SCHEDULE 14A
INFORMATION
Proxy Statement
Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. _____)
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Filed by the
Registrant ☒
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Filed by a Party
other than the Registrant ☐
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Check the
appropriate box:
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Preliminary Proxy
Statement
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Confidential, for
Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive Proxy
Statement
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Definitive
Additional Materials
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Soliciting Material
under §240.14a-12
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OLD LINE BANCSHARES,
INC
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(Name of Registrant
as Specified In Its Charter)
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(Name of Person(s)
Filing Proxy Statement, if other than the Registrant)
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Payment of Filing
Fee (Check the appropriate box):
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No fee
required.
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Fee computed on
table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title of each class
of securities to which transaction applies:
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(2)
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Aggregate number of
securities to which transaction applies:
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(3)
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Per unit price or
other underlying value of transaction computed pursuant to Exchange
Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4)
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Proposed maximum
aggregate value of transaction:
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(5)
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Total fee
paid:
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Fee paid previously
with preliminary materials.
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Check box if any
part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously
Paid:
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(2)
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Form, Schedule or
Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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OLD
LINE BANCSHARES, INC.
1525
Pointer Ridge Place
Bowie,
Maryland 20716
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD MAY 24, 2017 AT 5:00 P.M.
The
Annual Meeting of Stockholders of Old Line Bancshares, Inc., a
Maryland corporation, will be held on May 24, 2017, at 5:00 p.m.,
local time, at Old Line Bancshares, Inc.’s office located at
1525 Pointer Ridge Place, Bowie, Maryland for the following
purposes:
1.
To elect four
directors to serve for a three-year term ending at the Annual
Meeting of Stockholders to be held in 2020, and until their
successors are duly elected and qualified.
2.
To ratify the
appointment of Dixon Hughes Goodman LLP as independent public
accountants to audit the financial statements of Old Line
Bancshares, Inc. for 2017.
3.
To vote on a
non-binding advisory proposal to approve the compensation of our
named executive officers.
4.
To act upon any
other matter that may properly come before the meeting or any
adjournment or postponement thereof.
Only
stockholders of record at the close of business on April 3, 2017
will be entitled to notice of and to vote at the meeting or any
adjournment or postponement thereof.
Accompanying this
notice is a proxy statement and proxy form.
Whether or not you plan to attend the
meeting
,
you are urged to
submit your proxy as soon as possible so that your shares can be
voted at the meeting in accordance with your instructions. You may
vote by signing, dating and mailing the proxy card or by telephone
by calling 1-800-690-6903 and following the voice mail prompts or
over the Internet by following the instructions at
www.proxyvote.com
.
You will need information from your proxy card or electronic
delivery notice to submit your proxy.
You may revoke your
proxy at any time prior to or at the meeting by written notice to
Old Line Bancshares, Inc., by executing a proxy bearing a later
date, or by attending the meeting and voting in
person.
You are
cordially invited to attend the meeting in person.
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By
Order of the Board of Directors,
Mark A.
Semanie, Secretary
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Bowie,
Maryland
April
20, 2017
OLD LINE BANCSHARES, INC.
1525 Pointer Ridge Place
Bowie, Maryland 20716
PROXY STATEMENT
Annual Meeting of Stockholders to be held on
May 24, 2017 at 5:00 P.M.
INTRODUCTION
This
Proxy Statement is furnished on or about April 20, 2017 to
stockholders of Old Line Bancshares, Inc. in connection with the
solicitation of proxies by Old Line Bancshares, Inc.’s Board
of Directors to be used at the annual meeting of stockholders
described in the accompanying notice (the “Annual
Meeting”) and at any adjournments or postponements thereof.
The purposes of the Annual Meeting are set forth in the
accompanying notice of annual meeting of stockholders.
This
proxy material is being sent to Old Line Bancshares, Inc.’s
stockholders on or about April 20, 2017. Old Line Bancshares,
Inc.’s annual report on Form 10-K, including financial
statements for the year ended December 31, 2016 has been mailed to
all stockholders with this proxy material.
If you
are a stockholder of record (i.e. you own the shares directly in
your name), you may attend the meeting and vote in person as long
as you present valid proof of identification at the meeting. If you
hold your shares in Old Line Bancshares, Inc. beneficially but not
of record (i.e. the shares are held in the name of a broker or
other nominee for your benefit) you must present proof of
beneficial ownership in order to attend the meeting, which you can
generally obtain from the record holder, and you must obtain a
proxy from the record holder in order to vote your shares if you
wish to cast your vote in person at the meeting. For further
information, please contact our executive offices at (301) 430-2500
during regular business hours.
SOLICITATION AND REVOCATION OF PROXIES
The
enclosed proxy is solicited by the Board of Directors of Old Line
Bancshares, Inc. The Board of Directors selected Jeffrey A. Rivest
and Thomas H. Graham,
or
either of them, to act as proxies with full power of substitution.
The proxy is revocable at any time prior to or at the Annual
Meeting by written notice to Old Line Bancshares, Inc., by
executing a proxy bearing a later date, or by attending the Annual
Meeting and voting in person. A written notice of revocation of a
proxy should be sent to the Secretary, Old Line Bancshares, Inc.,
1525 Pointer Ridge Place, Bowie, Maryland 20716, and will be
effective if received by the Secretary prior to the Annual Meeting.
The presence of a stockholder at the Annual Meeting alone will not
automatically revoke such stockholder’s proxy.
In
addition to solicitation by mail, officers and directors of Old
Line Bancshares, Inc. may solicit proxies personally or by
telephone. Old Line Bancshares, Inc. will not specifically
compensate these persons for soliciting such proxies. Old Line
Bancshares, Inc. will bear the cost of soliciting proxies. These
costs may include reasonable out of pocket expenses in forwarding
proxy materials to beneficial owners. Old Line Bancshares, Inc.
will reimburse brokers and other persons for their reasonable
expenses in forwarding proxy materials to customers who are
beneficial owners of the common stock of Old Line Bancshares, Inc.
registered in the name of nominees.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON MAY 24, 2017
The
Proxy Statement for the annual meeting and our annual report on
Form 10-K for the year ended December 31, 2016 are available at
www.proxyvote.com.
Whether
or not you plan to attend the Annual Meeting, you may submit a
proxy to vote your shares via Internet, telephone or mail as
outlined below. You will need information from your proxy card or
electronic delivery notice to submit your proxy to vote your shares
by Internet or telephone.
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By Internet: Go to
www.proxyvote.com and follow the instructions.
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By Telephone: Call
1-800-690-6903 and follow the voice mail prompts.
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By Mail: Mark your
vote, sign your name exactly as it appears on your proxy card, date
your proxy card and return it in the envelope
provided.
OUTSTANDING SHARES AND VOTING RIGHTS
Stockholders of
record at the close of business on April 3, 2017 (the “Record
Date”) are entitled to notice of and to vote at the Annual
Meeting. As of the close of business on that date, there were
outstanding and entitled to vote 10,943,830 shares of common stock,
$0.01 par value per share, each of which is entitled to one
vote.
The
presence, in person or by proxy, of stockholders entitled to cast a
majority of all the votes entitled to be cast at the Annual Meeting
will be necessary to constitute a quorum at the Annual Meeting.
Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction
of business at the Annual Meeting.
Assuming a quorum
is present, the affirmative vote of a plurality of the shares cast
in person or represented by proxy at the Annual Meeting is required
to elect the director nominees. In other words, the nominees to
receive the greatest number of votes cast, up to the number of
nominees up for election, will be elected. Abstentions and broker
non-votes will not affect the outcome of the election of
directors.
The
affirmative vote of at least a majority of all votes cast at the
Annual Meeting is sufficient for the ratification of the
appointment of Dixon Hughes Goodman LLP. Abstentions and broker
non-votes are not included in calculating votes cast with respect
to this proposal and will have no effect on the outcome of this
proposal.
The
affirmative vote of at least a majority of all votes cast at the
Annual Meeting is required for the approval of the non-binding
resolution to approve the compensation of our named executive
officers. Abstentions and broker non-votes are not included in
calculating votes cast with respect to this proposal and will have
no effect on the outcome of this proposal.
If your
shares are held in the name of a bank, brokerage firm or other
similar holder of record (referred to as “in street
name”), you will receive instructions from the holder of
record that you must follow in order for you to specify how your
shares will be voted. If you do not specify how you would like your
shares to be voted, your shares held in street name may still be
voted but only by certain record holders and only with respect to
certain limited matters. In general, holders of record who are
brokers have the authority to vote shares for which their customers
do not provide voting instructions on certain routine, uncontested
items. In the case of contested items or items deemed non-routine,
the brokerage institution holding street name shares cannot vote
the shares if it has not received voting instructions. These are
considered to be “broker non-votes.” If your shares are
held of record by a person or institution other than a broker,
whether those shares can be voted without specific instructions
from you will depend on your individual arrangement with that
record holder, in particular, whether you have granted such record
holder discretionary authority to vote your shares.
Under
the applicable rules of the various securities exchanges applicable
to their member brokerage firms, the proposal to ratify the
appointment of our independent registered public accounting firm is
considered a “routine” item upon which brokerage firms
may vote in their discretion on behalf of their clients if such
clients have not furnished voting instructions. If your broker
holder of record signs and returns a proxy card on your behalf, but
does not indicate how the common stock should be voted, the common
stock represented on the proxy card will be voted FOR ratification
of the appointment of Dixon Hughes Goodman LLP as our independent
public accounting firm for 2017. The election of directors and the
non-binding advisory vote to approve the compensation of our named
executive officers are considered “non-routine” items
for which brokerage firms may not vote in their discretion on
behalf of clients who do not furnish voting instructions and, thus,
there may be “broker non-votes” at the Annual Meeting
with respect to these proposals. IF YOU HOLD YOUR SHARES IN STREET
NAME THROUGH A BROKER, YOU MUST PROVIDE VOTING INSTRUCTIONS TO YOUR
BROKER RECORD HOLDER IN ORDER FOR YOUR SHARES TO BE VOTED ON IN THE
ELECTION OF DIRECTORS AND THE NON-BINDING ADVISORY VOTE ON THE
COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION. FURTHER, IF
YOUR SHARES ARE HELD IN STREET NAME BY A BANK OR OTHER NOMINEE TO
WHOM YOU HAVE NOT GRANTED DISCRETIONARY AUTHORITY TO VOTE YOUR
SHARES, YOUR SHARES WILL NOT BE VOTED ON ANY PROPOSAL AT THE
MEETING UNLESS YOU PROVIDE VOTING INSTRUCTIONS TO YOUR RECORD
HOLDER.
All
proxies will be voted as directed by the stockholder on the proxy
form. A proxy, if executed and not revoked, will be voted in the
following manner (unless it contains instructions to the contrary,
in which event it will be voted in accordance with such
instructions), except that shares held by brokers for which
instructions were not received by the beneficial owners will only
be voted with respect to ratification of the auditors:
FOR the
nominees for director named below.
FOR
ratification of the appointment of Dixon Hughes Goodman LLP as
independent public accountants for 2017.
FOR the
non-binding advisory resolution approving the compensation of our
named executive officers.
Proxies
will be voted in the discretion of the holder on such other
business as may properly come before the Annual Meeting or any
adjournments or postponements thereof.
IT IS ANTICIPATED THAT OLD LINE BANCSHARES, INC.’S DIRECTORS
AND OFFICERS WILL VOTE THEIR SHARES OF COMMON STOCK IN FAVOR OF THE
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS LISTED, FOR THE
RATIFICATION OF THE APPOINTMENT OF DIXON HUGHES GOODMAN LLP AND FOR
THE NON-BINDING ADVISORY RESOLUTION APPROVING THE COMPENSATION OF
OUR NAMED EXECUTIVE OFFICERS.
OWNERSHIP OF OLD LINE BANCSHARES COMMON STOCK
The
following tables set forth, as of the Record Date, information with
respect to the beneficial ownership of Old Line Bancshares’
common stock by each director, by its executive officers and by all
of its directors and executive officers as a group, as well as
information regarding each other person that Old Line Bancshares
believes owns in excess of 5% of the outstanding common stock.
Unless otherwise noted below, Old Line Bancshares believes that
each person named in the table has or will have the sole voting and
sole investment power with respect to each of the securities
reported as owned by such person.
DIRECTORS & EXECUTIVE OFFICERS
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Name of Beneficial Owner
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Number of
Shares Owned
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Shares Owned Pursuant to
Options
(1)
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Total Number
of Shares
Beneficially
Owned
(2)
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Percent of
Class Owned
(3)
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Joseph E. Burnett
(4)
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54,655
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42,402
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97,057
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0.89%
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Craig E. Clark
(5)
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195,217
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2,400
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197,617
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1.81%
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James W. Cornelsen
(6)
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169,341
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163,567
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332,908
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3.04%
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G. Thomas Daugherty
(7)
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424,536
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5,800
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430,336
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3.93%
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James F. Dent
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65,492
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7,300
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72,792
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0.67%
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Andre' J. Gingles
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55,166
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1,200
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56,366
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0.52%
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Thomas H. Graham
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28,742
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3,600
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32,342
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0.30%
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William J. Harnett
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1,052,837
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3,600
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1,056,437
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9.65%
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Frank Lucente
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148,714
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7,300
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156,014
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1.43%
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Gail D. Manuel
(8)
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41,295
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7,300
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48,595
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0.44%
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Carla Hargrove McGill
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4,442
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4,387
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8,829
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0.08%
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M. John Miller
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11,073
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3,600
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14,673
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0.13%
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Gregory S. Proctor, Jr.
(9)
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46,537
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7,300
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53,837
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0.49%
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Jeffrey A. Rivest
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29,557
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4,800
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34,357
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0.31%
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Mark A. Semanie
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11,516
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11,680
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23,196
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0.21%
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Suhas R. Shah
(10)
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31,251
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7,300
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38,551
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0.35%
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John M. Suit, II
(11)
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62,994
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7,300
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70,294
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0.64%
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Frank E. Taylor
(12)
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12,935
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5,800
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18,735
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0.17%
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All directors & executive officers
as a group (18 people)
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2,446,300
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296,636
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2,742,936
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25.07%
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(1)
Indicates number of
shares underlying options exercisable within 60 days of the Record
Date.
(2)
The total number of
shares beneficially owned includes shares of common stock owned by
the named persons as of the Record Date and shares of common stock
subject to options held by the named persons that are exercisable
as of, or within 60 days of, the Record Date.
(3)
The shares of
common stock subject to options are deemed outstanding for the
purpose of computing the percentage ownership of the person holding
the options, but are not deemed outstanding for the purpose of
computing the percentage ownership of any other
person.
(4)
Includes 1,620
shares of common stock held jointly with his spouse.
(5)
Includes 138,214
shares of common stock held jointly with his spouse. Does not
include 17,256 shares of common stock an individual retirement
account owns for the benefit of his spouse and 1,334 shares of
common stock his spouse owns individually. Mr. Clark disclaims
beneficial ownership in such shares.
(6) Includes
12,122 shares of common stock held jointly with his
spouse.
(7)
Excludes 54,729
shares of common stock his spouse individually owns. Mr. Daugherty,
whose current term of office ends at the 2017 Annual Meeting, has
chosen not to stand for re-election.
(8)
Includes 15,215
shares of common stock owned jointly with her spouse and 6,424
shares of common stock Trinity Memorial Gardens owns. Ms. Manuel is
the owner and a Director of Trinity Memorial Gardens.
(9)
Includes 3,500
shares of common stock held jointly with his spouse.
(10)
Includes 15,922
shares of common stock held jointly with his spouse.
(11)
Includes 28,217
shares of common stock owned by the John M. Suit II Revocable Trust
and 31,512 shares of common stock owned by the Joan Marie Suit
Revocable Trust. Mr. Suit is trustee and beneficiary of these
trusts.
(12)
Includes 5,964
shares of common stock owned jointly with his spouse and 424 shares
of common stock owned with his adult son, 674 shares of common
stock owned with his adult daughter and 674 shares of common stock
owned with another adult daughter.
OTHERS WITH OWNERSHIP IN EXCESS OF 5%
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Name of Beneficial Owner and Addresses
of 5% Owners
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Number of
Shares
Owned
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Percent of
Class Owned
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FJ Capital Management, LLC
(1)
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593,851
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5.43%
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1313
Dolley Madison Blvd, Ste 306
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McLean,
VA 22101
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Endeavour Capital Advisors,
Inc.
