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Old Line Bancshares, Inc. Reports $1.3 Million in Net Income Available to Common Stockholders, for the Three Months Ended March 31, 2013

1st QUARTER 2013 HIGHLIGHTS

  • Net loans increased by $16.7 million, or 2.8%, since December 31, 2012.
  • Total deposits grew by $13.0 million, or 1.8%, since December 31, 2012.
  • Net income available to common stockholders was $1.3 million or $0.19 per basic share for the first quarter of 2013 as compared to $1.8 million, or $0.26 per basic share for the same period in 2012.
  • The first quarter Return on Average Assets (ROAA) and Return on Average Equity (ROAE) were 0.61% and 7.26%, respectively compared to ROAA and ROAE of 0.88% and 10.89%, respectively, for the first quarter of 2012.
  • The net interest margin for the first quarter of 2013 was 4.36% as compared to 4.51% for the same period in 2012.
  • Non-performing assets decreased to 0.94% of total assets at March 31, 2013 as compared to 1.31% at March 31, 2012 and 1.12% at December 31, 2012.
  • The ratio of the allowance for loan losses as a percent of gross loans was 0.66% at March 31, 2013.
  • We received all required regulatory approvals for our merger with WSB Holdings, Inc. (WSB) and we expect to complete the merger during the second quarter of 2013.

BOWIE, Md., April 30, 2013 (GLOBE NEWSWIRE) -- James W. Cornelsen, President & Chief Executive Officer of Old Line Bancshares, Inc. (Nasdaq:OLBK), the parent company of Old Line Bank, reported that net income available to common stockholders decreased $470,000 to $1.3 million for the three months ended March 31, 2013, compared with $1.8 million for the three months ended March 31, 2012. Earnings were $0.19 per basic and diluted common share for the three months ended March 31, 2013 and $0.26 per basic and diluted common share for the same period in 2012.

Mr. Cornelsen stated that "We continue to generate strong organic loan growth while maintaining above average margins. We have also added talent to sustain the balance sheet growth, expand fee income opportunities and strengthen our infrastructure to support continual growth and the completion of the WSB merger. This staffing growth combined with the costs associated with resolving non-performing assets and the closure of one branch had a negative impact on first quarter earnings. We anticipate that these actions will enhance future profitability by reducing expenses associated with maintaining foreclosed real estate and operating the branch. We also expect that the new Montgomery County, Maryland loan production office and the Old Line Financial Services team will increase interest and fee income. We will continue to make decisions based upon long term benefits even when these decisions may impact short term profitability."

The decrease in net income available to common stockholders, during the first quarter of 2013 compared to the first quarter of 2012, was primarily the result of a $1.2 million, or 20.99%, increase in total non-interest expense, which was partially offset by an $85,000 increase in net interest income, a $175,000 decrease in the provision for loan losses and a $148,000 increase in non-interest revenue. The growth in non-interest expenses, as compared to the first quarter of 2012 was mainly attributable to increases in salaries and benefits, merger and integration expenses, occupancy and equipment expenses and other operating expenses. Salaries and benefits increased by $424,000 or 15.08%, when compared to the first quarter of 2012 primarily as a result of the addition of the Montgomery County lending team and the Old Line Financial Services group during the second half of 2012. We anticipate these teams will generate increased interest and non-interest income that will more than offset the increased cost during 2013 and beyond. During the first quarter of 2013, we also added an Executive Vice President who we expect will enhance our core operational capabilities. The work associated with the acquisition of WSB caused merger and integration expenses to increase $211,000 compared to the same period in 2012. Occupancy and equipment expenses increased $161,000 or 17.73% compared to the same period in 2012 primarily due to the acceleration of the remaining lease expense for the Old Line Centre branch which we closed on March 29, 2013. Other operating expenses increased approximately $400,000 compared to the same period in 2012 primarily as a result of an approximately $265,000 increase in legal and other expenses associated with disposing of and maintaining foreclosed properties, a $45,000 increase in director compensation and recognition of the $51,000 stock option expense in the quarter for the grant of options that vested immediately.

