’s employment and from time-to-time throughout his employment where his circumstances have changed to make such a disclosure appropriate.
C. The Employee shall immediately notify the Company of (i) his own illness and consequent absence from work or (ii) any intended significant change in his plans to work for the Company.
5. Vacation, Sick and Personal Leave.
A. The Employee shall be entitled to a total of 20 days of paid vacation each calendar year, which he may use in accordance with the Bank’s announced policy that is in effect from time-to-time. The Employee may take his vacation at such times that do not interfere with the performance of his duties under this Agreement.
B. The Employee shall be entitled to paid sick leave and paid personal leave as is provided in the Employer’s policies then in effect.
6. Expenses. The Bank shall reimburse the Employee for all reasonable expenses incurred in connection with his duties on behalf of the Bank, provided that the Employee shall keep and present to the Bank records and receipts relating to reimbursable expenses incurred by him. Such records and receipts shall be maintained and presented in a format, and with such regularity, as the Bank reasonably may require in order to substantiate the Bank’s right to claim income tax deductions for such expenses. For any expenditure in excess of $500.00, the Employee must obtain written approval from the CEO if he is to be reimbursed for the expense. Without limiting the generality of the foregoing, the Employee shall be entitled to reimbursement for any business-related travel, business-related entertainment and other costs and expenses reasonably incident to the performance of his duties on behalf of the Bank.
7. Fringe Benefits.
A. Insurance. The Employee shall receive health insurance, consistent with the terms set forth in the plan established by the Bank for its employees. The Bank shall also pay the premiums for Employee to receive the following insurance, consistent with the terms set forth in the plans established by the Bank for its employees: dental; life; short-term disability; and long-term disability.
B. Banking. The Bank shall not charge the Employee for use of a savings account, checking account or debit card issued by the Bank. The Employee is eligible to have his paychecks deposited directly in any account he has with the Bank or elsewhere.
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8. Termination of Employment.
A. This Agreement shall terminate prior to the expiration of its Term only upon and on the occurrence of the following:
(i) on the death of the Employee in which event all unvested stock options previously granted to the Employee shall immediately vest and the Employer shall have no further obligation to the Employee other than payment of any unpaid salary and any contractually committed obligations to provide the Employee with vested benefits pursuant to a salary continuation agreement, supplemental life insurance agreement, or other form of retirement plan (“Retirement Benefits”) in effect as of the date of death;
(ii) on the date the Employee becomes physically or mentally incapacitated to the extent he has been unable to perform his duties under this Agreement for a period of 60 consecutive days and, in order to assist the Bank in making such determination, the Employee agrees to make himself available for medical examination by one or more physicians chosen by the Bank and grants to the Bank and such physicians access to all relevant medical information, including copies of the Employee’s medical records and access to the Employee’s own physicians, in which event Employer will have no further obligation to the Employee other than payment of any unpaid salary and Retirement Benefits as of the date of disability;
(iii) on the effective date of the Employee’s voluntary resignation for Good Reason (which for purposes of this Agreement is defined as “a change in location of the Employer’s principal office that results in the Employee’s commuting distance being at least 50 miles greater than the Employee’s commuting distance on the date of this Agreement” and which shall not occur unless (a) Employee notified the Employer of such condition within 90 days of its occurrence, (b) the Employer did not remedy such condition within 30 days, and (c) Employee resigned for Good Reason within 12 months of the condition) in which event (a) the Employer shall pay to the Employee a lump sum payment equal to the Employee’s salary (at the amount of such salary on the date of resignation) over the remaining Term, and the Employer shall pay such lump sum payment within ten business days of the effective date of termination of the Employee’s employment, (b) all unvested stock options previously granted to the Employee shall immediately vest, and (c) the Employee shall be entitled to payment of any unpaid salary and Retirement Benefits as of the effective date of termination of the Employee’s employment pursuant to such resignation;
(iv) on the effective date of the Employee’s voluntary resignation without Good Reason in which event the Employer will have no further obligation to the Employee other than payment of any unpaid salary and Retirement Benefits as of the date of voluntary resignation;
(v) on the date the Employer terminates the Employee for “cause” as defined below in which event the Employee will have no further obligation to the Employee other than payment of any unpaid salary and Retirement Benefits as of the date of termination; or
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(vi) on the date the Employer terminates the Employee other than for cause in which event (a) the Employer shall pay to the Employee a lump sum payment equal to the Employee’s salary (at the amount of such salary on the date of termination) over the remaining Term, and the Employer shall pay such lump sum payment within ten business days of the effective date of termination of the Employee’s employment, (b) all unvested stock options previously granted to the Employee shall immediately vest, and (c) the Employee shall be entitled to payment of any unpaid salary and Retirement Benefits as of the effective date of termination of the Employee’s employment.
B. Termination for Cause. Notwithstanding the provisions of Section 2 above, the Employee’s employment (and all of his rights and benefits under this Agreement) shall terminate immediately after written notice upon the happening of any one or more of the following events, which constitute “cause”: (i) the Employee has breached, in any material respect, a provision of this Agreement; (ii) the Employee refuses to perform the duties of his employment under this Agreement in any material respect; (iii) the Employee has committed any act or omission materially and adversely affecting his reputation or that of the Bank or any of its affiliates or materially and adversely affecting any product, policy, program or service offered through or developed by the Bank or any of its affiliates; (iv) the Employee is convicted of or pleads guilty to a charge of any felony or of any lesser crime involving fraud or moral turpitude or directed against the Bank, its affiliates or any of their shareholders, employees, agents or contractors; (v) the Employee commits any other act which is inconsistent with the good faith fulfillment of his responsibilities as an employee of the Bank or is done with the intent to harm the Bank, its affiliates or any of their shareholders, employees, agents or contractors; (vi) the Employee violates any material statute, rule or regulation of any federal, state or local governmental authority pertaining to the marketing, sale, solicitation or offer of any product, policy or program of the Bank or its affiliates; and (vii) the Employee commits any other act or omission which an arbitrator or a court of competent jurisdiction justifies as grounds for dismissal for cause.
C. Unused Vacation, Sick and Personal Leave. The Employee shall be eligible to receive the remaining balance of his unused vacation and personal leave at the termination of his employment only if he is not terminated for “cause” as defined above and he returns all Bank property to the Bank prior to his final day of employment. Employee shall have no right to receive any unused sick leave. If the Employee fails to return any Bank property prior to his last day of employment, the Employee authorizes the Bank to deduct from his final paycheck the reasonable cost (not value) of that item. In the event that the Employee elects to terminate his employment, he must provide the Company with 60 days’ notice as provided above in order to receive the remaining balance of his unused vacation and personal leave.
9. Non-Competition Agreement.
A. The Employee agrees that, for one year following termination from the Bank, regardless of reason, he will not, as an individual, stockholder, officer, director, partner, agent, employee, consultant, or representative, act for or on behalf of or have any interest, direct or indirect, in any business similar to or competitive with the Bank’s business within a 25-mile radius of the main office of the Bank exclusive of the State of Virginia or Washington, D.C.
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B. The Employee agrees, during the period of employment and for one year following the termination of employment, not to solicit or sell or attempt to solicit or sell, for his own account or on behalf of any person or corporation other than the Bank, services or products that are competitive with the services or products of the Bank to any customer or client to which the Employee (or employees under her managerial control) has solicited or sold any services or products on behalf of the Bank during any part of the two years immediately preceding the termination of his employment. This restriction shall, in the case of a multi-location customer or client, apply to the location or locations where the Employee (or employees under his managerial control) solicited or sold services or products, as well as any offices of that customer or client within a 25-mile radius of the main office of the Bank.
C. The Employee agrees, during the period of employment and for one year following termination, not to perform or render services or attempt to perform or render services, for his own account or on behalf of any person or corporation other than the Bank, for any customer or client of the Bank for which the Employee (or employees under his managerial control) has performed any services, during any part of the two years immediately preceding the termination of his employment. This restriction shall, in the case of a multi-location customer or client, apply to the location or locations where the Employee (or employees under her managerial control) performed or rendered services, as well as any offices of that customer or client within a 25-mile radius of the main office of the Bank.
D. The Employee agrees, during the period of employment and for one year following termination, not to solicit or hire, either directly or indirectly, any current employee of the Bank to work or perform services for his own account or on behalf of any person or corporation other than the Bank, or attempt to induce any employee to leave the employ of the Bank to work for the Employee or any other person, firm or corporation.
E. The Employee acknowledges that any breach of these provisions will cause irreparable harm to the Bank and entitle the Bank to injunctive or other equitable relief, as well as damages. In the event of a breach of Paragraphs A through C of this Section, the Employee shall pay to the Bank liquidated damages equal to any money received by the Employee due to violation of these Paragraphs, as well as court costs and reasonable attorneys’ fees incurred by the Bank to enforce this Agreement. In the event of a breach of Paragraph D of this Section, the Employee shall pay to the Bank liquidated damages equal to any money received by the Employee due to violation of this Paragraph or the equivalent of the most recent one year’s salary (at the company) of the hired solicited employee, whichever is greater. Additionally, the Employee agrees to pay the Bank court costs and reasonable attorneys’ fees incurred by the Bank to enforce this Agreement.
10. Trade Secrets, Confidential Information and Intellectual Property. The Employee acknowledges that and as a result of his employment with the Bank, the Employee has, is and will be making use of, acquiring, and adding to information of a special and unique nature and value relating to the Bank’s intellectual property, trade secrets and other confidential information. In that regard, the Employee agrees to the following:
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A. The Employee shall not, at any time during or following his employment with the Bank, divulge or disclose, or employ for any purpose whatsoever, any of the Bank’s trade secrets or other confidential information that have been obtained by or disclosed to the Employee as a result of the Employee’s employment by the Bank. For purposes of this Agreement, “trade secrets or other confidential information” shall mean all information which is used in the Bank’s business and which gives the Bank the opportunity to obtain advantage over its competitors who do not know or use such information, regardless of whether written or otherwise, including, but not limited to, trade secrets, business methods, business plans, financial data, customer lists and contracts, pricing plans, marketing plans or strategies, security devices, product information, billing procedures, employee lists, salaries and other personnel information, and other business arrangements. The term “trade secrets or other confidential information” is not meant to include any information which, at the time of disclosure, is generally known by the public or any competitors of the Bank. If the Employee has any questions regarding the confidential status of information, he should contact the CEO.
B. All notes, data, reference items, sketches, drawings, memoranda, records, and other materials in any way relating to any of the information referred to in the Paragraph above or to the Bank’s business shall belong exclusively to the Bank and the Employee agrees to turn over to the Bank all copies of such materials in the Employee’s possession or control (whether hard copy or electronic) at the Bank’s request or upon the termination of the Employee’s employment.
C. All intellectual property, including, but not limited to, all software (including, without limitation, computer programs, object code, source code, documentation, notes, records, work papers, and all other materials associated therewith), and all copyrights, trademarks, patents, trade secrets and other proprietary rights related thereto shall be deemed (i) the sole and exclusive property of the Bank (and/or the Bank’s clients or customers if the Bank so determines), and (ii) “trade secrets or other confidential information.” The Employee also agrees that any work prepared for the Bank or its customers or clients that are susceptible of copyright protection shall be a work-made-for-hire for the Bank. If any such work is deemed for any reason not to be a work-made-for-hire, the Employee hereby agrees to irrevocably assign to the Bank all of the Employee’s right, title and interest in and to the copyright in such work and the Employee further agrees to execute all such documents and assurances, and to take all such action, as the Bank shall request, in order to cause the rights assigned hereby fully to vest in the Bank. The Employee hereby waives all so-called “moral rights” relating to all work developed or produced by the Employee hereunder, including, without limitation, any and all rights of attribution, rights of approval, restriction or limitation of use or subsequent modifications. In furtherance of the foregoing, and not in limitation thereof, the Employee agrees to assign the Bank all of the Employee’s right, title and interest in and to any and all ideas, concepts, know-how, techniques, processes, methods, inventions, discoveries, developments, innovations and improvements conceived or made by the Employee, whether alone or with others, during the Employee’s employment with the Bank, and which either (i) involve or are reasonably related to the Bank’s business or (ii) incorporate or are based on, in whole or in part, any of the Bank’s trade secrets or other confidential information. (all of the aforesaid sometimes referred to herein as the “Inventions”). The Employee agrees to disclose all Inventions to the Bank promptly, and to provide all assistance reasonably requested by the Bank in the preservation of the Bank’s interest in the Inventions, such as by executing documents, testifying and the like, which assistance shall be provided at the Bank’s expense but without any additional compensation to the Employee. The Employee shall, at the Bank’s expense, assist the Bank or its nominee to obtain patent protection for such Inventions in any countries the Bank may elect in its sole discretion throughout the world. All Inventions shall be the property of the Bank or its nominees, whether patentable or not. The Employee hereby assigns and agrees to assign to the Bank, all of the Employee’s right title and interest in and to all patent applications, patents and reissues related to any Inventions. The Employee agrees to execute, acknowledge and deliver all documents, and to provide other assistance, at the Bank’s request and expense, during and subsequent to the Employee’s employment by the Bank, confirming the complete ownership by the Bank of any and all Inventions, enabling the Bank or its nominees to apply for and maintain patent protection (if applicable), and/or any other legal protection that may then be available for the Inventions.
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D. The Employee acknowledges that any breach of this Section will cause irreparable harm to the Bank and entitle the Bank to injunctive or other equitable relief, as well as damages. Damages shall include, but are not limited to, the Employee’s payment of the court costs and reasonable attorneys’ fees incurred by the Bank to enforce this Agreement.
E. Protected Rights. The Employee understands that nothing contained in this Agreement limits the Employee’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”). The Employee further understands that this Agreement does not limit the Employee’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. This Agreement does not limit the Employee’s right to receive an award for information provided to any Government Agencies.
11. Code Section 409A Exemption. It is the parties’ intent that to the maximum extent possible, the payments contemplated under Sections 8(A)(iii) and (vi) be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (“Code”) under the “short-term deferral” exemption as described under Treas. Reg. § 1.409A-1(b)(4) and/or the “separation pay” exemption under Treas. Reg. §1.409-1(b)(9) such that the payments shall not be deemed “deferred compensation” within the meaning of Code Section 409A. To the extent that any amount payable under this Agreement shall not fall within an exception but shall instead be “deferred compensation” subject to Code Section 409A, the following terms shall apply.
A. Termination of Employment. Any payments due under this Agreement that are contingent upon the Employee’s “termination of employment” will not be paid unless and until the Employee incurs a “separation from service” as set forth under Code Section 409A and the regulations promulgated thereunder.
B. Restriction on Timing of Distributions. Notwithstanding any provision of this Agreement to the contrary, if the Employee is considered a Specified Employee at termination of employment under such procedures as established by the Employer in accordance with Section 409A of the Code, distributions of “deferred compensation” that are made upon termination of employment may not commence earlier than six months after the date of such termination. Therefore, in the event this Subsection (B) is applicable to the Employee, any distribution of deferred compensation that would otherwise be paid to the Employee within the first six months following the termination of employment shall be accumulated and paid to the Employee in a lump sum on the first day of the seventh month following the termination. All subsequent distributions shall be paid in the manner specified. “Specified Employee” shall mean a key employee (as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) of the Employer if any stock of the Employer is publicly traded on an established securities market or otherwise.
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C. Non-Transferability. The Employee may not sell, assign, or transfer any deferred compensation or any of the benefits hereunder, and the deferred compensation shall not be subject in any manner to alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by the Employee’s creditors.
D. Change in Form or Timing of Payments. All changes in the form or timing of payments hereunder must comply with the following requirements. The changes:
i. may not accelerate the time or schedule of any payment, except as provided in Section 409A of the Code and the regulations thereunder;
ii. must be made at least 12 months prior to the termination of employment;
iii. must delay the commencement of payment for a minimum of five years from the date the first payment was originally scheduled to be made; and
iv. must take effect not less than 12 months after the election is made.
E. Compliance with Section 409A. This Agreement shall at all times be administered and the provisions of this Section 11 shall be interpreted consistent with the requirements of Section 409A of the Code and any and all regulations thereunder, including such regulations as may be promulgated after the effective date of this Agreement.
12. Code Section 280G.
A. Notwithstanding any other provision of this Agreement or any other plan, arrangement or agreement to the contrary, if any of the payments or benefits provided or to be provided by the Bank or its affiliates to the Employee or for the Employee’s benefit pursuant to the terms of this Agreement or otherwise (“Covered Payments”) constitute parachute payments (“Parachute Payments”) within the meaning of Section 280G of the Code and would, but for this Section 12, be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes (collectively, the “Excise Tax”), then prior to making the Covered Payments, a calculation shall be made comparing (i) the Net Benefit (as defined below) to the Employee of the Covered Payments after payment of the Excise Tax to (ii) the Net Benefit payable to the Employee if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the Covered Payments be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax (that amount, the “Reduced Amount”). “Net Benefit” shall mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment and excise taxes.
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B. The Covered Payments shall be reduced in a manner that maximizes the Employee’s economic position. In applying this principle, the reduction shall be made in a manner consistent with the requirements of Section 409A of the Code, and where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero.
C. Any determination required under this Section 12, including whether any payments or benefits are parachute payments, shall be made by the Bank in its sole discretion. The Employee shall provide the Bank with such information and documents as the Bank may reasonably request in order to make a determination under this Section 12. The Bank’s determination shall be final and binding on the Employee.
