Bay Bancorp (BYBK) 8-K/A Financial Statements and Exhibits

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements give effect to the April 19, 2013 merger (the “Merger”) of Jefferson Bancorp, Inc. (“Jefferson”) with and into Carrollton Bancorp (the “Company”) in which the Company was the surviving corporation.

The Merger is being accounted for as a reverse acquisition because the number of shares of the Company’s common stock that were issued to the stockholders of Jefferson in the Merger represented more than 50% of the number of shares of the Company’s common stock outstanding immediately after the Merger.  For accounting and financial statement reporting purposes, Jefferson was deemed to have acquired the Company in the Merger.  Accordingly, the purchase price is allocated among the fair values of the assets and liabilities of the Company, while the historical results of Jefferson are reflected in the results of the combined company.  For purposes of these unaudited pro forma condensed combined financial statements, Jefferson and the Company have made a preliminary allocation of the estimated purchase price to the assets acquired and liabilities assumed based on their fair value at the acquisition date.    A final determination of these estimated fair values will be made in due course.  The actual amounts recorded as of the completion of the Merger may differ materially from the information presented in these unaudited pro forma condensed combined financial statements as a result of the finalization of the valuation analyses.

The following unaudited pro forma condensed combined financial statements are based on the historical financial statements of Jefferson and the Company, adjusted to give effect to Jefferson’s acquisition (for accounting purposes) of the Company in the Merger.  The pro forma adjustments are described in the accompanying notes presented on the following pages.

The unaudited pro forma condensed combined balance sheet gives effect to the Merger based on the historical balance sheets of Jefferson and the Company as of March 31, 2013.  The Jefferson balance sheet information was derived from its unaudited balance sheet at March 31, 2013 that is included as part of Exhibit 99.2 to this Current Report on Form 8-K, as amended (this “Report”).  The Company balance sheet information was derived from its unaudited balance sheet at March 31, 2013 that was included in its Quarterly Report on Form 10-Q for the quarter then ended, which was filed with the Securities and Exchange Commission on May 9, 2013.

The unaudited pro forma condensed combined statements of income are presented as of  April 25, 2013 (the original filing date of this Report) based on the most recently completed fiscal years and interim periods of Jefferson and the Company.  The historical results of Jefferson were derived from its audited consolidated statement of income for the year ended December 31, 2012 and its unaudited consolidated statement of income for the three months ended March 31, 2013, which are included as part of Exhibit 99.2 to this Report.  The historical results of the Company were derived from its audited consolidated statement of income for the year ended December 31, 2012 that was included in its Annual Report on Form 10-K for the year then ended, filed on March 14, 2013, and its unaudited condensed consolidated financial statements for the three months ended March 31, 2013 that were included in its Quarterly Report on Form 10-Q for the quarter then ended, filed on May 9, 2013. The adjustments for unaudited pro forma condensed combined balance sheet as of March 31, 2013 assumes the merger was completed on that date. The adjustments for the unaudited pro forma statements of operations for the three months ended March 31, 2013 and for the year ended December 31, 2012 were prepared assuming the merger was completed on January 1, 2013 and January 1, 2012, respectively.

The following unaudited pro forma condensed combined financial statements have been prepared for illustrative purposes only and are not necessarily indicative of the consolidated financial position or results of operations in future periods or the results that actually would have been realized had Jefferson and the Company been combined during the specified periods. The following unaudited pro forma condensed combined financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, the historical financial statements referred to above.