While net interest income increased by $85,000 for the quarter as compared to the same period in 2012, the increase would have been greater if not for a $291,000 decline in the accretion of fair value discounts on acquired loans for the period. We recognized $240,000 of fair value accretion in the three month period ended March 31, 2013 as compared to $531,000 for the three month period ended March 31, 2012.

First quarter non-interest revenue was $148,000 or 16.87% higher than the first quarter of 2012, primarily because of an increase of $354,000 in gains on investment securities. These gains were partially offset by a $200,000 loss on the sale of other real estate owned compared to a $32,000 loss in the period ended March 31, 2012. We also incurred an $86,000 loss with the disposal of assets due to the closing of Old Line Centre.

Non-performing assets to total assets declined to 0.94% at March 31, 2013 compared to 1.12% at December 31, 2012 and 1.31% at March 31, 2012 while the allowance for loan losses as a percent of gross loans remained unchanged at 0.66%. The entire loan portfolio's asset quality remained strong and continued to improve during the quarter ended March 31, 2013. As a result, we decreased the provision expense for the first quarter of 2013. Based on our internal analysis, the ratio of non-performing assets to total assets, and the satisfactory historical performance of the loan portfolio, management believes that the allowance continues to appropriately reflect the inherent risk of loss in our portfolio and the current economic climate. However, should we see any evidence that there is deterioration in the loan portfolio we would adjust the allowance accordingly.

As we have previously reported, on September 10, 2012, we announced that we had executed a merger agreement that provided for the acquisition of WSB. During the first quarter of 2013, we received all of the required regulatory approvals, and subsequent to quarter end received all required stockholder approvals with respect to the merger. We plan to complete the merger during the second quarter of 2013. Until completion, we anticipate that we will continue to incur merger related expenses that may cause earnings to be lower than would otherwise be expected. However, we anticipate the WSB merger will be accretive to earnings within three quarters of closing. This combination will create a $1.2 billion banking institution and will allow us to expand our financial services with the addition of a successful and growing mortgage origination team. We also anticipate that the acquisition and integration of WSB will enhance the liquidity of our stock as well as our overall financial condition and operating performance.

Old Line Bancshares, Inc. is the parent company of Old Line Bank, a Maryland chartered commercial bank headquartered in Bowie, Maryland, approximately 10 miles east of Andrews Air Force Base and 20 miles east of Washington, D.C. Old Line Bank has 18 branches located in its primary market area of suburban Maryland (Washington, D.C. suburbs and Southern Maryland) counties of Anne Arundel, Calvert, Charles, Prince George's and St. Mary's. It also targets customers throughout the greater Washington, D.C. metropolitan area.

The statements in this press release that are not historical facts, in particular the statements with respect to the anticipated timing and effects on us and our stock of our pending merger with WSB, including that the merger will be accretive to earnings within three quarters of closing, continued growth and future expansion, future profitability and increased interest, non-interest and fee income, the impact of new hires and the income generated by our new teams offsetting the increased cost of hiring them, and the adequacy of our loan loss allowance constitute "forward-looking statements" as defined by Federal securities laws. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These statements can generally be identified by the use of forward-looking terminology such as "believes," "expects," "intends," "may," "will," "should," "anticipates", "plans" or similar terminology. Actual results could differ materially from those currently anticipated due to a number of factors, including, but not limited to, that the pending stockholder lawsuit related to the merger could delay or prevent the merger, that integrating WSB's business into our own could take longer or be more difficult than anticipated, deterioration in economic conditions or a slower than anticipated recovery in our target markets or nationally, sustained high levels of or further increases in the unemployment rate in our target markets, the actions of our competitors and our ability to successfully compete, in particular in new market areas, and changes in laws impacting our ability to collect on outstanding loans or otherwise negatively impact our business, including regulations implemented pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted in July 2010. Forward-looking statements speak only as of the date they are made. Old Line Bancshares, Inc. will not update forward-looking statements to reflect factual assumptions, circumstances or events that have changed after a forward-looking statement was made. For further information regarding risks and uncertainties that could affect forward-looking statements Old Line Bancshares, Inc. may make, please refer to the filings made by Old Line Bancshares, Inc. with the U.S. Securities and Exchange Commission available at www.sec.gov.

