Old Line Bancshares: Accumulating Assets, But EPS Growth Has Stalled

10/4/17

Old Line Bancshares (OLBK) is a fast-growing financial headquartered in Bowie, Maryland, which is 20 miles east of Washington, D.C. After a string of deals and branch consolidations, the company has grown from just four branches and a little over $100 million in deposits in 2005 to 28 branches and more than $2 billion in assets. $2 billion in assets is up from $1.79 billion that was reported at the end of June, which was prior to the July closing of a $40.9 million purchase of Damascus Community Bank (OTCPK:DCBB).

The deal, like most of OLBK’s past deals, helps solidify or increase market share in some legacy markets (Montgomery and Carroll Counties) while at the same time opening the door for new ones (Frederick County). This bolt-on and expand approach has been successfully executed and has room to continue, but while exciting the bank has failed to produce meaningful EPS growth for a very long time. A policy of continuous purchases opens the door for continuous one-time charges that could eventually disappear and reveal a much stronger earnings growth profile, or this could just be another great example we can all file away in the ‘more money more problems’ folder. With that said, OLBK is scaling up and producing attractive returns that add to the intrinsic value. For those not wanting to invest their time in a deeper dive into the financials, this is a good one to watch but I’m struggling with valuation.

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