Unaudited Pro Forma Combined Condensed Balance Sheet
March 31, 2013*
	(Accounting Acquirer) Jefferson			(Accounting Acquiree) Carrollton Bancorp			Pro Forma Merger Adjustments				Pro Forma Combined
Assets
Cash and due from banks	$	15,288,579		$	2,488,980		$	(6,178,251	)	(A)	$	11,599,308
Federal funds sold and other interest-bearing deposits		1,736,100			47,814,828			-				49,550,928
Federal Home Loan Bank stock, at cost		160,000			530,700			-				690,700
Investment securities available for sale		8,564,821			20,263,948			-				28,828,769
Investment securities held to maturity		-			2,264,226			-				2,264,226
Loans held for sale		-			34,394,871			-				34,394,871
Loans (gross)		102,613,122			239,449,793			(15,400,000	)	(B)		326,662,915
Allowance for credit losses		(642,726	)		(5,516,687	)		5,516,687		(C)		(642,726	)
Premises and equipment (net)		381,846			6,554,771							6,936,617
Accrued interest receivable		367,000			1,101,562			-				1,468,562
Bank owned life insurance		-			5,256,269			-				5,256,269
Deferred income taxes		408,320			6,117,353			1,366,406		(D)		7,892,079
Foreclosed real estate		1,376,108			1,286,699			(400,000	)	(F)		2,262,807
Core deposit intangible		155,709			-			3,750,000		(G)		3,905,709
Other assets		206,571			1,758,200			-				1,964,771
Total Assets	$	130,615,450		$	363,765,513		$	(11,345,158	)		$	483,035,805
Liabilities
Noninterest-bearing deposits	$	20,292,523		$	81,173,914		$	-			$	101,466,437
Interest-bearing deposits		77,871,720			244,294,541			1,000,000		(H)		323,166,261
Total Deposits		98,164,243			325,468,455			1,000,000				424,632,698
Advances from Federal Home Loan Bank		-			170,000			-				170,000
Accrued interest payable		51,000			26,391			-				77,391
Accrued pension plan		-			3,229,884			-				3,229,884
Other liabilities		410,443			2,754,691			(381,960	)	(A)(J)		2,783,174
Total Liabilities		98,625,686			331,649,421			618,040				430,893,147
Shareholders’ Equity
Preferred stock		-			9,123,769			(9,123,769	)	(A)		-
Common stock		26,250			2,579,388			6,749,740		(I)		9,355,378
Additional paid-in capital		27,140,729			15,738,804			(6,784,163	)	(I)(A)		36,095,370
Retained earnings		4,583,743			9,064,058			(7,194,933	)	(I)(J)(K)		6,452,868
Accumulated other comprehensive income (loss)		239,042			(4,389,927	)		4,389,927		(I)		239,042
Total Shareholders’ Equity		31,989,764			32,116,092			(11,963,198	)			52,142,658
Total Liabilities and Shareholders’ Equity	$	130,615,450		$	363,765,513		$	(11,345,158	)		$	483,035,805
		-			-			-				-
Per Share Data
Shares Outstanding		2,625,000			2,579,388							9,355,378
Book Value Per Common Share	$	12.19		$	8.91						$	5.57
Tangible Book Value Per Common Share	$	12.13		$	8.91						$	5.16
* Assumed date of merger for pro forma combined condensed balance sheet presented is March 31, 2013.

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Unaudited Pro Forma Combined Condensed Statement of Operations
For the three months ended March 31, 2013*
	(Accounting Acquirer) Jefferson		(Accounting Acquiree) Carrollton Bancorp			Pro Forma Merger Adjustments				Pro Forma Combined
Interest Income
Interest and fees on loans	$	2,169,793	$	3,399,811		$	710,000		(B)	$	6,279,604
Interest and dividends on securities
Taxable interest income		48,891		162,428			-				211,319
Nontaxable interest income		-		59,847			-				59,847
Dividends		-		3,737			-				3,737
Interest on federal funds sold and other interest income		11,996		20,563			-				32,559
Total Interest Income		2,230,680		3,646,386			710,000				6,587,066
Interest Expense
Interest on deposits		145,558		667,398			(159,000	)	(H)		653,956
Interest on federal funds purchased and borrowed funds		139		26,556			-				26,695
Total Interest Expense		145,697		693,954			(159,000	)			680,651
Net Interest Income		2,084,983		2,952,432			869,000				5,906,415
Provision for Credit Losses		29,381		642,285			-				671,666
Net Interest Income after Provision for Credit Losses		2,055,602		2,310,147			869,000				5,234,749
Noninterest Income
Service charges on deposit accounts		17,777		90,613			-				108,390
Brokerage commissions		-		185,073			-				185,073
Electronic banking fees		-		596,740			-				596,740
Mortgage banking fees and gains		-		1,430,150			-				1,430,150
Other fees and commissions		29,846		120,175			-				150,021
Write down of impaired securities		-		(34,067	)		-				(34,067	)
Total Noninterest Income		47,623		2,388,684			-				2,436,307
Noninterest Expense
Salaries and employee benefits		962,924		2,611,203			-				3,574,127
Occupancy		99,455		618,630							718,085
Furniture and equipment		56,780		147,058			-				203,838
Professional services		374,105		214,151			(301,000	)	(J)(E)		287,256
Foreclosed real estate costs		41,840		77,046			-				118,886
Other noninterest expenses		358,322		1,127,997			250,000		(G)		1,736,319
Total Noninterest Expense		1,893,426		4,796,085			(51,000	)			6,638,511
Income (Loss) before Income Tax Expense		209,799		(97,254	)		920,000				1,032,545
Income Tax Expense (Benefit)		88,519		(64,826	)		282,426		(D)		306,119
Net Income (Loss)		121,280		(32,428	)		637,574				726,426
Preferred stock dividends and discount accretion		-		137,079			-				137,079	��
Net Income (Loss) available to common stockholders	$	121,280	$	(169,507	)	$	637,574			$	589,347
Weighted average shares outstanding
Basic		2,625,000		2,579,388							9,355,378
Fully Diluted		2,625,000		2,579,388							9,355,378
Earnings (Loss) Per Common Share
Basic	$	0.05	$	(0.07	)					$	0.06
Fully Diluted	$	0.05	$	(0.07	)					$	0.06
* Assumed date of merger for pro forma combined condensed statement of operations presented is January 1, 2013.