Old Line Bancshares, Inc. & Subsidiaries
Consolidated Balance Sheets
March 31,
2013
December 31,
2012
September 30,
2012
June 30,
2012
March 31,
2012
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash and due from banks $ 37,651,112 $ 28,332,456 $ 43,813,588 $ 37,533,354 $ 24,018,472
Interest bearing accounts 30,291 130,192 26,137 122,824 1,020,231
Federal funds sold 331,153 228,113 908,495 508,150 1,094,891
Total cash and cash equivalents 38,012,556 28,690,761 44,748,220 38,164,328 26,133,594
Investment securities available for sale 154,081,188 171,541,222 180,363,532 168,502,783 163,204,721
Loans, less allowance for loan losses 611,850,594 595,144,928 573,147,401 573,146,131 552,843,016
Equity securities at cost 3,174,220 3,615,444 3,828,237 3,765,079 3,894,766
Premises and equipment 24,912,937 25,133,013 23,883,734 23,763,775 23,651,682
Accrued interest receivable 2,511,753 2,639,483 2,606,790 2,592,123 2,562,773
Prepaid income taxes -- -- -- -- 27,964
Deferred income taxes 8,015,351 7,139,545 6,791,483 7,346,728 7,307,974
Bank owned life insurance 16,977,347 16,869,307 16,757,707 16,644,925 16,530,205
Prepaid pension -- -- 1,030,551 1,030,551 1,030,551
Other real estate owned 2,726,910 3,719,449 3,231,449 3,490,730 3,919,461
Goodwill 633,790 633,790 633,790 633,790 633,790
Core deposit intangible 3,513,889 3,691,471 3,869,054 4,046,636 4,224,218
Other assets 2,575,612 3,038,064 2,990,530 3,036,820 3,727,066
Total assets $ 868,986,147 $ 861,856,477 $ 863,882,478 $ 846,164,399 $ 809,691,781
Deposits
Non-interest bearing $ 188,172,189 $ 188,895,263 $ 185,347,907 $ 186,639,878 $ 169,180,497
Interest bearing 560,330,114 546,562,555 545,730,571 532,956,475 517,467,161
Total deposits 748,502,303 735,457,818 731,078,478 719,596,353 686,647,658
Short term borrowings 31,510,107 37,905,467 44,544,608 41,955,385 40,505,782
Long term borrowings 6,166,788 6,192,350 6,216,463 6,239,129 6,261,429
Accrued interest payable 279,907 311,735 341,494 359,367 370,712
Accrued pension 4,690,584 4,615,699 4,570,725 4,480,261 4,411,462
Other liabilities 2,749,707 2,120,247 2,757,115 1,853,766 1,582,906
Total liabilities 793,899,396 786,603,316 789,508,883 774,484,261 739,779,949
Stockholders' equity
Common stock 68,538 68,454 68,308 68,285 68,285
Additional paid-in capital 53,875,593 53,792,015 53,647,456 53,574,827 53,519,196
Retained earnings 19,543,682 18,531,387 17,087,831 15,332,768 13,576,596
Accumulated other comprehensive income 1,220,486 2,469,758 3,171,006 2,284,600 2,311,030
Total Old Line Bancshares, Inc. stockholders' equity 74,708,299 74,861,614 73,974,601 71,260,480 69,475,107
Non-controlling interest 378,452 391,547 398,994 419,658 436,725
Total stockholders' equity 75,086,751 75,253,161 74,373,595 71,680,138 69,911,832
Total liabilities and stockholders' equity $ 868,986,147 $ 861,856,477 $ 863,882,478 $ 846,164,399 $ 809,691,781
Shares of basic common stock outstanding 6,853,814 6,845,432 6,830,832 6,828,452 6,828,452