D. It is possible that after the determinations and selections made pursuant to this Section 12 the Employee will receive Covered Payments that are in the aggregate more than the amount provided under this Section 12 (“Overpayment”) or less than the amount provided under this Section 12 (“Underpayment”).
i. In the event that it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved that an Overpayment has been made, then the Employee shall pay any such Overpayment to the Bank together with interest at the applicable federal rate (as defined in Section 7872(f)(2)(A) of the Code) from the date of the Employee’s receipt of the Overpayment until the date of repayment.
ii. In the event that a court of competent jurisdiction determines that an Underpayment has occurred, any such Underpayment will be paid promptly by the Bank to or for the benefit of the Employee together with interest at the applicable federal rate (as defined in Section 7872(f)(2)(A) of the Code) from the date the amount would have otherwise been paid to the Employee until the payment date.
13. Withholding. The Employer may withhold from any amounts payable hereunder such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
14. Applicable Law. This Agreement will be construed and enforced under and in accordance with the laws of the State of Maryland. The parties agree that any appropriate state court located in Prince George’s County, Maryland, will have jurisdiction of any case or controversy arising under or in connection with this Agreement and will be a proper forum in which to adjudicate such case or controversy. The parties consent to the jurisdiction of such courts.
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15. Entire Agreement. This Agreement embodies the entire and final agreement of the parties on the subject matter stated in the Agreement. No amendment or modification of this Agreement will be valid or binding upon the Employer or the Employee unless made in writing and signed by both parties. All prior understandings and agreements relating to the subject matter of this Agreement are hereby expressly terminated.
16. Severability. The parties agree that each of the provisions included in this Agreement is separate, distinct and severable from the other provisions of this Agreement and that the invalidity or unenforceability of any Agreement provision will not affect the validity or enforceability of any other provision of this Agreement. Further, if any provision of this Agreement is ruled invalid or unenforceable by a court of competent jurisdiction because of a conflict between the provision and any applicable law or public policy, the provision will be redrawn to make the provision consistent with and valid and enforceable under the law or public policy.
17. No Set-off by the Employee. The existence of any claim, demand, action or cause of action by the Employee against the Employer, or any affiliate of the Employer, whether predicated upon this Agreement or otherwise, will not constitute a defense to the enforcement by the Employer of any of its rights hereunder.
18. Notice. All notices and other communications required or permitted under this Agreement will be in writing and, if mailed by prepaid first-class mail or certified mail, return receipt requested, will be deemed to have been received on the earlier of the date shown on the receipt or three business days after the postmarked date thereof. In addition, notices hereunder may be delivered by hand, facsimile transmission or overnight courier, in which event the notice will be deemed effective when delivered or transmitted. All notices and other communications under this Agreement must be given to the parties hereto at the following addresses:
| (i) | If to the Employer, to it at: | |
| 1525 Pointer Ridge Road | ||
| Bowie, Maryland 20716 | ||
| Attn: President | ||
| (ii) | If to the Employee, to the Employee at: | |
| 2008 Haverford Drive | ||
| Crownsville, Maryland 21032 |
19. Assignment. Neither party hereto may assign or delegate this Agreement or any of its rights and obligations hereunder without the written consent of the other party hereto.
20. Waiver. A waiver by the Employer of any breach of this Agreement by the Employee will not be effective unless in writing, and no waiver will operate or be construed as a waiver of the same or another breach on a subsequent occasion.
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21. Interpretation. Words importing the singular form shall include the plural and vice versa. The terms “herein,” “hereunder,” “hereby,” “hereto,” “hereof” and any similar terms refer to this Agreement. Any captions, titles or headings preceding the text of any article, section or subsection herein are solely for convenience of reference and will not constitute part of this Agreement or affect its meaning, construction or effect.
22. Rights of Third Parties. Nothing herein expressed is intended to or will be construed to confer upon or give to any person, firm or other entity, other than the parties hereto and their permitted assigns, any rights or remedies under or by reason of this Agreement.
23. Survival. The obligations of the Employee pursuant to Sections 5, 6, 7, 8 and 9 will survive the termination of the employment of the Employee hereunder for the period designated under each of those respective sections.
24. This Agreement shall extend to, and be binding upon the Employee, and upon the Bank and its successors and assigns and the term “Bank” as used herein shall include its successors and assigns whether by merger, consolidation, combination or otherwise.
[signatures appear on following page]
| 11 |
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement to be executed as of the date first set forth above.
| WITNESS/ATTEST: | THE EMPLOYER: | |||
| OLD LINE BANK | ||||
| By: | ||||
| Name: | Mark A. Semanie | Name: | James W. Cornelsen | |
| Executive Vice President and | Title: | President and Chief Executive Officer | ||
| Chief Operating Officer | ||||
| WITNESS: | THE EMPLOYEE: | |||
| Name: | Martin John Miller | |||
12
Exhibit 31.1
I, James W. Cornelsen, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Old Line Bancshares, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: May 9, 2018 | By: | /s/ James W. Cornelsen | |
| Name: | James W. Cornelsen | ||
| Title: | President and Chief Executive Officer | ||
Exhibit 31.2
I, Elise M. Hubbard, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Old Line Bancshares, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: May 9, 2018 | By: | /s/ Elise M. Hubbard | |
| Name: | Elise M. Hubbard | ||
| Title: | Executive Vice President and Chief Financial Officer | ||
Exhibit 32
CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES OXLEY ACT OF 2002
Pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002, the undersigned officers of Old Line Bancshares, Inc. (the “Company”) each certifies to the best of his or her knowledge that the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
| By: | /s/ James W. Cornelsen | ||
| James W. Cornelsen | |||
| President and Chief Executive Officer | |||
| May 9, 2018 | |||
| By: | /s/ Elise M. Hubbard | ||
| Elise M. Hubbard | |||
| Executive Vice President and Chief Financial Officer | |||
| May 9, 2018 | |||
This certification is made solely for the purpose of 18 U.S.C. Section 1350, and is not being filed as part of the Form 10-Q or as a separate disclosure document, and may not be disclosed, distributed or used by any person for any reason other than as specifically required by law.
Document And Entity Information - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Apr. 30, 2018 |
|
| Document Information [Line Items] | ||
| Entity Registrant Name | OLD LINE BANCSHARES INC | |
| Entity Central Index Key | 0001253317 | |
| Trading Symbol | olbk | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Accelerated Filer | |
| Entity Current Reporting Status | Yes | |
| Entity Voluntary Filers | No | |
| Entity Well-known Seasoned Issuer | No | |
| Entity Common Stock, Shares Outstanding (in shares) | 16,974,783 | |
| Document Type | 10-Q | |
| Document Period End Date | Mar. 31, 2018 | |
| Document Fiscal Year Focus | 2018 | |
| Document Fiscal Period Focus | Q1 | |
| Amendment Flag | false |
Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Loans held for sale, fair value | $ 4,073,887 | $ 4,557,722 |
| Loans held for investment, allowance for loan losses | $ 6,257,519 | $ 5,920,586 |
| Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
| Common stock, shares authorized (in shares) | 25,000,000 | 25,000,000 |
| Common stock, shares issued (in shares) | 12,566,696 | 12,508,332 |
| Common stock, shares outstanding (in shares) | 12,566,696 | 12,508,332 |
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
| Net income | $ 6,065,182 | $ 3,973,782 |
| Other comprehensive income: | ||
| Unrealized gain/(loss) on securities available for sale, net of taxes of ($1,216,115), and $715,030, respectively | (3,203,310) | 1,097,727 |
| Reclassification adjustment for realized gain on securities available for sale included in net income, net of taxes of $0 and $6,184, respectively | (9,493) | |
| Other comprehensive income (loss) | (3,203,310) | 1,088,234 |
| Comprehensive income | $ 2,861,872 | $ 5,062,016 |
Consolidated Statements of Comprehensive Income (Unaudited) (Parentheticals) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
| Unrealized gain (loss) on securities available for sale, taxes | $ (1,216,115) | $ 715,030 |
| Reclassification adjustment for realized gain on securities available for sale included in net income, taxes | $ 0 | $ 6,184 |
Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - 3 months ended Mar. 31, 2018 - USD ($) |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Retained Earnings [Member] |
AOCI Attributable to Parent [Member] |
Total |
|---|---|---|---|---|---|
| Balance (in shares) at Dec. 31, 2017 | 12,508,332 | 12,508,332 | |||
| Balance at Dec. 31, 2017 | $ 125,083 | $ 148,882,865 | $ 61,054,487 | $ (2,335,249) | $ 207,727,186 |
| Net income attributable to Old Line Bancshares, Inc. | 6,065,182 | 6,065,182 | |||
| Other comprehensive loss, net of income tax of $1,216,115 | (3,203,310) | (3,203,310) | |||
| Stock based compensation awards | 288,559 | 288,559 | |||
| Stock options exercised (in shares) | 38,921 | ||||
| Stock options exercised | $ 389 | 520,507 | 520,896 | ||
| Restricted stock issued (in shares) | 19,443 | ||||
| Restricted stock issued | $ 195 | (195) | |||
| Common stock cash dividends $0.08 per share | (1,005,723) | $ (1,005,723) | |||
| Balance (in shares) at Mar. 31, 2018 | 12,566,696 | 12,566,696 | |||
| Balance at Mar. 31, 2018 | $ 125,667 | 149,691,736 | 66,573,919 | (5,998,532) | $ 210,392,790 |
| Reclassification of stranded tax effect resulting from the Tax Cuts and Jobs Act | $ 459,973 | $ (459,973) |
Consolidated Statement of Changes in Stockholders' Equity (Unaudited) (Parentheticals) |
3 Months Ended |
|---|---|
|
Mar. 31, 2018
USD ($)
$ / shares
| |
| AOCI Attributable to Parent [Member] | |
| Other comprehensive income, tax | $ | $ 1,216,115 |
| Retained Earnings [Member] | |
| Dividends per common share (in dollars per share) | $ / shares | $ 0.08 |
Note 1 - Summary of Significant Accounting Policies |
3 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2018 | ||||
| Notes to Financial Statements | ||||
| Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block] |
Organization and Description of Business - Old Line Bancshares, Inc. (“Old Line Bancshares”) was incorporated under the laws of the State of Maryland on April 11, 2003 to serve as the holding company of Old Line Bank. The primary business of Old Line Bancshares is to own all of the capital stock of Old Line Bank. We provide a full range of banking services to customers located in Anne Arundel, Baltimore, Calvert, Carroll, Charles, Frederick, Montgomery, Prince George’s, and St. Mary’s Counties in Maryland and surrounding areas.As previously announced, on September 27, 2017, Old Line Bancshares entered into an Agreement and Plan of Merger with Bay Bancorp, Inc. (“BYBK”), the parent company of Bay Bank, FSB (“Bay Bank”), pursuant to which BYBK merged with and into Old Line Bancshares (the “Merger”) on April 13, 2018. Please see Note 11 to our consolidated financial statements, “Subsequent Event,” for more information.Basis of Presentation and Consolidation The foregoing consolidated financial statements for the periods ended March 31, 2018 and 2017 are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), however, in the opinion of management we have included all adjustments necessary for a fair presentation of the results of the interim period. We derived the balances as of December 31, 2017 from audited financial statements. These statements should be read in conjunction with Old Line Bancshares’ financial statements and accompanying notes included in Old Line Bancshares’ Form 10 -K for the year ended December 31, 2017. We have made no significant changes to Old Line Bancshares’ accounting policies as disclosed in the Form 10 -K, except as described in the Recent Accounting Pronoucements section below.Use of Estimates may affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. A material estimate that is particularly susceptible to significant change in the near term relates to the determination of the allowance for loan losses.Revenue from Contracts with Customers 606, “Revenue from Contracts with Customers” (“Topic 606” ). Under Topic 606, we must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) we satisfy a performance obligation. Significant revenue has not been recognized in the current reporting period that results from performance obligations satisfied in previous periods.Our primary sources of revenue are derived from interest and dividends earned on loans, investment securities, and other financial instruments that are not within the scope of Topic 606. We have evaluated the nature of Old Line Bancshares’ contracts with customers and determined that further disaggregation of revenue from contracts with customers into more granular categories beyond what is presented in the Consolidated Statements of Income was not necessary. Old Line Bancshares generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers.Reclassifications 2017 financial presentation to conform to the 2018 presentation. These reclassifications did not change net income or stockholders’ equity.Recent Accounting Pronouncements – In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014 -09 – Revenue from Contracts with Customers , which will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principal of this ASU is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The ASU allows for either full retrospective or modified retrospective adoption. The ASU does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under U.S. GAAP. Our revenue is comprised of net interest income on financial assets and liabilities, which is explicitly excluded from the scope of the new guidance, and non-interest income. The contracts that are within scope of the guidance are primarily related to service charges on deposit accounts, cardholder and merchant income, wealth advisory services income, other service charges and fees, sales of other real estate owned, insurance commissions and miscellaneous fees. Old Line Bancshares adopted the ASU on January 1, 2018, utilizing the modified retrospective approach. Based on our overall assessment of revenue streams and review of related contracts affected by the ASU, it did not have a material impact on our consolidated financial position or consolidated results of operations as a result of the adoption of this ASU.In January 2016, FASB issued ASU No. 2016 -01 , Financial Instruments – Recognition and Measurement of Financial Assets and Liabilities, which is intended to improve the recognition and measurement of financial instruments by: requiring equity investments (other than equity method or consolidation) to be measured at fair value with changes in fair value recognized in net income; requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities; eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. This ASU is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We adopted this ASU effective January 1, 2018. With the adoption of this ASU, equity securities can no longer be classified as available for sale, and as such marketable equity securities are disclosed as a separate line item on the balance sheet with changes in the fair value of equity securities reflected in net income. During the first quarter of 2018, we began using an exit price notion when measuring the fair value of our loan portfolio, excluding loans held for sale, for disclosure purposes. The adoption of this ASU did not have a significant impact on our consolidated financial statements.In February 2016, FASB issued ASU 2016 -02 , Leases (Topic ). FASB issued this ASU to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet by lessees for those leases classified as operating leases under current U.S. GAAP and disclosing key information about leasing arrangements. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after 842 December 15, 2018. Early application of this ASU is permitted for all entities. This ASU will be effective for us in our first quarter of 2019. Old Line Bancshares is currently assessing the impact that the adoption of this standard will have on its financial condition and results of operations and will closely monitor any new developments or additional guidance to determine the potential impact the new standard will have on our consolidated financial statements.In June 2016, FASB issued ASU 2016 -13 , Financial Instruments – Credit Losses (Topic , which sets forth a “current expected credit loss” (“CECL”) model requiring Old Line Bancshares to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. For public business entities that are U.S. Securities and Exchange Commission filers, the amendments in this update are effective for fiscal years beginning after 326 ): Measurement of Credit Losses on Financial Instruments December 15, 2019, including interim periods within those fiscal years. Old Line Bancshares has constituted a committee that has the responsibility to gather loan information and consider acceptable methodologies to comply with this ASU. The committee meets periodically to discuss the latest developments and committee members keep themselves updated on such developments via webcasts, publications, and conferences. We have also evaluated and selected a third party vendor solution to assist us in the application of ASU 2016 -13. The adoption of ASU 2016 -13 is likely to result in an increase in the allowance for loan losses as a result of changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. Furthermore, ASU 2016 -13 will necessitate that we establish an allowance for expected credit losses on debt securities. Old Line Bancshares’ evaluation indicates that the provisions of ASU No. 2016 -13 will impact its consolidated financial statements, in particular the level of the reserve for loan losses. We are, however, continuing to evaluate the extent of the potential impact.In August 2016, FASB issued ASU 2016 -15 , Statement of Cash Flows (Topic ): 230 Classification of Certain Cash Receipts and Cash Payments , to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments provide guidance on the following nine specific cash flow issues: 1 ) debt prepayment or debt extinguishment costs; 2 ) settlement of zero -coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; 3 ) contingent consideration payments made after a business combination; 4 ) proceeds from the settlement of insurance claims; 5 ) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned; 6 ) life insurance policies; 7 ) distributions received from equity method investees; 8 ) beneficial interests in securitization transactions; and 9 ) separately identifiable cash flows and application of the predominance principle. The ASU is effective for all annual and interim periods beginning January 1, 2018 and is required to be applied retrospectively to all periods presented. We adopted this guidance January 1, 2018, which did not result in a change in the classification in the statement of cash flows and did not have a material impact on our consolidated financial statements or on our financial position or results of operations.In January 2017, FASB issued ASU 2017 -01, Business Combinations (Topic : Clarifying the definition of a business, which clarifies the definition of a business and assists entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under this guidance, when substantially all of the fair value of gross assets acquired is concentrated in a single asset (or group of similar assets), the assets acquired would 805 )not represent a business. In addition, in order to be considered a business, an acquisition would have to include at a minimum an input and a substantive process that together significantly contribute to the ability to create an output. The guidance also narrows the definition of outputs by more closely aligning it with how outputs are described in FASB guidance for revenue recognition. We adopted this guidance effective January 1, 2018. The adoption of this ASU did not have a material impact on our consolidated financial statements.In January 2017, FASB issued ASU 2017 -04, Simplifying the Test for Goodwill Impairment, which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under the ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Old Line Bancshares does not expect the adoption of ASU 2017 -04 to have a material impact on its consolidated financial statements.In March 2017, FASB issued ASU No. 2017 -08, Premium Amortization on Purchased Callable Debt Securities . This ASU shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. Today, entities generally amortize the premium over the contractual life of the security. The new guidance does not change the accounting for purchased callable debt securities held at a discount; the discount continues to be amortized to maturity. ASU No. 2017 -08 is effective for interim and annual reporting periods beginning after December 15, 2018; early adoption is permitted. The guidance calls for a modified retrospective transition approach under which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. We do not expect the adoption of this guidance to have a material impact on Old Line Bancshares’ consolidated financial statements.In August 2017, FASB issued ASU No. 2017 -12, Targeted Improvements to Accounting for Hedging Activities . This ASU’s objectives are to: (1 ) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities; and (2 ) reduce the complexity of and simplify the application of hedge accounting by preparers. ASU No. 2017 -12 is effective for interim and annual reporting periods beginning after December 15, 2018; early adoption is permitted. Old Line Bancshares currently does not designate any derivative financial instruments as formal hedging relationships, and therefore, does not utilize hedge accounting. However, Old Line Bancshares is currently evaluating this ASU to determine whether its provisions will enhance its ability to employ risk management strategies, while improving the transparency and understanding of those strategies for financial statement users.In February 2018, FASB issued ASU No. 2018 -02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220 ). This ASU allows an entity to elect a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act that changed our income tax rate from 35% to 21%. The amount of that reclassification should include the effect of changes of tax rate on the deferred tax amount, any related valuation allowance and other income tax effects on the items in AOCI. The ASU requires an entity to state if an election to reclassify the tax effect to retained earnings is made along with the description of other income tax effects that are reclassified from AOCI. ASU 2018 -02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years with early adoption permitted. Old Line Bancshares adopted ASU 2018 -02 in the first quarter of 2018. The change in accounting principal was accounted for as a cumulative effect adjustment to the balance sheet resulting in a reclass of $459,973 thousand from AOCI to retained earnings during the first quarter of 2018. |
Note 2 - Acquisition of DCB Bancshares, Inc. |
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| Business Combination Disclosure [Text Block] |
On July 28, 2017, Old Line Bancshares acquired DCB Bancshares, Inc. (“DCB”), the parent company of Damascus Community Bank (“Damascus”). Upon the consummation of the merger, each share of common stock of DCB outstanding immediately before the merger was converted into the right to receive 0.9269 shares of Old Line Bancshares’ common stock, provided that cash was paid in lieu of any fractional shares of Old Line Bancshares common stock. As a result, Old Line Bancshares issued 1,495,090 shares of its common stock in exchange for the shares of DCB common stock in the merger. The aggregate merger consideration was approximately $40.9 million based on the closing sales price of Old Line Bancshares’ common stock on July 28, 2017. In connection with the merger, Damascus merged with and into Old Line Bank, with Old Line Bank the surviving bank. At July 28, 2017, DCB had consolidated assets of approximately $311 million. This merger added six banking locations located in Montgomery, Frederick and Carroll Counties in Maryland.The acquired assets and assumed liabilities of DCB were measured at estimated fair value. Management made significant estimates and exercised significant judgment in accounting for the acquisition of DCB. Management judgmentally assigned risk ratings to loans based on appraisals and estimated collateral values, expected cash flows, prepayment speeds and estimated loss factors to measure fair value for loans. Management used quoted or current market prices to determine the fair value of DCB’s investment securities. The following table provides the purchase price as of the acquisition date and the identifiable assets acquired and liabilities assumed at their estimated fair values.