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Unaudited Pro Forma Combined Condensed Statement of Operations
For the year ended December 31, 2012*
	(Accounting Acquirer) Jefferson		(Accounting Acquiree) Carrollton Bancorp			Pro Forma Merger Adjustments				Pro Forma Combined
Interest Income
Interest and fees on loans	$	9,564,612	$	15,047,502		$	2,800,000		(B)	$	27,412,114
Interest and dividends on securities
Taxable interest income		229,951		801,935			-				1,031,886
Nontaxable interest income		-		291,655			-				291,655
Dividends		-		25,592			-				25,592
Interest on federal funds sold and other interest income		30,966		57,226			-				88,192
Total Interest Income		9,825,529		16,223,910			2,800,000				28,849,439
Interest Expense
Interest on deposits		572,039		2,915,748			(637,000	)	(H)		2,850,787
Interest on federal funds purchased and borrowed funds		88		159,892			-				159,980
Total Interest Expense		572,127		3,075,640			(637,000	)			3,010,767
Net Interest Income		9,253,402		13,148,270			3,437,000				25,838,672
Provision for Credit Losses		733,817		1,165,012			-				1,898,829
Net Interest Income after Provision for Credit Losses		8,519,585		11,983,258			3,437,000				23,939,843
Noninterest Income
Service charges on deposit accounts		73,902		355,298			-				429,200
Brokerage commissions		-		632,308			-				632,308
Electronic banking fees		-		3,044,297			-				3,044,297
Mortgage banking fees and gains		-		5,901,513			-				5,901,513
Gain on sale of foreclosed real estate		181,090		-			-				181,090
Other fees and commissions		157,690		362,753			-				520,443
Losses on securities		-		(806,901	)		-				(806,901	)
Total Noninterest Income		412,682		9,489,268			-				9,901,950
Noninterest Expense
Salaries and employee benefits		4,002,556		9,879,701			-				13,882,257
Occupancy		379,553		2,288,134							2,667,687
Furniture and equipment		249,582		630,114			-				879,696
Professional services		1,585,430		1,842,655			(2,133,000	)	(J)(E)		1,295,085
Foreclosed real estate costs		294,737		2,175,237			-				2,469,974
Loss on sale of foreclosed real estate		-		55			-				55
Other noninterest expenses		1,717,406		4,479,580			1,000,000		(G)		7,196,986
Total Noninterest Expense		8,229,264		21,295,476			(1,133,000	)			28,391,740
Income (Loss) before Income Tax Expense		703,003		177,050			4,570,000				5,450,053
Income Tax Expense (Benefit)		645,450		281,716			1,138,777		(D)		2,065,943
Net Income (Loss)		57,553		(104,666	)		3,431,223				3,384,110
Preferred stock dividends and discount accretion		-		548,315			-				548,315
Net Income (Loss) attributable to common stockholders	$	57,553	$	(652,981	)	$	3,431,223			$	2,835,795
Weighted average shares outstanding
Basic		2,625,000		2,579,339							9,355,378
Fully Diluted		2,625,000		2,579,339							9,355,378
Earnings (Loss) Per Common Share
Basic	$	0.02	$	(0.25	)					$	0.30
Fully Diluted	$	0.02	$	(0.25	)					$	0.30
* Assumed date of merger for pro forma combined condensed statement of operations presented is January 1, 2012.

