UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number: 000-50345
 Old Line Bancshares, Inc.
  Maryland
(State or other jurisdiction 
of incorporation or organization)
    
    20-0154352
(I.R.S. Employer
Identification No.)
 1525 Pointer Ridge Place 
Bowie, Maryland
(Address of principal executive offices)
    
    20716
(Zip Code)
   þ o
  o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated
filer o(Do
not check if a smaller reporting
company)Smaller reporting company þ  o þ




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##### 



Part I. Financial Information
 Item 1. Financial Statements
 Old Line Bancshares, Inc. & Subsidiaries
Consolidated Balance Sheets
 September 30,
    
    
    December 31,2010
    
    
    2009(Unaudited)AssetsCash and due from banks
    
    $
    10,330,900
    
    
    $
    7,402,137Interest bearing accounts
    
    
    13,328,485
    
    
    
    3,953,312Federal funds sold
    
    
    3,112,431
    
    
    
    81,138Total cash and cash equivalents
    
    
    26,771,816
    
    
    
    11,436,587Time deposits in other banks
    
    
    7,894,859
    
    
    
    15,031,102Investment securities available for sale
    
    
    24,113,001
    
    
    
    28,012,948Investment securities held to maturity
    
    
    23,528,079
    
    
    
    5,806,507Loans, less allowance for loan losses
    
    
    296,634,058
    
    
    
    265,008,669Restricted equity securities at cost
    
    
    2,623,351
    
    
    
    2,957,650Premises and equipment
    
    
    17,041,913
    
    
    
    17,326,099Accrued interest receivable
    
    
    1,241,977
    
    
    
    1,055,249Prepaid income taxes
    
    
    325
    
    
    
    Deferred income taxes
    
    
    117,722
    
    
    
    178,574Bank owned life insurance
    
    
    8,635,741
    
    
    
    8,422,879Other real estate owned
    
    
    823,169
    
    
    
    Other assets
    
    
    1,786,434
    
    
    
    1,982,262Total assets
    
    $
    411,212,445
    
    
    $
    357,218,526Liabilities and Stockholders EquityDepositsNon-interest bearing
    
    $
    64,254,972
    
    
    $
    40,883,419Interest bearing
    
    
    276,859,497
    
    
    
    245,464,373Total deposits
    
    
    341,114,469
    
    
    
    286,347,792Short term borrowings
    
    
    13,947,355
    
    
    
    16,149,939Long term borrowings
    
    
    16,393,239
    
    
    
    16,454,067Accrued interest payable
    
    
    460,362
    
    
    
    517,889Income tax payable
    
    
    
    
    
    
    175,543Other liabilities
    
    
    1,496,390
    
    
    
    941,165Total liabilities
    
    
    373,411,815
    
    
    
    320,586,395Stockholders equityCommon stock, par value $0.01 per share; authorized 15,000,000 shares;
issued and outstanding 3,880,005 in 2010 and 3,862,364 in 2009
    
    
    38,800
    
    
    
    38,624Additional paid-in capital
    
    
    29,126,953
    
    
    
    29,034,954Retained earnings
    
    
    7,456,442
    
    
    
    6,498,446Accumulated other comprehensive income
    
    
    557,129
    
    
    
    368,880Total Old Line Bancshares, Inc. stockholders equity
    
    
    37,179,324
    
    
    
    35,940,904Non-controlling interest
    
    
    621,306
    
    
    
    691,227Total stockholders equity
    
    
    37,800,630
    
    
    
    36,632,131Total liabilities and stockholders equity
    
    $
    411,212,445
    
    
    $
    357,218,526
 The accompanying notes are an integral part of these consolidated financial statements
 1




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##### 



Old Line Bancshares, Inc. & Subsidiaries
Consolidated Statements of Income
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Interest revenueLoans, including fees
    
    $
    4,260,382
    
    
    $
    3,952,742
    
    
    $
    12,259,381
    
    
    $
    11,343,471U.S. Treasury securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,230U.S. government agency securities
    
    
    42,133
    
    
    
    75,672
    
    
    
    132,830
    
    
    
    262,862Mortgage backed securities
    
    
    373,619
    
    
    
    276,302
    
    
    
    1,047,096
    
    
    
    800,666Municipal securities
    
    
    19,699
    
    
    
    20,809
    
    
    
    60,059
    
    
    
