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

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| Source: Old Line Bancshares, Inc.

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.
CHRISTINE M. RUSH
CHIEF FINANCIAL OFFICER
(301) 430-2544