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Note 3 - Investment Securities |
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| Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block] |
Presented below is a summary of the amortized cost and estimated fair value of securities.
At March 31, 2018 and December 31, 2017, securities with unrealized losses segregated by length of impairment were as follows:
At March 31, 2018 and December 31, 2017, we had 116 and 56 investment securities, respectively, in an unrealized loss position for 12 months or more and 76 and 56 securities, respectively, in an unrealized loss position for less than 12 months. We consider all unrealized losses on securities as of March 31, 2018 to be temporary losses because we will redeem each security at face value at or prior to maturity. We have the ability and intent to hold these securities until recovery or maturity. As of March 31, 2018, we do not have the intent to sell any of the securities classified as available for sale and believe that it is more likely than not that we will not have to sell any such securities before a recovery of cost. In most cases, market interest rate fluctuations cause a temporary impairment in value. We expect the fair value to recover as the investments approach their maturity date or re-pricing date or if market yields for these investments decline. We do not believe that credit quality caused the impairment in any of these securities. Because we believe these impairments are temporary, we have not realized any loss in our consolidated statement of income.During the three months ended March 31, 2018, we received $6.2 million in proceeds from maturities or calls and principal pay-downs on investment securities. All the net proceeds of these transactions were used to purchase new investment securities. We received $8.3 million in proceeds from maturities or calls and principal pay-downs on investment securities and realized gains of $16 thousand from the remaining discount on one called security for the three months ended March 31, 2017. The net proceeds of these transactions and the proceeds of principal paydowns in the first quarter of 2017 were used to purchase new investment securities.Contractual maturities and pledged securities at March 31, 2018 are shown below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties. We classify mortgage-backed securities (“MBS”) based on maturity date. However, we receive payments on a monthly basis.
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Note 4 - Loans |
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| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans, Notes, Trade and Other Receivables Disclosure [Text Block] |
Major classifications of loans held for investment are as follows:
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Credit Policies and Administration We have adopted a comprehensive lending policy, which includes stringent underwriting standards for all types of loans. We have designed our underwriting standards to promote a complete banking relationship rather than a transactional relationship. In an effort to manage risk, prior to funding, the loan committee consisting of the Executive Officers and seven members of the board of directors must approve by a majority vote all credit decisions in excess of a lending officer’s lending authority.Management believes that it employs experienced lending officers, secures appropriate collateral and carefully monitors the financial condition of its borrowers and loan concentrations. In addition to the internal business processes employed in the credit administration area, Old Line Bank retains an outside independent firm to review the loan portfolio. This firm performs a detailed annual review and an interim update. We use the results of the firm’s report to validate our internal ratings and we review the commentary on specific loans and on our loan administration activities in order to improve our operations. Commercial Real Estate Loans We finance commercial real estate for our clients, for owner occupied and investment properties, hospitality and land acquisition and development. Commercial real estate loans totaled $1.2 billion and $1.1 billion at March 31, 2018 and December 31, 2017, respectively. This lending has involved loans secured by owner-occupied commercial buildings for office, storage and warehouse space, as well as non-owner occupied commercial buildings. Our underwriting criteria for commercial real estate loans include maximum loan-to-value ratios, debt coverage ratios, secondary sources of repayments, guarantor requirements, net worth requirements and quality of cash flows. Loans secured by commercial real estate may be large in size and may involve a greater degree of risk than one -to-four family residential mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties. We will generally finance owner occupied commercial real estate that does not exceed loan to value of 80% and investor real estate at a maximum loan to value of 75%. Commercial real estate lending entails significant risks. Risks inherent in managing our commercial real estate portfolio relate to sudden or gradual drops in property values as well as changes in the economic climate that may detrimentally impact the borrower’s ability to repay. We monitor the financial condition and operating performance of the borrower through a review of annual tax returns and updated financial statements. In addition, we meet with the borrower and/or perform site visits as required.At March 31 2018, we had approximately $171.1 million of commercial real estate loans outstanding to the hospitality industry. An individual review of these loans indicates that they generally have a low loan to value, more than acceptable existing or projected cash flow, are to experienced operators and are generally dispersed throughout the region.Residential Real Estate Loans We offer a variety of consumer oriented residential real estate loans including home equity lines of credit, home improvement loans and first or second mortgages on owner occupied and investment properties. Our residential loan portfolio amounted to $315.6 million and $310.7 million at March 31, 2018 and December 31, 2017, respectively. Although most of these loans are in our market area, the diversity of the individual loans in the portfolio reduces our potential risk. Usually, we secure our residential real estate loans with a security interest in the borrower’s primary or secondary residence with a loan to value not exceeding 85%. Our initial underwriting includes an analysis of the borrower’s debt/income ratio which generally may not exceed 43%, collateral value, length of employment and prior credit history. A credit score of 640 is required. We do not originate any subprime residential real estate loans.This segment of our portfolio also consists of funds advanced for construction of custom single family residences homes (where the home buyer is the borrower) and financing to builders for the construction of pre-sold homes and multi-family housing. These loans generally have short durations, meaning maturities typically of twelve months or less. Old Line Bank limits its construction lending risk through adherence to established underwriting procedures. These loans generally have short durations, meaning maturities typically of twelve months or less. Residential houses, multi-family dwellings and commercial buildings under construction and the underlying land for which the loan was obtained secure the construction loans. The vast majority of these loans are concentrated in our market area.Construction lending also entails significant risk. These risks generally involve larger loan balances concentrated with single borrowers with funds advanced upon the security of the land or the project under construction. An appraisal of the property estimates the value of the project “as is and as if” completed. An appraisal of the property estimates the value of the project prior to completion of construction. Thus, initial funds are advanced based on the current value of the property with the remaining construction funds advanced under a budget sufficient to successfully complete the project within the “as completed” loan to value. To further mitigate the risks, we generally limit loan amounts to 80% or less of appraised values and obtain first lien positions on the property.We generally only offer real estate construction financing only to experienced builders, commercial entities or individuals who have demonstrated the ability to obtain a permanent loan “take-out” (conversion to a permanent mortgage upon completion of the project). We also perform a complete analysis of the borrower and the project under construction. This analysis includes a review of the cost to construct, the borrower’s ability to obtain a permanent “take-out” the cash flow available to support the debt payments and construction costs in excess of loan proceeds, and the value of the collateral. During construction, we advance funds on these loans on a percentage of completion basis. We inspect each project as needed prior to advancing funds during the term of the construction loan. We may provide permanent financing on the same projects for which we have provided the construction financing.We also offer fixed rate home improvement loans. Our home equity and home improvement loan portfolio gives us a diverse client base. Although most of these loans are in our market area, the diversity of the individual loans in the portfolio reduces our potential risk. Usually, we secure our home equity loans and lines of credit with a security interest in the borrower’s primary or secondary residence. Under our loan approval policy, all residential real estate loans approved must comply with federal regulations. Generally, we will make residential mortgage loans in amounts up to the limits established by Fannie Mae and Freddie Mac for secondary market resale purposes. Currently this amount for single-family residential loans currently varies from $453,100 up to a maximum of $679,650 for certain high-cost designated areas. We also make residential mortgage loans up to limits established by the Federal Housing Administration, which currently is $679,650. The Washington, D.C. and Baltimore areas are both considered high-cost designated areas. We will, however, make loans in excess of these amounts if we believe that we can sell the loans in the secondary market or that the loans should be held in our portfolio. For loans we originate for sale in the secondary market, we typically require a credit score or 620 or higher, with some exceptions provided we receive an approval recommendation from FannieMae, FreddieMac or the Federal Housing Administration’s automated underwriting approval system. Loans sold in the secondary market are sold to investors on a servicing released basis and recorded as loans as held for sale. The premium is recorded in income on marketable loans in non-interest income, net of commissions paid to the loan officers.Commercial and Industrial Lending Our commercial and industrial lending consists of lines of credit, revolving credit facilities, accounts receivable financing, term loans, equipment loans, Small Business Administration loans, standby letters of credit and unsecured loans. We originate commercial loans for any business purpose including the financing of leasehold improvements and equipment, the carrying of accounts receivable, general working capital, and acquisition activities. We have a diverse client base and we do not have a concentration of these types of loans in any specific industry segment. We generally secure commercial business loans with accounts receivable, equipment, deeds of trust and other collateral such as marketable securities, cash value of life insurance and time deposits at Old Line Bank.Commercial business loans have a higher degree of risk than residential mortgage loans because the availability of funds for repayment generally depends on the success of the business. They may also involve high average balances, increased difficulty monitoring and a high risk of default. To help manage this risk, we typically limit these loans to proven businesses and we generally obtain appropriate collateral and personal guarantees from the borrower’s principal owners and monitor the financial condition of the business. For loans in excess of $250,000, monitoring generally includes a review of the borrower’s annual tax returns and updated financial statements.Consumer Installment Lending We offer various types of secured and unsecured consumer loans. We make consumer loans for personal, family or household purposes as a convenience to our customer base. Consumer loans, however, are not a focus of our lending activities. The underwriting standards for consumer loans include a determination of the applicant’s payment history on other debts and an assessment of his or her ability to meet existing obligations and payments on the proposed loan. As a general guideline, a consumer’s total debt service should not exceed 40% of his or her gross income.Our consumer loan portfolio, includes indirect loans, which consists primarily of auto and RV loans. These loans are financed through dealers and the dealers receive a percentage of the finance charge, which varies depending on the terms of each loan. We use the same underwriting standards in originating these indirect loans as we do for consumer loans generally. Consumer loans may present greater credit risk than residential mortgage loans because many consumer loans are unsecured or rapidly depreciating assets secure these loans. Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance because of the greater likelihood of damage, loss or depreciation. Consumer loan collections depend on the borrower’s continuing financial stability. If a borrower suffers personal financial difficulties, the consumer may not repay the loan. Also, various federal and state laws, including bankruptcy and insolvency laws, may limit the amount we can recover on such loans.Concentrations of Credit Most of our lending activity occurs within the state of Maryland within the suburban Washington, D.C.and Baltimore market areas in Anne Arundel, Baltimore, Calvert, Carroll, Charles, Frederick, Montgomery, Prince George’s and St. Mary’s Counties. The majority of our loan portfolio consists of commercial real estate loans and residential real estate loans. Non-Accrual and Past Due Loans We consider loans past due if the borrower has not paid the required principal and interest payments when due under the original or modified terms of the promissory note and place a loan on non-accrual status when the payment of principal or interest has become 90 days past due. When we classify a loan as non-accrual, we no longer accrue interest on such loan and we reverse any interest previously accrued but not collected. We will generally restore a non-accrual loan to accrual status when the borrower brings delinquent principal and interest payments current and we expect to collect future monthly principal and interest payments. We recognize interest on non-accrual legacy loans only when received. We originally recorded purchased, credit-impaired loans at fair value upon acquisition, and an accretable yield is established and recognized as interest income on purchased loans to the extent subsequent cash flows support the estimated accretable yield. Purchased, credit-impaired loans that perform consistently with the accretable yield expectations are not reported as non-accrual or nonperforming. However, purchased, credit-impaired loans that do not continue to perform according to accretable yield expectations are considered impaired, and presented as non-accrual and nonperforming. Currently, management expects to fully collect the carrying value of acquired, credit-impaired loans.The table below presents an age analysis of the loans held for investment portfolio at March 31, 2018 and December 31, 2017. Age Analysis of Past Due Loans
We consider all nonperforming loans and troubled debt restructurings (“TDRs”) to be impaired. We do not recognize interest income on nonperforming loans during the time period that the loans are nonperforming. We only recognize interest income on nonperforming loans when we receive payment in full for all amounts due of all contractually required principle and interest, and the loan is current with its contractual terms. The tables below present our impaired loans at and for the periods ended March 31, 2018 and December 31, 2017.
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We consider a loan a TDR when we conclude that both of the following conditions exist: the restructuring constitutes a concession and the debtor is experiencing financial difficulties. Restructured loans at March 31, 2018 consisted of seven loans for $2.6 million compared to seven loans at December 31, 2017 for $2.7 million.The following table includes the recorded investment in and number of modifications of TDRs for the three months ended March 31, 2018 and 2017. We report the recorded investment in loans prior to a modification and also the recorded investment in the loans after the loans were restructured. Reductions in the recorded investment are primarily due to the partial charge-off of the principal balance prior to the modification. We had no loans that were modified as a TDR that defaulted within three months of the modification date during the three month periods ended March 31, 2018 and 2017.
Acquired impaired loans The following table documents changes in the accretable (premium) discount on acquired impaired loans during the three months ended March 31, 2018 and 2017, along with the outstanding balances and related carrying amounts for the beginning and end of those respective periods.