    64,808Federal funds sold
    
    
    2,656
    
    
    
    233
    
    
    
    4,842
    
    
    
    973Other
    
    
    60,707
    
    
    
    66,360
    
    
    
    218,920
    
    
    
    241,390Total interest revenue
    
    
    4,759,196
    
    
    
    4,392,118
    
    
    
    13,723,128
    
    
    
    12,721,400Interest expenseDeposits
    
    
    985,950
    
    
    
    1,153,366
    
    
    
    2,960,315
    
    
    
    3,499,621Borrowed funds
    
    
    248,292
    
    
    
    252,263
    
    
    
    803,025
    
    
    
    772,037Total interest expense
    
    
    1,234,242
    
    
    
    1,405,629
    
    
    
    3,763,340
    
    
    
    4,271,658Net interest income
    
    
    3,524,954
    
    
    
    2,986,489
    
    
    
    9,959,788
    
    
    
    8,449,742Provision for loan losses
    
    
    200,000
    
    
    
    210,000
    
    
    
    440,000
    
    
    
    760,000Net interest income after provision for loan losses
    
    
    3,324,954
    
    
    
    2,776,489
    
    
    
    9,519,788
    
    
    
    7,689,742Non-interest revenueService charges on deposit accounts
    
    
    78,247
    
    
    
    80,641
    
    
    
    231,478
    
    
    
    225,495Gains on sales of investment securities
    
    
    
    
    
    
    634
    
    
    
    
    
    
    
    158,551Earnings on bank owned life insurance
    
    
    83,963
    
    
    
    95,322
    
    
    
    254,071
    
    
    
    282,937Loss on disposal of assets
    
    
    
    
    
    
    (4,803
    )
    
    
    
    
    
    
    (4,803
    )Other fees and commissions
    
    
    141,036
    
    
    
    196,614
    
    
    
    381,639
    
    
    
    844,828Total non-interest revenue
    
    
    303,246
    
    
    
    368,408
    
    
    
    867,188
    
    
    
    1,507,008Non-interest expenseSalaries
    
    
    1,263,368
    
    
    
    1,075,572
    
    
    
    3,559,727
    
    
    
    2,851,559Employee benefits
    
    
    319,550
    
    
    
    242,778
    
    
    
    987,488
    
    
    
    760,624Occupancy
    
    
    330,752
    
    
    
    306,871
    
    
    
    983,209
    
    
    
    773,177Equipment
    
    
    105,342
    
    
    
    96,004
    
    
    
    311,370
    
    
    
    258,398Data processing
    
    
    126,412
    
    
    
    90,821
    
    
    
    325,912
    
    
    
    247,812FDIC insurance and State of Maryland assessments
    
    
    130,595
    
    
    
    100,590
    
    
    
    361,263
    
    
    
    442,892Merger Expense
    
    
    187,125
    
    
    
    
    
    
    
    187,125
    
    
    
    Other operating
    
    
    605,068
    
    
    
    471,475
    
    
    
    1,656,814
    
    
    
    1,384,027Total non-interest expense
    
    
    3,068,212
    
    
    
    2,384,111
    
    
    
    8,372,908
    
    
    
    6,718,489Income before income taxes
    
    
    559,988
    
    
    
    760,786
    
    
    
    2,014,068
    
    
    
    2,478,261Income taxes
    
    
    265,299
    
    
    
    257,512
    
    
    
    765,431
    
    
    
    812,414Net Income
    
    
    294,689
    
    
    
    503,274
    
    
    
    1,248,637
    
    
    
    1,665,847Less: Net Income (loss) attributable to the noncontrolling interest
    
    
    (17,876
    )
    
    
    (4,258
    )
    
    
    (58,559
    )
    
    
    95,930Net Income attributable to Old Line Bancshares, Inc.
    