(2)
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581,046
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5.31%
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410
Greenwich Avenue
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Greenwich,
CT 06830
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(1)
FJ Capital
Management, LLC, a Virginia limited liability company, and Martin
S. Friedman jointly reported in a Schedule 13G/A filed with the
Securities and Exchange Commission on February 14, 2017, that they
have shared voting power of 593,851 shares of common stock and
shared investment power of 178,466 of such shares of common stock,
comprised of (i) 170,225 shares of common stock held by Financial
Opportunity Fund, LLC, and 5,975 shares of common stock held by
Financial Opportunity Long/Short Fund LLC of which FJ Capital
Management LLC is the managing member, (ii) 415,385 shares of
common stock held by Bridge Equities, III, LLC, of which FJ Capital
Management, LLC is the sub-investment advisor, (iii) 2,266 shares
of common stock held by a managed account that FJ Capital
Management, LLC manages, but of which they disclaim beneficial
ownership. Martin S. Friedman in the Managing Member of FJ Capital
Management, LLC.
(2)
Endeavour Capital
Advisors, Inc., a Delaware Corporation, Laurence M. Austin and
Mitchell J. Katz jointly reported in a Schedule 13G/A filed with
the Securities and Exchange Commission on February 14, 2017 that
they share voting and investment power of 581,046 shares of common
stock.
PROPOSAL I
ELECTION OF DIRECTORS
The
Board of Directors currently has 15 directors, divided into three
classes – Class A, Class B and Class C. The directors in each
class are elected to serve for a three-year term and until their
respective successors are duly elected and qualified.
The
Board of Directors is recommending the election of Craig E. Clark,
Gail D. Manuel, Gregory S. Proctor, and Suhas R. Shah as Class B
directors for a term ending at the 2020 annual meeting of
stockholders. G. Thomas Daugherty, who is also a current Class B
director, has elected not to run for re-election at the Annual
Meeting. As a result, upon adjournment of the Annual Meeting, the
size of the Board of Directors will be set at 14.
All of
the nominees are currently directors of Old Line Bancshares, Inc.
and each nominee has consented to serve as a director, if elected.
The directors whose terms have not expired will continue to serve
as directors until the expiration of their respective
terms.
It is
not contemplated that any of the nominees will become unavailable
to serve, but if that should occur before the Annual Meeting,
proxies that do not withhold authority to vote for the nominees
listed below will be voted for another nominee, or nominees,
selected by the Board of Directors.
A
plurality of the shares cast at the Annual Meeting is necessary in
order for each director to be elected. Abstentions and broker
non-votes have no effect on the outcome of the
election.
Information
regarding the nominees and the directors who will continue to serve
unexpired terms follows.
The
Board of Directors recommends that stockholders vote
“FOR” the election of all nominees.
Nominees for election to
the Board of Directors for a three-year term expiring in
2020
:
Craig E. Clark,
75,
retired in 2006 as President of Waldorf Carpets, Inc., a wholesale
and retail flooring company, which he established in 1969. Mr.
Clark is a founder of Old Line Bank. He has served as Chairman of
the Board of Directors of Old Line Bank since 1994 and of Old Line
Bancshares, Inc. since its incorporation in 2003 and has served as
a member of the Board of Directors of Old Line Bank since 1988. Mr.
Clark is a member of each of the Board of Directors’
committees with the exception of the Loan Committee and Risk
Committee. The Board of Directors of Old Line Bancshares, Inc. and
Old Line Bank believe that Mr. Clark’s experience managing
and operating his own business, his affiliations within the local
community and his active involvement in the founding and oversight
of Old Line Bank uniquely qualify him to be Chairman and a member
of the Board of Directors. Mr. Clark demonstrates his commitment
through his involvement in all levels of Board governance. He
additionally lends his expertise and experience to a myriad of
special projects including but not limited to business development,
branch expansion and overall asset growth.
Gail D. Manuel,
61,
is the owner and a Director of Trinity Memorial Gardens and
Mausoleum and Friendship Pet Memorial Park in Waldorf, Maryland.
She is a past member of the Board of Directors of the Charles
County Chamber of Commerce, a member of the Charles County Planning
Commission and past President of Charles County Zonta Club and a
member of ?Talbots? Advisory Board. The International Cemetery,
Cremations & Funeral Association presented Ms. Manuel with the
prestigious ?KIP? (Keeping It Personal) award for Best Business and
Consumer Practices in the death care industry. She resides in
Welcome, Maryland. She has been a member of the Board of Directors
of Old Line Bank since 1992 and Old Line Bancshares, Inc. since its
incorporation in 2003. Ms. Manuel serves on the Asset and
Liability, Risk and Compensation Committees. The Board of Directors
of Old Line Bancshares, Inc. and Old Line Bank believe that Ms.
Manual?s qualifications for serving on the Board of Directors of
Old Line Bank and Old Line Bancshares, Inc. include her many years
of active involvement with the Board of Directors, her experience
owning and operating a small business in our market area and her
long standing affiliations with the local business
community.
Gregory S. Proctor
Jr.,
53, is President and Chief Executive Officer of G.S.
Proctor & Associates, Inc., a Maryland registered lobbying and
consulting firm, which he established in 1995. He resides in Upper
Marlboro, Maryland. He has been a member of the Board of Directors
of Old Line Bancshares, Inc. and Old Line Bank since 2004. He
currently serves on the Loan and Compensation and Corporate
Governance Committees. The Board of Directors believes his
qualifications to serve as a Director of Old Line Bank and Old Line
Bancshares, Inc. include his legislative knowledge, his management
and consulting skills and his business affiliations in our market
area.
Suhas R. Shah,
CPA
,
62,
is a principal and member of
Source One Business Services, LLC, and has served in that capacity
since 1986 and is a principal and shareholder of Regan, Schickner,
Shah & Harper, LLC., and has served in that capacity since
1986. Source One Business Services, LLC provides cash flow and
budgeting analysis, computer consulting and tax planning and
preparation for corporations, individuals, estates and trusts, as
well as litigation support, financial forecasts and merger and
acquisitions advisory services to a variety of clients. Regan,
Schickner, Shah & Harper is a certified public accounting firm.
Mr. Shah resides in Marriottsville, Maryland. He has been a member
of the Board of Directors of Old Line Bancshares. Inc. and Old Line
Bank since 2006. He currently serves on the Asset and Liability
Committee and as Chair of the Audit Committee. The Board of
Directors believes that Mr. Shah?s qualifications for these
positions and for his service on the Board includes his educational
background, extensive experience with public and financial
accounting matters, his financial expertise, his accounting
certification and his affiliations with the business community in
our market area.
Continuing Directors
The
directors whose terms are not expiring at the Annual Meeting are as
follows:
Term Expiring at the 2018 Annual Meeting
Andre' J. Gingles,
59, has been the owner of Gingles, LLC, a law firm now located in
Laurel, Maryland, since 2003. Mr. Gingles’ practice
concentrates on large mixed use projects involving land use, zoning
and government relations. He has been a member of the Board of
Directors of Old Line Bancshares, Inc. and Old Line Bank since
2011. Mr. Gingles is an accomplished and effective senior executive
with extensive management and leadership experience in the public
and private sectors. Mr. Gingles has served in the Prince
George’s County Government in multiple capacities and
provides counsel to several metropolitan real estate development
companies on a variety of business and land use issues. He holds a
bachelor’s degree from Howard University, Washington, D.C.
and a Juris Doctor degree from Southern University Law Center,
Baton Rouge, LA. He holds membership in a number of professional
and community organizations including serving as Chairman of the
Foundation Schools and Past Chairman of Trial Courts Judicial
Nominating Commission for District 13, Prince Georges County,
Maryland. The Board of Directors believes that Mr. Gingles’
extensive knowledge of Old Line Bank’s market areas and
familiarity with businesses located in those areas provides
significant assistance to Old Line Bank in achieving business
development goals and market growth. Currently, he is a member of
the Asset and Liability and the Corporate Governance Committees.
His experience working with local government and his extensive
legal background provide additional insight to the Board with
regard to future planning and strategic development.
William J. Harnett,
86, was a Director of WSB Holdings, Inc. since its formation in
January 2008, served as a Director of The Washington Savings Bank,
F.S.B. since its inception in 1982 and served as Chairman of the
Board of WSB Holdings, Inc. and The Washington Savings Bank from
1988 until May 10, 2013, when they merged into Old Line Bancshares,
Inc. and Old Line Bank, respectively. He also served as Chief
Executive Officer of The Washington Savings Bank from 1988 until he
retired as Chief Executive Officer in February 2005. He also was
founder, Chairman and Chief Executive Officer of Washington Homes,
Inc., before it was sold in 1988. The Board of Directors of Old
Line Bancshares, Inc. and Old Line Bank believe that Mr.
Harnett’s qualifications to serve as a Director include his
extensive knowledge of the banking industry, which include the
business and operations of a financial institution as well as the
risks faced in the industry, as a result of his long tenure with
The Washington Savings Bank as both a director and former CEO, as
well as his knowledge of the former The Washington Savings
Bank’s customer base and market area.
Frank Lucente, Jr.,
75, is President of Lucente Enterprises, Inc., an investment
holding company that he established in 1985. Mr. Lucente has
previously served as a director of Peoples National Bank, Suburban
Bank (also known as Columbia Bank) and Prince George’s
Community College. He is currently a partner in Chesapeake Custom
Homes, Diamond Custom Homes and Heritage Investment Company. He has
also been a partner in Robin Hood Homes, Diamond Development, Kings
Grant, Inc., Regent Construction Company, Diamond Renovations,
Diamond Utilities and Bay of America (which is now National
Harbor). Mr. Lucente has been a partner in entities that have built
over 800,000 square feet of commercial office spaces and has been
involved in the construction and development of over 5,700 homes in
the Washington Metropolitan Area. Mr. Lucente resides in Palm Beach
County, Florida and Edgewater, Maryland. He has been a member of
the Board of Directors of Old Line Bank since 2002 and Old Line
Bancshares, Inc. since its incorporation in 2003. He has served as
Vice Chairman of the Board of Directors of Old Line Bancshares,
Inc. and Old Line Bank since 2003. He is currently a member of the
Loan Committee. The Board of Directors believes Mr. Lucente’s
qualifications for these positions, including his service as a
director, include his business affiliations in our market area, his
knowledge of the real estate industry and his operational and
management expertise gained from his many years as a business owner
and previous director at financial institutions and entities
affiliated with our industry.
John M. Suit, II,
72, served as Senior Vice President for Branch Banking and Trust
(BB&T) from 2003 through his retirement in 2006. From 1996
until 2003, Mr. Suit served as Chairman of the Board of Farmers
Bank of Maryland. Mr. Suit also served as President, CEO and
Director of Farmers National Bancorp and Farmers National Bank of
Maryland from 1989 to 1996. Mr. Suit lives in Annapolis, Maryland.
He has served on the Board of Directors of Old Line Bancshares,
Inc. and Old Line Bank since 2007. He currently serves on the
Audit, Corporate Governance, Loan, and Compensation Committees. The
Board of Directors believes his qualifications for these positions,
including his service as a director, include his financial
expertise resulting from his prior Chairman and executive officer
positions and his leadership in the banking industry.
Frank Taylor,
67
,
has been the President
of Taylor Gas Company, Inc., a family business founded in 1950 that
markets propane throughout the lower part of Southern Maryland,
since 1982. He served on the Board of Directors for Maryland Bank
and Trust Company, N.A. from 1995 until its merger with Old Line
Bank in 2011. He previously served on the Board of Governors of the
Calvert Marine Museum and currently serves on their Finance
Committee. He has also served on a variety of other Boards and
Commissions including the United States Navy League, St.
Mary’s County Metropolitan Commission, Three Oaks Center,
Mid-Atlantic Propane Gas Association, National Propane Gas
Association, St. Mary’s County Chamber of Commerce and The
St. Mary’s County Planning Commission, and is a 2016 graduate
of Leadership Southern Maryland. He began serving on the Board of
Directors of Old Line Bancshares, Inc. and Old Line Bank in 2011
and is currently a member of the Audit and Risk Committees. The
Board of Directors believes his qualifications to serve as a
director include his extensive community banking experience as a
director as well as his experience on numerous other Boards. His
extensive knowledge of Old Line Bank’s Southern Maryland
market and familiarity with businesses located in that area
provides invaluable insight with regard to future planning and
strategic development in that market.
Term Expiring at the 2019 Annual Meeting
James W. Cornelsen
,
62, is the President and Chief Executive Officer of Old Line
Bancshares, Inc. and Old Line Bank. He joined Old Line Bank
as President and Chief Executive Officer and became a member of its
Board of Directors in 1994. He has been a member of the Board
of Directors of Old Line Bancshares, Inc. since its incorporation
in April 2003, and currently serves as Chairman of the Loan
Committee and the Asset and Liability Committee. He has over
36 years of commercial banking experience. Mr. Cornelsen
serves on the American Bankers Association (ABA) Community Bankers
Council, as well as on its Administrative Committee, the ABA
Payment Solutions Board of Directors and the ABA Board of Directors
Fund for Economic Growth. Additionally, Mr. Cornelsen serves
on the Board of Directors of the Greater Washington Board of Trade,
the Maryland Chamber of Commerce, The Foundation Schools, FIS
Global CEO Strategic Planning Advisory Council, Maryland Humanities
Council and the Greater Prince George’s Business Roundtable.
He is the Past Chairman of the Board of Directors of the Prince
George’s County Chamber of Commerce and the Past Chairman of
the Board of Trustees of St. Mary’s Ryken High School,
Leonardtown, Maryland. He has also served on the Board of Directors
of Maryland Financial Bank and the Board of Directors of the
Maryland Bankers Association, in addition to serving on various
committees of the Maryland Bankers Association. He also
previously served on the ABA Membership Committee and the Board of
Directors of Historic Sotterley Plantation, and is active in many
community organizations. The Board of Directors believes that
Mr. Cornelsen’s qualifications to serve on the Board and as
President and Chief Executive Officer of Old Line Bancshares, Inc.
include his many years of banking experience and proven leadership
in the success of these companies combined with his leadership as
Chair of the Loan and Asset and Liability Committees.
James F.
Dent
,
80
,
is
a founding member of Old Line Bank and has served as a member of
the Board of Directors since 1988. He also served as a member of
the Board of Directors of Old Line Bancshares, Inc. since its 2003
incorporation. Mr. Dent was a successful businessman, owning and
operating an award-winning State Farm Insurance Agency from 1961
until his retirement in 2006. Additionally, he served on the boards
of, and led various non-profit, charitable and service
organizations, chaired the Economic Development Commission and was
president of the Maryland Association of Counties, was appointed to
lead other county and state commissions/committees, and served as
county commissioner for eight years. Mr. Dent currently serves on
the Loan and Compensation Committees. The Board of Directors
believes that Mr. Dent’s more than 50 years’ successful
experience in the insurance industry in our market area, his active
involvement in the founding and continued oversight of Old Line
Bank, and his extensive experience providing community leadership
uniquely qualify him for his membership on the Board of Directors
of Old Line Bancshares, Inc. and Old Line Bank.
Thomas H. Graham,
57,
is the principal of T.H. Graham
& Associates, LLC., a strategic consulting firm that focuses
primarily on Energy, Cybersecurity, Environmental, Government
Affairs, Supplier Diversity and Workforce Development solutions, a
position he has held since its formation in 2016. He retired from
Pepco Holdings, Inc. (?PHI?) in June 2016. During his 30-year
career at PHI, Mr. Graham held several positions including:
President, Pepco region; Regional Vice President; Manager Strategic
Accounts (large commercial engineering design and construction);
and Manager Billing Services & Investigations. ?His career at
PHI concluded on the Executive Leadership Team as vice president
People Strategy and Human Resources. Mr. Graham currently serves as
a director for Prince George?s County Economic Development
Corporation, Greater Prince George?s Business Roundtable,
Excellence in Education Foundation and Green Branch Foundation
(Chairman). Mr. Graham has also served as the chairman of the
Center for Energy Workforce Development and Maryland Chamber of
Commerce. Other affiliations include Leadership Maryland,
Leadership Montgomery, American Association of Blacks in Energy
(D.C. Chapter President), Brothers for a Cause and Leadership
Prince George?s.
Mr. Graham has
been a member of the Board of Directors of Old Line Bancshares,
Inc., and Old Line Bank since November 2013. The Board of Directors
believes his qualifications to serve as a Director of Old Line Bank
and Old Line Bancshares, Inc. include his exceptional leadership
and management expertise and his business affiliations in our
market area. He is currently a member of the Asset and Liability
Committee and the Risk Committee.
Carla Hargrove
McGill
, 55, has served as President of Hargrove, Inc., a
Lanham, Maryland headquartered company that designs and executes a
wide range of events from trades shows and galas to presidential
inaugurals, since 2008; prior to that she held the position of Vice
President of Special Events. Ms. McGill serves as a Chair of the
Board of The Foundation Schools and as a committee member for the
Anne Arundel Medical Center Gala. Ms. McGill became a director of
Old Line Bancshares and Old Line Bank in April 2013, and is
currently a member of the Asset and Liability and Risk Committees.
The Board of Directors of Old Line Bancshares, Inc. and Old Line
Bank believe that Ms. McGill’s experience managing and
operating her own business, her affiliations within the local
community and her active involvement in the in local charitable
organizations uniquely qualify her for membership on our
Board.