Credit Quality Indicators We review the adequacy of the allowance for loan losses at least quarterly. We base the evaluation of the adequacy of the allowance for loan losses upon loan categories. We categorize loans as residential real estate loans, commercial real estate loans, commercial loans and consumer loans. We further divide commercial real estate loans by owner occupied, investment, hospitality and land acquisition and development. We also divide residential real estate by owner occupied, investment, land acquisition and development and junior liens. All categories are divided by risk rating and loss factors and weighed by risk rating to determine estimated loss amounts. We evaluate delinquent loans and loans for which management has knowledge about possible credit problems of the borrower or knowledge of problems with collateral separately and assign loss amounts based upon the evaluation. We determine loss ratios for all loans based upon a review of the three year loss ratio for the category and qualitative factors.We charge off loans that management has identified as losses. We consider suggestions from our external loan review firm and bank examiners when determining which loans to charge off. We automatically charge off consumer loan accounts based on regulatory requirements. We partially charge off real estate loans that are collateral dependent based on the value of the collateral. If a loan that was previously rated a pass performing loan, from our acquisitions, deteriorates subsequent to the acquisition, the subject loan will be assessed for risk and, if necessary, evaluated for impairment. If the risk assessment rating is adversely changed and the loan is determined to not be impaired, the loan will be placed in a migration category and the credit mark established for the loan will be compared to the general reserve allocation that would be applied using the current allowance for loan losses formula for General Reserves. If the credit mark exceeds the allowance for loan losses formula for General Reserves, there will be no change to the allowance for loan losses. If the credit mark is less than the current allowance for loan losses formula for General Reserves, the allowance for loan losses will be increased by the amount of the shortfall by a provision recorded in the income statement. If the loan is deemed impaired, the loan will be subject to evaluation for loss exposure and a specific reserve. If the estimate of loss exposure exceeds the credit mark, the allowance for loan losses will be increased by the amount of the excess loss exposure through a provision. If the credit mark exceeds the estimate of loss exposure there will be no change to the allowance for loan losses. If a loan from the acquired loan portfolio is carrying a specific credit mark and a current evaluation determines that there has been an increase in loss exposure, the allowance for loan losses will be increased by the amount of the current loss exposure in excess of the credit mark.The following tables outline the class of loans by risk rating at March 31, 2018 and December 31, 2017:
The following table details activity in the allowance for loan losses by portfolio segment for the three month periods ended March 31, 2018 and 2017. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
Our recorded investment in loans at March 31, 2018 and 2017 related to each balance in the allowance for probable loan losses by portfolio segment and disaggregated on the basis of our impairment methodology was as follows:
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Note 5 - Other Real Estate Owned |
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| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real Estate Owned [Text Block] |
At March 31, 2018 and December 31, 2017, the fair value of other real estate owned was $1.8 million and $2.0 million, respectively. As a result of the acquisitions of Maryland Bankcorp , WSB Holdings and Regal , we have segmented the other real estate owned (“OREO”) into two components, real estate obtained as a result of loans originated by Old Line Bank (legacy) and other real estate acquired from MB&T, WSB and Regal Bank or obtained as a result of loans originated by MB&T, WSB and Regal Bank (acquired); we did not acquire any OREO properties in the Damascus acquisition. We are currently aggressively either marketing these properties for sale or improving them in preparation for sale.The following outlines the transactions in OREO during the period.
Residential Foreclosures and Repossessed Assets — Once all potential alternatives for reinstatement are exhausted, past due loans collateralized by residential real estate are referred for foreclosure proceedings in accordance with local requirements of the applicable jurisdiction. Once possession of the property collateralizing the loan is obtained, the repossessed property will be recorded within other assets either as other real estate owned or, where management has both the intent and ability to recover its losses through a government guarantee, as a foreclosure claim receivable. At March 31, 2018, residential foreclosures classified as other real estate owned totaled $966 thousand. We had two loans for an aggregate of $529 thousand secured by residential real estate in process of foreclosure at March 31, 2018 compared to one loan for $277 thousand at December 31, 2017. |
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Note 6 - Earnings Per Common Share |
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| Earnings Per Share [Text Block] |
We determine basic earnings per common share by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding giving retroactive effect to stock dividends. We calculate diluted earnings per common share by including the average dilutive common stock equivalents outstanding during the period. Dilutive common equivalent shares consist of stock options, calculated using the treasury stock method.
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Note 7 - Stock Based Compensation |
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Mar. 31, 2018 | |||
| Notes to Financial Statements | |||
| Shareholders' Equity and Share-based Payments [Text Block] |
For the three months ended March 31, 2018 and 2017, we recorded stock-based compensation expense of $288,559 and $115,113, respectively. At March 31, 2018, there was total unrecognized compensation cost of $1.5 million related to non-vested stock options and $4.1 million related to restricted stock awards that we expect to realize over the next 2.2 years. As of March 31, 2018, there were 232,005 shares remaining available for future issuance under the 2010 equity incentive plan. The officers exercised 36,951 options during the three month period ended March 31, 2018 compared to 8,500 options during the three month period ended March 31, 2017. For purposes of determining estimated fair value of stock options and restricted stock awards, we have computed the estimated fair values of all stock-based compensation using the Black-Scholes option pricing model and, for stock options and restricted stock awards granted prior to March 31, 2018, have applied the assumptions set forth in Old Line Bancshares’ Annual Report on Form 10 -K for the year ended December 31, 2017. During the three months ended March 31, 2018, there were 40,000 stock options granted compared to no stock options issued during the three months ended March 31, 2017. The weighted average grant date fair value of the 2018 stock options is $8.63 and was computed using the Black-Scholes option pricing model under similar assumptions.During the three months ended March 31, 2018 and 2017, we granted 19,443 and 24,415 restricted common stock awards, respectively. The weighted average grant date fair value of these restricted stock awards is $32.00 at March 31, 2018. There were no restricted shares forfeited during the three month periods ended March 31, 2018 and 2017. |
Note 8 - Fair Value Measurement |
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| Fair Value Disclosures [Text Block] |
The fair value of an asset or liability is the price that participants would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability, or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.The fair value hierarchy established by accounting standards defines three input levels for fair value measurement. The applicable standard describes three levels of inputs that may be used to measure fair value: Level 1 is based on quoted market prices in active markets for identical assets. Level 2 is based on significant observable inputs other than Level 1 prices. Level 3 is based on significant unobservable inputs that reflect a company’s own assumptions about the assumption that market participants would use in pricing an asset or liability. We evaluate fair value measurement inputs on an ongoing basis in order to determine if there is a change of sufficient significance to warrant a transfer between levels. For the three months ended March 31, 2018 and year ended December 31, 2017, there were no transfers between levels.At March 31, 2018, we hold, as part of our investment portfolio, available for sale securities reported at fair value consisting of municipal securities, U.S. government sponsored entities, corporate bonds, mortgage-backed securities. The fair value of the majority of these securities is determined using widely accepted valuation techniques including matrix pricing and broker-quote based applications. Inputs include benchmark yields, reported trades, issuer spreads, prepayments speeds and other relevant items. These are inputs used by a third -party pricing service used by us.To validate the appropriateness of the valuations provided by the third party, we regularly update the understanding of the inputs used and compare valuations to an additional third party source. We classify all our investment securities available for sale in Level 2 of the fair value hierarchy, with the exception of treasury securities that fall into Level 1 and our corporate bonds, which fall into Level 3. Assets and Liabilities Measured at Fair Value on a Recurring Basis
Our valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes our methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value. Furthermore, we have not comprehensively revalued the fair value amounts since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the above presented amounts.The fair value of the majority of the securities in significant unobservable inputs (Level 3 ) is determined using widely accepted valuation techniques including matrix pricing and broker-quote based applications. Inputs include benchmark yields, reported trades, issuer spreads, prepayments speeds and other relevant items. These are inputs used by a third -party pricing service used by us.The following table provides a reconciliation of changes in fair value included in assets measured in the Consolidated Balance Sheet using inputs classified as level 3 in the fair value for the period indicated:
The fair value calculated may not be indicative of net realized value or reflective of future fair values.Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis We may be required, from time to time, to measure certain assets at fair value on a non-recurring basis in accordance with U.S. generally accepted accounting principles. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis at March 31, 2018 and December 31, 2017 are included in the tables below.We also measure certain non-financial assets such as other real estate owned, TDRs, and repossessed or foreclosed property at fair value on a non-recurring basis. Generally, we estimate the fair value of these items using Level 2 inputs based on observable market data or Level 3 inputs based on discounting criteria.
As of March 31, 2018 and December 31, 2017, we estimated the fair value of impaired assets using Level 3 inputs to be $7.9 million and $8.2 million, respectively. We determined these Level 3 inputs based on appraisal evaluations, offers to purchase and/or appraisals that we obtained from an outside third party during the preceding twelve months less costs to sell. Discounts have predominantly been in the range of 0% to 50%. As a result of the acquisitions of Maryland Bankcorp, WSB Holdings and Regal, we have segmented the OREO into two components, real estate obtained as a result of loans originated by Old Line Bank (legacy) and other real estate acquired from MB&T, WSB and Regal Bank or obtained as a result of loans originated by MB&T, WSB and Regal Bank (acquired).The following presents the carrying amount, fair value, and placement in the fair value hierarchy of Old Line Bancshares’ financial instruments not recorded at fair value on a recurring or non-recurring basis as of March 31, 2018 and December 31, 2017. For short term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. For non-marketable equity securities the carrying amount is a reasonable estimate of fair value as these securities can only be redeemed or sold at their par value and only to the respective issuing government-supported institution or to another member institution. For net loans recievable, an exit price notion was used consistant with ASC Topic 820, Fair Value Measurement. Prior to adoption, loans were calculated using an entry price notion. For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings deposits, the carrying amount is a reasonable estimate of fair value due to these products having no stated maturity.
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Note 9 - Short Term Borrowings |
3 Months Ended | ||
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Mar. 31, 2018 | |||
| Notes to Financial Statements | |||
| Short-term Debt [Text Block] |
Short term borrowings consist of promissory notes or overnight repurchase agreements sold to Old Line Bank’s customers, federal funds purchased and advances from the Federal Home Loan Bank of Atlanta (“FHLB”). At March 31, 2018, we had $125.0 million outstanding in short term FHLB borrowings, compared to $155.0 million at December 31, 2017. At March 31, 2018 and December 31, 2017, we had no unsecured promissory notes and $36.5 million and $37.6 million, respectively, in secured promissory notes.Securities Sold Under Agreements to Repurchase To support the $36.5 million in repurchase agreements at March 31, 2018, we have provided collateral in the form of investment securities. At March 31, 2018 we have pledged $61.5 million in U.S. government agency securities and mortgage-backed securities to customers who require collateral for overnight repurchase agreements and deposits. Securities sold under agreements to repurchase are stated at the amount of cash received in connection with the transaction. As a result, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. We monitor collateral levels on a continuous basis. We may be required to provide additional collateral based on the fair value of the underlying securities in the event the collateral fair value falls below stipulated levels. We closely monitor the collateral levels to ensure adequate levels are maintained. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agents. We have the right to sell or re-pledge the investment securities. For government entity repurchase agreements, the collateral is held by Old Line Bank in a segregated custodial account under a tri-party agreement. The repurchase agreements totaling $36.5 million mature daily and will remain fully collateralized until the account has been closed or terminated. |
Note 10 - Long Term Borrowings |
3 Months Ended | ||
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Mar. 31, 2018 | |||
| Notes to Financial Statements | |||
| Long-term Debt [Text Block] |
Long term borrowings consist of $35 million in aggregate principal amount of Old Line Bancshares 5.625% Fixed-to-Floating Rate Subordinated Notes due 2026 (the “Notes”). The Notes were issued pursuant to an indenture and a supplemental indenture, each dated as of August 15, 2016, between Old Line Bancshares and U.S. Bank National Association as Trustee. The Notes are unsecured subordinated obligations of Old Line Bancshares and rank equally with all other unsecured subordinated indebtedness currently outstanding or issued in the future. The Notes are subordinated in right of payment of all senior indebtedness. The fair value of the Notes is $34.1 million.Also included in long term borrowings are trust preferred subordinated debentures totaling $4.1 million (net of $2.6 million fair value adjustment) at March 31, 2018 acquired in the Regal acquisition. The trust preferred subordinated debentures consists of two trusts – Trust 1 in the amount of $4.0 million (fair value adjustment of $1.4 million) maturing on March 17, 2034 and Trust 2 in the amount of $2.5 million (fair value adjustment $1.2 million) maturing on December 14, 2035. |
Note 11 - Subsequent Event |
3 Months Ended | ||
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Mar. 31, 2018 | |||
| Notes to Financial Statements | |||
| Subsequent Events [Text Block] |
On April 13, 2018, Old Line Bancshares BYBK, the parent company of Bay Bank. Upon the consummation of the Merger, all outstanding shares of BYBK common stock were exchanged for shares of common stock of Old Line Bancshares. As a result of the merger, each share of common stock of BYBK was converted into the right to receive 0.4088 shares of Old Line Bancshares’ common stock, provided that cash was paid in lieu of any fractional shares of Old Line Bancshares common stock. As a result, Old Line Bancshares issued approximately 4,408,087 shares of its common stock in exchange for the shares of common stock of BYBK in the merger. The aggregate merger consideration was approximately $143.6 million, consisting of approximately 4,408,087 shares of Old Line Bancshares common stock, valued at approximately $142.6 million based on the closing sales price of Old Line Bancshares’ common stock on April 13, 2018, and approximately $968,805 in cash in exchange for unexercised options to purchase BYBK common stock that were outstanding immediately before the Merger.In connection with the merger, the parties have caused Bay Bank to merge with and into Old Line Bank, with Old Line Bank the surviving bank. At December 31, 2017, BYBK had consolidated assets of approximately $659 million. This merger adds 11 banking locations located in market areas of Baltimore City and Baltimore, Howard and Harford Counties in Maryland.The initial accounting for the business combination is incomplete as of the date of this report due to the timing of the closing date for the acquisition. The required information is not yet available for Old Line Bancshares to perform the necessary financial reporting and fair values of the related acquisition. |
Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2018 | |
| Accounting Policies [Abstract] | |
| Consolidation, Policy [Policy Text Block] | Basis of Presentation and Consolidation The foregoing consolidated financial statements for the periods ended March 31, 2018 and 2017 are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), however, in the opinion of management we have included all adjustments necessary for a fair presentation of the results of the interim period. We derived the balances as of December 31, 2017 from audited financial statements. These statements should be read in conjunction with Old Line Bancshares’ financial statements and accompanying notes included in Old Line Bancshares’ Form 10 -K for the year ended December 31, 2017. We have made no significant changes to Old Line Bancshares’ accounting policies as disclosed in the Form 10 -K, except as described in the Recent Accounting Pronoucements section below. |
| Use of Estimates, Policy [Policy Text Block] | Use of Estimates may affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. A material estimate that is particularly susceptible to significant change in the near term relates to the determination of the allowance for loan losses. |