    
    312,565
    
    
    
    507,532
    
    
    
    1,307,196
    
    
    
    1,569,917Preferred stock dividends and discount accretion
    
    
    
    
    
    
    280,849
    
    
    
    
    
    
    
    485,993Net income available to common stockholders
    
    $
    312,565
    
    
    $
    226,683
    
    
    $
    1,307,196
    
    
    $
    1,083,924Basic earnings per common share
    
    $
    0.08
    
    
    $
    0.06
    
    
    $
    0.34
    
    
    $
    0.28Diluted earnings per common share
    
    $
    0.08
    
    
    $
    0.06
    
    
    $
    0.34
    
    
    $
    0.28Dividend per common share
    
    $
    0.03
    
    
    $
    0.03
    
    
    $
    0.09
    
    
    $
    0.09
 The accompanying notes are an integral part of these consolidated financial statements
 2




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##### 



Old Line Bancshares, Inc. & Subsidiaries
Consolidated Statement of Changes in Stockholders Equity
Nine Months Ended September 30, 2010
(Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    otherCommon stock
    
    
    paid-in
    
    
    
    
    
    
    comprehensive
    
    
    Comprehensive
    
    
    Non-controllingShares
    
    
    Par value
    
    
    capital
    
    
    Retained earnings
    
    
    income
    
    
    income
    
    
    InterestBalance, December 31, 2009
    
    
    3,862,364
    
    
    $
    38,624
    
    
    $
    29,034,954
    
    
    $
    6,498,446
    
    
    $
    368,880
    
    
    $
    
    
    
    $
    691,227Net income attributable
to Old Line Bancshares, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,307,196
    
    
    
    
    
    
    
    1,307,196
    
    
    
    Unrealized gain on
securities available for sale,
net of income tax benefit of $122,624
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    188,249
    
    
    
    188,249
    
    
    
    Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,495,445
    
    
    
    Net income attributable
to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58,559
    )Distributions to minority member(s)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,362
    )Stock based compensation awards
    
    
    17,641
    
    
    
    176
    
    
    
    91,999
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock cash dividend
$0.09 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (349,200
    )
    
    
    
    
    
    
    
    
    
    
    Balance September 30, 2010
    
    
    3,880,005
    
    
    $
    38,800
    
    
    $
    29,126,953
    
    
    $
    7,456,442
    
    
    $
    557,129
    
    
    
    
    
    
    $
    621,306
 The accompanying notes are an integral part of these consolidated financial statements
 3




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##### 



Old Line Bancshares, Inc. & Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 Nine Months Ended September 30,
    
    2010
    
    
    2009Cash flows from operating activitiesInterest received
    
    $
    13,694,364
    
    
    $
    12,705,525Fees and commissions received
    
    
    654,326
    
    
    
    1,102,930Interest paid
    
    
    (3,820,867
    )
    
    
    (4,221,461
    )Cash paid to suppliers and employees
    
    
    (6,924,009
    )
    
    
    (8,533,195
    )Income taxes paid
    
    
    (1,003,071
    )
    
    
    (816,988
    )2,600,743
    
    
    
    236,811Cash flows from investing activitiesNet change in time deposits in other banks
    
    
    7,136,243
    
    
    
    (3,136,920
    )Purchase of investment securitiesHeld to maturity
    
    
    (20,316,548
    )
    
    
    Available for sale
    
    
    (3,140,625
    )
    
    
    (9,936,282
    )Proceeds from disposal of investment securitiesHeld to maturity at maturity or call
    
    
    2,819,165
    
    
    
    1,809,595Available for sale at maturity or call
    
    
    6,940,703
    
    
    
    5,912,538Available for sale securities sold
    
    
    
    
    
    
    3,994,289Loans made, net of principal collected
    
    
    (32,859,969
    )
    
    
    (31,996,060
    )Redemption (Purchase) of equity securities
    
    
    334,299
    
    
    
    (831,100
    )Purchase of premises, equipment and software
    
    
    (321,485
    )
    
    
    (3,271,907
    )(39,408,217
    )
    
    
    (37,455,847
    )Cash flows from financing activitiesNet increase (decrease) inTime deposits
    
    
    5,800,014
    
    
    
    40,615,700Other deposits
    
    
    48,966,663
    
    
    
    6,361,915Increase in short term borrowings
    
    
    (2,202,584
    )
    
    
    (2,120,523
    )Decrease in long term borrowings
    
    
    (60,828
    )
    
    
    (57,064
    )Redemption of preferred stock and warrants
    
    
    
    
    
    
    (7,225,000
    )Cash dividends paid-preferred stock
    
    
    
    
    
    
    (213,888
    )Cash dividends paid-common stock
    
    
    (349,200
    )
    
    
    (347,612
    )Distributions to minority members
    
    
    (11,362
    )
    
    
    52,142,703
    
    
    