Old Line Bancshares, Inc. & Subsidiaries
Consolidated Statements of Income
Three Months
Ended
March 31,
Three Months
Ended
December 31,
Three Months
Ended
September 30,
Three Months
Ended
June 30,
Three Months
Ended
March 31,
2013 2012 2012 2012 2012
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest revenue
Loans, including fees $ 7,831,823 $ 8,521,466 $ 8,702,142 $ 8,632,296 $ 7,952,835
Investment securities and other 985,253 1,034,100 1,098,431 1,131,401 1,149,451
Total interest revenue 8,817,076 9,555,566 9,800,573 9,763,697 9,102,286
Interest expense
Deposits 857,139 963,334 1,057,075 1,087,200 1,127,498
Borrowed funds 112,487 190,310 206,721 213,111 212,376
Total interest expense 969,626 1,153,644 1,263,796 1,300,311 1,339,874
Net interest income 7,847,450 8,401,922 8,536,777 8,463,386 7,762,412
Provision for loan losses 200,000 400,000 375,000 375,000 375,000
Net interest income after provision for loan losses 7,647,450 8,001,922 8,161,777 8,088,386 7,387,412
Non-interest revenue
Service charges on deposit accounts 300,741 318,250 315,468 328,142 319,327
Gain on sales or calls of investment securities 631,429 307,242 289,511 282,858 277,170
Earnings on bank owned life insurance 133,228 136,171 137,082 138,496 136,705
Gains (losses) on sales other real estate owned (200,454) -- (48,509) 191,201 (31,988)
Gains (losses) on disposal of assets (85,561) -- -- -- --
Other fees and commissions 247,683 182,450 146,550 215,089 177,599
Total non-interest revenue 1,027,066 944,113 840,102 1,155,786 878,813
Non-interest expense
Salaries & employee benefits 3,232,677 3,188,366 3,016,334 3,024,815 2,808,994
Occupancy & Equipment 1,068,867 931,197 933,775 914,576 907,871
Pension plan termination -- 700,884 -- -- --
Data processing 239,057 238,830 214,187 192,232 224,735
Merger and integration 240,485 363,375 49,290 29,166 29,167
Core deposit premium 177,582 177,582 177,582 177,582 194,675
Other operating 1,920,773 1,655,193 1,690,590 1,910,797 1,520,731
Total non-interest expense 6,879,441 7,255,427 6,081,758 6,249,168 5,686,173
Income before income taxes 1,795,075 1,690,608 2,920,121 2,995,004 2,580,052
Income taxes 521,722 (18,808) 912,490 982,759 844,005
Net income 1,273,353 1,709,416 2,007,631 2,012,245 1,736,047
Less: Net income (loss) attributable to the noncontrolling interest (13,095) (7,447) (20,664) (17,067) (19,947)
Net income available to common stockholders $ 1,286,448 $ 1,716,863 $ 2,028,295 $ 2,029,312 $ 1,755,994
Earnings per basic share $ 0.19 $ 0.25 $ 0.30 $ 0.30 $ 0.26
Earnings per diluted share $ 0.19 $ 0.25 $ 0.29 $ 0.29 $ 0.26
Dividend per common share $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04
Average number of basic shares 6,848,505 6,834,665 6,829,785 6,828,452 6,820,894
Average number of dilutive shares 6,950,749 6,929,296 6,909,147 6,905,041 6,855,568
Old Line Bancshares, Inc. & Subsidiaries
Average Balances, Interest and Yields
3/31/2013 12/31/2012 9/30/2012 6/30/2012 3/31/2012
Average
Balance