Jeffrey A. Rivest,
64, served as President and Chief Executive Officer of the
University of Maryland Medical Center from 2004 through his
retirement in August 2015. In this position he was responsible for
all aspects of organizational strategy and operations for a 750 bed
academic medical center with 7,000 employees. From 1988 through
2004, he held several positions at The Children’s Hospital of
Philadelphia, starting with Senior Vice President for Clinical and
Ambulatory Service, moving on to Executive Vice President and Chief
Operating Officer and finishing his time there as Executive Vice
President and Chief Operating Officer. Mr. Rivest has additionally
held seats on multiple Boards, which currently include the
University Care Board of Directors since 2006, the Maryland
Medicine Comprehensive Insurance Program Board of Directors
Executive Committee since 2010, and the Maryland Medicine
Comprehensive Insurance program Board of Directors since 2005. He
previously served on the Maryland Highway Safety Foundation Board
from 2009 through 2010, the United Way of Central Maryland Board
from 2010 through 2012 and Maryland Hospital Association Executive
committee of the Board of Trustees from 2007 through 2009. Mr.
Rivest has served as a director of Old Line Bancshares and Old Line
Bank since 2012 and currently serves on the Old Line Bank/Old Line
Bancshares, Inc. Corporate Governance Committee, Risk Committee and
the Asset and Liability Committee. He also previously served on the
Audit Committee. The Board of Directors believes the Mr.
Rivest’s qualifications to serve on the Board center on his
extensive management and strategic organizational experience. With
local roots and numerous affiliations in the business community,
Mr. Rivest provides invaluable business development opportunities
to our organization.
The
Board of Directors has determined that Directors, Craig E. Clark,
James F. Dent, Andre´ Gingles, Thomas H. Graham, Gail D.
Manuel, Carla Hargrove McGill, Gregory S. Proctor, Jr., Jeffery A.
Rivest, Suhas R. Shah, John M. Suit, II, and Frank Taylor are
“independent” as defined under the applicable rules and
listing standards of the NASDAQ Stock Market LLC.
Director Selection Process
The
Corporate Governance Committee selects nominees for director and
considers a variety of factors to ensure diversity and that the
Board of Directors, as a whole, is diverse and consists of
individuals with various and relevant career experience, relevant
technical skill, industry knowledge and experience, financial
expertise, local or community ties and minimum individual
qualifications, including high moral character, mature judgment,
familiarity with our business and industry, independence of thought
and an ability to work collegially.
The
Board of Directors also conducts a self-assessment annually, which
our Corporate Governance Committee reviews and discusses with the
Board. At a meeting of the non-management directors of the Board,
the Corporate Governance Committee presents this review and
recommends individuals for re-election to the Board of Directors
and any new individuals for nomination who may enhance the
diversity of the Board of Directors.
Board Leadership Structure
Craig
E. Clark has served as Chairman of the Board of Directors of Old
Line Bank since 1994 and of Old Line Bancshares, Inc. since its
incorporation in 2003. He has served as a member of the Board of
Directors of Old Line Bank since its inception in
1988.
The
Chairman of the Board of Directors organizes the work of the Board
and ensures that it has access to sufficient information to enable
it to carry out its functions. Those functions include monitoring
our performance and the performance of management. The Chairman is
also responsible for presiding over all meetings of the Board of
Directors and stockholders, oversight of the distribution of
information to Directors, appointment of committee members and the
chairs of those committees as well as the oversight and strategic
planning for Old Line Bancshares, Inc. and Old Line
Bank.
The
Board of Directors believes that in order to maintain independent
oversight of management it is important that the Chairman is not an
officer or employee of Old Line Bancshares, Inc. or Old Line Bank.
Independent directors and management provide different perspectives
and roles in strategy development. The Chief Executive Officer sits
on the Board of Directors to facilitate the dissemination of
information and understanding between the Board of Directors and
management but does not hinder the Board’s overall
independence. Although the Board of Directors has not adopted a
formal policy in this regard, the Chairman of the Board of
Directors has been an independent director since inception of Old
Line Bancshares, Inc.
BOARD MEETINGS AND COMMITTEES
Old
Line Bancshares, Inc.’s Board of Directors meets for regular
meetings each month (usually the fourth Wednesday of each month)
and convenes additional special meetings as circumstances may
require. The Board of Directors of Old Line Bancshares, Inc. and
Old Line Bank met 12 times during 2016. Each director attended at
least 75% of the total number of meetings of the Board of Directors
and the Board committees of Old Line Bancshares, Inc. and Old Line
Bank of which he or she was a member during 2016, with the
exception of Mr. Harnett.
The
Board of Directors of Old Line Bancshares, Inc. has standing Audit,
Corporate Governance, Compensation and Strategic Opportunities
Committees. Old Line Bank also has a number of standing committees,
including the Asset and Liability Committee, Risk Committee, Audit
Committee, Compensation Committee, Loan Committee and Corporate
Governance Committee. The members of Old Line Bancshares,
Inc.’s and Old Line Bank’s Audit, Compensation and
Corporate Governance Committees are the same, and these committees
typically hold joint meetings.
Old
Line Bancshares, Inc.’s policy provides that, in the absence
of an unavoidable conflict, all directors are expected to attend
the annual meeting of Old Line Bancshares, Inc.’s
stockholders. Thirteen of our then-current 15 members of the Board
of Directors of Old Line Bancshares, Inc. attended the 2016 annual
meeting (Mr. Harnett and Mr. Shah did not attend).
Oversight of Risk Management
The
Board of Directors has an active role in overseeing and monitoring
Old Line Bancshares’ risk management processes. The Board of
Directors regularly reviews information regarding our asset
quality, securities portfolio, capital, liquidity, compensation,
financial reporting, strategic plan, products, security and
operations. The Board of Directors oversees the risk management
process through correlated committee processes and through Board
management and/or participation in these committees. In 2015, the
Board established the Old Line Bancshares, Inc. Risk Committee to
assist with this oversight, as further discussed below. The
Compensation Committee is responsible for overseeing the management
of risks related to our executive and non-executive compensation
plans. The Audit Committee has responsibility for oversight of
financial reporting, information technology, security and
regulatory risks. The Corporate Governance Committee manages risk
associated with the Board of Directors, including independence and
competence of the directors. The Asset and Liability Committee,
which consists of directors and one senior officer of Old Line
Bank, is responsible for oversight of the management of risks
associated with our policies and procedures related to financial
management, interest rate sensitivity, liquidity, investment, and
capital. The Loan Committee is responsible for management of risk
associated with loans and reviews loans as set forth in Old Line
Bank’s loan policy. The purpose of the Strategic
Opportunities Committee is to review and assess, and to assist the
Company’s Board of Directors in reviewing and assessing,
potential mergers and acquisitions.
The
first level of risk management begins with internal business units
with the support of Management’s Enterprise Risk Oversight
Committee (EROC), which is facilitated by our Chief Risk Officer.
Committee membership consists of members of senior management and
their responsibilities include risk management oversight,
measurement, monitoring and reporting. The Chief Risk Officer has
direct access to the Board Risk Committee and communicates
EROC’s analysis of risks across various lines of business
with a goal toward identifying and mitigating or eliminating
identified risks.
Old
Line Bancshares, Inc. has also contracted with outside vendors to
conduct internal audits. The firms, working in coordination with
the Chief Risk Officer, report to the Chairman of the Audit
Committee. On an annual basis, or more frequently if required, the
Audit Committee approves a schedule of internal reviews and audits
for the firm to complete. The findings from their reviews and
audits are reported to the Audit Committee. The Chair of the Audit
Committee makes a full report of each finding to the full Board of
Directors.
The
Board of Directors does not believe that the administration of its
risk oversight function has had any effect on its leadership
structure as described above.
Risk Committee
Old
Line Bancshares, Inc.’s Risk Committee members are Jeffrey
Rivest, Thomas Graham, Gail Manuel, Carla Hargrove McGill and Frank
Taylor. The Risk Committee was established to document, review and
approve the enterprise-wide risk management practices of Old Line
Bancshares and Old Line Bank and assist the Board of Directors in
fulfilling their responsibility to oversee the Company’s risk
management. The Committee held five meetings in 2016. The
Committee’s responsibilities include: (i) monitoring and
advising the Board of Directors regarding the Company’s risk
exposures, such as credit, market, liquidity, operational,
compliance, legal, strategic and reputational risks; (ii)
establishing a level of risk tolerance, evaluating and monitoring
the adequacy and effectiveness of the Company’s risk
management framework to ensure strategic plans and business
operations are commensurate with the established risk tolerance and
appropriately identifying, monitoring and controlling risk; (iii)
monitoring the work of the Enterprise Risk Oversight Committee, a
management committee; (iv) reviewing, approving and monitoring the
Company’s risks, risk appetite and supporting risk tolerance
levels; and (v) reviewing reports from the Enterprise Risk
Oversight Committee and management to ensure risks are managed
within the approved risk tolerances. While the Risk Committee
maintains responsibility for all areas of risk, it may delegate
direct oversight of specific areas of risk to other Board
committees as it deems appropriate. To minimize the duplication of
time and effort, the Committee may defer to those other committees
with respect to such specific matters, but it will consult with,
and may request reports or information from, those other committees
in order to ensure that such matters are adequately addressed as
part of the Company’s enterprise-wide risk management
framework.
Asset and Liability Committee
Old
Line Bancshares, Inc.’s Asset and Liability Committee members
are James W. Cornelsen, Craig E. Clark, Andre´ Gingles, Thomas
H. Graham, Carla Hargrove McGill, Suhas R. Shah, and Erin G.
Lyddane, our Senior Vice President of Operations. The Asset and
Liability Committee held four meetings in 2016. The
committee’s responsibilities include: (i) monitoring actual
financial performance compared with established guidelines and
plans, identifying causes for variances, and determining the
actions needed to change performance; (ii) determining liquidity
requirements and monitoring the sources and uses of liquidity,
including the status of contingency plans; (iii) monitoring Old
Line Bank’s exposure to potential interest rate changes and
determining strategies to minimize the risk of loss; (iv) reviewing
and revising as necessary the near term forecast for sources and
uses of funds and the pricing on these funds; and (v) managing and
maintaining, in a manner consistent with the goals of the Board of
Directors, capital adequacy, asset and investment quality, earnings
at the maximum level possible within the constraints of prudent
banking and the reasonable requirements of customers and the
community, growth which is sound, profitable and balanced without
the sacrifice of quality of service and ensuring compliance with
applicable laws and banking regulations.
Audit Committee
Old
Line Bancshares, Inc.’s Audit Committee members are Craig E.
Clark, John M. Suit, II, Suhas R. Shah and Frank Taylor. The Board
of Directors has determined that each of these individuals is
independent, as defined under the applicable rules and listing
standards of the NASDAQ Stock Market LLC and the rules and
regulations of the Securities and Exchange Commission (the
“SEC”). In addition, the Board of Directors has
determined that each committee member is able to read and
understand fundamental financial statements, including Old Line
Bancshares, Inc.’s consolidated balance sheet, income
statement and cash flow statement. In addition, the Board of
Directors has determined that Mr. Shah is an “audit committee
financial expert” as the rules and regulations of the SEC
define that term.
The
Audit Committee of Old Line Bancshares, Inc. and Old Line Bank held
four meetings in 2016. The Audit Committee’s primary
responsibilities are to assist the Board by monitoring:
(i) the integrity of the financial statements of Old Line
Bancshares, Inc.; (ii) the independent auditors’
qualifications and independence; (iii) the performance of Old Line
Bancshares, Inc.’s and its subsidiaries’ internal audit
function and independent auditors; (iv) Old Line Bancshares,
Inc.’s system of internal controls; (v) Old Line Bancshares,
Inc.’s financial reporting and system of disclosure controls;
and (vi) Old Line Bancshares, Inc.’s compliance with legal
and regulatory requirements.
In
addition, the Audit Committee was appointed to oversee treatment
of, and any necessary investigation concerning, any employee
complaints or concerns regarding Old Line Bancshares, Inc.’s
accounting and auditing matters. Pursuant to procedures adopted by
Old Line Bancshares, Inc., any employee with such complaints or
concerns is encouraged to report them, anonymously if they desire,
to the Chair of the Audit Committee for investigation, and
appropriate corrective action, by the Audit Committee.
The
Audit Committee has a written charter, a copy of which is available
in the shareholder relations section of Old Line Bank’s
website at
www
.
oldlinebank.com
.
Corporate Governance Committee
Old
Line Bancshares, Inc.’s Corporate Governance Committee
members are John M. Suit, II, Craig E. Clark, Andre´ J.
Gingles, Jeffrey A. Rivest and Gregory S. Proctor, Jr. The Board of
Directors has determined that each of these individuals is
independent, as defined under the applicable rules and listing
standards of the NASDAQ Stock Market LLC. The Corporate Governance
Committee has a written charter, a copy of which is available in
the shareholder relations section of Old Line Bank’s website
at
www
.
oldlinebank.com
.
The Corporate Governance Committee of Old Line Bancshares, Inc.
held two meetings in 2016.
The
Corporate Governance Committee determines whether the incumbent
directors should stand for reelection to the Board of Directors and
identifies and evaluates candidates for membership on the Board of
Directors. In the case of a director nominated to fill a vacancy on
the Board of Directors due to an increase in the size of the Board
of Directors, the Corporate Governance Committee recommends to the
Board of Directors the class of directors in which the
director-nominee should serve. The Corporate Governance Committee
also conducts appropriate inquiries into the backgrounds and
qualifications of possible director candidates and reviews and
makes recommendations regarding the composition and size of the
Board of Directors.
In
identifying and evaluating candidates for membership on the Board
of Directors, the Corporate Governance Committee takes into account
all factors it considers appropriate. These factors may include
ensuring that the Board of Directors, as a whole, is diverse and
consists of individuals with various and relevant career
experience, relevant technical skill, industry knowledge and
experience, financial expertise, local or community ties and
minimum individual qualifications, including high moral character,
mature judgment, familiarity with the our business and industry,
independence of thought and an ability to work collegially.
However, the committee retains the right to modify any or all of
these factors from time to time.
The
Corporate Governance Committee also evaluates candidates for
nomination to the Board of Directors who are recommended by a
stockholder. Stockholders who wish to recommend individuals for
consideration by the Corporate Governance Committee to become
nominees for election to the Board may do so by submitting a
written recommendation to the Secretary of Old Line Bancshares,
Inc. at 1525 Pointer Ridge Place, Bowie, Maryland 20716.
Submissions must include sufficient biographical information
concerning the recommended individual, including age, five-year
employment history with employer names and a description of the
employer’s business, whether such individual can read and
understand basic financial statements and other board memberships,
for the Corporate Governance Committee to consider. A written
consent of the individual to stand for election if nominated and to
serve if elected by the stockholders must accompany the submission.
The Corporate Governance Committee will consider recommendations
received by a date not later than 120 calendar days before the date
the Proxy Statement was released to stockholders in connection with
the prior year’s annual meeting for nomination at that annual
meeting. The Corporate Governance Committee will consider
nominations received beyond that date at the annual meeting
subsequent to the next annual meeting.
The
Corporate Governance Committee identifies potential candidates
through various methods, including but not limited to,
recommendations from existing directors, customers and
employees.
The
Corporate Governance Committee evaluates nominees for directors
recommended by security holders in the same manner in which it
evaluates any nominees for directors. Minimum qualifications
include high moral character, mature judgment, familiarity with Old
Line Bancshares, Inc.’s business and industry, independence
of thought and ability to work collegially.
Compensation Committee
Old
Line Bancshares, Inc.’s Compensation Committee members are
Craig E. Clark, James F. Dent, Gail D. Manuel, Gregory S. Proctor,
Jr., Jeffrey Rivest and John M. Suit, II. The Board of Directors
has determined that each of these individuals is independent, as
defined under the applicable rules and listing standards of the
NASDAQ Stock Market LLC. The Compensation Committee of Old Line
Bancshares, Inc. and Old Line Bank held three meetings in
2016.
The
Compensation Committee evaluates the performance of the President
and Chief Executive Officer and makes recommendations to the Board
of Directors regarding the President and Chief Executive
Officer’s compensation. The Compensation Committee also
reviews current industry practices regarding compensation packages
provided to executive management and the Board of Directors,
including salary, bonus, stock options and other perquisites. Based
on recommendations from the President and Chief Executive Officer,
the Compensation Committee approves compensation provided to
members of executive management, excluding the President and Chief
Executive Officer. The President and Chief Executive Officer bases
his recommendation primarily on our results as outlined in the
Incentive Plan Model and Stock Option Model, as well as his own
evaluation of the officer’s performance during the
year.