    37,013,528Net increase (decrease) in cash and cash equivalents
    
    
    15,335,229
    
    
    
    (205,508
    )Cash and cash equivalents at beginning of period
    
    
    11,436,587
    
    
    
    10,963,695Cash and cash equivalents at end of period
    
    $
    26,771,816
    
    
    $
    10,758,187
 The accompanying notes are an integral part of these consolidated financial statements
 4




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##### 



Old Line Bancshares, Inc. & Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 Nine Months Ended September 30,
    
    2010
    
    
    2009Reconciliation of net income to net cash
provided by operating activitiesNet income
    
    $
    1,248,637
    
    
    $
    1,665,847Adjustments to reconcile net income to net
cash provided by operating activitiesDepreciation and amortization
    
    
    605,671
    
    
    
    510,237Provision for loan losses
    
    
    440,000
    
    
    
    760,000Change in deferred loan fees net of costs
    
    
    (28,589
    )
    
    
    (60,517
    )Gain on sale of securities
    
    
    
    
    
    
    (158,551
    )Amortization of premiums and discounts
    
    
    186,553
    
    
    
    67,900Deferred income taxes
    
    
    (61,772
    )
    
    
    (40,636
    )Stock based compensation awards
    
    
    92,175
    
    
    
    106,230Increase (decrease) inAccrued interest payable
    
    
    (57,527
    )
    
    
    50,197Income tax payable
    
    
    (175,543
    )
    
    
    413Other liabilities
    
    
    555,225
    
    
    
    (2,640,960
    )Decrease (increase) inAccrued interest receivable
    
    
    (186,728
    )
    
    
    (23,258
    )Bank owned life insurance
    
    
    (212,862
    )
    
    
    (245,527
    )Prepaid income taxes
    
    
    (325
    )
    
    
    35,649Other assets
    
    
    195,828
    
    
    
    209,787$
    2,600,743
    
    
    $
    236,811Supplemental Disclosure:Loans transferred to other real estate owned
    
    $
    823,169
    
    
    $
    
 The accompanying notes are an integral part of these consolidated financial statements
 5




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##### 



Old Line Bancshares, Inc. & Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Organization and Description of BusinessOld Line Bancshares, Inc. (Old Line Bancshares) was
incorporated under the laws of the State of Maryland on April 11, 2003 to serve as the
holding company of Old Line Bank. The primary business of Old Line Bancshares is to own all
of the capital stock of Old Line Bank. We provide a full range of banking services to
customers located in Prince Georges, Charles, Anne Arundel, and St. Marys counties in
Maryland and surrounding areas.On November 17, 2008, we purchased Chesapeake Custom Homes, L.L.C.s 12.5% membership
interest in Pointer Ridge Office Investment, LLC (Pointer Ridge), a real estate investment
company. The effective date of the purchase was November 1, 2008. As a result of this
purchase, our membership interest increased from 50.0% to 62.5%. Consequently, we
consolidated Pointer Ridges results of operations from the date of acquisition. Prior to
the date of acquisition, we accounted for our investment in Pointer Ridge using the equity
method.Basis of Presentation and ConsolidationThe accompanying consolidated financial statements
include the activity of Old Line Bancshares and its wholly owned subsidiary, Old Line Bank,
and its majority owned subsidiary Pointer Ridge. We have eliminated all significant
intercompany transactions and balances.We report the non-controlling interest in Pointer Ridge separately in the consolidated
balance sheet. We report the income of Pointer Ridge attributable to Old Line Bancshares on
the consolidated statement of income.The foregoing consolidated financial statements are unaudited; however, in the opinion of
management we have included all adjustments (comprising only normal recurring accruals)
necessary for a fair presentation of the results of the interim period. We derived the
balances as of December 31, 2009 from audited financial statements. These statements should
be read in conjunction with Old Line Bancshares financial statements and accompanying notes
included in Old Line Bancshares Form 10-K for the year ended December 31, 2009. We have
made no significant changes to Old Line Bancshares accounting policies as disclosed in the
Form 10-K.The accounting and reporting policies of Old Line Bancshares conform to accounting
principles generally accepted in the United States of America.Accounting Standards CodificationThe Financial Accounting Standards Boards (FASB)
Accounting Standards Codification (ASC) became effective on July 1, 2009. At that date, ASC
became FASBs officially recognized source of authoritative United States (U.S.) generally
accepted accounting principles (GAAP) applicable to all public and non-public,
non-governmental entities, superseding existing FASB, American Institute of Certified Public
Accountants (AICPA), Emerging Issues Task Force (EITF) and related literature. Rules and
interpretive releases of the United States Securities and Exchange Commission (SEC) under
the authority of federal securities laws are also sources of authoritative GAAP for SEC
registrants. All other accounting literature is considered non-authoritative. The switch
to ASC affects the way companies refer to U.S. GAAP in financial statements and accounting
policies. Citing particular content in the ASC involves specifying the unique numeric path
to the content through the Topic, Subtopic, Section and Paragraph structure.ReclassificationsWe have made certain reclassifications to the 2009 financial presentation
to conform to the 2010 presentation.Subsequent EventsWe evaluated subsequent events after September 30, 2010 through November
8, 2010, the date this report was available to be issued. No significant subsequent events
were identified which would affect the presentation of the financial statements.
 6