Yield
Average
Balance

Yield
Average
Balance

Yield
Average
Balance

Yield
Average
Balance

Yield
Assets:
Int. Bearing Deposits $ 1,870,920 0.15% $ 10,506,932 0.20% $ 9,609,610 0.21% $ 8,718,890 0.21% $ 5,240,111 0.16%
Investment Securities 168,672,425 3.06% 177,162,367 2.88% 171,086,288 3.11% 165,770,050 3.28% 163,199,617 3.26%
Loans 605,701,991 5.35% 587,421,759 5.86% 576,428,450 6.11% 558,859,415 6.27% 549,594,392 5.87%
Allowance for Loan Losses (4,058,816) (4,186,009) (4,266,214) (3,966,131) (3,825,189)
Total Loans
Net of allowance 601,643,175 5.39% 583,235,750 5.90% 572,162,236 6.16% 554,893,284 6.32% 545,769,203 5.94%
Total interest-earning assets 772,186,520 4.87% 770,905,049 5.15% 752,858,134 5.39% 729,382,224 5.56% 714,208,931 5.26%
Noninterest bearing cash 25,465,996 30,544,104 50,174,932 34,172,441 27,694,416
Other Assets 62,206,398 61,756,948 61,911,524 62,310,069 62,002,664
Total Assets $ 859,858,914 $ 863,206,101 $ 864,944,590 $ 825,864,734 $ 803,906,011
Liabilities and Stockholders' Equity
Interest-bearing Deposits $ 552,649,682 0.63% $ 551,598,937 0.69% $ 553,524,257 0.76% $ 524,538,999 0.83% $ 521,623,877 0.87%
Borrowed Funds 40,335,859 1.13% 35,952,280 2.10% 49,608,300 1.66% 46,432,730 1.85% 45,823,568 1.86%
Total interest-bearing
liabilities
592,985,541 0.66% 587,551,217 0.78% 603,132,557 0.83% 570,971,729 0.92% 567,447,445 0.95%
Noninterest bearing deposits 187,697,564 197,676,047 186,319,471 181,789,188 164,540,014
780,683,105 785,227,264 789,452,028 752,760,917 731,987,459
Other Liabilities 6,909,547 7,600,642 6,898,432 6,172,023 6,631,135
Noncontrolling Interest 387,467 392,942 406,102 423,568 443,876
Stockholder's Equity 71,878,795 69,985,253 68,188,028 66,508,226 64,843,541
Total Liabilities and Stockholder's Equity $ 859,858,914 $ 863,206,101 $ 864,944,590 $ 825,864,734 $ 803,906,011
Net interest spread 4.21% 4.37% 4.56% 4.64% 4.31%

Net interest income and Net interest margin(1)
$ 8,299,213 4.36% $ 8,818,546 4.55% $ 8,932,729 4.72% $ 8,775,024 4.84% $ 8,003,071 4.51%
(1) Interest revenue is presented on a fully taxable equivalent (FTE) basis. The FTE basis adjusts for the tax favored status of these types of assets. Management believes providing this information on a FTE basis provides investors with a more accurate picture of our net interest spread and net interest income and we believe it to be the preferred industry measurement of these calculations. See "Reconciliation of Non-GAAP Measures."
(2) Available for sale investment securities are presented at amortized cost.
(3) Average non-accruing loans for the three month periods ended March 31, 2013 and 2012 were $5,713,683 and $5,074,864, respectively. There was no non-accrual interest included in interest income.