The Compensation
Committee also evaluates and recommends to the Board of Directors
fees for non-employee board members. The Compensation Committee has
adopted a written charter, a copy of which is available in the
shareholder relations section of Old Line Bank’s website at
www.oldlinebank.com
.
In
2016, the Compensation Committee engaged, for the third year, Meyer
Chatfield Compensation Advisors to conduct an executive officer and
director compensation review. Those reviews provided information
about the performance of our peer banks with respect to return on
average assets, asset growth, net interest margin and
non-performing assets and compared Old Line Bank’s
performance to the peer banks’ performance. The reviews also
provided information on base and bonus compensation for the
executive management teams and boards of directors of the peer
banks and compared Old Line Bank’s compensation structure to
them. The Compensation Committee used these surveys to assist them
in determining the appropriate salary levels for the executive
officers and directors.
Compensation Committee Interlocks and Insider
Participation
During
the fiscal year ended December 31, 2016, Messrs. Clark, Dent,
Proctor and Suit and Ms. Manuel served as members of our
Compensation Committee. No such person is currently, or has been at
any time, one of our officers or employees. None of our executive
officers currently serves, or has served during the last completed
fiscal year, as a member of the Board of Directors or Compensation
Committee of any other entity that has or had one or more executive
officers serving as a member of our Board of Directors or
Compensation Committee.
DIRECTOR COMPENSATION
The
following table discloses all fees and other payments to each
director for the fiscal year ended December 31, 2016.
Name
|
Fees Earned
or
Paid in Cash
|
|
|
|
|
$
|
$
|
$
|
$
|
Craig
E. Clark
|
77,600
|
10,650
|
6,108
|
94,358
|
James W. Cornelsen
(4)
|
-
|
-
|
-
|
-
|
G.
Thomas Daugherty
|
42,700
|
10,650
|
6,108
|
59,458
|
James
F. Dent
|
48,300
|
10,650
|
6,108
|
65,058
|
Andre
Gingles
|
43,400
|
10,650
|
6,108
|
60,158
|
Thomas
H. Graham
|
43,900
|
10,650
|
6,108
|
60,658
|
William
J. Harnett
|
33,200
|
10,650
|
6,108
|
49,958
|
Frank
Lucente
|
49,600
|
10,650
|
6,108
|
66,358
|
Gail
D. Manuel
|
42,400
|
10,650
|
6,108
|
59,158
|
Carla
Hargrove McGill
|
41,800
|
10,650
|
6,108
|
58,558
|
Gregory
S. Proctor
|
49,400
|
10,650
|
6,108
|
66,158
|
Jeffrey
A. Rivest
|
46,200
|
10,650
|
6,108
|
62,958
|
Suhas
Shah
|
44,000
|
10,650
|
6,108
|
60,758
|
John
M. Suit, II
|
51,800
|
10,650
|
6,108
|
68,558
|
|
44,000
|
10,650
|
6,108
|
60,758
|
|
$
658,300
|
$
149,100
|
$
85,512
|
$
892,912
|
(1)
We
estimated the fair value of the 600 restricted stock awards granted
to each non-employee director at $17.75 using the closing stock
price on February 24, 2016. There were no unvested Director stock
awards outstanding as of December 31, 2016.
(2)
We estimated the
fair value of the stock option awards granted at $5.38 per option
using the Black-Scholes valuation model as outlined in Note
15-Employee Benefits in Item 8 Financial Statements of our Annual
Report on Form 10-K for the year ended December 31,
2016.
(3)
The aggregate
number of vested options outstanding is disclosed in the Security
Ownership of Management and Certain Security Holders table. There
were no unvested Director stock option awards outstanding at
December 31, 2016.
(4)
Mr. Cornelsen is an
executive officer and is not compensated for his services as a
director.
Currently and
during 2016, each non-employee Director of Old Line Bank, other
than the Chairman of the Board and the Vice Chairman of the Board,
receives $700 for each attended meeting of the Board of Directors,
$300 for each attended meeting of the Loan Committee and $400 for
each attended meeting of the Corporate Governance Committee, the
Compensation Committee, the Audit Committee, the Risk Committee,
the Strategic Opportunities Committee and the Asset and Liability
Committee. The Chairmen of the Corporate Governance Committee, the
Compensation Committee, the Risk Committee and the Audit Committee
also received an additional $300 for each attended meeting of their
respective committees. If a Director attends any of these meetings
via teleconference in lieu of in person, the Director receives $200
instead of the regular in-person payment. Each non-employee
Director of Old Line Bank, other than the Chairman of the Board and
the Vice Chairman of the Board, also receives an $8,400 quarterly
retainer. During 2016, the Chairman of the Board received an annual
retainer of $77,600 and the Vice Chairman received an annual
retainer of $49,600 in lieu of attendance fees.
In
September 2012, the Board of Directors adopted a resolution
providing directors who retire from the Board with at least seven
years of service a payment of $50,000, payable in three annual
installments.
Old
Line Bancshares, Inc. has paid no cash remuneration, direct or
otherwise, to its directors since its incorporation. It is expected
that unless and until Old Line Bancshares, Inc. becomes actively
involved in additional businesses other than owning all the capital
stock of Old Line Bank, it will pay no separate cash compensation
to the directors of Old Line Bancshares, Inc. in addition to that
paid to them by Old Line Bank in their capacities as directors of
Old Line Bank. However, Old Line Bancshares, Inc. may determine in
the future that such separate cash compensation is
appropriate.
In
February 2016, Old Line Bancshares granted 600 shares of restricted
stock and options to purchase 1,200 shares of our common stock to
each non-employee director. The options have an exercise price of
$17.75, the closing price of the common stock on the NASDAQ Stock
Market on February 24, 2016, the date of the grant. The options
vested immediately and the restricted stock vested on December 31,
2016.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The
primary objective of our executive compensation program is to
attract and retain talented and motivated executive officers that
will contribute to the Company’s overall success. Executive
officers are instrumental to supporting growth and profitability as
well as minimizing risk, resulting in the advancement of
shareholder interests. The performance of each of the executive
officers has a potentially vital impact on our profitability;
therefore, we believe the design and administration of the
compensation program is of considerable importance.
Executive Compensation Philosophy and Objectives
Old
Line Bank strives to provide a compensation package that is based
on the Company’s overall performance, increase in shareholder
value and the performance of the individual executive. We therefore
assess our executive officers’ performance both objectively
and subjectively using both financial measures, as identified in
our incentive compensation plan, as well as non-financial goals
that include risk mitigation and attainment of strategic
objectives. As such, we believe executive compensation should be
comprised of both fixed and variable pay. Our executive
compensation package includes base salary, performance-based cash
incentives, performance-based equity incentives and
benefits.
We
establish base salaries for our named executives to be competitive
with peer institutions and that are structured to attract talent.
Performance-based cash and equity incentives, both short and long
term, are variable in nature and are based on specific Bank
performance metrics established to drive desired behavior in
alignment with the Bank’s strategic plan. Certain benefits,
such as the Salary Continuation Plan and equity incentives, in
addition to providing a benefit, also serve as a mechanism to
retain our best talent.
Annually, our
Compensation Committee performs a review of our executive
officers’ total compensation. This review assists the
Committee with determining whether our executive officers are
appropriately compensated relative to external benchmarks. The
Committee considers the Company’s strategic objectives,
individual contributions to company objectives and our performance
in relation to peers. The Committee receives annual input from the
Chief Executive Officer regarding the performance of each of the
other executive officers. In addition, the Committee evaluates the
performance of the Chief Executive Officer in order to make
decisions regarding his compensation.
The
Committee strives to provide a program that will attract, retain,
motivate and reward our executive officers, which ultimately
creates value for our stockholders. To do this, they have
established a program that is designed to:
●
provide
compensation opportunities that are competitive within our market
and industry;
●
link a portion of
total compensation to the achievement of identified goals in a way
that rewards higher performance levels; and
●
align executive
interests with those of our stockholders by using equity as a
component of our incentive program
●
and ensure that
executives are not encouraged or rewarded for taking excessive
risk.
Identification of Named Executive Officers for 2016
This
Compensation
Discussion and Analysis provides information about the 2016
compensation for our named executive officers, who
include:
●
James W. Cornelsen,
President and Chief Executive Officer
●
Joseph E. Burnett,
Executive Vice President and Chief Lending Officer
●
Mark A. Semanie,
Executive Vice President and Chief Operating Officer
●
M. John Miller,
Executive Vice President and Chief Credit Officer
●
Elise Hubbard,
Senior Vice President and Chief Financial Officer
Compensation Committee and Advisor Independence
The
Compensation Committee is composed solely of independent directors,
and has under its own authority, engaged its own independent
advisors, including a compensation consultant and legal
counsel.
Shareholder Advisory Vote on Executive Compensation
We
conduct an annual shareholder advisory vote on the compensation of
the named executive officers, and our Board of Directors and the
Compensation Committee carefully consider the outcome of these
advisory votes when making compensation decisions. In 2016, 91% of
our stockholders voted in favor of the non-binding advisory
proposal to approve the compensation of our named executive
officers. The Compensation Committee has made no significant
changes to our pay practices, however, it continues to be the
Committee’s goal to maintain alignment of our pay practices
with the best interests of the Company and its stockholders. We
will, therefore, continue to evaluate the appropriateness of the
Company’s compensation program and consider stockholder
feedback throughout the evaluation process.
Compensation-Related Risk Assessment
We
conduct an annual evaluation of our compensation programs, policies
and practices to ensure that they reflect an appropriate level of
risk-taking but do not encourage our employees to take excessive or
unnecessary risks that could have an adverse impact on the
Bank.
Change in Control and Termination Arrangements
As
further described below, our post-employment compensation
arrangements for Messrs. Cornelsen, Burnett, Semanie and Miller
include payments under the salary continuation plan agreements
described below, continued payments for the remaining term of their
employment agreements and immediate vesting of unvested options
upon a change of control and, with respect to Messrs. Burnett,
Semanie and Miller, if they are involuntarily terminated without
cause. Mr. Cornelsen is also entitled to receive post-employment
payments under his salary continuation plan agreement. In addition,
Mr. Cornelsen is entitled to receive a termination payment equal to
1.99 times his average annual compensation if his employment is
terminated (i) involuntarily without cause, (ii) upon his permanent
disability, (iii) by him for good reason including a material
reduction in his duties or failure to be elected as President and
Chief Executive Officer, or (iv) voluntarily by Mr. Cornelsen
prior to or within six months following consummation of a change in
control of Old Line Bancshares or Old Line Bank. Mr. Cornelsen is
additionally entitled to receive a separate non-competition payment
equal to one times his average annual compensation if his
employment is terminated for any reason other than cause. This
provision was added to his employment agreement upon completion of
a 2015 analysis of the impact to the Company should Mr. Cornelsen
leave and compete with Old Line Bank in the same geographic region.
Were Mr. Cornelsen to have left at that time and taken three senior
loan officers with him, the impact on the Company was estimated to
have been approximately $7.8 million assuming the movement of 10%
of their loan portfolios. This amount would have grown to $19.5
million upon movement of 25% of their loan portfolios.
The
Compensation Committee believes that these agreements are necessary
to provide a competitive total compensation plan to attract and
retain the employment of our executive officers who are a party to
the agreements.
The Role of the Compensation Committee
The
Compensation Committee is responsible for establishing our
compensation philosophy and reviews and approves our executive
compensation programs, including the specific compensation of our
executive officers. The Compensation Committee has the authority to
retain special counsel and other advisors, including compensation
consultants, to assist in carrying out its responsibilities to
determine the compensation of our executive officers. Such
compensation components include base salary levels, target bonus
opportunities, actual bonus payments, equity awards and benefits.
The Compensation Committee meets on a regularly-scheduled basis and
at other times as needed. To carry out its responsibilities, the
Compensation Committee reviews, at least annually, all executive
compensation programs. This review helps to ensure compensation
actions are aligned with our compensation philosophy, provide
appropriate targets for performance incentives for our executive
officers and are competitive with the market and our peer
companies.
The
Compensation Committee believes that alignment of pay and
incentives with company performance is instrumental to ensuring a
focus on shareholder interests. The Compensation Committee has
historically strived to provide compensation opportunities that are
competitive with our peer group median, while applying variables
based on Old Line Bank’s performance relative to our
strategic goals and relative to industry peers. The Compensation
Committee believes that above median pay should be provided when
Old Line Bank exceeds goals and peer performance. Conversely,
median or below median performance should result in average or
below average compensation. With this philosophy in mind, the
Committee analyzed bank performance, growth and shareholder value
for 2016 and determined that the CEO’s salary should be
competitive with the 75
th
percentile as
compared to peers. Items of specific consideration by the Committee
included asset growth, total shareholder return, return on assets
and the efficiency ratio. They also considered our success with
strategic growth, both through acquisition as well as through
organic growth. In addition they analyzed the detriment to the
company’s strategic direction should the CEO resign, to
include the loss of leadership, strategic direction and his 22 plus
years of knowledge of Old Line Bank acquired through his service to
the company.
Compensation Consultants
The
Compensation Committee, under authority granted by its charter,
occasionally utilizes outside consultants, actuaries and attorneys
to assist it in developing and implementing our compensation
program, including incentive compensation arrangements and the
supplemental executive retirement plan.
During
2016, the Compensation Committee continued their engagement with
Meyer Chatfield Compensation Advisors (“MCCA”), who
conducted an executive officer and director compensation review.
Per Committee instruction, their engagement provides market data,
information on compensation trends, and commentary and analysis
relating to executive and director compensation. In addition, the
Committee also requested their review and input on the CEO’s
existing employment agreement as well as assistance with the
performance of an updated 280G analysis with regard to potential
change in control payments to our CEO. MCCA assisted the Committee
in its assessment of the compensation peer group and executive
compensation benchmarking. MCCA provided no services to and
received no fees from the Company, or its affiliates, other than in
connection with the engagement entered into by the Compensation
Committee. The amount of fees paid or payable by the Bank to MCCA
in respect to the engagement was $24,000 for 2016. There are no
personal relationships between MCCA and any member of the
Compensation Committee other than in respect of the engagement. No
employee of MCCA owns any stock of the Company and there are no
business or personal relationships between MCCA and any executive
officer of the Company other than in respect to the engagement
entered into by the Compensation Committee of the Company. The
Committee has concluded that there are no conflicts of interest
with regard to the engagement of MCCA.
The
Compensation Committee utilized a proxy peer group to review
compensation levels for the executive team and board of directors,
similar to studies performed in previous years. We strive to
continue as a high performing bank, thus we excluded peers that did
not meet certain minimum performance levels with regards to return
on average assets, asset growth, net interest margin and
non-performing assets. Old Line Bank’s 2016 performance
compared favorably to our compensation peer group and ranked from
the 57
th
percentile to the 83
rd
percentile on key
performance metrics. Old Line Bank continues to exhibit strong
performance in asset growth rates.
The Role of Management
In
addition to input from its compensation consultants, the Committee
also considers input from senior management regarding financial
performance in relation to the budget and the attainment of
incentive plan metrics. The Chief Operating Officer and Chief
Financial Officer, with input from the Chief Executive Officer, are
responsible for the development of our annual budget, which is
reviewed and approved by the Board of Directors. The budget has
provided the foundation for setting performance goals and targets
to be achieved during the fiscal year that are included in the
incentive compensation plan. The Committee also receives
information regarding executive officer compensation and benefits
from the Director of Human Resources. The Director of Human
Resources prepares Compensation Committee and Board meeting
materials and performs work as requested by the Compensation
Committee, including working with the compensation consultants in
preparing peer analyses for the Committee’s
consideration.
The
Chief Executive Officer attends Compensation Committee meetings as
needed and makes recommendations regarding base salary, bonuses and
other benefits for named executive officers other than the Chief
Executive Officer. Although the Committee considers such
input, the Compensation Committee has final authority on
compensation matters for all named executive officers.
Peer Review and Performance Comparisons
The
Compensation Committee regularly reviews market information
provided by our compensation consultants. The primary data sources
used provide information publicly disclosed by a peer group of
publicly traded banks. The Committee reviews comparative
compensation and benefit information contained in the public
filings of our peer group as identified below.
The
purpose of the peer group is to provide relative comparative data
to assist the Board in making sound decisions with respect to the
Bank’s compensation practices. The peer group was developed
from an initial group of 176 publically traded banks with 2013
compensation data and assets between $700 million and $2.5 billion.
This group of banks was then narrowed down based on relevant
criteria, including asset size, geographic location, number of
offices, number of employees, and performance metrics. The
Compensation Committee assesses the group annually or more often as
needed to ensure that it continues to provide a valid base for
comparison. The 2016 peer group contains 24 publically traded banks
or bank holding companies with available 2015 compensation data and
assets between $1.0 billion and $4.3 billion as of
12/31/15.