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##### 



2.
    
    INVESTMENT SECURITIES
 As Old Line Bank purchases securities, management determines if we should classify the
securities as held to maturity, available for sale or trading. We record the securities
which management has the intent and ability to hold to maturity at amortized cost which is
cost adjusted for amortization of premiums and accretion of discounts to maturity. We
classify securities which we may sell before maturity as available for sale and carry these
securities at fair value with unrealized gains and losses included in stockholders equity
on an after tax basis. Management has not identified any investment securities as trading.We record gains and losses on the sale of securities on the trade date and determine these
gains or losses using the specific identification method. We amortize premiums and accrete
discounts using the interest method. Presented below is a summary of the amortized cost and
estimated fair value of securities.
 Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    EstimatedSeptember 30, 2010
    
    cost
    
    
    gains
    
    
    losses
    
    
    fair valueAvailable for saleU.S. government agency
    
    $
    4,791,451
    
    
    $
    110,424
    
    
    $
    (9,067
    )
    
    $
    4,892,808Municipal securities
    
    
    1,303,147
    
    
    
    65,421
    
    
    
    (111
    )
    
    
    1,368,457Mortgage-backed
    
    
    17,098,365
    
    
    
    753,371
    
    
    
    
    
    
    
    17,851,736$
    23,192,963
    
    
    $
    929,216
    
    
    $
    (9,178
    )
    
    $
    24,113,001Held to maturityMunicipal securities
    
    $
    984,451
    
    
    $
    27,009
    
    
    $
    
    
    
    $
    1,011,460Mortgage-backed
    
    
    22,543,628
    
    
    
    618,829
    
    
    
    
    
    
    
    23,162,457$
    23,528,079
    
    
    $
    645,838
    
    
    $
    
    
    
    $
    24,173,917
 December 31, 2009Available for saleU.S. government agency
    
    $
    7,133,657
    
    
    $
    171,946
    
    
    $
    (14,928
    )
    
    $
    7,290,675Municipal securities
    
    
    2,253,107
    
    
    
    36,759
    
    
    
    (14,294
    )
    
    
    2,275,572Mortgage-backed
    
    
    18,017,019
    
    
    
    429,682
    
    
    
    
    
    
    
    18,446,701$
    27,403,783
    
    
    $
    638,387
    
    
    $
    (29,222
    )
    
    $
    28,012,948Held to maturityMunicipal securities
    
    $
    300,779
    
    
    $
    2,714
    
    
    $
    
    
    
    $
    303,493Mortgage-backed
    
    
    5,505,728
    
    
    
    267,544
    
    
    
    
    
    
    
    5,773,272$
    5,806,507
    
    
    $
    270,258
    
    
    $
    
    
    
    $
    6,076,765
 7




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##### 



2.
    
    INVESTMENT SECURITIES (Continued)As of September 30, 2010, securities with unrealized losses segregated by length of
impairment were as follows:
 Fair
    
    
    UnrealizedSeptember 30, 2010
    
    value
    
    
    lossesUnrealized losses less than 12 monthsU.S. government agency
    
    $
    
    
    
    $
    Municipal securities
    
    
    
    
    
    
    Mortgage-backed
    
    
    
    
    
    
    Total unrealized losses less than 12 months
    
    
    
    
    
    
    Unrealized losses greater than 12 monthsU.S. government agency
    
    
    1,757,789
    
    
    
    9,067Municipal securities
    
    
    200,402
    
    
    