| Revenue from Contract with Customer [Policy Text Block] | Revenue from Contracts with Customers 606, “Revenue from Contracts with Customers” (“Topic 606” ). Under Topic 606, we must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) we satisfy a performance obligation. Significant revenue has not been recognized in the current reporting period that results from performance obligations satisfied in previous periods.Our primary sources of revenue are derived from interest and dividends earned on loans, investment securities, and other financial instruments that are not within the scope of Topic 606. We have evaluated the nature of Old Line Bancshares’ contracts with customers and determined that further disaggregation of revenue from contracts with customers into more granular categories beyond what is presented in the Consolidated Statements of Income was not necessary. Old Line Bancshares generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers. |
| Reclassification, Policy [Policy Text Block] | Reclassifications 2017 financial presentation to conform to the 2018 presentation. These reclassifications did not change net income or stockholders’ equity. |
| New Accounting Pronouncements, Policy [Policy Text Block] | Recent Accounting Pronouncements – In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014 -09 – Revenue from Contracts with Customers , which will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principal of this ASU is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The ASU allows for either full retrospective or modified retrospective adoption. The ASU does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under U.S. GAAP. Our revenue is comprised of net interest income on financial assets and liabilities, which is explicitly excluded from the scope of the new guidance, and non-interest income. The contracts that are within scope of the guidance are primarily related to service charges on deposit accounts, cardholder and merchant income, wealth advisory services income, other service charges and fees, sales of other real estate owned, insurance commissions and miscellaneous fees. Old Line Bancshares adopted the ASU on January 1, 2018, utilizing the modified retrospective approach. Based on our overall assessment of revenue streams and review of related contracts affected by the ASU, it did not have a material impact on our consolidated financial position or consolidated results of operations as a result of the adoption of this ASU.In January 2016, FASB issued ASU No. 2016 -01 , Financial Instruments – Recognition and Measurement of Financial Assets and Liabilities, which is intended to improve the recognition and measurement of financial instruments by: requiring equity investments (other than equity method or consolidation) to be measured at fair value with changes in fair value recognized in net income; requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities; eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. This ASU is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We adopted this ASU effective January 1, 2018. With the adoption of this ASU, equity securities can no longer be classified as available for sale, and as such marketable equity securities are disclosed as a separate line item on the balance sheet with changes in the fair value of equity securities reflected in net income. During the first quarter of 2018, we began using an exit price notion when measuring the fair value of our loan portfolio, excluding loans held for sale, for disclosure purposes. The adoption of this ASU did not have a significant impact on our consolidated financial statements. In February 2016, FASB issued ASU 2016 -02 , Leases (Topic ). FASB issued this ASU to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet by lessees for those leases classified as operating leases under current U.S. GAAP and disclosing key information about leasing arrangements. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after 842 December 15, 2018. Early application of this ASU is permitted for all entities. This ASU will be effective for us in our first quarter of 2019. Old Line Bancshares is currently assessing the impact that the adoption of this standard will have on its financial condition and results of operations and will closely monitor any new developments or additional guidance to determine the potential impact the new standard will have on our consolidated financial statements.In June 2016, FASB issued ASU 2016 -13 , Financial Instruments – Credit Losses (Topic , which sets forth a “current expected credit loss” (“CECL”) model requiring Old Line Bancshares to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. For public business entities that are U.S. Securities and Exchange Commission filers, the amendments in this update are effective for fiscal years beginning after 326 ): Measurement of Credit Losses on Financial Instruments December 15, 2019, including interim periods within those fiscal years. Old Line Bancshares has constituted a committee that has the responsibility to gather loan information and consider acceptable methodologies to comply with this ASU. The committee meets periodically to discuss the latest developments and committee members keep themselves updated on such developments via webcasts, publications, and conferences. We have also evaluated and selected a third party vendor solution to assist us in the application of ASU 2016 -13. The adoption of ASU 2016 -13 is likely to result in an increase in the allowance for loan losses as a result of changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. Furthermore, ASU 2016 -13 will necessitate that we establish an allowance for expected credit losses on debt securities. Old Line Bancshares’ evaluation indicates that the provisions of ASU No. 2016 -13 will impact its consolidated financial statements, in particular the level of the reserve for loan losses. We are, however, continuing to evaluate the extent of the potential impact.In August 2016, FASB issued ASU 2016 -15 , Statement of Cash Flows (Topic ): 230 Classification of Certain Cash Receipts and Cash Payments , to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments provide guidance on the following nine specific cash flow issues: 1 ) debt prepayment or debt extinguishment costs; 2 ) settlement of zero -coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; 3 ) contingent consideration payments made after a business combination; 4 ) proceeds from the settlement of insurance claims; 5 ) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned; 6 ) life insurance policies; 7 ) distributions received from equity method investees; 8 ) beneficial interests in securitization transactions; and 9 ) separately identifiable cash flows and application of the predominance principle. The ASU is effective for all annual and interim periods beginning January 1, 2018 and is required to be applied retrospectively to all periods presented. We adopted this guidance January 1, 2018, which did not result in a change in the classification in the statement of cash flows and did not have a material impact on our consolidated financial statements or on our financial position or results of operations.In January 2017, FASB issued ASU 2017 -01, Business Combinations (Topic : Clarifying the definition of a business, which clarifies the definition of a business and assists entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under this guidance, when substantially all of the fair value of gross assets acquired is concentrated in a single asset (or group of similar assets), the assets acquired would 805 )not represent a business. In addition, in order to be considered a business, an acquisition would have to include at a minimum an input and a substantive process that together significantly contribute to the ability to create an output. The guidance also narrows the definition of outputs by more closely aligning it with how outputs are described in FASB guidance for revenue recognition. We adopted this guidance effective January 1, 2018. The adoption of this ASU did not have a material impact on our consolidated financial statements.In January 2017, FASB issued ASU 2017 -04, Simplifying the Test for Goodwill Impairment, which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under the ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Old Line Bancshares does not expect the adoption of ASU 2017 -04 to have a material impact on its consolidated financial statements.In March 2017, FASB issued ASU No. 2017 -08, Premium Amortization on Purchased Callable Debt Securities . This ASU shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. Today, entities generally amortize the premium over the contractual life of the security. The new guidance does not change the accounting for purchased callable debt securities held at a discount; the discount continues to be amortized to maturity. ASU No. 2017 -08 is effective for interim and annual reporting periods beginning after December 15, 2018; early adoption is permitted. The guidance calls for a modified retrospective transition approach under which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. We do not expect the adoption of this guidance to have a material impact on Old Line Bancshares’ consolidated financial statements.In August 2017, FASB issued ASU No. 2017 -12, Targeted Improvements to Accounting for Hedging Activities . This ASU’s objectives are to: (1 ) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities; and (2 ) reduce the complexity of and simplify the application of hedge accounting by preparers. ASU No. 2017 -12 is effective for interim and annual reporting periods beginning after December 15, 2018; early adoption is permitted. Old Line Bancshares currently does not designate any derivative financial instruments as formal hedging relationships, and therefore, does not utilize hedge accounting. However, Old Line Bancshares is currently evaluating this ASU to determine whether its provisions will enhance its ability to employ risk management strategies, while improving the transparency and understanding of those strategies for financial statement users.In February 2018, FASB issued ASU No. 2018 -02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220 ). This ASU allows an entity to elect a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act that changed our income tax rate from 35% to 21%. The amount of that reclassification should include the effect of changes of tax rate on the deferred tax amount, any related valuation allowance and other income tax effects on the items in AOCI. The ASU requires an entity to state if an election to reclassify the tax effect to retained earnings is made along with the description of other income tax effects that are reclassified from AOCI. ASU 2018 -02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years with early adoption permitted. Old Line Bancshares adopted ASU 2018 -02 in the first quarter of 2018. The change in accounting principal was accounted for as a cumulative effect adjustment to the balance sheet resulting in a reclass of $459,973 thousand from AOCI to retained earnings during the first quarter of 2018. |
Note 2 - Acquisition of DCB Bancshares, Inc. (Tables) |
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Note 3 - Investment Securities (Tables) |
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| Impaired Financing Receivables [Table Text Block] |
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| Troubled Debt Restructurings on Financing Receivables [Table Text Block] |
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| Schedule of Loans and Leases Receivable Outstanding Balances and Related Carrying Amounts for Acquired Impaired Loans [Table Text Block] |
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| Financing Receivable Credit Quality Indicators [Table Text Block] |
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| Allowance for Credit Losses on Financing Receivables [Table Text Block] |
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| Schedule of Recorded Investment Based on Impairment Methodology [Table Text Block] |
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Note 5 - Other Real Estate Owned (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Other Real Estate, Roll Forward [Table Text Block] |
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Note 6 - Earnings Per Common Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||
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| Schedule of Weighted Average Number of Shares [Table Text Block] |
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Note 8 - Fair Value Measurement (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block] |
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| Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block] |
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| Fair Value Measurements, Nonrecurring [Table Text Block] |
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| Fair Value, by Balance Sheet Grouping [Table Text Block] |
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Note 1 - Summary of Significant Accounting Policies (Details Textual) - USD ($) |
3 Months Ended | 12 Months Ended | |
|---|---|---|---|
Mar. 31, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
| Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 35.00% | ||
| New Accounting Pronouncement, Early Adoption, Effect [Member] | Reclassification of Stranded Tax Debit From Accumulated Other Comprehensive Income to Retained Earnings [Member] | |||
| Tax Cuts and Jobs Act of 2017, Reclassification from AOCI to Retained Earnings, Tax Effect | $ 459,973 | ||
| Scenario, Forecast [Member] | |||
| Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 21.00% | ||
Note 2 - Acquisition of DCB Bancshares, Inc. (Details Textual) - DCB Bancshares [Member] |
Jul. 28, 2017
USD ($)
$ / shares
shares
|
|---|---|
| Business Acquisition Amount of Company Stock Received Per Share | $ / shares | $ 0.9269 |
| Stock Issued During Period, Shares, Acquisitions | shares | 1,495,090 |
| Business Combination, Consideration Transferred, Total | $ 40,850,410 |
| Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets, Total | $ 310,974,425 |
Note 2 - Acquisition of DCB Bancshares, Inc. - Assets and Liabilities Acquired (Details) - DCB Bancshares [Member] |
Jul. 28, 2017
USD ($)
|
|---|---|
| Cash consideration | $ 4,534 |
| Purchase price assigned to shares exchanged for stock | 40,845,876 |
| Total purchase price for DCB acquisition | 40,850,410 |
| Cash and due from banks | 35,571,479 |
| Investment securities available for sale | 42,349,201 |
| Loans, net | 216,172,008 |
| Premises and equipment | 5,214,193 |
| Accrued interest receivable | 585,195 |
| Deferred income taxes | 599,336 |
| Bank owned life insurance | 3,085,783 |
| Core deposit intangible | 3,746,430 |
| Other assets | 3,650,800 |
| Total assets acquired | 310,974,425 |
| Fair Value of Liabilities assumed | |
| Deposits | 277,867,449 |
| Short term borrowings | 4,753,521 |
| Other liabilities | 2,800,363 |
| Total liabilities assumed | 285,421,333 |
| Fair Value of net assets acquired | 25,553,092 |
| Total Purchase Price | 40,850,410 |
| Goodwill recorded for DCB | $ 15,297,318 |
Note 3 - Investment Securities (Details Textual) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
|
Mar. 31, 2018
USD ($)
|
Mar. 31, 2017
USD ($)
|
Dec. 31, 2017 |
|
| Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Positions | 116 | 56 | |
| Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Number of Positions | 76 | 56 | |
| Proceeds from Sale and Maturity of Debt Securities, Available-for-sale, Total | $ 6,200 | $ 8,300 | |
| Available-for-sale Securities, Gross Realized Gain (Loss), Total | $ 16 | ||
Note 3 - Investment Securities - Contractual Maturities (Details) |
Mar. 31, 2018
USD ($)
|
|---|---|
| Within one year, amortized cost | $ 3,307,089 |
| Within one year, fair value | 3,296,591 |
| Over one to five years, amortized cost | 2,095,597 |
| Over one to five years, fair value | 2,091,156 |
| Over five to ten years, amortized cost | 53,449,035 |
| Over five to ten years, fair value | 52,128,458 |
| Over ten years, amortized cost | 159,777,902 |
| Over ten years, fair value | 152,837,583 |
| Total | 218,629,623 |
| Total | 210,353,788 |
| Pledged securities, amortized cost | 64,300,151 |
| Pledged securities, fair value | $ 61,506,128 |
Note 4 - Loans - Past Due Loans (Details) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
Mar. 31, 2017 |
|||
|---|---|---|---|---|---|---|
| Current | $ 1,748,844,886 | $ 1,691,320,409 | ||||
| Total accruing past due loans | 9,848,968 | 7,183,523 | ||||
| Nonaccruing loans | 1,766,251 | 1,764,651 | ||||
| Total Loans | 1,760,460,105 | 1,700,268,583 | $ 1,421,175,827 | |||
| Commercial Real Estate Portfolio Segment [Member] | ||||||
| Total Loans | 1,186,455,713 | 1,100,000,000 | 994,016,759 | |||
| Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total Loans | 341,106,892 | 355,786,942 | ||||
| Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total Loans | 586,863,514 | 538,463,660 | ||||
| Commercial Real Estate Portfolio Segment [Member] | Hospitality Industry [Member] | ||||||
| Nonaccruing loans | 1,467,846 | |||||
| Total Loans | 171,122,930 | 171,588,414 | ||||
| Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Nonaccruing loans | 196,171 | 190,193 | ||||
| Total Loans | 87,362,377 | 76,541,431 | ||||
| Residential Portfolio Segment [Member] | ||||||
| Total Loans | 315,636,770 | 310,700,000 | 273,584,188 | |||
| Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Nonaccruing loans | 192,501 | 192,501 | ||||
| Total Loans | 100,536,841 | 100,983,200 | ||||
| Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Nonaccruing loans | 1,147,497 | 1,153,402 | ||||
| Total Loans | 136,072,289 | 129,762,493 | ||||
| Residential Portfolio Segment [Member] | HELOC and Jr Liens [Member] | ||||||
| Total Loans | 35,851,235 | 37,539,757 | ||||
| Commercial Portfolio Segment [Member] | ||||||
| Nonaccruing loans | ||||||
| Total Loans | 199,710,622 | 148,538,357 | ||||
| Consumer Portfolio Segment [Member] | ||||||
| Total Loans | 58,656,999 | 59,841,340 | $ 5,036,523 | |||
| Financing Receivables 30 To 89 Days Past Due [Member] | ||||||
| Total accruing past due loans | 9,519,109 | 7,067,556 | ||||
| Financing Receivables 30 To 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total accruing past due loans | 585,036 | |||||
| Financing Receivables 30 To 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total accruing past due loans | 901,216 | 1,932,728 | ||||
| Financing Receivables 30 To 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Total accruing past due loans | 2,769,789 | 413,824 | ||||
| Financing Receivables 30 To 89 Days Past Due [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Total accruing past due loans | 770,987 | 777,422 | ||||
| Financing Receivables 30 To 89 Days Past Due [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total accruing past due loans | 1,624,416 | 2,457,528 | ||||
| Financing Receivables 30 To 89 Days Past Due [Member] | Residential Portfolio Segment [Member] | HELOC and Jr Liens [Member] | ||||||
| Total accruing past due loans | 130,556 | |||||
| Financing Receivables 30 To 89 Days Past Due [Member] | Commercial Portfolio Segment [Member] | ||||||
| Total accruing past due loans | 453,885 | 312,169 | ||||
| Financing Receivables 30 To 89 Days Past Due [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total accruing past due loans | 945,934 | 1,043,329 | ||||
| Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | ||||||
| Total accruing past due loans | 329,859 | 115,967 | ||||
| Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total accruing past due loans | 230,082 | 228,555 | ||||
| Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total accruing past due loans | 221,828 | 37,560 | ||||
| Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total accruing past due loans | 108,031 | 78,407 | ||||