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NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(A)	Net adjustment reflects the payment for the tender of 42.5% of the outstanding shares of common stock of Carrollton Bancorp at $6.20/share per the Agreement and Plan of Merger ($6.8 million), payoff of preferred stock in the form of TARP ($9.2 million) and related accumulated preferred stock dividends and accrued interest declared ($977,000), repurchase of TARP warrant ($206,000) and partially offset by the capital infusion by Financial Services Partners Fund I into Jefferson Bancorp, Inc. ("Jefferson"), ($11.0 million).
(B)	Mark-to-market adjustment to reflect the fair value of Carrollton Bancorp's loan portfolio, based on preliminary valuations performed.  This adjustment is comprised of a credit quality component ($11.8 million) and interest component ($3.6 million).  The adjustment will be recognized over the estimated life of the loan portfolio using the level yield method.  The unaudited pro forma condensed combined statement of operations impact for the interest component of the fair value adjustment would have resulted in increases to interest income of $710,000 and $2.8 million for the three months ended March 31, 2013 and year ended December 31, 2012, respectively.
(C)	Mark-to-market adjustment to reflect the removal of the allowance for credit losses in connection with applying purchase accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification ("ASC") Topic 805, Business Combinations.  No pro forma earnings impact was assumed from the adjustments as it was assumed that future credit losses were incorporated in the loan valuation discounts established.
(D)	Adjustment to recognize the deferred tax assets resulting from the fair value adjustments in accordance with ASC Topic 740, Income Taxes.  The tax effects of adjustments were calculated based on the statutory rate (39.45%) in effect during the periods for which the pro forma statements of operations were presented.  Costs deemed to be in the nature of facilitating the Merger are not deductible for tax purposes.
(E)	A portion of these costs are deemed to be in the nature of facilitating the Merger and therefore no tax benefit is reflected on them.
(F)	Mark-to-market adjustment to reflect the fair value of Carrollton Bancorp's other real estate owned ("OREO").  Amount reflects the decrease in values relative to carrying value.  No pro forma earnings impact was assumed for this adjustment as it was assumed that future losses on the disposal of the OREO would be offset against these discounts.
(G)	Mark-to-market adjustment to create core deposit intangible which reflects the fair value of this asset and related amortization.  The related amortization adjustment is based upon an accelerated method over an expected life of 7.5 years.  The unaudited pro forma condensed combined statement of operations impact for this adjustment would have resulted in expected increases to non-interest expense of $250,000 and $1 million for the three months ended March 31, 2013 and year ended December 31, 2012, respectively.
(H)	Mark-to-market adjustment to reflect the fair values of certain interest-bearing time deposit liabilities based on current interest rates for similar instruments.  The adjustment will be recognized using a level yield amortization over the 1.6 year weighted average maturity.  The unaudited pro forma condensed combined statement of operations impact for this adjustment would have resulted in expected decreases to interest expense of $159,000 and $637,000 for the three months ended March 31, 2013 and year ended December 31, 2012, respectively.
(I)	Adjustment to reflect the issuance of shares of Carrollton Bancorp common stock in connection with the Merger and the adjustments to shareholders’ equity for the reclassification of Carrollton Bancorp's historical equity accounts (common stock, accumulated other comprehensive loss, and retained earnings) into additional paid-in capital as well as adjustment for an expected $2.5 million bargain purchase gain, net of tax.

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(J)

Balance sheet adjustment relates to recognition of estimated one-time merger obligations and costs of $944,000, or $595,000 on an after-tax basis, expected to be incurred by the accounting acquirer (Jefferson) in connection with the Merger.  Such obligations and costs include estimates of fees related to professional services provided in connection with the Merger as well as an estimate of the associated severance, retention and other employee benefits. Statement of operations adjustment relates to one-time merger obligations and costs totaling approximately $301,000 or $263,000 on an after-tax basis, consisting of $211,000 before tax and $176,000 after-tax, previously incurred by the accounting acquirer (Jefferson), and $90,000 before tax and $87,000 after tax previously incurred by the accounting acquiree (Carrollton Bancorp) in connection with the Merger for the three months ended March 31, 2013.  For the year ended December 31, 2012, statement of operations adjustment relates to one-time merger obligations totaling approximately $2,133,000 before-tax and $1,956,000 on an after-tax basis, consisting of $1,024,000 before tax and 902,000 on an after-tax basis previously incurred by Jefferson, and $1,109,000 before tax and $1,054,000 after-tax previously incurred by Carrollton Bancorp in connection with the Merger.  Such obligations and costs include estimates of fees related to professional services, and information systems costs incurred in connection with the Merger.