    111Mortgage-backed
    
    
    
    
    
    
    Total unrealized losses greater than 12 months
    
    
    1,958,191
    
    
    
    9,178Total unrealized lossesU.S. government agency
    
    
    1,757,789
    
    
    
    9,067Municipal securities
    
    
    200,402
    
    
    
    111Mortgage-backed
    
    
    
    
    
    
    Total unrealized losses
    
    $
    1,958,191
    
    
    $
    9,178
 We consider all unrealized losses on securities as of September 30, 2010 to be temporary
losses because we will redeem each security at face value at or prior to maturity. We have
the ability and intent to hold these securities until recovery or maturity. As of September
30, 2010, we do not have the intent to sell any of the securities classified as available
for sale and believe that it is more likely than not that we will not have to sell any such
securities before a recovery of cost. In most cases, market interest rate fluctuations
cause a temporary impairment in value. We expect the fair value to recover as the
investments approach their maturity date or repricing date or if market yields for these
investments decline. We do not believe that credit quality caused the impairment in any of
these securities. Because we believe these impairments are temporary, we have not realized
any loss in our consolidated statement of income.In the three and nine month periods ended September 30, 2010, we did not record any gains or
losses from the sale of available for sale securities. In the three and nine month periods
ended September 30, 2009, we recorded gross realized gains of $634 and $158,551,
respectively from the sale of available-for-sale securities.
 8




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##### 



2.
    
    INVESTMENT SECURITIES (Continued)Contractual maturities and pledged securities at September 30, 2010 are shown below. Actual
maturities will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without prepayment penalties. We classify mortgage
backed securities based on maturity date. However, we receive payments on a monthly basis.
 Available for Sale
    
    
    Held to MaturityAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairSeptember 30, 2010
    
    cost
    
    
    value
    
    
    cost
    
    
    valueMaturingOver one to five years
    
    $
    4,047,832
    
    
    $
    4,201,476
    
    
    $
    
    
    
    $
    Over five to ten years
    
    
    9,756,293
    
    
    
    10,062,011
    
    
    
    7,170,646
    
    
    
    7,503,589Over ten years
    
    
    9,388,838
    
    
    
    9,849,514
    
    
    
    16,357,433
    
    
    
    16,670,328$
    23,192,963
    
    
    $
    24,113,001
    
    
    $
    23,528,079
    
    
    $
    24,173,917Pledged securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 3. POINTER RIDGE OFFICE INVESTMENT, LLC
 In 2008, we purchased Chesapeake Custom Homes, L.L.C.s 12.5% membership interest in Pointer
Ridge. As a result of this purchase, we own 62.5% of Pointer Ridge and consolidated their
results of operations from the date of acquisition.The following table summarizes the condensed Balance Sheets and Statements of Income
information for Pointer Ridge.Pointer Ridge Office Investment, LLC
 September 30,
    
    December 31,Balance Sheets
    
    2010
    
    2009Current assets
    
    $
    786,313
    
    
    $
    891,233Non-current assets
    
    
    7,301,501
    
    
    
    7,432,268Liabilities
    
    
    6,430,997
    
    
    
    6,480,230Equity
    
    
    1,656,817
    
    
    
    1,843,271
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Statements of IncomeRevenue
    
    $
    215,704
    
    
    $
    251,274
    
    
    $
    612,900
    
    
    $
    1,032,235Expenses
    
    
    263,374
    
    
    
    262,630
    
    
    
    769,058
    
    
    
    776,423Net income (loss)
    
    $
    (47,670
    )
    
    $
    (11,356
    )
    
    $
    (156,158
    )
    
    $
    255,812
 9




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##### 



4.
    
    INCOME TAXES
 The provision for income taxes includes taxes payable for the current year and deferred
income taxes. We determine deferred tax assets and liabilities based on the difference
between the financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which we expect the differences to reverse. We have not
recorded a valuation allowance against deferred tax assets as management believes that it is
more likely than not that we will realize all of the deferred tax assets because they were
supported by recoverable taxes paid in prior years. We allocate tax expense and tax
benefits to Old Line Bank and Old Line Bancshares based on their proportional share of
taxable income.
 5.
    