2016 Peer Group
|
1
|
BSB
Bancorp, Inc.
|
2
|
Enterprise
Bancorp, Inc.
|
3
|
Community
Financial Corporation
|
4
|
Bar
Harbor Bankshares
|
5
|
1st
Constitution Bancorp
|
6
|
BCB
Bancorp, Inc.
|
7
|
Chemung
Financial Corporation
|
8
|
C
& F Financial Corporation
|
9
|
Peapack-Gladstone
Financial Corporation
|
10
|
Bridge
Bancorp, Inc.
|
11
|
First
of Long Island Corporation
|
12
|
Suffolk
Bancorp
|
13
|
Bryn
Mawr Bank Corporation
|
14
|
Eastern
Virginia Bankshares, Inc.
|
15
|
QNB
Corp.
|
16
|
Republic
First Bancorp, Inc.
|
17
|
Hingham
Institution for Savings
|
18
|
Univest
Corporation of Pennsylvania
|
19
|
Access
National Corporation
|
20
|
Southern
National Bancorp of Virginia, Inc.
|
21
|
Middleburg
Financial Corporation
|
22
|
Washington
First Bankshares, Inc.
|
23
|
Penns
Woods Bancorp, Inc.
|
24
|
Clifton
Bancorp, Inc.
|
The
Compensation Committee considers the peer group compensation data,
as well as other competitive market factors, when making base
salary decisions for the executives. It also considers this data to
ensure award opportunities under our cash and equity incentive
plans are competitive and reasonable. Based on its 2016 analysis,
the Committee adjusted executive base salaries to keep base
compensation in line with peers. The Bank also has a formal
performance-based annual cash incentive plan. Details surrounding
this plan are disclosed later in this section. The compensation
analysis validated that the 2017 adjusted target and maximum award
levels under the annual cash incentive plan are competitive,
ranging from a target of 50.0% to a maximum of 75.0% of salary for
Mr. Cornelsen and 30.0% target to 50.0% maximum for the other named
executive officers. The Compensation Committee also uses
performance to determine annual equity awards. Equity awards, once
earned, are subject to a three-year vesting schedule.
The
Compensation Committee additionally considers overall company
performance and its effect on stockholders.
The
Committee believes our financial results and total shareholder
return compare favorably with our peer group indicating a strong
pay and performance alignment.
The
following graph illustrates five year shareholder
return.
SNL US
Bank and Thrift: All major Exchanges Banks and Thrifts in
SNL’s coverage universe
SNL US
Financial Institutions: All Financial Institutions in SNL’s
coverage universe whose primary shares trade on a US
exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of our Compensation Program
The
elements of the compensation programs for the Bank’s
executive officers, which are base salary, cash incentives, equity
incentives, and benefits, are detailed below. While the
Compensation Committee considers total compensation when reviewing
benchmarking data, one component does not specifically affect
another as they each serve specific individual purposes. In
addition to providing a benefit to the executive each component
serves the purpose of either attracting or retaining
talent.
Base Salary
The
Compensation Committee views base salary as the foundation of the
compensation program and is a primary consideration for attracting
experienced talent. Our executive compensation program provides
base salaries and benefits, which include health, disability and
life insurance programs, a 401(k) retirement program and paid
leave, to compensate executive officers for the performance of core
duties and responsibilities associated with their individual
positions. We establish our executive officers’ base salaries
using criteria that includes technical expertise, individual
responsibility level, organizational performance and the
competitive data from the peer group identified above and believe
that base salaries should be paid at a level that affords us the
ability to hire and retain experienced individuals in our industry
that can effectively contribute to the achievement of our strategic
business goals.
Base
salary for the Bank’s Chief Executive Officer is set by the
Committee on an annual basis. Base salaries for the Bank’s
executive officers other than its Chief Executive Officer are made
on an annual basis and are based upon recommendations by the Chief
Executive Officer. The factors for the Committee's compensation
decisions include Bank financial performance, industry base
salaries within the Peer Group, the nature and responsibilities of
the position, the contribution and experience of the officer, and
the length of the officer's service with the Bank. The Compensation
Committee additionally considers the specific contributions of each
executive officer and the officer’s opportunity for
professional growth when approving annual salary adjustments. While
our performance incentive plan provides executive officers rewards
for the Bank’s attainment of budgeted goals, it is through
base salary that executives are rewarded for their individual
contributions to the organization.
Annual Cash Incentive Plan.
The
Annual Cash Incentive Plan (“ACIP”) was implemented to
reward executives for achieving and exceeding predefined
performance goals. In doing so, the Committee believes the ACIP
also provides a focus on those goals identified by the Committee as
being important to the overall performance of the Company, while
also serving as a retention tool. In 2016, due to their strategic
contributions to the Company, Messrs. Cornelsen, Burnett, Miller
and Semanie as well as Ms. Hubbard were identified by the
Compensation Committee as participants in the ACIP.
The
ACIP is performance-based with cash award opportunities defined for
threshold, target and maximum performance levels. Under the 2016
Incentive Plan Model, at the target levels, Mr. Cornelsen was
eligible to receive a bonus equal to 40.0% of his base salary and
Mr. Burnett, Mr. Miller, Mr. Semanie and Ms. Hubbard were eligible
to receive a target bonus equal to 25.0% of their base salaries.
Maximum award levels are set at 60.0% and 37.5% of base salary,
respectively, subject to a modifier as described below. If a
threshold performance level is not achieved, the portion of the
award for that metric will be 0%.
Each
year, the Compensation Committee has worked with management to set
Bank-wide performance-based goals based on the Bank’s budget
and strategic plan. The Committee reviews the combination of
performance metrics each year to ensure that they do not encourage
risky behavior or expose Old Line Bancshares, Inc. to material
risk. In addition, the Committee aims to discourage focus on
achievement of one metric at the expense of the others. The Board
ultimately approves the performance metrics at the beginning of
each performance year. The Compensation Committee certifies
performance of goals each year and has ultimate discretion over
payouts.
In
October 2012, the Compensation Committee approved the addition of
modifiers to certain performance metrics, which are used to rank
our performance relative to our peers and allow for reductions
and/or increases to executive incentive payouts based on that
performance comparison. It is the Committee’s belief that the
application of incentive modifiers to goals provides a balanced
approach that is consistent with our compensation philosophy while
discouraging excessive risk taking and goal manipulation. In 2016,
the Committee applied a modifier to the Return on Equity
(“ROE”) metric, following the guidelines
below.
Percentile
Comparison
|
Multiplier
|
Less than
40
th
Percentile
|
0.50
|
40
th
–
49
th
Percentile
|
0.75
|
50
th
–
59
th
Percentile
|
1.00
|
60
th
–
74
th
Percentile
|
1.50
|
Greater than 74
th
Percentile
|
2.00
|
In 2016
our ROE percentage fell in the 74
th
percentile of the
peer group’s ROE, therefore the 1.50 multiplier was applied
to the potential payout in that category, increasing the payout to
the executives by 50%.
Performance metrics
for 2016 included total shareholder return, return on equity,
non-performing assets, and earnings per share. The executives
exceeded target performance in each of the categories which, with
the 1.50% modifier applied to ROE, resulted in a bonus payout of
53.92% for Mr. Cornelsen and 33.71% for each of Mr. Burnett, Mr.
Semanie, Mr. Miller and Ms. Hubbard.
The
following table illustrates plan metrics, goals and actual
incentive payouts as a percentage of base salary.
|
Total Shareholder
Return
(20% Weighting)
|
Return on
Equity
(20% Weighting)
|
Non-Performing
Assets
(20% Weighting)
|
Earnings Per
Share
(40% Weighting)
|
Potential Cash Incentive
as a % of Salary
CEO
|
Potential Cash
Incentive
as a % of Salary
Other Execs.
|
threshold
|
53.77
|
7.25
|
0.76
|
$
0.99
|
20.00
%
|
12.50
%
|
target
|
67.21
|
9.06
|
0.62
|
$
1.24
|
40.00
%
|
25.00
%
|
stretch
|
80.65
|
10.87
|
0.52
|
$
1.49
|
60.00
%
|
37.50
%
|
actual performance
|
71.54
|
9.59
|
0.59
|
$
1.38
|
49.34
%
|
30.84
%
|
actual payout
|
|
|
|
|
53.92
%
|
33.71
%
|
The
performance metrics approved for use in the 2017 ACIP are 3-year
Total Shareholder Return, Return on Assets and Non-performing
Assets.
Equity Incentive Plan
The
Compensation Committee believes that equity should represent a
significant part of executive compensation and further aligns the
interests of management with those of our stockholders and provides
for a longer-term retention tool. We have been incorporating equity
as an element of executive compensation since 2005. Under the
Equity Incentive Plan, the target award levels the named executive
officers would be eligible to receive are equal to a fair value of
20% of salary (for Mr. Cornelsen) or 10% of salary (for Mr.
Burnett, Mr. Miller, Mr. Semanie and Ms. Hubbard). Maximum equity
awards are 20% of base salary for Ms. Hubbard and Messrs. Burnett,
Miller and Semanie and 40% of base salary for Mr.
Cornelsen.
Equity
grants are performance-based, that is, the final equity award (if
any) is based on whether Old Line Bancshares, Inc. meets the
cumulative threshold, target or stretch levels for financial
metrics in a given year; for example, overall attainment of 75% of
the total target goal results in the payment of 75% of the payout
at the target level for the CEO and other executive officers. For
2016, these metrics included total shareholder return, return on
equity, non-performing assets, and earning per share. The Committee
believes that utilizing the same metrics for both cash and equity
awards enhances executive focus on those areas identified as being
of strategic importance. Once year-end financial results are final,
the Committee determines the fair value of equity award for each
executive. This is then delivered as restricted stock, stock
options or a combination thereof that, once granted, are subject to
a three-year vesting schedule.
On
February 16, 2017, the Compensation Committee of the Board of
Directors of Old Line Bancshares, Inc. and Old Line Bank reviewed
the financial performance of Old Line Bancshares, Inc. and Old Line
Bank for the fiscal year ended December 31, 2016 in order to
determine equity awards for the named executive
officers.
Based
on this review and upon finalization of our year-end financial
statements, effective February 23, 2017, we issued equity awards to
Mr. Cornelsen totaling 29.40% of his base salary and to each
of Messrs. Burnett, Semanie and Miller and Ms. Hubbard
totaling 14.70% of their base salary.
Other Benefits
Our
executives are eligible to participate in all of our employee
benefit plans, such as medical, dental, vision, group life and
disability insurance and our 401(k) plan, in each case on the same
basis as our other employees. Mr. Cornelsen and Mr. Burnett are
also covered by a bank owned life insurance policy that provides
for a split-dollar benefit. Additionally, Mr. Cornelsen, Mr.
Burnett and Mr. Semanie are provided a supplemental executive
retirement plan. Both additional benefits are discussed in greater
detail below.
We
provide a Company-owned automobile to Mr. Cornelsen due to the
amount of travel required as a representative of the Company. We
also provide one country club membership to Mr. Cornelsen to help
facilitate his role as a Company representative.
Risk Assessment Procedures
We
have reviewed our compensation policies and programs for all of our
employees and have determined that the compensation policies and
incentive compensation programs in place are not reasonably likely
to have a material adverse effect on Old Line Bancshares, Inc. or
the Bank and do not encourage our employees to take excessive
risks. We are confident that the internal controls and procedures
we have in place throughout our organization sufficiently manage
any inherent risk in our programs. Among other things, our
executive compensation programs incorporate the following policies
and practices:
●
The
Compensation Committee is composed solely of independent directors,
under its own authority, and has engaged its own independent
compensation consultant;
●
We
conduct an annual shareholder advisory vote on the compensation of
the named executive officers, and our Board of Directors and the
Compensation Committee carefully consider the outcome of these
advisory votes;
●
We
award both cash and stock incentives with an emphasis on
performance;
●
We
allow for adjustments of payouts for negative outcomes related to
asset quality and comparison to peers;
●
We have adopted a comprehensive clawback policy,
which states that
in the event of a restatement of the Old
Line Bank/Old Line Bancshares, Inc. financial statements, the
result of which is that any performance based compensation paid
would have been a lower amount had it been calculated based on such
restated results, the Compensation Committee shall seek to recover
for the benefit of the Company the pre-tax portion of the
difference between the awarded compensation and the actual
compensation;
●
We
do not provide significant perquisites or other personal benefits
to our executive officers other than the supplemental executive
retirement plan and bank owned life insurance, which the Committee
has determined does not encourage our executives to take
unnecessary risks, as they are defined benefits and not related to
any specific performance metric. Our executive officers participate
in our health and welfare benefit programs on the same basis as all
of our employees; and
●
Annually,
the Board of Directors reviews and approves all policies of the
Bank to ensure that they reflect an appropriate level of
risk-taking but do not encourage our employees to take excessive or
unnecessary risks that could have an adverse impact on the
Bank.
Compensation Committee Report
The
Compensation Committee has reviewed the Compensation Discussion and
Analysis included in this Proxy Statement and discussed it with
Company management. Based on this review and discussion, the
Compensation Committee recommended to the Board of Directors that
the Compensation Discussion and Analysis be included in this Proxy
Statement.
Compensation
Committee:
By:
Craig E. Clark
James
F. Dent
Gail D.
Manuel
Gregory
S. Proctor, Jr.
John M.
Suit, II
Summary Compensation Table
The
following table sets forth the compensation paid by Old Line Bank
to its Chief Executive Officer, Chief Financial Officer and to the
next three most highly compensated executive officers who received
total compensation in excess of $100,000 during 2016 (the
“named executive officers”).
SUMMARY COMPENSATION TABLE
Name and principal
position
|
|
Year
|
|
|
|
|
Non-equity
incentive plan
compensation
(8)
|
Change in pension value and
non-qualified deferred compensation
earnings
|
|
|
|
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
James
W. Cornelsen
|
|
2014
|
490,000
|
-
|
42,924
|
100,156
|
172,921
|
241,108
|
36,922
|
1,084,031
|
President & CEO
(1)
|
|
2015
|
514,500
|
-
|
56,800
|
132,535
|
315,080
|
281,447
|
33,507
|
1,333,869
|
|
2016
|
550,515
|
-
|
161,851
|
-
|
296,838
|
327,836
|
34,576
|
1,371,616
|
|
|
|
|
|
|
|
|
|
|
Joseph
E. Burnett
|
|
2014
|
235,000
|
-
|
10,434
|
24,346
|
63,215
|
-
|
13,033
|
346,028
|
Executive
Vice
|
|
2015
|
246,750
|
-
|
13,621
|
31,781
|
94,456
|
-
|
13,392
|
400,000
|
President & CLO
(2)
|
|
2016
|
264,023
|
-
|
38,811
|
-
|
89,002
|
-
|
14,194
|
406,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
A. Semanie
|
|
2014
|
260,000
|
-
|
11,544
|
26,936
|
69,940
|
-
|
13,124
|
381,544
|
Executive
Vice
|
|
2015
|
273,000
|
-
|
15,070
|
33,162
|
104,504
|
52,708
|
14,039
|
492,483
|
President & COO
(3)
|
|
2016
|
292,110
|
-
|
42,940
|
-
|
98,470
|
59,028
|
14,039
|
506,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M.
John Miller
|
|
2014
|
200,000
|
-
|
8,880
|
20,720
|
53,800
|
-
|
8,306
|
291,706
|
Executive
Vice
|
|
2015
|
210,000
|
-
|
11,592
|
27,048
|
80,388
|
-
|
10,210
|
339,238
|
President & CCO
(4)
|
|
2016
|
224,700
|
-
|
33,031
|
|
75,746
|
-
|
11,136
|
344,613
|
|
|
|
|
|
|
|
|
|
|
Elise
M. Hubbard
|
|
2014
|
125,000
|
-
|
-
|
-
|
-
|
-
|
5,342
|
130,342
|
Senior
Vice
|
|
2015
|
150,000
|
30,000
|
18,750
|
-
|
-
|
-
|
8,215
|
206,965
|
President & CFO
(5)
|
|
2016
|
160,050
|
25,000
|
23,527
|
-
|
53,953
|
-
|
9,006
|
271,536
|
(1)
Other compensation
includes: $10,400, $10,600 and $10,600 in contributions to Old Line
Bank’s 401(k) retirement plan in 2014, 2015 and 2016,
respectively; $3,957 in long term disability insurance premiums
paid on Mr. Cornelsen’s behalf in each of 2014, 2015 and
2016; and $1,200 in short term disability insurance premiums paid
on Mr. Cornelsen’s behalf in each of 2014, 2015 and 2016.
Other compensation for Mr. Cornelsen also includes $12,060, $12,250
and $13,210 for the value of the Company-owned car provided to Mr.
Cornelsen and $9,305, $5,500 and $5,609 in country club dues for
2014 2015 and 2016, respectively.