| Legacy [Member] | ||||||
| Current | 1,429,320,233 | 1,352,406,852 | ||||
| Total accruing past due loans | 4,586,988 | 1,692,220 | ||||
| Nonaccruing loans | 467,934 | 473,631 | ||||
| Total Loans | [1] | 1,434,375,155 | 1,354,572,703 | |||
| Legacy [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total Loans | [1] | 260,238,291 | 268,128,087 | |||
| Legacy [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total Loans | [1] | 536,823,023 | 485,536,921 | |||
| Legacy [Member] | Commercial Real Estate Portfolio Segment [Member] | Hospitality Industry [Member] | ||||||
| Nonaccruing loans | 1,174,349 | |||||
| Total Loans | [1] | 164,411,156 | 164,193,228 | |||
| Legacy [Member] | Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Nonaccruing loans | ||||||
| Total Loans | [1] | 78,199,476 | 67,310,660 | |||
| Legacy [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Nonaccruing loans | 192,501 | 192,501 | ||||
| Total Loans | [1] | 79,549,169 | 79,762,682 | |||
| Legacy [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Nonaccruing loans | 275,433 | 281,130 | ||||
| Total Loans | [1] | 75,114,741 | 67,237,699 | |||
| Legacy [Member] | Residential Portfolio Segment [Member] | HELOC and Jr Liens [Member] | ||||||
| Total Loans | [1] | 20,896,736 | 21,520,339 | |||
| Legacy [Member] | Commercial Portfolio Segment [Member] | ||||||
| Nonaccruing loans | ||||||
| Legacy [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total Loans | [1] | 14,407,498 | 10,758,589 | |||
| Legacy [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | ||||||
| Total accruing past due loans | 4,586,988 | 1,692,220 | ||||
| Legacy [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total accruing past due loans | ||||||
| Legacy [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total accruing past due loans | 71,397 | 1,089,022 | ||||
| Legacy [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Total accruing past due loans | 2,610,890 | 254,925 | ||||
| Legacy [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Total accruing past due loans | 268,430 | 270,822 | ||||
| Legacy [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total accruing past due loans | 229 | |||||
| Legacy [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | Residential Portfolio Segment [Member] | HELOC and Jr Liens [Member] | ||||||
| Total accruing past due loans | ||||||
| Legacy [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | Commercial Portfolio Segment [Member] | ||||||
| Total accruing past due loans | 403,453 | 51,088 | ||||
| Legacy [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total accruing past due loans | 58,469 | 26,134 | ||||
| Legacy [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | ||||||
| Total accruing past due loans | ||||||
| Legacy [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total accruing past due loans | ||||||
| Legacy [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total accruing past due loans | ||||||
| Legacy [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total accruing past due loans | ||||||
| Acquired [Member] | ||||||
| Current | 319,524,653 | 338,913,557 | ||||
| Total accruing past due loans | 5,261,980 | 5,491,303 | ||||
| Nonaccruing loans | 1,298,317 | 1,291,020 | ||||
| Total Loans | 326,084,950 | 345,695,880 | ||||
| Acquired [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total Loans | 80,868,601 | 87,658,855 | ||||
| Acquired [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total Loans | 50,040,491 | 52,926,739 | ||||
| Acquired [Member] | Commercial Real Estate Portfolio Segment [Member] | Hospitality Industry [Member] | ||||||
| Nonaccruing loans | 293,497 | |||||
| Total Loans | 6,711,774 | 7,395,186 | ||||
| Acquired [Member] | Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Nonaccruing loans | 196,171 | 190,193 | ||||
| Total Loans | 9,162,901 | 9,230,771 | ||||
| Acquired [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Nonaccruing loans | ||||||
| Total Loans | 20,987,672 | 21,220,518 | ||||
| Acquired [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Nonaccruing loans | 872,064 | 872,272 | ||||
| Total Loans | 60,957,548 | 62,524,794 | ||||
| Acquired [Member] | Residential Portfolio Segment [Member] | HELOC and Jr Liens [Member] | ||||||
| Total Loans | 14,954,499 | 16,019,418 | ||||
| Acquired [Member] | Commercial Portfolio Segment [Member] | ||||||
| Nonaccruing loans | ||||||
| Acquired [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total Loans | 44,249,501 | 49,082,751 | ||||
| Acquired [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | ||||||
| Total accruing past due loans | 4,932,121 | 5,375,336 | ||||
| Acquired [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total accruing past due loans | 585,036 | |||||
| Acquired [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total accruing past due loans | 829,819 | 843,706 | ||||
| Acquired [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Total accruing past due loans | 158,899 | 158,899 | ||||
| Acquired [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Total accruing past due loans | 502,557 | 506,600 | ||||
| Acquired [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total accruing past due loans | 1,624,416 | 2,457,299 | ||||
| Acquired [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | Residential Portfolio Segment [Member] | HELOC and Jr Liens [Member] | ||||||
| Total accruing past due loans | 130,556 | |||||
| Acquired [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | Commercial Portfolio Segment [Member] | ||||||
| Total accruing past due loans | 50,432 | 261,081 | ||||
| Acquired [Member] | Financing Receivables 30 To 89 Days Past Due [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total accruing past due loans | 887,465 | 1,017,195 | ||||
| Acquired [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | ||||||
| Total accruing past due loans | 329,859 | 115,967 | ||||
| Acquired [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total accruing past due loans | 230,082 | 228,555 | ||||
| Acquired [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total accruing past due loans | 221,828 | 37,560 | ||||
| Acquired [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total accruing past due loans | $ 108,031 | $ 78,407 | ||||
| ||||||
Note 4 - Loans - Impaired Loans (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |||
|---|---|---|---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
||||
| Related allowance | $ 423,882 | $ 424,663 | |||
| Unpaid principal balance, total | 6,891,595 | 7,074,108 | |||
| Recorded investment, total | 6,495,485 | 6,615,350 | |||
| Average recorded investment, total | 6,929,678 | 7,434,872 | |||
| Interest income recognized, total | 55,686 | 266,577 | |||
| Legacy [Member] | |||||
| Related allowance | 241,830 | 242,610 | |||
| Unpaid principal balance, total | 4,454,955 | 4,502,108 | |||
| Recorded investment, total | 4,454,955 | 4,502,108 | |||
| Average recorded investment, total | 4,465,938 | 4,821,268 | |||
| Interest income recognized, total | 49,622 | 198,746 | |||
| Legacy [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | |||||
| Unpaid principal balance, with no related allowance recorded | 1,782,165 | 1,797,030 | |||
| Recorded investment, with no related allowance recorded | 1,782,165 | 1,797,030 | |||
| Average recorded investment, with no related allowance recorded | 1,782,165 | 1,913,873 | |||
| Interest income recognized, with no related allowance recorded | 18,595 | 70,623 | |||
| Legacy [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | |||||
| Unpaid principal balance, with no related allowance recorded | 1,143,826 | 1,155,595 | |||
| Recorded investment, with no related allowance recorded | 1,143,826 | 1,155,595 | |||
| Average recorded investment, with no related allowance recorded | 1,143,826 | 1,183,738 | |||
| Interest income recognized, with no related allowance recorded | 15,341 | 51,806 | |||
| Unpaid principal balance, with an allowance recorded | 587,663 | 592,432 | |||
| Recorded investment, with an allowance recorded | 587,663 | 592,432 | |||
| Related allowance | 69,903 | 69,903 | |||
| Average recorded investment, with an allowance recorded | 587,663 | 601,959 | |||
| Interest income recognized, with an allowance recorded | 7,388 | 30,576 | |||
| Legacy [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | |||||
| Unpaid principal balance, with no related allowance recorded | 224,092 | 226,554 | |||
| Recorded investment, with no related allowance recorded | 224,092 | 226,554 | |||
| Average recorded investment, with no related allowance recorded | 230,786 | 233,618 | |||
| Interest income recognized, with no related allowance recorded | 2,188 | 10,536 | |||
| Unpaid principal balance, with an allowance recorded | 51,341 | 54,576 | |||
| Recorded investment, with an allowance recorded | 51,341 | 54,576 | |||
| Related allowance | 37,076 | 37,075 | |||
| Average recorded investment, with an allowance recorded | 55,830 | 217,673 | |||
| Interest income recognized, with an allowance recorded | 1,134 | ||||
| Legacy [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | |||||
| Unpaid principal balance, with an allowance recorded | 192,501 | 192,501 | |||
| Recorded investment, with an allowance recorded | 192,501 | 192,501 | |||
| Related allowance | 39,420 | 39,420 | |||
| Average recorded investment, with an allowance recorded | 192,501 | 192,501 | |||
| Interest income recognized, with an allowance recorded | |||||
| Legacy [Member] | Commercial Portfolio Segment [Member] | |||||
| Unpaid principal balance, with no related allowance recorded | 377,936 | 387,208 | |||
| Recorded investment, with no related allowance recorded | 377,936 | 387,208 | |||
| Average recorded investment, with no related allowance recorded | 377,936 | 379,983 | |||
| Interest income recognized, with no related allowance recorded | 3,365 | 30,245 | |||
| Unpaid principal balance, with an allowance recorded | 95,431 | 96,212 | |||
| Recorded investment, with an allowance recorded | 95,431 | 96,212 | |||
| Related allowance | 95,431 | 96,212 | |||
| Average recorded investment, with an allowance recorded | 95,231 | 97,923 | |||
| Interest income recognized, with an allowance recorded | 1,611 | 4,960 | |||
| Acquired [Member] | |||||
| Related allowance | [1] | 182,052 | 182,053 | ||
| Unpaid principal balance, total | [1] | 2,436,640 | 2,572,000 | ||
| Recorded investment, total | [1] | 2,040,530 | 2,113,242 | ||
| Average recorded investment, total | [1] | 2,463,740 | 2,613,604 | ||
| Interest income recognized, total | [1] | 6,064 | 67,831 | ||
| Acquired [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | |||||
| Unpaid principal balance, with no related allowance recorded | [1] | 254,445 | 253,865 | ||
| Recorded investment, with no related allowance recorded | [1] | 254,445 | 253,865 | ||
| Average recorded investment, with no related allowance recorded | [1] | 254,445 | 252,988 | ||
| Interest income recognized, with no related allowance recorded | [1] | 2,155 | |||
| Acquired [Member] | Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | |||||
| Unpaid principal balance, with no related allowance recorded | [1] | 328,851 | 334,271 | ||
| Recorded investment, with no related allowance recorded | [1] | 45,000 | 45,000 | ||
| Average recorded investment, with no related allowance recorded | [1] | 328,851 | 334,271 | ||
| Interest income recognized, with no related allowance recorded | [1] | ||||
| Unpaid principal balance, with an allowance recorded | [1] | 154,297 | 148,196 | ||
| Recorded investment, with an allowance recorded | [1] | 154,297 | 148,196 | ||
| Related allowance | [1] | 80,072 | 80,072 | ||
| Average recorded investment, with an allowance recorded | [1] | 161,153 | 155,621 | ||
| Interest income recognized, with an allowance recorded | [1] | 2,498 | |||
| Acquired [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | |||||
| Unpaid principal balance, with no related allowance recorded | [1] | 1,377,804 | 1,382,055 | ||
| Recorded investment, with no related allowance recorded | [1] | 1,265,545 | 1,269,796 | ||
| Average recorded investment, with no related allowance recorded | [1] | 1,374,804 | 1,390,037 | ||
| Interest income recognized, with no related allowance recorded | [1] | 4,870 | 31,601 | ||
| Unpaid principal balance, with an allowance recorded | [1] | 250,194 | 250,194 | ||
| Recorded investment, with an allowance recorded | [1] | 250,194 | 250,194 | ||
| Related allowance | [1] | 77,464 | 77,464 | ||
| Average recorded investment, with an allowance recorded | [1] | 273,618 | 273,596 | ||
| Interest income recognized, with an allowance recorded | [1] | 23,424 | |||
| Acquired [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | |||||
| Unpaid principal balance, with no related allowance recorded | [1] | 131,294 | |||
| Recorded investment, with no related allowance recorded | [1] | 74,066 | |||
| Average recorded investment, with no related allowance recorded | [1] | 132,812 | |||
| Interest income recognized, with no related allowance recorded | 4,378 | ||||
| Acquired [Member] | Commercial Portfolio Segment [Member] | |||||
| Unpaid principal balance, with an allowance recorded | [1] | 71,049 | 72,125 | ||
| Recorded investment, with an allowance recorded | [1] | 71,049 | 72,125 | ||
| Related allowance | [1] | 24,516 | 24,517 | ||
| Average recorded investment, with an allowance recorded | [1] | 70,869 | 74,279 | ||
| Interest income recognized, with an allowance recorded | [1] | $ 1,194 | $ 3,775 | ||
| |||||
Note 4 - Loans - Loans Modified as TDRs (Details) |
3 Months Ended | |
|---|---|---|
|
Mar. 31, 2018
USD ($)
|
Mar. 31, 2017
USD ($)
|
|
| Number of contracts | 2 | |
| Pre-modification outstanding recorded investment | $ 2,011,064 | |
| Post-modification outstanding recorded investment | $ 2,011,064 | |
| Legacy [Member] | Commercial Real Estate Portfolio Segment [Member] | ||
| Number of contracts | 1 | |
| Pre-modification outstanding recorded investment | $ 1,596,740 | |
| Post-modification outstanding recorded investment | $ 1,596,740 | |
| Legacy [Member] | Commercial Portfolio Segment [Member] | ||
| Number of contracts | 1 | |
| Pre-modification outstanding recorded investment | $ 414,324 | |
| Post-modification outstanding recorded investment | $ 414,324 | |
Note 4 - Loans - Acquired Impaired Loans (Details) - USD ($) |
3 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
| Contractually required payments receivable | $ 8,421,446 | $ 8,857,375 | $ 8,277,731 | $ 9,597,703 |
| Carrying amount | 6,799,657 | 7,078,918 | $ 6,617,774 | $ 7,558,415 |
| Acquired [Member] | ||||
| Balance at beginning of period | 115,066 | (22,980) | ||
| Accretion of fair value discounts | (27,770) | (41,601) | ||
| Reclassification from non-accretable discount | 23,195 | 42,146 | ||
| Balance at end of period | $ 110,491 | $ (22,435) | ||
Note 4 - Loans - Credit Quality (Details) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
Mar. 31, 2017 |
|||
|---|---|---|---|---|---|---|
| Total before allowance and deferred loan cost | $ 1,760,460,105 | $ 1,700,268,583 | $ 1,421,175,827 | |||
| Commercial Real Estate Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 1,186,455,713 | 1,100,000,000 | 994,016,759 | |||
| Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 341,106,892 | 355,786,942 | ||||
| Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 586,863,514 | 538,463,660 | ||||
| Commercial Real Estate Portfolio Segment [Member] | Hospitality Industry [Member] | ||||||
| Total before allowance and deferred loan cost | 171,122,930 | 171,588,414 | ||||
| Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 87,362,377 | 76,541,431 | ||||
| Residential Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 315,636,770 | 310,700,000 | 273,584,188 | |||
| Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 100,536,841 | 100,983,200 | ||||
| Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 136,072,289 | 129,762,493 | ||||
| Residential Portfolio Segment [Member] | Residential Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 43,176,406 | 42,416,013 | ||||
| Residential Portfolio Segment [Member] | HELOC and Jr Liens [Member] | ||||||
| Total before allowance and deferred loan cost | 35,851,235 | 37,539,757 | ||||
| Commercial Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 199,710,622 | 148,538,357 | ||||
| Consumer Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 58,656,999 | 59,841,340 | $ 5,036,523 | |||
| Pass [Member] | ||||||
| Total before allowance and deferred loan cost | 1,729,578,651 | 1,669,576,864 | ||||
| Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 330,856,628 | 345,447,055 | ||||
| Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 582,906,575 | 534,469,130 | ||||
| Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Hospitality Industry [Member] | ||||||
| Total before allowance and deferred loan cost | 170,829,433 | 171,588,414 | ||||
| Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 85,117,361 | 74,250,242 | ||||
| Pass [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 98,020,792 | 98,661,680 | ||||
| Pass [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 131,126,427 | 124,784,001 | ||||
| Pass [Member] | Residential Portfolio Segment [Member] | Residential Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 40,223,017 | 39,439,906 | ||||
| Pass [Member] | Residential Portfolio Segment [Member] | HELOC and Jr Liens [Member] | ||||||
| Total before allowance and deferred loan cost | 35,851,234 | 37,539,757 | ||||
| Pass [Member] | Commercial Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 196,051,157 | 183,620,663 | ||||
| Pass [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 58,596,027 | 59,776,016 | ||||
| Special Mention [Member] | ||||||
| Total before allowance and deferred loan cost | 15,089,012 | 14,646,573 | ||||
| Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 3,208,434 | 3,251,808 | ||||
| Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 1,406,508 | 1,421,265 | ||||
| Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member] | Hospitality Industry [Member] | ||||||
| Total before allowance and deferred loan cost | 293,497 | |||||
| Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 2,200,016 | 2,246,189 | ||||
| Special Mention [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 1,647,628 | 1,335,766 | ||||
| Special Mention [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 1,894,492 | 1,916,011 | ||||
| Special Mention [Member] | Residential Portfolio Segment [Member] | Residential Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 2,802,219 | 2,830,914 | ||||
| Special Mention [Member] | Commercial Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 1,575,246 | 1,579,296 | ||||
| Special Mention [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 60,972 | 65,324 | ||||
| Substandard [Member] | ||||||
| Total before allowance and deferred loan cost | 15,792,442 | 16,045,146 | ||||
| Substandard [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 7,041,830 | 7,088,079 | ||||
| Substandard [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 2,550,431 | 2,573,265 | ||||
| Substandard [Member] | Commercial Real Estate Portfolio Segment [Member] | Hospitality Industry [Member] | ||||||
| Total before allowance and deferred loan cost | ||||||
| Substandard [Member] | Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 45,000 | 45,000 | ||||
| Substandard [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 868,421 | 985,754 | ||||
| Substandard [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 3,051,370 | 3,062,481 | ||||
| Substandard [Member] | Residential Portfolio Segment [Member] | Residential Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 151,171 | 145,193 | ||||
| Substandard [Member] | Commercial Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 2,084,219 | 2,145,374 | ||||
| Substandard [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | ||||||