The accretion of the fair value adjustments positively impacted the yield on loans and increased the net interest margin as follows:

3/31/2013 12/31/2012 9/30/2012 6/30/2012 3/31/2012
Fair Value
Accretion
Dollars
% Impact on
Net Interest
Margin
Fair Value
Accretion
Dollars
% Impact on
Net Interest
Margin
Fair Value
Accretion
Dollars
% Impact on
Net Interest
Margin
Fair Value
Accretion
Dollars
% Impact on
Net Interest
Margin
Fair Value
Accretion
Dollars
% Impact on
Net Interest
Margin
Commercial loans (1) $ 209,144 0.11% $ 38,783 0.02% $ 64,142 0.03% $ 42,718 0.02% $ 41,752 0.02%
Mortgage loans (1) (4,500) (0.00) 819,028 0.42 776,089 0.41 1,007,812 0.56 423,275 0.24
Consumer loans 2,371 0.00 2,188 0.00 1,968 0.01 1,899 0.00 1,694 0.00
Interest bearing deposits 33,461 0.02 33,379 0.02 33,847 0.01 57,081 0.03 64,813 0.04
Total Fair Value Accretion $ 240,476 0.13% $ 893,378 0.46% $ 876,046 0.46% $ 1,109,510 0.61% $ 531,534 0.30%
(1) Reclassification of a single loan from mortgage loans to commercial loans during the period caused the negative amortization in mortgage loans during the first quarter of 2013, The impact of this reclassification was immaterial in prior periods.

Below is a reconciliation of the fully tax equivalent adjustments and the GAAP basis information presented in this report:

3/31/2013 12/31/2012 9/30/2012 6/30/2012 3/30/2012
Net Interest
Income

Yield
Net Interest
Income

Yield
Net Interest
Income

Yield
Net Interest
Income

Yield
Net Interest
Income

Yield
GAAP net interest income $ 7,847,450 4.12% $ 8,401,922 4.34% $ 8,536,777 4.51% $ 8,463,386 4.67% $ 7,762,412 4.37%
Tax equivalent adjustment
Federal funds sold 2 0.00 1 0.00 -- -- 1 0.00 -- --
Investment securities 287,612 0.15 258,483 0.13 241,934 0.13 224,794 0.12 174,470 0.10
Loans 164,149 0.09 158,140 0.08 154,018 0.08 86,843 0.05 66,189 0.04
Total tax equivalent adjustment 451,763 0.24 416,624 0.22 395,952 0.21 311,638 0.17 240,659 0.14
Tax equivalent interest yield $ 8,299,213 4.36% $ 8,818,546 4.55% $ 8,932,729 4.72% $ 8,775,024 4.84% $ 8,003,071 4.51%
Old Line Bancshares, Inc. & Subsidiaries
Selected Loan Information
(Dollars in thousands)
March 31,
2013
December 31,
2012
September 30,
2012
June 30,
2012
March 31,
2012
Acquired Loans(1)
Non-accrual(2) $ 4,064 $ 4,092 $ 5,079 $ 4,842 $ 4,860
Accruing 30-89 days past due 802 602 24 726 2,652
Accruing 90 or more days past due -- 6 82 940 6
Legacy Loans(3)
Non-accrual $ 1,388 $ 1,818 $ 3,151 $ 1,787 $ 1,787
Accruing 30-89 days past due 2,077 1,799 2,348 2,799 1,278
Accruing 90 or more days past due -- -- 2 -- --
Allowance for loan losses as % of gross loans 0.66% 0.66% 0.78% 0.71% 0.68%
Allowance for loan losses as % of legacy loans 0.84% 0.85% 1.03% 0.96% 0.96%
Total non-performing loans as a % of gross loans 0.89% 0.99% 2.00% 1.92% 1.90%
Total non-performing assets as a % of total assets 0.94% 1.12% 1.34% 1.31% 1.31%
(1) Acquired loans represent all loans acquired on April 1, 2011. We originally recorded these loans at fair value upon acquisition.
(2) These loans are loans that are considered non-accrual because they are not paying in conformance with the original contractual agreement. At acquisition, we recorded these loans at fair value. As provided for under ASC 310-30, we recognize interest income on these loans through the accretion of the difference between the carrying value of these loans and their expected cash flows.
(3) Legacy loans represent total loans excluding loans acquired April 1, 2011.

CONTACT: CHRISTINE M. RUSH CHIEF FINANCIAL OFFICER (301) 430-2544Source:Old Line Bancshares, Inc.

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