(2)
Other compensation
includes: $9,379, $10,600 and $10,600 in contributions to Old Line
Bank’s 401(k) retirement plan in 2014, 2015 and 2016,
respectively; $2,454, $1,592 and $2,394 in long term disability
premiums paid by Old Line Bank on Mr. Burnett’s behalf in
2014, 2015 and 2016, respectively; and $1,200 in short term
disability premiums paid by Old Line Bank on Mr. Burnett’s
behalf in each of 2014, 2015 and 2016.
(3)
Other compensation
includes: $10,351, $10,600 and $10,600 in contributions to Old Line
Bank’s 401(k) retirement plan in 2014, 2015 and 2016
respectively; $1,573, $2,239 and $2,239 in long term disability
insurance premiums paid by Old Line Bank on Mr. Semanie’s
behalf in 2014, 2015 and 2016, respectively; and $1,200 in short
term disability insurance premiums paid by Old Line Bank on Mr.
Semanie’s behalf in each of 2014, 2015 and 2016.
(4)
Other compensation
includes: $6,111, $7,599 and $8,044 in contribution to Old Line
Bank’s 401(k) retirement plan in 2014, 2015 and 2016,
respectively; $995, $1,411 and $1,893 in long term disability
premiums paid on Mr. Miller’s behalf in 2014, 2015 and 2016,
respectively; and $1,200 in short term disability premiums paid on
Mr. Miller’s behalf in each of 2014, 2015 and
2016.
(5)
Other compensation
includes: $3,977, $6,850 and $7,258 in contributions to Old Line
Bank’s 401(k) retirement plan in 2014, 2015 and 2016,
respectively; $500, $500 and $640.20 in long term disability
premiums paid on Ms. Hubbard’s behalf in 2014, 2015 and 2016,
respectively; and $865, $865 and $1,108 in short term disability
premiums paid on Ms. Hubbard’s behalf in 2014, 2015 and 2016,
respectively.
(6)
Consists of
restricted stock awards. Restricted stock value is based on the
share price at issuance of $14.38, $17.75 and $28.82 for the years
2014, 2015 and 2016, respectively. Restricted stock was granted in
February 2015, February 2016 and February 2017 based on the
previous year’s performance under the Old Line
Bancshares’ Incentive Plan Model for Messrs. Cornelsen,
Burnett, Semanie and Miller. Ms. Hubbard’s 2015 restricted
stock award was granted in July 2015 for her individual performance
over the previous 12 months and its value is based on the share
price at issuance of $15.71. Ms. Hubbard was also granted
restricted stock in February 2017 pursuant to the 2016 Old Line
Bancshares’ Incentive Plan Model.
(7)
We estimated the
weighted average fair value of the options granted at $5.09 and
$5.38 using the Black-Scholes option pricing model for grants
issued for performance in 2014 and 2015, respectively. The model
assumed volatility rates of 40.894% and 25.28% respectively,
expected life of five years for 2014 and ten years for 2015. The
yield rate was based on the 5-year note for 2014 and the 10-year
note for 2015.
(8)
Paid in February
2015, February 2016 and February 2017 based on the previous
year’s performance under Old Line Bancshares’ Incentive
Plan Model.
Grants
of Plan-Based Awards
The
following table sets forth information on plan-based awards made to
the named executive officers during the year ended December 31,
2016. The restricted stock earned by Mr. Cornelsen, Mr. Burnett,
Mr. Miller, Mr. Semanie and Ms. Hubbard is based on the incentive
plan awards they received during 2016, as disclosed in the Summary
Compensation Table and discussed in the Compensation Discussion and
Analysis above, and were issued in 2017 based on 2016
performance.
Grants
of Plan-Based Awards
Fiscal
Year 2016
|
|
|
Estimated possible
payouts under
non-equity incentive
plan awards
(3)
|
Estimated possible
payouts under
equity incentive
plan awards
(4)
|
Grant date fair value of stock and option
|
|
Grant
|
Issue
|
|
|
|
|
|
|
|
Name
|
|
|
|
|
|
|
|
|
|
James
Cornelsen
|
2/24/2016
|
2/23/2017
|
110,103
|
220,206
|
330,309
|
1,910
|
3,820
|
7,641
|
99,684
|
Joseph
Burnett
|
2/24/2016
|
2/23/2017
|
33,003
|
66,006
|
99,009
|
458
|
916
|
1,832
|
23,909
|
M.
John Miller
|
2/24/2016
|
2/23/2017
|
28,088
|
56,175
|
84,263
|
390
|
780
|
1,559
|
20,342
|
Mark
Semanie
|
2/24/2016
|
2/23/2017
|
36,514
|
73,028
|
109,541
|
507
|
1,014
|
2,027
|
26,448
|
Elise
Hubbard
|
2/24/2016
|
2/23/2017
|
20,006
|
40,013
|
60,019
|
278
|
555
|
1,111
|
14,484
|
(1)
Date Committee approved
2016 Incentive Plan and related metrics.
(2)
Date Equity grants were approved in relation to the 2016 Incentive
Plan.
(3) The
information included in the Threshold, Target and Stretch columns
reflects the range of potential non-equity payouts under the 2016
ACIP.
(4) The
information included in the Threshold, Target and Stretch columns
reflects the range of potential equity payouts under the 2016 ACIP;
equity is calculated as a percentage of salary and grants were made
in the form of restricted stock, with the number of restricted
stock grants based on share price at issuance. Actual award amounts
are included in the Summary Compensation Table.
(5)
Represents the fair value of restricted stock award on the grant
date.
Employment Agreements
Old
Line Bank has entered into employment agreements with each of James
W. Cornelsen, Joseph E. Burnett, Mark A. Semanie and M. John
Miller.
Elise
Hubbard is an at-will employee and not a party to an employment
agreement. As an executive officer of the Company, she is eligible
to participate in the ACIP. She is also eligible to participate in
all other benefit plans that are generally available to our
salaried employees.
As of
December 10, 2015, Old Line Bank entered into a second amended and
restated employment agreement with Mr. Cornelsen (replacing a 2011
agreement) to serve as the President and Chief Executive Officer of
Old Line Bank and Old Line Bancshares, Inc. This agreement, as
amended to date, provides for an initial term ending on March 30,
2019, which may be extended by the Board of Directors for one
additional year or such greater term as the Board of Directors
deems appropriate. Mr. Cornelsen’s employment agreement is
currently set to expire in March 2021.
Mr.
Cornelsen’s employment agreement provides for an annual base
salary that is subject to annual review and increase as may be
determined by the Board of Directors. His 2017 base salary has been
approved at $616,577. Mr. Cornelsen may also receive an annual cash
or non-cash bonus as determined by the Board of Directors. The
agreement also provides that Mr. Cornelsen will not be compensated
for his attendance at Board of Directors’ meetings and that
he is entitled to an automobile provided by Old Line Bank and to
participate in such other bonus, incentive and other executive
compensation programs as are made available to senior management of
Old Line Bank from time to time.
Mr.
Cornelsen’s employment agreement terminates upon Mr.
Cornelsen’s death or by mutual written agreement. In
addition, Mr. Cornelsen may terminate the agreement within six
months following (or in certain circumstances, in anticipation of)
a “change in control,” as defined in the agreement, or
for good reason as defined in the agreement. Old Line Bank may
terminate the agreement for certain events constituting cause as
defined in the agreement. Either party may also terminate the
agreement without cause or good reason or upon Mr.
Cornelsen’s permanent disability provided that such party
provides 60 days prior written notice to the other party. Please
see “—Potential Payments Upon Termination of Employment
or Change in Control” for a discussion of the
post-termination payments provided under Mr. Cornelsen’s
employment agreement.
The
agreement also contains non-compete, non-solicitation and
confidentiality provisions.
On
January 26, 2011, Old Line Bank entered into an amended and
restated employment agreement with Mr. Burnett, as amended as of
January 1, 2013, to serve as Executive Vice President of Old Line
Bank. The agreement, as amended to date, provides for an initial
term of two years, which Old Line Bank may extend annually for one
additional year or such greater term as it deems appropriate. Mr.
Burnett’s employment agreement is currently set to expire in
March 2019.
On May
13, 2013, Old Line Bank entered into an employment agreement with
Mark A. Semanie to serve as Executive Vice President of Old Line
Bank. His agreement, as amended to date, provides for an initial
term of two years, which Old Line Bank may extend annually for one
additional year or such greater term as it deems appropriate. Mr.
Semanie’s employment agreement is currently set to expire in
March 2019.
On
February 26, 2014, Old Line Bank entered into an employment
agreement with Martin J. Miller to serve as Executive Vice
President of Old Line Bank. His agreement, as amended to date,
provides for an initial term of two years, which Old Line Bank may
extend annually for one additional year or such greater term as it
deems appropriate. Mr. Miller’s employment agreement is
currently set to expire in March 2019.
Under
their agreements each of the aforementioned executive officers is
entitled to an annual base salary and may receive an annual
discretionary bonus.
Mr. Burnett’s annual salary
is currently set at $300,000, Mr. Semanie’s annual base
salary is currently set at $315,000 and Mr. Miller’s annual
base salary is currently set at $242,700.
Each
such agreement terminates upon the employee’s death, in which
case all non-vested stock options will immediately vest, or
physical or mental incapacitation that has left the employee unable
to perform his duties for a period of 60 consecutive days. In
addition, the employee may terminate his agreement voluntarily. Old
Line Bank may terminate each agreement for certain events
constituting cause as defined in the agreements or without cause.
If Old Line Bank terminates the agreements other than for cause,
the employee is entitled to be paid his salary and benefits, for
the remaining term of the agreement, and any unvested stock options
shall immediately vest. In addition, each employee is entitled to
receive the remaining balance of his unused vacation and personal
leave at the termination of employment unless the employee is
terminated for cause. The agreements also contain non-compete,
non-solicitation and confidentiality provisions.
Salary Continuation Agreements and Supplemental Life Insurance
Agreements
On
January 3, 2006, Old Line Bank entered into supplemental life
insurance agreements and salary continuation agreements with each
of Mr. Cornelsen and Mr. Burnett. Under the supplemental
life insurance agreements, Old Line Bank is obligated to cause the
payment of death benefits to the executives’ designated
beneficiaries in the following amounts: Mr. Cornelsen -
$1,661,666 and Mr. Burnett - $663,820.
The
salary continuation agreements provide that, if they are employed
with the Bank when they reach age 65, Mr. Cornelsen will be
paid an annual amount of $131,607 and Mr. Burnett will be paid an
annual amount of $23,177 beginning upon their termination of
employment. Mr. Burnett is over the age of 65 and therefore will
begin to receive these payments upon termination of his employment.
If the executive dies while receiving payments, but prior to
receiving all the payments due, the unpaid balance of the payment
will continue to be paid to his beneficiary. All payments under
these agreements are paid in monthly installments for a 15-year
period. Under this salary continuation agreement, if Mr. Cornelsen
becomes no longer employed by the Bank (voluntarily or
involuntarily) prior to age 65 other than due to his death or
following a change in control, he will be paid an annual amount
ranging from $106,680 to $126,076, depending on the date his
employment is terminated, beginning on the first day of the month
following his 65
th
birthday. If Mr.
Cornelsen dies prior to age 65 and while employed by the 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 the Bank, as defined in
the agreement, then in lieu of the payments discussed above he will
be entitled to an annual payment of $116,969.
Effective February
26, 2010, Old Line Bank entered into an additional the salary
continuation plan agreement with each of Messrs. Cornelsen and
Burnett pursuant to which they are entitled to additional
benefits.
Under
the 2010 salary continuation plan agreements, upon reaching the age
of 65 with respect to Mr. Cornelsen or 68 with respect to Mr.
Burnett, the executives will be paid the following annual amounts
for 15 years: Mr. Cornelsen - $28,131; and
Mr. Burnett - $5,895. If the executive dies while receiving
payments, but prior to receiving all the payments due, the unpaid
balance of the payment will continue to be paid to his beneficiary.
All payments under the agreements are paid in monthly installments
and continue for 15 years, other than as described below. Mr.
Burnett reached the age of 68 and began receiving these payments in
2013. Under this salary continuation agreement, if Mr. Cornelsen
dies before reaching age 65 or becomes disabled, as defined in the
agreement, while employed by the Bank, or he otherwise becomes no
longer employed by the Bank (voluntarily or involuntarily) other
than following a change in control, he or his beneficiary will be
paid an annual amount ranging from $20,757 to $26,687, depending on
the date of the event. Such benefit begins on the first day of the
second month following the earlier of the date Mr. Cornelsen
reaches age 65 or dies. This agreement also provides for change in
control payments to be paid to Mr. Cornelsen if he is employed with
the Bank upon a change in control (as defined in the agreement) of
the Bank that occurs prior to his normal retirement age or any
termination of his employment. The change in control payments range
from $24,800 to $27,342 annually, 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.
If, however, Mr. Cornelsen’s employment with the 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
Mr. Cornelsen will receive additional benefits.
The
first 2012 salary continuation plan agreement provides that if Mr.
Cornelsen remains employed by the 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 payment will continue for 15 years. If Mr. Cornelsen
dies while receiving payments, but prior to receiving all the
payments due, the unpaid balance of the payment will continue to be
paid to his beneficiary. If Mr. Cornelsen dies before reaching age
65, becomes disabled, as defined in the agreement, while employed
by the Bank, or he otherwise becomes no longer employed by the Bank
(voluntarily or involuntarily) other than following a change in
control, he or his beneficiary will be paid an annual amount
ranging from $30,702to $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 the Bank upon a change in
control (as defined in the agreement) of the Bank that occurs prior
to his 65th birthday. The change in control payments range from
$56,586 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 the
Bank. If, however, Mr. Cornelsen’s employment with the 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.
The
second 2012 salary continuation plan agreement provides that if Mr.
Cornelsen remains employed by the 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. If Mr. Cornelsen dies before reaching age 65 or becomes
disabled, as defined in the agreement, while employed by the Bank,
or he otherwise becomes no longer employed by the Bank (voluntarily
or involuntarily) other than following a change in control, he or
his beneficiary will be paid an annual amount ranging from $107,341
to $180,913, depending on the date of the event, for a period of
five years. Such death benefit is payable to Mr. Cornelsen’s
beneficiary beginning on the first day of the second month
following the 15th anniversary of his death, while the other
payments begin on the first day of the second month following Mr.
Cornelsen’s 80th birthday, in each case on a monthly basis
The agreement also provides for change in control payments to be
paid to Mr. Cornelsen if he is employed with the Bank upon a change
in control (as defined in the agreement) of the Bank that occurs
prior to his normal retirement age. The change in control payments
range from $197,840 to $218,119 annually, depending on the date of
the change of control, and will be paid on a monthly basis for a
period of five years beginning on the 15th anniversary of the first
day of the second month following the date of termination of Mr.
Cornelsen’s employment with the Bank. If, however, Mr.
Cornelsen’s employment with the 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 or (ii) monthly
installments over two years. All payments under this agreement will
be paid to Mr. Cornelsen’s beneficiary if he should die
before five years of payments are made.
Effective January
1, 2014, Old Line Bank entered into a salary continuation plan
agreement with Mr. Semanie pursuant to which Mr. Semanie will
receive benefits. The agreement provides that if Mr. Semanie
remains employed by the 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
$154,435. Such payment will continue for 15 years. If Mr. Semanie
dies while receiving payments, but prior to receiving all the
payments due, the unpaid balance of the benefit will continue to be
paid to his beneficiary. If Mr. Semanie dies before reaching age 65
or becomes disabled, as defined in the agreement, while employed by
the Bank, or he otherwise becomes no longer employed by the Bank
other than following a change in control, he or his beneficiary
will be paid an annual amount ranging from $32,513 and $151,726,
depending on the date of the event, for a period of 15 years. Such
benefits are payable monthly and generally beginning on the first
day of the second month following the earlier of Mr.
Semanie’s 65th birthday or death. The agreement also provides
for change in control payments to be paid to Mr. Semanie if he is
employed with the Bank upon a change in control (as defined in the
agreement) of the Bank that occurs prior to his 65
th
birthday. The
change in control payments range from $89,200 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 the Bank. If, however, Mr.
Semanie’s employment with the 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.
The
salary continuation plan agreements 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
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 and 2010 Plans
|
Assumed
separation
d
ate
|
Age
|
Early
termination
annual
b
enefit
(1)
|
Disability
annual
b
enefit
(1)
|
Change in
control annual
b
enefit
(2)
|
1/1/2017
|
62
|
127,437
|
127,437
|
141,769
|
1/1/2018
|
63
|
140,100
|
140,100
|
148,858
|
1/1/2019
|
64
|
152,763
|
152,763
|
156,301
|
6/23/2019
(3)
|
65
|
159,738
|
159,738
|
159,738
|
(1)
Payments are made
in 180 equal monthly installments commencing within 60 days
following the earlier of normal retirement age or
death.
(2)
Payments are made
in 180 equal monthly installments commencing at separation of
service.
(3)
This is the date
the executive reaches normal retirement age.