    EARNINGS PER COMMON SHARE
 Effective January 1, 2009, we adopted the new authoritative accounting guidance under FASB
ASC Topic 260, Earnings Per Share, which provides that non-vested share based payment awards
that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or
unpaid) are participating securities and shall be included in the computation of basic
earnings per common share pursuant to the two class method. We have determined that our
outstanding stock option awards are not participating securities and do not include them in
the computation of basic earnings per common share. We have determined that our restricted
stock awards are participating securities and include them in the computation of basic
earnings per common share. We calculate basic earnings per common share by dividing net
income by the weighted average number of shares of common stock outstanding giving
retroactive effect to stock dividends.We calculate diluted earnings per common share by including the average dilutive common
stock equivalents outstanding during the period. Dilutive common equivalent shares consist
of stock options, calculated using the treasury stock method.
 Three Months Ended
    
    Nine Months EndedSepember 30,
    
    September 30,2010
    
    2009
    
    2010
    
    2009Weighted average number of shares
    
    
    3,880,005
    
    
    
    3,862,364
    
    
    
    3,880,005
    
    
    
    3,862,364Dilutive average number of shares
    
    
    24,011
    
    
    
    9,159
    
    
    
    19,154
    
    
    
    6,857
 6.
    
    STOCK-BASED COMPENSATION
 We account for stock options and restricted stock awards under the fair value method of
accounting using a Black-Scholes valuation model to measure stock-based compensation expense
at the date of grant. We recognize compensation expense related to stock-based compensation
awards in our income statements over the period during which we require an individual to
provide service in exchange for such award. For the nine months ended September 30, 2010
and 2009, we recorded stock-based compensation expense of $92,175 and $106,230,
respectively. For the three months ended September 30, 2010 and 2009, we recorded
stock-based compensation expense of $25,923 and $15,646, respectively.We only recognize tax benefits for options that ordinarily will result in a tax deduction
when the grant is exercised (non-qualified options). There were no non-qualified options
included in the expense calculation during the three months and nine months ended September
30, 2010 or the three months ended
September 30, 2009. We recognized an $8,298 tax benefit associated with the portion of the
expense that was related to the issuance of non-qualified options for the nine months ended
September 30, 2009.
 10




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##### 



6.
    
    STOCK-BASED COMPENSATION (Continued)We have three equity incentive plans under which we may issue stock options and restricted
stock, the 2010 Equity Incentive Plan, approved at the 2010 Annual Meeting of stockholders,
the 2001 Incentive Stock Option Plan, as amended, and the 2004 Equity Incentive Plan. Our
Compensation Committee administers the equity incentive plans. As the plans outline, the
Compensation Committee approves stock option and restricted stock grants to directors and
employees, determines the number of shares, the type of award, the option or share price,
the term (not to exceed 10 years from the date of issuance), the restrictions, and the
vesting period of options and restricted stock issued. The Compensation Committee has
approved and we have granted options vesting immediately as well as over periods of two,
three and five years and restricted stock awards that vest over periods of twelve months to
three years. We recognize the compensation expense associated with these grants over their
respective vesting periods. At September 30, 2010, there was $114,419 of total unrecognized
compensation cost related to non-vested stock options and restricted stock awards that we
expect to realize over the next 3 years. As of September 30, 2010, there were 281,308
shares remaining available for future issuance under the equity incentive plans. Directors
and officers did not exercise any options during the three month or nine month periods ended
September 30, 2010 or 2009.A summary of the stock option activity during the nine month period follows:
 September 30,2010
    
    2009Weighted
    
    
    
    
    
    WeightedNumber
    
    average
    
    Number
    
    averageof shares
    
    exercise price
    
    of shares
    
    exercise priceOutstanding, beginning of period
    
    
    299,270
    
    
    $
    8.50
    
    
    
    236,620
    
    
    $
    9.09Options granted
    
    
    22,581
    
    
    
    7.13
    
    
    
    62,650
    
    
    
    6.30Options forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding, end of period
    
    
    321,851
    
    
    $
    8.41
    
    
    
    299,270
    
    
    $
    8.50
 Information related to options as of September 30, 2010 follows:
 Outstanding options
    
    Exercisable optionsWeighted
    
    Weighted
    
    
    
    
    
    WeightedNumber
    
    average
    
    average
    
    Number
    
    averageof shares at
    
    remaining
    
    exercise
    
    of shares at
    
    exerciseExercise price
    
    September 30, 2010
    
    term
    
    price
    
    September 30, 2010
    
    price$3.33-$4.17
    
    
    11,700
    
    
    