| Doubtful [Member] | ||||||
| Total before allowance and deferred loan cost | ||||||
| Unlikely to be Collected Financing Receivable [Member] | ||||||
| Total before allowance and deferred loan cost | ||||||
| Legacy [Member] | ||||||
| Total before allowance and deferred loan cost | [1] | 1,434,375,155 | 1,354,572,703 | |||
| Legacy [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | [1] | 260,238,291 | 268,128,087 | |||
| Legacy [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total before allowance and deferred loan cost | [1] | 536,823,023 | 485,536,921 | |||
| Legacy [Member] | Commercial Real Estate Portfolio Segment [Member] | Hospitality Industry [Member] | ||||||
| Total before allowance and deferred loan cost | [1] | 164,411,156 | 164,193,228 | |||
| Legacy [Member] | Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | [1] | 78,199,476 | 67,310,660 | |||
| Legacy [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Total before allowance and deferred loan cost | [1] | 79,549,169 | 79,762,682 | |||
| Legacy [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | [1] | 75,114,741 | 67,237,699 | |||
| Legacy [Member] | Residential Portfolio Segment [Member] | Residential Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | [1] | 36,633,466 | 35,879,853 | |||
| Legacy [Member] | Residential Portfolio Segment [Member] | HELOC and Jr Liens [Member] | ||||||
| Total before allowance and deferred loan cost | [1] | 20,896,736 | 21,520,339 | |||
| Legacy [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | [1] | 14,407,498 | 10,758,589 | |||
| Legacy [Member] | Pass [Member] | ||||||
| Total before allowance and deferred loan cost | 1,417,499,884 | 1,337,737,550 | ||||
| Legacy [Member] | Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 254,527,556 | 262,377,665 | ||||
| Legacy [Member] | Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 534,711,778 | 483,404,883 | ||||
| Legacy [Member] | Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Hospitality Industry [Member] | ||||||
| Total before allowance and deferred loan cost | 164,411,156 | 164,193,228 | ||||
| Legacy [Member] | Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 76,107,752 | 65,184,837 | ||||
| Legacy [Member] | Pass [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 78,607,349 | 78,814,931 | ||||
| Legacy [Member] | Pass [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 74,773,041 | 66,888,943 | ||||
| Legacy [Member] | Pass [Member] | Residential Portfolio Segment [Member] | Residential Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 34,485,110 | 33,712,187 | ||||
| Legacy [Member] | Pass [Member] | Residential Portfolio Segment [Member] | HELOC and Jr Liens [Member] | ||||||
| Total before allowance and deferred loan cost | 20,896,735 | 21,520,339 | ||||
| Legacy [Member] | Pass [Member] | Commercial Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 164,571,909 | 150,881,948 | ||||
| Legacy [Member] | Pass [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 14,407,498 | 10,758,589 | ||||
| Legacy [Member] | Special Mention [Member] | ||||||
| Total before allowance and deferred loan cost | 6,934,303 | 7,001,095 | ||||
| Legacy [Member] | Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 431,911 | 435,751 | ||||
| Legacy [Member] | Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 379,756 | 384,011 | ||||
| Legacy [Member] | Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member] | Hospitality Industry [Member] | ||||||
| Total before allowance and deferred loan cost | ||||||
| Legacy [Member] | Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 2,091,724 | 2,125,823 | ||||
| Legacy [Member] | Special Mention [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 298,030 | 300,824 | ||||
| Legacy [Member] | Special Mention [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 66,267 | 67,626 | ||||
| Legacy [Member] | Special Mention [Member] | Residential Portfolio Segment [Member] | Residential Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 2,148,357 | 2,167,666 | ||||
| Legacy [Member] | Special Mention [Member] | Commercial Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 1,518,258 | 1,519,394 | ||||
| Legacy [Member] | Special Mention [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | ||||||
| Legacy [Member] | Substandard [Member] | ||||||
| Total before allowance and deferred loan cost | 9,940,968 | 9,834,058 | ||||
| Legacy [Member] | Substandard [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 5,278,824 | 5,314,671 | ||||
| Legacy [Member] | Substandard [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 1,731,489 | 1,748,027 | ||||
| Legacy [Member] | Substandard [Member] | Commercial Real Estate Portfolio Segment [Member] | Hospitality Industry [Member] | ||||||
| Total before allowance and deferred loan cost | ||||||
| Legacy [Member] | Substandard [Member] | Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | ||||||
| Legacy [Member] | Substandard [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 643,790 | 646,927 | ||||
| Legacy [Member] | Substandard [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 275,433 | 281,130 | ||||
| Legacy [Member] | Substandard [Member] | Residential Portfolio Segment [Member] | Residential Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | ||||||
| Legacy [Member] | Substandard [Member] | Commercial Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 2,011,432 | 1,843,303 | ||||
| Legacy [Member] | Substandard [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | ||||||
| Legacy [Member] | Doubtful [Member] | ||||||
| Total before allowance and deferred loan cost | ||||||
| Legacy [Member] | Unlikely to be Collected Financing Receivable [Member] | ||||||
| Total before allowance and deferred loan cost | ||||||
| Acquired [Member] | ||||||
| Total before allowance and deferred loan cost | 326,084,950 | 345,695,880 | ||||
| Acquired [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 80,868,601 | 87,658,855 | ||||
| Acquired [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 50,040,491 | 52,926,739 | ||||
| Acquired [Member] | Commercial Real Estate Portfolio Segment [Member] | Hospitality Industry [Member] | ||||||
| Total before allowance and deferred loan cost | 6,711,774 | 7,395,186 | ||||
| Acquired [Member] | Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 9,162,901 | 9,230,771 | ||||
| Acquired [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 20,987,672 | 21,220,518 | ||||
| Acquired [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 60,957,548 | 62,524,794 | ||||
| Acquired [Member] | Residential Portfolio Segment [Member] | Residential Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 6,542,940 | 6,536,160 | ||||
| Acquired [Member] | Residential Portfolio Segment [Member] | HELOC and Jr Liens [Member] | ||||||
| Total before allowance and deferred loan cost | 14,954,499 | 16,019,418 | ||||
| Acquired [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 44,249,501 | 49,082,751 | ||||
| Acquired [Member] | Pass [Member] | ||||||
| Total before allowance and deferred loan cost | 312,078,767 | 331,839,314 | ||||
| Acquired [Member] | Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 76,329,072 | 83,069,390 | ||||
| Acquired [Member] | Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 48,194,797 | 51,064,247 | ||||
| Acquired [Member] | Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Hospitality Industry [Member] | ||||||
| Total before allowance and deferred loan cost | 6,418,277 | 7,395,186 | ||||
| Acquired [Member] | Pass [Member] | Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 9,009,609 | 9,065,405 | ||||
| Acquired [Member] | Pass [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 19,413,443 | 19,846,749 | ||||
| Acquired [Member] | Pass [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 56,353,386 | 57,895,058 | ||||
| Acquired [Member] | Pass [Member] | Residential Portfolio Segment [Member] | Residential Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 5,737,907 | 5,727,719 | ||||
| Acquired [Member] | Pass [Member] | Residential Portfolio Segment [Member] | HELOC and Jr Liens [Member] | ||||||
| Total before allowance and deferred loan cost | 14,954,499 | 16,019,418 | ||||
| Acquired [Member] | Pass [Member] | Commercial Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 31,479,248 | 32,738,715 | ||||
| Acquired [Member] | Pass [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 44,188,529 | 49,017,427 | ||||
| Acquired [Member] | Special Mention [Member] | ||||||
| Total before allowance and deferred loan cost | 8,154,709 | 7,645,478 | ||||
| Acquired [Member] | Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 2,776,523 | 2,816,057 | ||||
| Acquired [Member] | Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 1,026,752 | 1,037,254 | ||||
| Acquired [Member] | Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member] | Hospitality Industry [Member] | ||||||
| Total before allowance and deferred loan cost | 293,497 | |||||
| Acquired [Member] | Special Mention [Member] | Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 108,292 | 120,366 | ||||
| Acquired [Member] | Special Mention [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 1,349,598 | 1,034,942 | ||||
| Acquired [Member] | Special Mention [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 1,828,225 | 1,848,385 | ||||
| Acquired [Member] | Special Mention [Member] | Residential Portfolio Segment [Member] | Residential Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 653,862 | 663,248 | ||||
| Acquired [Member] | Special Mention [Member] | Commercial Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 56,988 | 59,902 | ||||
| Acquired [Member] | Special Mention [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 60,972 | 65,324 | ||||
| Acquired [Member] | Substandard [Member] | ||||||
| Total before allowance and deferred loan cost | 5,851,474 | 6,211,088 | ||||
| Acquired [Member] | Substandard [Member] | Commercial Real Estate Portfolio Segment [Member] | Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 1,763,006 | 1,773,408 | ||||
| Acquired [Member] | Substandard [Member] | Commercial Real Estate Portfolio Segment [Member] | Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 818,942 | 825,238 | ||||
| Acquired [Member] | Substandard [Member] | Commercial Real Estate Portfolio Segment [Member] | Hospitality Industry [Member] | ||||||
| Total before allowance and deferred loan cost | ||||||
| Acquired [Member] | Substandard [Member] | Commercial Real Estate Portfolio Segment [Member] | Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 45,000 | 45,000 | ||||
| Acquired [Member] | Substandard [Member] | Residential Portfolio Segment [Member] | Residential First Investment [Member] | ||||||
| Total before allowance and deferred loan cost | 224,631 | 338,827 | ||||
| Acquired [Member] | Substandard [Member] | Residential Portfolio Segment [Member] | Residential First Owner Occupied [Member] | ||||||
| Total before allowance and deferred loan cost | 2,775,937 | 2,781,351 | ||||
| Acquired [Member] | Substandard [Member] | Residential Portfolio Segment [Member] | Residential Land and A&D [Member] | ||||||
| Total before allowance and deferred loan cost | 151,171 | 145,193 | ||||
| Acquired [Member] | Substandard [Member] | Commercial Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | 72,787 | 302,071 | ||||
| Acquired [Member] | Substandard [Member] | Consumer Portfolio Segment [Member] | ||||||
| Total before allowance and deferred loan cost | ||||||
| Acquired [Member] | Doubtful [Member] | ||||||
| Total before allowance and deferred loan cost | ||||||
| Acquired [Member] | Unlikely to be Collected Financing Receivable [Member] | ||||||
| Total before allowance and deferred loan cost | ||||||
| ||||||
Note 4 - Loans - Allowance for Loan Losses Activity (Details) - USD ($) |
3 Months Ended | ||||||
|---|---|---|---|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Mar. 31, 2018 |
Mar. 31, 2017 |
||||
| Beginning balance | $ 5,920,586 | $ 6,195,469 | |||||
| Provision for loan losses | 394,896 | 440,491 | |||||
| Recoveries | 4,116 | 5,691 | |||||
| Total | 6,319,598 | 6,641,651 | |||||
| Loans charged off | (62,079) | (1,031,862) | |||||
| Ending Balance | 6,257,519 | 5,609,789 | |||||
| Loans held for investment, allowance for loan losses | 6,257,519 | 6,195,469 | $ 6,257,519 | $ 5,609,789 | |||
| Legacy [Member] | |||||||
| Beginning balance | [1] | 5,738,534 | |||||
| Ending Balance | [1] | 6,075,467 | |||||
| Individually evaluated for impairment | 241,830 | 351,399 | |||||
| Other loans not individually evaluated | 5,833,637 | 5,152,288 | |||||
| Loans held for investment, allowance for loan losses | [1] | 6,075,467 | 6,075,467 | ||||
| Acquired [Member] | |||||||
| Beginning balance | 182,052 | ||||||
| Ending Balance | 182,052 | ||||||
| Individually evaluated for impairment | 182,052 | 106,102 | |||||
| Loans held for investment, allowance for loan losses | 182,052 | 182,052 | |||||
| Commercial Portfolio Segment [Member] | |||||||
| Beginning balance | 1,262,030 | 1,372,235 | |||||
| Provision for loan losses | (50,372) | 430,390 | |||||
| Recoveries | 300 | 1,050 | |||||
| Total | 1,211,958 | 1,803,675 | |||||
| Loans charged off | (570,523) | ||||||
| Ending Balance | 1,211,958 | 1,233,152 | |||||
| Loans held for investment, allowance for loan losses | 1,262,030 | 1,372,235 | 1,211,958 | 1,233,152 | |||
| Commercial Portfolio Segment [Member] | Legacy [Member] | |||||||
| Individually evaluated for impairment | 95,431 | 300,960 | |||||
| Other loans not individually evaluated | 1,092,011 | 906,658 | |||||
| Commercial Portfolio Segment [Member] | Acquired [Member] | |||||||
| Individually evaluated for impairment | 24,516 | 25,534 | |||||
| Commercial Real Estate Portfolio Segment [Member] | |||||||
| Beginning balance | 3,783,735 | 3,990,152 | |||||
| Provision for loan losses | 527,631 | 132,613 | |||||
| Recoveries | 139 | 417 | |||||
| Total | 4,311,505 | 4,123,182 | |||||
| Loans charged off | (439,922) | ||||||
| Ending Balance | 4,311,505 | 3,683,260 | |||||
| Loans held for investment, allowance for loan losses | 3,783,735 | 3,990,152 | 4,311,505 | 3,683,260 | |||
| Commercial Real Estate Portfolio Segment [Member] | Legacy [Member] | |||||||
| Individually evaluated for impairment | 69,903 | 30,177 | |||||
| Other loans not individually evaluated | 4,161,530 | 3,653,083 | |||||
| Commercial Real Estate Portfolio Segment [Member] | Acquired [Member] | |||||||
| Individually evaluated for impairment | 80,072 | ||||||
| Residential Portfolio Segment [Member] | |||||||
| Beginning balance | 844,355 | 823,520 | |||||
| Provision for loan losses | (148,161) | (137,611) | |||||
| Recoveries | 32 | 900 | |||||
| Total | 696,226 | 686,809 | |||||
| Loans charged off | (2,268) | ||||||
| Ending Balance | 696,226 | 684,541 | |||||
| Loans held for investment, allowance for loan losses | 844,355 | 823,520 | 696,226 | 684,541 | |||
| Residential Portfolio Segment [Member] | Legacy [Member] | |||||||
| Individually evaluated for impairment | 76,496 | 20,262 | |||||
| Other loans not individually evaluated | 542,266 | 583,711 | |||||
| Residential Portfolio Segment [Member] | Acquired [Member] | |||||||
| Individually evaluated for impairment | 77,464 | 80,568 | |||||
| Consumer Portfolio Segment [Member] | |||||||
| Beginning balance | 30,466 | 9,562 | |||||
| Provision for loan losses | 65,798 | 15,099 | |||||
| Recoveries | 3,645 | 3,324 | |||||
| Total | 99,909 | 27,985 | |||||
| Loans charged off | (62,079) | (19,149) | |||||
| Ending Balance | 37,830 | 8,836 | |||||
| Loans held for investment, allowance for loan losses | $ 30,466 | $ 9,562 | 37,830 | 8,836 | |||
| Consumer Portfolio Segment [Member] | Legacy [Member] | |||||||
| Individually evaluated for impairment | |||||||
| Other loans not individually evaluated | 37,830 | 8,836 | |||||
| Consumer Portfolio Segment [Member] | Acquired [Member] | |||||||
| Individually evaluated for impairment | |||||||
| |||||||
Note 4 - Loans - Allowance by Impairment Methodology (Details) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
Mar. 31, 2017 |
|||
|---|---|---|---|---|---|---|
| Individually evaluated for impairment without specific reserve (ASC 310-30 at acquisition) | $ 6,799,656 | $ 7,078,918 | ||||
| Total Loans | 1,760,460,105 | $ 1,700,268,583 | 1,421,175,827 | |||
| Commercial Portfolio Segment [Member] | ||||||
| Individually evaluated for impairment without specific reserve (ASC 310-30 at acquisition) | ||||||
| Total Loans | 199,710,622 | 148,538,357 | ||||
| Commercial Real Estate Portfolio Segment [Member] | ||||||
| Individually evaluated for impairment without specific reserve (ASC 310-30 at acquisition) | 3,434,002 | 3,934,823 | ||||
| Total Loans | 1,186,455,713 | 1,100,000,000 | 994,016,759 | |||
| Residential Portfolio Segment [Member] | ||||||
| Individually evaluated for impairment without specific reserve (ASC 310-30 at acquisition) | 3,351,654 | 3,144,095 | ||||
| Total Loans | 315,636,770 | 310,700,000 | 273,584,188 | |||
| Consumer Portfolio Segment [Member] | ||||||
| Individually evaluated for impairment without specific reserve (ASC 310-30 at acquisition) | 14,000 | |||||
| Total Loans | 58,656,999 | 59,841,340 | 5,036,523 | |||
| Legacy [Member] | ||||||
| Individually evaluated for impairment with specific reserve | 926,936 | 1,100,788 | ||||
| Individually evaluated for impairment without specific reserve | 3,528,019 | 3,711,172 | ||||
| Other loans not individually evaluated | 1,429,920,200 | 1,236,854,536 | ||||
| Total Loans | [1] | 1,434,375,155 | 1,354,572,703 | |||
| Legacy [Member] | Commercial Portfolio Segment [Member] | ||||||
| Individually evaluated for impairment with specific reserve | 95,431 | 300,960 | ||||
| Individually evaluated for impairment without specific reserve | 377,936 | 414,324 | ||||
| Other loans not individually evaluated | 167,628,232 | 142,496,583 | ||||
| Legacy [Member] | Commercial Real Estate Portfolio Segment [Member] | ||||||
| Individually evaluated for impairment with specific reserve | 587,663 | 607,327 | ||||
| Individually evaluated for impairment without specific reserve | 2,925,991 | 3,033,353 | ||||
| Other loans not individually evaluated | 1,036,158,293 | 888,876,611 | ||||
| Legacy [Member] | Residential Portfolio Segment [Member] | ||||||
| Individually evaluated for impairment with specific reserve | 243,842 | 192,501 | ||||
| Individually evaluated for impairment without specific reserve | 224,092 | 263,495 | ||||
| Other loans not individually evaluated | 211,726,177 | 200,565,837 | ||||
| Legacy [Member] | Consumer Portfolio Segment [Member] | ||||||
| Individually evaluated for impairment with specific reserve | ||||||
| Individually evaluated for impairment without specific reserve | ||||||
| Other loans not individually evaluated | 14,407,498 | 4,915,505 | ||||
| Total Loans | [1] | 14,407,498 | 10,758,589 | |||
| Acquired [Member] | ||||||
| Individually evaluated for impairment with specific reserve subsequent to acquisition (ASC 310-20 at acquisition) | 475,540 | 225,651 | ||||
| Individually evaluated for impairment without specific reserve (ASC 310-20 at acquisition) | 1,564,990 | 1,048,310 | ||||
| Collectively evaluated for impairment without reserve (ASC 310-20 at acquisition) | 317,244,764 | 171,156,452 | ||||
| Total Loans | 326,084,950 | 345,695,880 | ||||
| Acquired [Member] | Commercial Portfolio Segment [Member] | ||||||
| Individually evaluated for impairment with specific reserve subsequent to acquisition (ASC 310-20 at acquisition) | 71,049 | 75,221 | ||||
| Individually evaluated for impairment without specific reserve (ASC 310-20 at acquisition) | ||||||
| Collectively evaluated for impairment without reserve (ASC 310-20 at acquisition) | 31,537,974 | 5,251,269 | ||||
| Acquired [Member] | Commercial Real Estate Portfolio Segment [Member] | ||||||
| Individually evaluated for impairment with specific reserve subsequent to acquisition (ASC 310-20 at acquisition) | 154,297 | 150,430 | ||||