James. W Cornelsen 2012-A Plan
|
Age 65 Payment with 15 Year Guarantee
|
Assumed
separation
d
ate
|
Age
|
Early
termination
annual
b
enefit
(1)
|
Disability
annual
b
enefit
(1)
|
Change in
control annual
b
enefit
(2)
|
10/1/2016
|
62
|
30,702
|
30,702
|
56,586
|
10/1/2017
|
63
|
40,680
|
40,680
|
59,416
|
10/1/2018
|
64
|
51,745
|
51,745
|
62,386
|
6/23/2019
(3)
|
65
|
63,991
|
63,991
|
63,991
|
(1)
The early
termination benefit or disability benefit under the plan shall be
the annual benefit amount determined for the year in which
termination or disability occurs, as applicable multiplied by
15.
(2)
The change in
control benefit shall be the change in control annual benefit
amount determined for the year in which the change in control
occurs, multiplied by 15.
(3)
This is the date
that the executive reaches normal retirement age.
James. W Cornelsen 2012-B Plan
|
Age 80 Payment with 5 Year Guarantee
|
Assumed
separation
d
ate
|
Age
|
Early
termination
annual
b
enefit
(1)
|
Disability
annual
b
enefit
(1)
|
Change in
control annual
b
enefit
(2)
|
10/1/2016
|
62
|
107,341
|
107,341
|
197,840
|
10/1/2017
|
63
|
142,227
|
142,227
|
207,732
|
10/1/2018
|
64
|
180,913
|
180,913
|
218,119
|
6/23/2019
(3)
|
65
|
223,729
|
223,729
|
223,729
|
(1)
The early
termination benefit or disability benefit under the plan shall be
the annual benefit amount determined for the year in which
termination or disability occurs, as applicable multiplied by
five.
(2)
The change in
control benefit shall be the change in control annual benefit
amount determined for the year in which the change in control
occurs, multiplied by five.
(3)
This is the date
that the executive reaches normal retirement age and becomes vested
in the normal retirement benefit.
Mark A. Semanie
|
Assumed
separation
d
ate
|
Age
|
Early
termination
annual
b
enefit
(1)
|
Disability
annual
b
enefit
(1)
|
Change in
control annual
b
enefit
(2)
|
1/1/2017
|
53
|
32,513
|
32,513
|
89,200
|
1/1/2018
|
54
|
43,350
|
43,350
|
93,660
|
1/1/2019
|
55
|
54,188
|
54,188
|
98,343
|
1/1/2020
|
56
|
65,025
|
65,025
|
103,260
|
1/1/2021
|
57
|
75,863
|
75,863
|
108,424
|
1/1/2022
|
58
|
86,700
|
86,700
|
113,845
|
1/1/2023
|
59
|
97,538
|
97,538
|
119,537
|
1/1/2024
|
60
|
108,375
|
108,375
|
125,514
|
1/1/2025
|
61
|
119,213
|
119,213
|
131,789
|
1/1/2026
|
62
|
130,050
|
130,050
|
138,379
|
1/1/2027
|
63
|
140,888
|
140,888
|
145,298
|
1/1/2028
|
64
|
151,726
|
151,726
|
152,563
|
4/22/2028
(3)
|
65
|
154,435
|
154,435
|
154,435
|
(1)
Payments are made
in 180 equal monthly installments commencing within 60 days
following the earlier of normal retirement age or
death.
(2)
Payments are made
in 180 equal monthly installments commencing at separation of
service.
(3)
This is the date
the executive reaches normal retirement age.
Changes in Nonqualified Deferred Compensation
The
following table shows the changes in the balance of the named
executive officers’ supplemental executive retirement plans
during 2016.
Executive
|
|
Executive contributions in last fiscal year
$
|
Registrant contributions in last fiscal year
$
|
Aggregate earnings in last fiscal year
$
|
Aggregate withdrawal/
distribution
$
|
Aggregate balance at last fiscal year end
$
|
James
Cornelsen
|
Plan 1
|
n/a
|
132,447
|
-
|
-
|
909,339
|
|
Plan 2
|
n/a
|
33,871
|
-
|
-
|
175,634
|
|
2012-A
|
n/a
|
97,125
|
-
|
-
|
348,780
|
|
2012-B
|
n/a
|
89,853
|
-
|
-
|
322,663
|
Joseph
Burnett
|
Plan 1
|
n/a
|
-
|
-
|
-
|
228,927
|
|
Plan 2
|
n/a
|
3,138
|
-
|
5,895
|
50,632
|
Mark
Semanie
|
Plan 2014
|
n/a
|
62,225
|
-
|
-
|
156,528
|
Participant
contributions are not permitted under the supplemental executive
retirement plans.
The
following table discloses information about unexercised options and
equity incentive plan awards outstanding as of the end of our last
fiscal year.
OUTSTANDING EQUITY AWARDS
AT FISCAL YEAR-END
DECEMBER 31, 2016
|
|
|
|
|
|
|
Number of securities
underlying unexercised
options:
|
Number of securities
underlying unexercised
options:
|
|
option
expiration
|
grant
|
Number of shares that have
not
|
Market value of shares that have
not
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
W. Cornelsen
|
-
|
24,647
|
17.75
|
2/24/2026
|
2/24/2016
|
3,200
|
76,736
|
|
6,553
|
13,108
|
14.38
|
2/25/2025
|
2/25/2015
|
1,990
|
47,720
|
|
14,656
|
7,329
|
16.76
|
2/26/2024
|
2/26/2014
|
-
|
-
|
|
19,097
|
-
|
12.04
|
2/27/2023
|
2/27/2013
|
-
|
-
|
|
28,784
|
-
|
8.00
|
12/31/2021
|
|
-
|
-
|
|
8,576
|
-
|
7.82
|
1/27/2021
|
|
-
|
-
|
|
11,823
|
-
|
7.13
|
1/28/2020
|
|
-
|
-
|
|
33,790
|
-
|
6.30
|
1/22/2019
|
|
-
|
-
|
|
18,200
|
-
|
7.75
|
1/31/2018
|
|
-
|
-
|
Total
|
141,479
|
45,084
|
|
|
|
5,190
|
124,456
|
|
|
|
|
|
|
|
|
Joseph
E. Burnett
|
-
|
5,910
|
17.75
|
2/24/2026
|
2/24/2016
|
767
|
18,393
|
|
1,593
|
3,186
|
14.38
|
2/25/2025
|
2/25/2015
|
484
|
11,606
|
|
3,984
|
1,993
|
16.76
|
2/26/2024
|
2/26/2014
|
-
|
-
|
|
6,095
|
-
|
12.04
|
2/27/2023
|
2/27/2013
|
-
|
-
|
|
12,560
|
-
|
8.00
|
12/31/2021
|
|
-
|
-
|
|
2,814
|
-
|
7.82
|
1/27/2021
|
|
-
|
-
|
|
9,800
|
-
|
7.75
|
1/31/2018
|
|
-
|
-
|
Total
|
36,846
|
11,089
|
|
|
|
1,251
|
29,999
|
|
|
|
|
|
|
|
|
Mark
A. Semanie
|
-
|
6,539
|
17.75
|
2/24/2026
|
2/24/2016
|
849
|
20,359
|
|
1,762
|
3,525
|
14.38
|
2/25/2025
|
2/25/2025
|
535
|
12,829
|
|
3,984
|
1,993
|
16.76
|
2/26/2024
|
2/26/2014
|
-
|
-
|
Total
|
5,746
|
12,057
|
|
|
|
1,384
|
33,188
|
|
|
|
|
|
|
|
|
M.
John Miller
|
-
|
5,030
|
17.75
|
2/24/2026
|
2/24/2016
|
653
|
15,659
|
|
1,355
|
2,712
|
14.38
|
02/25/2025
|
02/25/2015
|
412
|
9,880
|
Total
|
1,355
|
7,742
|
|
|
|
1,065
|
25,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elise
M. Hubbard
|
-
|
-
|
|
|
|
1,299
|
31,150
|
|
-
|
-
|
|
|
|
796
|
19,088
|
Total
|
-
|
-
|
|
|
|
2,095
|
50,238
|
|
|
|
|
|
|
|
|
|
185,426
|
75,972
|
|
|
|
10,985
|
263,420
|
(1) One-third of the options with an
expiration date of 02/24/2026 became exercisable on 02/24/2017, 1/3
will become exercisable on 02/24/2018 and the remaining 1/3 will
become exercisable on 02/24/2019. One-half of the un-exercisable
options with an expiration date of 02/25/2025 became exercisable on
02/26/2017 and the remaining half will become exercisable on
02/26/2018. The remaining un-exercisable options with an expiration
date of 2/27/2024 became exercisable on 02/27/2017.
|
(2) One-third of the options
with an expiration date of 02/25/2025 became exercisable on
02/25/2016, 1/3 became exercisable on 02/25/2017 and the remaining
1/3 will become exercisable on 02/25/2018. One-half of the
un-exercisable options with an expiration date of 02/26/2024 became
exercisable on 02/26/2016 and the remaining half became exercisable
on 02/26/2017. The remaining un-exercisable options with an
expiration date of 2/27/2023 became exercisable on
02/27/2016.
|
Option Exercises and Stock Vested 2016
The
following table presents information for those named executive
officers that exercised options during 2016. We also present
information for those named executive officers that had restricted
stock vest in 2016.
Option Exercises and Stock Vested
Fiscal Year 2016
|
|
|
Name
|
Number of shares
acquired on exercise
#
|
Value realized
on exercise
$
|
Number of shares
acquired on vesting
#
|
Value realized
on vesting
$
|
James
W. Cornelsen
|
15,000
|
222,150.00
|
1,869
|
38,695.58
|
Joseph
E. Burnett
|
19,341
|
259,503.82
|
480
|
10,025.84
|
Mark
A. Semanie
|
-
|
-
|
506
|
10,489.16
|
M.
John Miller
|
-
|
-
|
205
|
3,653.10
|
Elise
M. Hubbard
|
-
|
-
|
397
|
7,336.56
|
Pension Benefits
The
following table shows the present value of the accumulated benefit
under the Old Line Bank supplemental executive retirement plan. As
noted earlier, Mr. Cornelsen, Mr. Burnett and Mr. Semanie are
participants in the plan.
Executive
|
|
Number of
years credited
Service
#
|
Present value
of accumulated
benefit
$
|
Payments
during last
fiscal year
$
|
James
Cornelsen
|
Plan 1
|
10
|
962,127
|
-
|
|
Plan 2
|
7
|
186,259
|
-
|
|
2012-A
|
5
|
371,926
|
-
|
|
2012-B
|
5
|
344,076
|
-
|
Joseph Burnett
(1)
|
Plan 1
|
10
|
228,927
|
-
|
|
Plan 2
|
7
|
47,702
|
5,895
|
Mark
Semanie
|
Plan 2014
|
3
|
177,663
|
-
|
(1)
Mr. Burnett
has reached normal retirement age in both Plans 1 and 2; his
benefit is fully accrued and he has begun receiving monthly
payments from Plan 2. These amounts reflect the present value of
the remaining obligation.
Potential Payments Upon Termination of Employment or Change in
Control
Mr.
Cornelsen’s employment agreement provides that if he
terminates his employment for good reason or because of his
permanent disability, or if Old Line Bank terminates Mr.
Cornelsen’s employment without cause or because of permanent
disability, and a change in control has not occurred,
he will
receive severance pay for the remaining term of the agreement in an
amount equal to his average annual compensation over the prior five
years.
As of December 31,
2016, this amount was $2,490,379.
If Mr. Cornelsen is terminated or
terminates his employment in anticipation of or within six months
following a change in control, as defined in the agreement, he is
entitled to a lump sum payment equal to 1.99 times his average
annual compensation over the prior five years, minus any other
payments he receives that are contingent on the change in control.
If the change in control payments were required to be paid as of
December 31, 2016, Mr. Cornelsen would have received
approximately
$1,166,083. In
addition, as of December 31, 2016, the change in control payments
under Mr. Cornelsen’s salary continuation agreements vest
immediately and he is entitled to begin receiving payments, upon
separation, of $198,355 annually for 15 years plus $197,840
annually for five years. Further, under the terms of the grant
agreements with respect to his awards of options to purchase our
common stock and shares of restricted stock, any unvested options
and shares of restricted stock will vest upon a change in control.
The value relating to stock options is typically reflected as the
difference between the exercise price and the closing price of our
common stock on the applicable date, while we use the full market
value of our common stock on the date of the calculation to
determine the value of the accelerated vesting of shares of
restricted stock. Mr. Cornelsen had unvested options to purchase
45,084 shares of our common stock, all of which had an exercise
price below the closing price of our common stock, on December 31,
2016. The value of the accelerated vesting of these stock options
was $332,303 as of December 31, 2016
. Mr. Cornelsen also had
5,190 shares of unvested restricted stock, the value of the
accelerated vesting of which was $124,456, as of December 31,
2016.
In the event of Mr. Cornelsen’s termination
other than for cause, whether or not following or in connection
with a change of control, his employment agreement provides for an
additional payment of one times his average annual compensation
over the prior five years in equal monthly installments for a
period of 12 months following his termination as consideration for
his agreement to the non-competition provision of his employment
agreement. As of December 31, 2016, this amount was $585,971.
The employment agreement also provides that if Mr.
Cornelsen’s employment is terminated other than for cause,
the Bank
is
required to continue his health insurance for him and his wife for
three years after his termination. Based on the current health
insurance premiums and estimated yearly increases in such premiums,
we estimate the value of this benefit as of December 31, 2016 to be
$71,677.
In the event of Mr. Burnett’s
termination by the Bank other than for cause,
Mr. Burnett’s employment agreement provides for
continuation of his current salary and benefits for the remaining
term of his agreement plus options to purchase at least 2,250
shares of our common stock, which would vest upon grant. As of
December 31, 2016, this amount, including the value of such
options, was $383,983. Additionally, as of December 31, 2016, upon
termination Mr. Burnett would receive $23,177 for 15 years under
his salary continuation agreement. Further, his unvested options
and unvested shares of restricted stock would vest immediately upon
a change in control pursuant to the terms of the grant agreements
with respect to his options and restricted stock awards, and his
unvested options would vest immediately upon his termination for
any reason other than for cause pursuant to the terms of his
employment agreement. As noted previously, the value relating to
stock options is typically reflected as the difference between the
exercise price and the closing price of our common stock on the
applicable date. Mr. Burnett had unvested options to purchase
11,089 shares of our common stock, all of which had an exercise
price below the closing price of our common stock, on December 31,
2016. The value of the accelerated vesting of these stock options
is $81,794 as of December 31, 2016. Mr. Burnett also had 1,251
shares of unvested restricted stock,
the value of the
accelerated vesting of which was $29,999, as of December 31,
2016.
In the event of Mr. Semanie’s
termination by the Bank other than for cause,
Mr. Semanie’s employment agreement provides for
continuation of his current salary and benefits for the remaining
term of his agreement plus options to purchase at least 2,250
shares of our common stock, which would vest upon grant. As of
December 31, 2016, this amount, including the value of such
options, was $419,093. Additionally, as of December 31, 2016, upon
termination following a change in control, Mr. Semanie would
receive $84,953 for 15 years under his salary continuation
agreement. Further, his unvested options and unvested shares of
restricted stock would vest immediately upon a change in control
pursuant to the terms of the grant agreements with respect to his
options and restricted stock awards, and his unvested options would
vest immediately upon his termination for any reason other than for
cause pursuant to the terms of his employment agreement. Mr.
Semanie had unvested options to purchase 12,057 shares of our
common stock, all of which had an exercise price below the closing
price of our common stock, on December 31, 2016. The value of the
accelerated vesting of these stock options is $88,967 as of
December 31, 2016. Mr. Semanie also had 1,384 shares of unvested
restricted stock
, the value of the accelerated vesting of
which was $33,188, as of December 31, 2016.
In the event of Mr. Miller’s
termination by the Bank other than for cause,
Mr. Miller’s employment agreement provides for
continuation of his current salary and benefits for the remaining
term of his agreement plus options to purchase at least 2,250
shares of our common stock, which would vest upon grant. As of
December 31, 2016, this amount, including the value of such
options, was $334,830. Further, his unvested options and unvested
shares of restricted stock would vest immediately upon a change in
control pursuant to the terms of the grant agreements with respect
to his option and restricted stock awards, and his unvested options
would vest immediately upon his termination for any reason other
than for cause pursuant to the terms of his employment agreement.
As of December 31, 2016, Mr. Miller had unvested options to
purchase 7,742 shares of our common stock, all which had an
exercise price below the closing price of our common stock on
December 31, 2016. The value of the accelerated vesting of the
stock options that were in the money is $57,372 as of December 31,
2016. Mr. Miller also had 1,065 shares of unvested restricted
stock,
the value of the accelerated vesting of which was
$25,539, as of December 31, 2016.