(K)

Adjustment to reflect estimated bargain purchase gain (negative goodwill) for the amount of Carrollton Bancorp net assets acquired in excess of consideration paid by Jefferson in the Merger.  See calculation of the preliminary estimated purchase price and bargain purchase gain below:

Calculation of Preliminary Estimated Purchase Price(1)
Shares of Carrollton Bancorp common stock outstanding as of March 31, 2013		2,579,388
Less: Shares estimated to be tendered for cash		1,095,932
Estimated shares of Carrollton Bancorp retained by current stockholders		1,483,456
Estimated shares of Carrollton Bancorp retained by current stockholders		1,483,456
x Market price per share as of April 19, 2013	$	4.91
Estimated purchase price based on value of shares retained				$	7,283,769
Shares estimated to be tendered for cash		1,095,932
x Price per share as agreed to in the Definitive Agreement	$	6.20
Estimated purchase price based on value of shares tendered for cash					6,794,778
Estimated purchase price				$	14,078,547
Carrollton Bancorp shareholders' equity at March 31, 2013				$	32,116,092
Payoff of preferred stock (TARP including warrants, deferred dividends and accrued interest)					(9,406,513	)
Estimated mark-to-market adjustments to reflect net assets acquired at fair value:
Net loans	$	(15,400,000	)
Allowance for credit losses		5,516,687
Deferred income taxes		2,971,515
Foreclosed real estate		(400,000	)
Core deposit intangible		3,750,000
Interest-bearing deposits		(1,000,000	)
Total estimated mark-to-market adjustments to reflect net assets acquired at fair value					(4,561,798	)
Adjusted net assets acquired					18,147,781
Total estimated bargain purchase gain, before tax(2)					4,069,234
Tax expense					1,605,109
Total estimated bargain purchase gain, after tax				$	2,464,124
(1) Assuming that the maximum number of shares of Carrollton Bancorp permitted in the Definitive Agreement, are tendered for cash.
(2) Amount of net assets acquired in excess of estimated purchase price.

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COMPARATIVE PER SHARE DATA

        The following table summarizes per share information for Jefferson and the Company on a historical basis and on a pro forma combined basis.

        The pro forma per share information gives effect to the merger as if the merger had occurred on the dates presented, in the case of the book value data, as if the merger had occurred on March 31, 2013, and in the case of earnings per share data, as if the merger had occurred on January 1, 2013 and January 1, 2012 for the three months ended March 31, 2013 and year ended December 31, 2012, respectively.  The pro forma per share information assumes that the merger is accounted for using the acquisition method of accounting.  As explained in more detail in the “NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION” beginning on page __, the pro forma financial adjustments record the assets and liabilities acquired from Carrollton Bancorp at their estimated fair values at the acquisition date and are subject to adjustment as additional information becomes available.

        The following historical and pro forma per share information is derived from and should be read in conjunction with the historical financial statements and related notes of Jefferson which are included on pages __ through __ of this document and of Carrollton Bancorp which are available through the SEC's website at http://www.sec.gov . The pro forma per share information below is presented for illustrative purposes only and is not necessarily indicative of the income per share and book value per share that would have occurred if the merger had been completed as of the beginning of the periods presented, nor is it necessarily indicative of the future operating results or financial position of the combined company.

	(Accounting Acquirer) Jefferson		(Accounting Acquiree) Carrollton Bancorp			Pro Forma Combined
Earnings (Loss) Per Common Share:
For the three months ended March 31, 2013
Basic	$	0.05	$	(0.07	)	$	0.06
Fully Diluted	$	0.05	$	(0.07	)	$	0.06
Earnings (Loss) Per Common Share:
For the year ended December 31, 2012
Basic	$	0.02	$	(0.25	)	$	0.30
Fully Diluted	$	0.02	$	(0.25	)	$	0.30
Book Value Per Common Share:
March 31, 2013	$	12.19	$	8.91		$	5.57
Tangible Book Value Per Common Share:
March 31, 2013	$	12.13	$	8.91		$	5.16

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