| Individually evaluated for impairment without specific reserve (ASC 310-20 at acquisition) | 299,445 | |||||
| Collectively evaluated for impairment without reserve (ASC 310-20 at acquisition) | 142,896,022 | 97,414,215 | ||||
| Acquired [Member] | Residential Portfolio Segment [Member] | ||||||
| Individually evaluated for impairment with specific reserve subsequent to acquisition (ASC 310-20 at acquisition) | 250,194 | |||||
| Individually evaluated for impairment without specific reserve (ASC 310-20 at acquisition) | 1,265,545 | 1,048,310 | ||||
| Collectively evaluated for impairment without reserve (ASC 310-20 at acquisition) | 98,575,266 | 68,369,950 | ||||
| Acquired [Member] | Consumer Portfolio Segment [Member] | ||||||
| Individually evaluated for impairment with specific reserve subsequent to acquisition (ASC 310-20 at acquisition) | ||||||
| Individually evaluated for impairment without specific reserve (ASC 310-20 at acquisition) | ||||||
| Collectively evaluated for impairment without reserve (ASC 310-20 at acquisition) | 44,235,502 | $ 121,018 | ||||
| Total Loans | $ 44,249,501 | $ 49,082,751 | ||||
| ||||||
Note 5 - Other Real Estate Owned (Details Textual) |
Mar. 31, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
|---|---|---|
| Other Real Estate, Foreclosed Assets, and Repossessed Assets, Total | $ 1,799,598 | $ 2,003,998 |
| Loans in Process of Foreclosure, Number | 2 | 1 |
| Mortgage Loans in Process of Foreclosure, Amount | $ 529,000 | $ 277,000 |
| Residential Portfolio Segment [Member] | ||
| Other Real Estate, Foreclosed Assets, and Repossessed Assets, Total | $ 966,000 |
Note 5 - Other Real Estate Owned - Transactions in Other Real Estate Owned (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
| Beginning balance | $ 2,003,998 | |
| Real estate acquired through foreclosure of loans | ||
| Addiitonal valuation adjustment of real estate owned | ||
| Sales/deposits on sales | (191,884) | |
| Net realized gain/(loss) | 12,516 | $ (17,689) |
| Total end of period | 1,799,598 | |
| Legacy [Member] | ||
| Beginning balance | 425,000 | |
| Real estate acquired through foreclosure of loans | ||
| Addiitonal valuation adjustment of real estate owned | ||
| Sales/deposits on sales | ||
| Net realized gain/(loss) | ||
| Total end of period | 425,000 | |
| Acquired [Member] | ||
| Beginning balance | 1,578,998 | |
| Real estate acquired through foreclosure of loans | ||
| Addiitonal valuation adjustment of real estate owned | ||
| Sales/deposits on sales | (191,884) | |
| Net realized gain/(loss) | 12,516 | |
| Total end of period | $ 1,374,598 | |
Note 6 - Earnings Per Share - Weighted Average Number of Shares (Details) - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
| Weighted average number of shares (in shares) | 12,544,266 | 10,926,181 |
| Dilutive average number of shares (in shares) | 12,743,282 | 11,139,802 |
Note 7 - Stock Based Compensation (Details Textual) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
| Allocated Share-based Compensation Expense, Total | $ 288,559 | $ 115,113 |
| Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition | 2 years 73 days | |
| Common Stock, Capital Shares Reserved for Future Issuance | 232,005 | |
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 40,000 | 0 |
| Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ 8.63 | |
| Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 19,443 | 24,415 |
| Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 32 | |
| Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period | 0 | 0 |
| Officer [Member] | ||
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period | 36,951 | 8,500 |
| Employee Stock Option [Member] | ||
| Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total | $ 1,500,000 | |
| Restricted Stock [Member] | ||
| Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total | $ 4,100,000 | |
Note 8 - Fair Value Measurement (Details Textual) - Fair Value, Inputs, Level 3 [Member] $ in Millions |
Mar. 31, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
|---|---|---|
| Assets, Fair Value Disclosure | $ 7.9 | $ 8.2 |
| Minimum [Member] | Measurement Input, Discount Rate [Member] | ||
| Other Real Estate Owned, Measurement Input | 0 | |
| Impaired Financing Receivable Measurement Input | 0 | |
| Maximum [Member] | Measurement Input, Discount Rate [Member] | ||
| Other Real Estate Owned, Measurement Input | 50 | |
| Impaired Financing Receivable Measurement Input | 50 |
Note 8 - Fair Value Measurement - Assets and Liabilities Measured on a Recurring Basis (Details) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Investment securities available for sale-at fair value | $ 210,353,788 | $ 218,352,558 |
| US Treasury Securities [Member] | ||
| Investment securities available for sale-at fair value | 2,993,438 | 3,005,391 |
| US Government Agencies Debt Securities [Member] | ||
| Investment securities available for sale-at fair value | 18,635,189 | 17,733,766 |
| Corporate Debt Securities [Member] | ||
| Investment securities available for sale-at fair value | 14,714,109 | 14,658,059 |
| US States and Political Subdivisions Debt Securities [Member] | ||
| Investment securities available for sale-at fair value | 76,418,216 | 79,555,288 |
| Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | ||
| Investment securities available for sale-at fair value | 18,354,501 | 19,454,235 |
| Federal National Mortgage Association Certificates and Obligations (FNMA) [Member] | ||
| Investment securities available for sale-at fair value | 59,441,379 | 62,945,917 |
| Government National Mortgage Association Certificates and Obligations (GNMA) [Member] | ||
| Investment securities available for sale-at fair value | 19,796,956 | 20,999,902 |
| Fair Value, Measurements, Recurring [Member] | ||
| Investment securities available for sale-at fair value | 210,354,000 | 218,353,000 |
| Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | ||
| Investment securities available for sale-at fair value | 2,994,000 | 3,005,000 |
| Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | ||
| Investment securities available for sale-at fair value | 192,646,000 | 200,690,000 |
| Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | ||
| Investment securities available for sale-at fair value | 14,714,000 | 14,658,000 |
| Fair Value, Measurements, Recurring [Member] | US Treasury Securities [Member] | ||
| Investment securities available for sale-at fair value | 2,994,000 | 3,005,000 |
| Fair Value, Measurements, Recurring [Member] | US Treasury Securities [Member] | Fair Value, Inputs, Level 1 [Member] | ||
| Investment securities available for sale-at fair value | 2,994,000 | 3,005,000 |
| Fair Value, Measurements, Recurring [Member] | US Treasury Securities [Member] | Fair Value, Inputs, Level 2 [Member] | ||
| Investment securities available for sale-at fair value | ||
| Fair Value, Measurements, Recurring [Member] | US Treasury Securities [Member] | Fair Value, Inputs, Level 3 [Member] | ||
| Investment securities available for sale-at fair value | ||
| Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member] | ||
| Investment securities available for sale-at fair value | 18,635,000 | 17,734,000 |
| Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member] | ||
| Investment securities available for sale-at fair value | ||
| Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member] | ||
| Investment securities available for sale-at fair value | 18,635,000 | 17,734,000 |
| Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member] | ||
| Investment securities available for sale-at fair value | ||
| Fair Value, Measurements, Recurring [Member] | Corporate Debt Securities [Member] | ||
| Investment securities available for sale-at fair value | 14,714,000 | 14,658,000 |
| Fair Value, Measurements, Recurring [Member] | Corporate Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member] | ||
| Investment securities available for sale-at fair value | ||
| Fair Value, Measurements, Recurring [Member] | Corporate Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member] | ||
| Investment securities available for sale-at fair value | ||
| Fair Value, Measurements, Recurring [Member] | Corporate Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member] | ||
| Investment securities available for sale-at fair value | 14,714,000 | 14,658,000 |
| Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | ||
| Investment securities available for sale-at fair value | 76,418,000 | 79,555,000 |
| Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member] | ||
| Investment securities available for sale-at fair value | ||
| Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member] | ||
| Investment securities available for sale-at fair value | 76,418,000 | 79,555,000 |
| Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member] | ||
| Investment securities available for sale-at fair value | ||
| Fair Value, Measurements, Recurring [Member] | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | ||
| Investment securities available for sale-at fair value | 18,355,000 | 19,455,000 |
| Fair Value, Measurements, Recurring [Member] | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Fair Value, Inputs, Level 1 [Member] | ||
| Investment securities available for sale-at fair value | ||
| Fair Value, Measurements, Recurring [Member] | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Fair Value, Inputs, Level 2 [Member] | ||
| Investment securities available for sale-at fair value | 18,355,000 | 19,455,000 |
| Fair Value, Measurements, Recurring [Member] | Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member] | Fair Value, Inputs, Level 3 [Member] | ||
| Investment securities available for sale-at fair value | ||
| Fair Value, Measurements, Recurring [Member] | Federal National Mortgage Association Certificates and Obligations (FNMA) [Member] | ||
| Investment securities available for sale-at fair value | 59,441,000 | 62,946,000 |
| Fair Value, Measurements, Recurring [Member] | Federal National Mortgage Association Certificates and Obligations (FNMA) [Member] | Fair Value, Inputs, Level 1 [Member] | ||
| Investment securities available for sale-at fair value | ||
| Fair Value, Measurements, Recurring [Member] | Federal National Mortgage Association Certificates and Obligations (FNMA) [Member] | Fair Value, Inputs, Level 2 [Member] | ||
| Investment securities available for sale-at fair value | 59,441,000 | 62,946,000 |
| Fair Value, Measurements, Recurring [Member] | Federal National Mortgage Association Certificates and Obligations (FNMA) [Member] | Fair Value, Inputs, Level 3 [Member] | ||
| Investment securities available for sale-at fair value | ||
| Fair Value, Measurements, Recurring [Member] | Government National Mortgage Association Certificates and Obligations (GNMA) [Member] | ||
| Investment securities available for sale-at fair value | 19,797,000 | 21,000,000 |
| Fair Value, Measurements, Recurring [Member] | Government National Mortgage Association Certificates and Obligations (GNMA) [Member] | Fair Value, Inputs, Level 1 [Member] | ||
| Investment securities available for sale-at fair value | ||
| Fair Value, Measurements, Recurring [Member] | Government National Mortgage Association Certificates and Obligations (GNMA) [Member] | Fair Value, Inputs, Level 2 [Member] | ||
| Investment securities available for sale-at fair value | 19,797,000 | 21,000,000 |
| Fair Value, Measurements, Recurring [Member] | Government National Mortgage Association Certificates and Obligations (GNMA) [Member] | Fair Value, Inputs, Level 3 [Member] | ||
| Investment securities available for sale-at fair value |
Note 8 - Fair Value Measurement - Reconciliation of Changes in Fair Value (Details) - Fair Value, Inputs, Level 3 [Member] $ in Thousands |
3 Months Ended |
|---|---|
|
Mar. 31, 2018
USD ($)
| |
| Balance | $ 14,658 |
| Included in earnings | |
| Included in other comprehensive income | 56 |
| Purchases, issuances, sales and settlements | |
| Transfers into or out of level 3 | |
| Balance | $ 14,714 |
Note 8 - Fair Value Measurement - Loan Fair Value on a Non-recurring Basis (Details) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
||
|---|---|---|---|---|
| Impaired Loans | $ 6,495,485 | $ 6,615,350 | ||
| Fair Value, Inputs, Level 3 [Member] | ||||
| Total | 7,900,000 | 8,200,000 | ||
| Fair Value, Measurements, Nonrecurring [Member] | ||||
| Impaired Loans | 6,071,000 | 6,191,000 | ||
| Other real estate owned | 1,800,000 | 2,004,000 | ||
| Total | 7,871,000 | 8,195,000 | ||
| Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member] | ||||
| Impaired Loans | ||||
| Other real estate owned | ||||
| Total | ||||
| Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member] | ||||
| Impaired Loans | ||||
| Other real estate owned | ||||
| Total | ||||
| Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member] | ||||
| Impaired Loans | 6,071,000 | 6,191,000 | ||
| Other real estate owned | 1,800,000 | 2,004,000 | ||
| Total | 7,871,000 | 8,195,000 | ||
| Legacy [Member] | ||||
| Impaired Loans | 4,454,955 | 4,502,108 | ||
| Legacy [Member] | Fair Value, Measurements, Nonrecurring [Member] | ||||
| Impaired Loans | 4,213,000 | 4,260,000 | ||
| Other real estate owned | 425,000 | 425,000 | ||
| Legacy [Member] | Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member] | ||||
| Impaired Loans | ||||
| Other real estate owned | ||||
| Legacy [Member] | Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member] | ||||
| Impaired Loans | ||||
| Other real estate owned | ||||
| Legacy [Member] | Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member] | ||||
| Impaired Loans | 4,213,000 | 4,260,000 | ||
| Other real estate owned | 425,000 | 425,000 | ||
| Acquired [Member] | ||||
| Impaired Loans | [1] | 2,040,530 | 2,113,242 | |
| Acquired [Member] | Fair Value, Measurements, Nonrecurring [Member] | ||||
| Impaired Loans | 1,858,000 | 1,931,000 | ||
| Other real estate owned | 1,375,000 | 1,579,000 | ||
| Acquired [Member] | Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member] | ||||
| Impaired Loans | ||||
| Other real estate owned | ||||
| Acquired [Member] | Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member] | ||||
| Impaired Loans | ||||
| Other real estate owned | ||||
| Acquired [Member] | Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member] | ||||
| Impaired Loans | 1,858,000 | 1,931,000 | ||
| Other real estate owned | $ 1,375,000 | $ 1,579,000 | ||
| ||||
Note 8 - Fair Value Measurement - Carrying and Fair Value (Details) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Loans held for sale, fair value | $ 4,073,887 | $ 4,557,722 |
| Bank owned life insurance | 41,849,569 | 41,612,496 |
| Accrued interest receivable | 5,310,151 | 5,476,230 |
| Non-interest bearing | 572,119,981 | 451,803,052 |
| Interest bearing | 1,213,584,463 | 1,201,100,317 |
| Accrued Interest payable | 1,105,830 | 1,471,954 |
| Reported Value Measurement [Member] | ||
| Cash and cash equivalents | 88,506,000 | 35,174,000 |
| Loans receivable, net | 1,756,577,000 | 1,696,361,000 |
| Loans held for sale, fair value | 3,934,000 | 4,404,000 |
| Investment securities available for sale | 210,354,000 | 218,353,000 |
| Equity Securities at cost | 7,783,000 | 8,978,000 |
| Bank owned life insurance | 41,850,000 | 41,612,000 |
| Accrued interest receivable | 5,310,000 | 5,476,000 |
| Non-interest bearing | 572,120,000 | 451,803,000 |
| Interest bearing | 1,213,584,000 | 1,201,100,000 |
| Short term borrowings | 161,478,000 | 192,612,000 |
| Long term borrowings | 38,173,000 | 38,107,000 |
| Accrued Interest payable | 1,106,000 | 1,472,000 |
| Estimate of Fair Value Measurement [Member] | ||
| Cash and cash equivalents | 88,506,000 | 35,174,000 |
| Loans receivable, net | 1,722,797,000 | 1,692,018,000 |
| Loans held for sale, fair value | 4,074,000 | 4,558,000 |
| Investment securities available for sale | 210,354,000 | 218,353,000 |
| Equity Securities at cost | 7,783,000 | 8,978,000 |
| Bank owned life insurance | 41,850,000 | 41,612,000 |
| Accrued interest receivable | 5,310,000 | 5,476,000 |
| Non-interest bearing | 572,120,000 | 451,803,000 |
| Interest bearing | 1,219,276,000 | 1,205,936,000 |
| Short term borrowings | 161,478,000 | 192,612,000 |
| Long term borrowings | 38,173,000 | 38,107,000 |
| Accrued Interest payable | 1,106,000 | 1,472,000 |
| Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member] | ||
| Cash and cash equivalents | 88,506,000 | 35,174,000 |
| Loans receivable, net | ||
| Loans held for sale, fair value | ||
| Investment securities available for sale | 2,993,000 | 3,005,000 |
| Equity Securities at cost | ||
| Bank owned life insurance | ||
| Accrued interest receivable | ||
| Non-interest bearing | ||
| Interest bearing | ||
| Short term borrowings | ||
| Long term borrowings | ||
| Accrued Interest payable | ||
| Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | ||
| Cash and cash equivalents | ||
| Loans receivable, net | ||
| Loans held for sale, fair value | 4,074,000 | 4,558,000 |
| Investment securities available for sale | 192,647,000 | 200,690,000 |
| Equity Securities at cost | 7,783,000 | 8,978,000 |
| Bank owned life insurance | 41,850,000 | 41,612,000 |
| Accrued interest receivable | 1,152,000 | 1,215,000 |
| Non-interest bearing | 572,120,000 | 451,803,000 |
| Interest bearing | 1,219,276,000 | 1,205,936,000 |
| Short term borrowings | 161,478,000 | 192,612,000 |
| Long term borrowings | 38,173,000 | 38,107,000 |
| Accrued Interest payable | 1,106,000 | 1,472,000 |
| Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member] | ||
| Cash and cash equivalents | ||
| Loans receivable, net | 1,722,797,000 | 1,692,018,000 |
| Loans held for sale, fair value | ||
| Investment securities available for sale | 14,714,000 | 14,658,000 |
| Equity Securities at cost | ||
| Bank owned life insurance | ||
| Accrued interest receivable | 4,158,000 | 4,261,000 |
| Non-interest bearing | ||
| Interest bearing | ||
| Short term borrowings | ||
| Long term borrowings | ||
| Accrued Interest payable |
Note 9 - Short Term Borrowings (Details Textual) - USD ($) $ in Millions |
Mar. 31, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Secured Debt, Repurchase Agreements | $ 36.5 | $ 37.6 |
| Securities Sold under Agreements to Repurchase, Total | 36.5 | |
| Secured Debt [Member] | Federal Home Loan Bank of Atlanta [Member] | ||
| Federal Home Loan Bank, Advances, Maturities Summary, Due in Next Twelve Months, Total | 125.0 | $ 155.0 |
| Securities Sold under Agreements to Repurchase [Member] | ||
| Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged | $ 61.5 |
Note 10 - Long Term Borrowings (Details Textual) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
|
| Long-term Debt, Total | $ 38,172,653 | $ 38,106,930 |
| Trust One Maturing on March 17, 2034 [Member] | ||
| Long-term Debt, Fair Value | 4,000,000 | |
| Liabilities, Fair Value Adjustment | 1,400,000 | |
| Trust Two Maturing on December 14, 2035 [Member] | ||
| Long-term Debt, Fair Value | 2,500,000 | |
| Liabilities, Fair Value Adjustment | 1,200,000 | |
| Subordinated Debt [Member] | ||
| Long-term Debt, Total | $ 35,000,000 | |
| Debt Instrument, Interest Rate, Stated Percentage | 5.625% | |
| Long-term Debt, Fair Value | $ 34,100,000 | |
| Trust Preferred Subordinated Debentures [Member] | ||
| Long-term Debt, Fair Value | 4,100,000 | |
| Liabilities, Fair Value Adjustment | $ 2,600,000 |
Note 11 - Subsequent Event (Details Textual) - Bay Bancorp, Inc [Member] - USD ($) |
Apr. 13, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets, Total | $ 659,000,000 | |
| Subsequent Event [Member] | ||
| Business Acquisition Amount of Company Stock Received Per Share | $ 0.4088 | |
| Stock Issued During Period, Shares, Acquisitions | 4,408,087 | |
| Business Combination, Consideration Transferred, Total | $ 143,600,000 | |
| Business Combination, Consideration Transferred, Equity Interests Issued and Issuable | 142,600,000 | |
| Payments to Acquire Businesses, Gross | $ 968,805 |