Information Regarding Executive Officers Who are Not Directors and
Key Employees
Executive Officers
Joseph E.
Burnett
,
71,
joined Old Line Bank as a Senior Vice President and Chief Lending
Officer in August 2001 and was promoted to Executive Vice President
in May 2006. He is also an Executive Vice President of Old Line
Bancshares, Inc. He has over 50 years of banking experience in the
Washington, D.C. metropolitan area specializing in commercial
transactions. Prior to joining Old Line Bank, Mr. Burnett was a
Senior Vice President in Commercial Lending at Farmers Bank for two
years (1999-2001) and at Suburban Bank for 12 years
(1987-1999).
M. John Miller,
67
,
has served as Old Line
Bank?s Executive Vice President and Chief Credit Officer since
January 2014. He was hired in 2011 as Senior Vice President of Old
Line Bank. Mr. Miller is also responsible for managing the special
assets at Old Line Bank. Prior to joining Old Line Bank, he was a
Senior Vice President for Commercial Real Estate Lending and
Special Assets at Bank Annapolis from 2007-2010. From 1998-2007, he
was a Senior Vice President of Commercial Real Estate Lending at
Annapolis Bank & Trust. Mr. Miller has also developed
residential property including custom waterfront homes. He has over
39 years of banking and real estate development
experience.
Mark A. Semanie
, 54,
joined Old Line Bank in January 2013 as Executive Vice President of
Old Line Bank and Old Line Bancshares. He was appointed Chief
Operating Officer in May 2013. Prior to joining Old Line Bank, Mr.
Semanie had served as Chief Financial Officer of Carrollton Bancorp
and Senior Vice President and Chief Financial Officer of Carrollton
Bank, located in Columbia, Maryland, since January 2010. Prior to
that he was a self-employed business consultant specializing in the
financial services industry from January – December 2009 and
was Executive Vice President and Chief Financial Officer for Bay
National Bank from October 2000 through December 2008. Mr. Semanie
passed the CPA exam in 1985 and worked in public accounting from
1985 until 1993.
Elise Hubbard,
44,
has been a Senior Vice President and Chief Financial Officer of Old
Line Bank and Old Line Bancshares since April 2014
. She originally joined the Bank in 2006 and has
19 years of accounting experience. Ms. Hubbard has held various
positions at the Bank, including Vice President, Assistant Vice
President, Senior Accountant and Accounting Administrator. She
holds a B.S. in Accounting with minors in Business Management and
Human Resources from the University of
Maryland.
The
respective Board of Directors of Old Line Bancshares, Inc. and Old
Line Bank annually elect our officers following the annual meeting
of stockholders and the officers serve for terms of one year or
until their successors are duly elected and qualified except where
a longer term is expressly provided in an employment contract duly
authorized and approved by the Board of Directors. See
“Executive Compensation-Employment
Agreements.”
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The
federal securities laws require that Old Line Bancshares,
Inc.’s directors and executive officers and persons holding
more than ten percent of its outstanding shares of common stock are
required to report their ownership and changes in such ownership to
the SEC and Old Line Bancshares, Inc. Based solely on its review of
the copies of such reports, Old Line Bancshares, Inc. believes
that, for the year ended December 31, 2016, all Section 16(a)
filing requirements applicable to Old Line Bancshares, Inc.’s
officers, directors and greater than ten percent shareholders were
complied with on a timely basis, except for a Form 4 for each of
our non-employee directors with respect to a grant of restricted
stock made to each such director on February 24, 2016. Due to an
administrative oversight, only 50% of each such grant was initially
reported, with the remainder not reported timely. The Forms 4 were
subsequently amended to reflect the entire amount of each
restricted stock grant.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Old
Line Bank has had in the past, and expects to have in the future,
banking transactions with directors and executive officers and the
business and professional organizations in which they are
associated in the ordinary course of business. Any loans and loan
commitments are made in accordance with all applicable laws and on
substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable loans to
unrelated persons. In the opinion of management, these transactions
do not and will not involve more than the normal risk of
collectability or present other unfavorable features. Directors or
officers with any personal interest in any loan application are
excluded from considering any such loan application. The aggregate
amount of loans outstanding to Old Line Bank’s directors,
executive officers and their affiliates at December 31, 2016 was
approximately $713,400.
Old
Line Bank has entered into various transactions with firms in which
owners are also members of the Board of Directors. Fees charged for
these services are at similar rates charged by unrelated parties
for similar products or services. Old Line Bank leases three branch
office facilities from G. Thomas Daugherty or companies owned by
Mr. Daugherty. In 2016, Old Line Bank paid lease payments for these
facilities of $282,093.
Old
Line Bancshares has a 100.00% interest in Pointer Ridge Office
Investments, LLC (“Pointer Ridge”). Frank Lucente, a
director of Old Line Bancshares and Old Line Bank, controlled
12.50% of Pointer Ridge until Old Line Bank’s purchase of the
37.5% of the interests in Pointer Ridge not then owned by Old Line
Bancshares on August 19, 2016. From January 1, 2016 through August
19, 2016, Old Line Bank paid Pointer Ridge $665,008.
We have
not adopted a formal policy that covers the review and approval of
related person transactions by our Board of Directors; however the
Board does review all proposed related party transactions for
approval. During such a review, the Board will consider, among
other things, the related person’s relationship to the
Company, the facts and circumstances of the proposed transaction,
the aggregate dollar amount of the transaction, the related
person’s relationship to the transaction and any other
material information. Those directors that are involved in a
proposed related party transaction are excused from the Board
meeting during the discussion of and vote on the proposed
transaction.
PROPOSAL II
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The
Board of Directors has ratified and confirmed the Audit
Committee’s selection of Dixon Hughes Goodman LLP as Old Line
Bancshares, Inc.’s independent public accountants for 2017.
Dixon Hughes Goodman LLP has served as Old Line Bancshares,
Inc.’s independent public accountants since 2013 and the
Audit Committee and management consider them to be well
qualified.
A
representative of Dixon Hughes Goodman LLP will be present at the
Annual Meeting to respond to appropriate questions and to make a
statement if he or she desires to do so.
Approval of this
proposal requires a majority of votes cast at the Annual Meeting.
Abstentions and broker non-votes will have no effect on the vote
for this proposal.
If the
stockholders fail to ratify this appointment, the Audit Committee
will reconsider whether to retain Dixon Hughes Goodman LLP and may
retain that firm or another firm without resubmitting the matter to
Old Line Bancshares, Inc.’s stockholders. Even if the
appointment is ratified, the Audit Committee may, in its
discretion, direct the appointment of different independent public
accountants at any time during the year if it determines that such
change would be in the best interests of Old Line Bancshares, Inc.
and its stockholders.
The
Board of Directors recommends that stockholders vote
“FOR” the ratification of the appointment of Dixon
Hughes Goodman LLP as independent public accountants for
2017.
AUDIT COMMITTEE REPORT
The
Audit Committee has (1) reviewed and discussed Old Line
Bancshares, Inc.’s audited financial statements with Old Line
Bancshares, Inc.’s management and representatives of Dixon
Hughes Goodman LLP, the independent auditors for 2016;
(2) discussed with Dixon Hughes Goodman LLP the matters
required to be discussed by Statement on Auditing Standards No.
1301, Communications with Audit Committees, issued by the Public
Company Accounting Oversight Board; and (3) has received the
written disclosures and the letter from Dixon Hughes Goodman LLP
required by applicable requirements of the Public Company
Accounting Oversight Board regarding the independent
accountant’s communications with the Audit Committee
concerning independence and has discussed with Dixon Hughes Goodman
LLP the independence of Dixon Hughes Goodman LLP. Based on its
review and discussions, the Audit Committee recommended to the
Board of Directors that the audited financial statements for the
year ended December 31, 2016 be included in Old Line Bancshares,
Inc.’s Annual Report on Form 10-K for the last fiscal
year.
Audit
Committee:
By:
Suhas R. Shah, CPA, Chairman
Craig.
E. Clark
John M.
Suit, II
Frank
E. Taylor
Audit and Non-Audit Fees
The
following table presents combined fees for professional audit
services rendered by Dixon Hughes Goodman LLP for the audit of Old
Line Bancshares, Inc.’s annual consolidated financial
statements for the years ended December 31, 2016 and 2015 and fees
billed for other services rendered by Dixon Hughes Goodman LLP
during those periods.
|
|
|
|
|
|
|
Audit fees
(1)
|
$
289,535
|
$
191,050
|
Tax fees
(2)
|
23,875
|
32,250
|
All other fees
(3)
|
105,000
|
60,000
|
Total
|
$
418,410
|
$
283,300
|
(1)
Audit
fees consist of fees billed for professional services rendered for
the audit of the Old Line Bancshares, Inc.’s consolidated (or
Old Line Bank’s) annual financial statements and review of
the interim consolidated financial statements included in quarterly
reports as well as services that Dixon Hughes Goodman LLP normally
provides in connection with statutory and regulatory filings or
engagements.
(2)
Tax
fees consist of fees billed for professional services rendered for
federal and state tax compliance, tax advice and tax
planning.
(3)
All
other fees include fees billed for professional services rendered
for the audits of the 401(k) plan and Housing and Urban Development
programs. For 2015, this also amount includes fees for assistance
related to the acquisition of Regal Bancorp, Inc. and Regal Bank
& Trust, and for 2016 it includes fees billed for professional
services provided in conjunction with our issuance of subordinated
notes.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit
Services of Independent Auditor
Old
Line Bancshares, Inc.’s Audit Committee approves the
engagement before Old Line Bancshares, Inc. or Old Line Bank
engages the independent auditor to render any audit or non-audit
services.
PROPOSAL III
NON-BINDING ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED
EXECUTIVE OFFICERS
The
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
and related SEC regulations require, at least once every three
years, that we provide our stockholders with the opportunity to
express their views, on a non-binding, advisory basis, on the
compensation of our named executive officers as disclosed in this
proxy statement. We first held this vote, which is often referred
to as the “say-on-pay” vote, at our annual meeting of
stockholders held in 2013. At such meeting, consistent with the
Board of Directors recommendation, our stockholders voted to hold
the say-on-pay vote on an annual basis; therefore our Board of
Directors determined that the Company will hold future non-binding
advisory votes on the compensation of our named executive officers
every year, at least until the next required vote on the frequency
of stockholder votes on the compensation of our named executive
officers, which will be in 2019. This vote provides stockholders
with the opportunity to endorse or not endorse the compensation of
our named executive officers by voting on the following
non-binding, advisory resolution:
RESOLVED, that the
stockholders of Old Line Bancshares, Inc. (the
“Company”) approve, on an advisory basis, the
compensation of the Company’s named executive officers as
disclosed in the compensation tables and related material in the
Proxy Statement for the 2017 annual meeting of
stockholders.
Approval of the
non-binding, advisory proposal to approve the compensation of our
named executive officers requires the affirmative vote of a
majority of the votes cast on the matter at the Annual
Meeting.
Because
the vote is advisory, it will not be binding upon the Board of
Directors or the Compensation Committee and may not be construed as
overruling a decision by the Board or the Compensation Committee,
or create or imply any additional fiduciary duty on the Board or
our Directors. It will also not affect any compensation paid or
awarded to any executive. The Board of Directors and its
Compensation Committee may, however, take into account the outcome
of the vote when considering future executive compensation
arrangements.
The
Board of Directors believes that the Company’s executive
compensation program, as described elsewhere in this proxy
statement, is reasonable in comparison both to similar sized
companies in the industry and to the Company’s performance,
and that it strongly aligns the interests of the Company’s
executive officers with the interests of the Company’s
stockholders in the creation of long-term value of the Company as
well as the components that drive long-term value.
The
Board of Directors recommends that stockholders vote "FOR" approval
of the non-binding advisory resolution to approve the compensation
of our named executive officers as described in this proxy
statement.
STOCKHOLDER COMMUNICATIONS
If you
would like to contact Old Line Bancshares, Inc.’s Board of
Directors, including a committee of the Board of Directors, you can
send an email to msemanie@oldlinebank.com, or write to the
following address:
Board
of Directors
c/o
Corporate Secretary
Old
Line Bancshares, Inc.
1525
Pointer Ridge Place
Bowie,
Maryland 20716
The
Secretary will compile all communications and submit them to the
Board of Directors or the individual Directors on a periodic
basis.
STOCKHOLDER PROPOSALS
In
order to be included in the proxy materials for Old Line
Bancshares, Inc.’s 2018 annual meeting of stockholders,
stockholder proposals submitted to Old Line Bancshares, Inc. in
compliance with SEC Rule 14a-8 (which concerns shareholder
proposals that are requested to be included in a company’s
proxy statement) must be received in written form at Old Line
Bancshares, Inc.’s executive offices on or before December
21, 2017. In order to curtail controversy as to compliance with
this requirement, stockholders are urged to submit proposals to the
Secretary of Old Line Bancshares, Inc. by Certified
Mail—Return Receipt Requested.
Pursuant to the
proxy rules under the Securities Exchange Act of 1934, as amended,
Old Line Bancshares’ stockholders are notified that the
notice of any stockholder proposal to be submitted outside of the
Rule 14a-8 process for consideration at the 2018 annual meeting of
stockholders must be received by our Secretary between February 23,
2018 and March 25, 2018; provided, however, that if the date of the
2018 annual meeting is advanced more than 30 days prior to May 24,
2018 or is delayed more than 60 days after such date, then to be
timely such notice must be received by the Company no later than
the later of 70 days prior to the date of the meeting or the 10th
day following the day on which public announcement of the date of
the meeting is made. As to all such matters which we do not have
notice on or prior to that date, discretionary authority to vote on
such proposal will be granted to the persons designated in Old Line
Bancshares, Inc.’s proxy related to the 2018 annual meeting
of stockholders.
In
addition to any other applicable requirements, for nominations for
election to the Board of Directors at an annual meeting of
stockholders outside of the procedures established in the charter
of the Corporate Governance Committee of Old Line Bancshares, Inc.
and even if the nomination is not to be included in the Proxy
Statement, pursuant to Old Line Bancshares, Inc.’s Bylaws,
the stockholder must give notice in writing to the Secretary of Old
Line Bancshares, Inc. not less than 60 days nor more than
90 days prior to the anniversary of the preceding year’s
annual meeting of stockholders; provided, however, that if the date
of the annual meeting is advanced more than 30 days prior to such
anniversary date or is delayed more than 60 days after such
anniversary date, then to be timely such notice must be received by
the Company no later than the later of 70 days prior to the date of
the meeting or the 10th day following the day on which public
announcement of the date of the meeting was made.
Please
see our bylaws for a description of the information that must be
contained in a notice for a stockholder proposal or director
nomination.
ANNUAL REPORT
The Old
Line Bancshares, Inc. annual report on Form 10-K for the year
ending December 31, 2016 is being mailed with this proxy statement.
Copies of the report will also be available at the Annual Meeting
on May 24, 2017.
A
COPY OF OLD LINE BANCSHARES, INC.’S ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2016, INCLUDING
FINANCIAL STATEMENTS AND THE SCHEDULES THERETO, WILL BE FURNISHED
BY MANAGEMENT TO ANY BENEFICIAL OWNER OF ITS SECURITIES WITHOUT
CHARGE UPON RECEIPT OF A WRITTEN REQUEST FROM SUCH PERSON. REQUESTS
IN WRITING SHOULD BE DIRECTED TO OLD LINE BANCSHARES, INC. C/O
CORPORATE SECRETARY, 1525 POINTER RIDGE PLACE, BOWIE, MARYLAND
20716. EACH REQUEST MUST SET FORTH A GOOD FAITH REPRESENTATION
THAT, AS OF APRIL 3, 2017, THE RECORD DATE FOR THE ANNUAL MEETING,
THE PERSON MAKING THE REQUEST WAS A BENEFICIAL OWNER OF SECURITIES
ENTITLED TO VOTE AT SUCH MEETING.
OTHER BUSINESS
The
management of the Old Line Bancshares, Inc. does not intend to
present any other matters for action at the Annual Meeting, and the
Board of Directors has not been informed that other persons intend
to present any matters for action at the Annual Meeting. However,
if any other matter should properly come before the Annual Meeting,
including matters for which we did not receive notice by March 7,
2017, the persons named in the accompanying form of proxy intend to
vote thereon, pursuant to the proxy, in accordance with their
judgment of the best interests of Old Line Bancshares, Inc. The
Board of Directors intends to exercise its discretionary authority
to the fullest extent permitted under the Securities Exchange Act
of 1934.
|
By order of the
Board of Directors
|
|
|
|
|
April 20,
2017
|
Craig E. Clark,
Chairman of the Board
|
Important Notice Regarding the Availability of Proxy Materials for
the Annual Meeting:
The
Notice and Proxy Statement and Annual Report are available at
www.proxyvote.com
Please date, sign and mail your proxy card in the envelope provided
as soon as possible
.
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