    0.25
    
    
    $
    3.44
    
    
    
    11,700
    
    
    $
    3.44$4.18-$5.00
    
    
    18,000
    
    
    
    1.80
    
    
    
    4.69
    
    
    
    18,000
    
    
    
    4.69$5.01-$7.64
    
    
    85,231
    
    
    
    8.59
    
    
    
    6.52
    
    
    
    53,294
    
    
    
    6.42$7.65-$8.65
    
    
    37,300
    
    
    
    7.34
    
    
    
    7.75
    
    
    
    37,300
    
    
    
    7.75$8.66-$10.00
    
    
    46,620
    
    
    
    3.89
    
    
    
    9.74
    
    
    
    46,620
    
    
    
    9.74$10.01-$11.31
    
    
    123,000
    
    
    
    5.56
    
    
    
    10.43
    
    
    
    119,000
    
    
    
    10.42321,851
    
    
    
    5.92
    
    
    $
    8.41
    
    
    
    285,914
    
    
    $
    8.57
 Intrinsic value of outstanding options
where the market value exceeds the
exercise price
    
    $
    268,166Intrinsic value of exercisable options
where the market value exceeds the
exercise price
    
    $
    222,215
 11




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##### 



6.
    
    STOCK-BASED COMPENSATION (Continued)
  September 30,2010WeightedaverageNumber
    
    
    grant dateof shares
    
    
    fair valueOutstanding, beginning of period
    
    
    
    
    
    $
    Restricted stock granted
    
    
    17,641
    
    
    
    7.13Restricted stock forfeited
    
    
    
    
    
    
    Outstanding, end of period
    
    
    17,641
    
    
    $
    7.13Vested, end of period
    
    
    
    
    
    
    Intrinsic value of outstanding restricted stock awards
    
    
    
    
    
    $
    143,421Intrinsic value of vested restricted
stock awards
    
    
    
    
    
    $
    
 7.
    
    RETIREMENT PLANEligible employees participate in a profit sharing plan that qualifies under Section 401(k)
of the Internal Revenue Code. The plan allows for elective employee deferrals and Old Line
Bank makes matching contributions of up to 4% of eligible employee compensation. Our
contributions to the plan, included in employee benefit expenses, for the nine months ended
September 30, 2010 and 2009 were $120,598 and $99,106, respectively. Old Line Banks
contribution to the plan for the three months ended September 30, 2010 and 2009 were $41,648
and $35,485, respectively.Old Line Bank also offers Supplemental Executive Retirement Plans (SERPs) to its executive
officers providing for retirement income benefits. We accrue the present value of the SERPs
over the remaining number of years to the executives retirement dates. Old Line Banks
expenses for the SERPs for the nine month periods ended September 30, 2010 and 2009 were
$163,086 and $91,738, respectively. The SERP expense for the three month periods ended
September 30, 2010 and 2009 were $60,410 and $30,569, respectively. The SERPs are
non-qualified defined benefit pension plans that we have not funded.
 8.
    
    FAIR VALUE MEASUREMENTSOn January 1, 2008, we adopted FASB ASC Topic 820 Fair Value Measurements and Disclosures
which defines fair value as the price that participants would receive to sell an asset or
pay to transfer a liability in an orderly transaction between market participants. A fair
value measurement assumes that the transaction to sell the asset or transfer the liability
occurs in the principal market for the asset or liability, or, in the absence of a principal
market, the most advantageous market for the asset or liability. The price in the principal
(or most advantageous) market used to measure the fair value of the asset or liability shall
not be adjusted for transaction costs. An orderly transaction is a transaction that assumes
exposure to the market for a period prior to the measurement date to allow for marketing
activities that are usual and customary for transactions involving such assets and
liabilities; it is not a forced transaction. Market participants are
 12




---



##### 



8.
    
    FAIR VALUE MEASUREMENTS (Continued)buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable,
(iii) able to transact and (iv) willing to transact. We value investment securities
classified as available for sale at fair value. The fair value hierarchy established in FASB ASC Topic 820 defines three input levels for
fair value measurement. Level 1 is based on quoted market prices in active markets for
identical assets. Level 2 is based on significant observable inputs other than those in
Level 1. Level 3 is based on significant unobservable inputs.We value investment securities classified as available for sale at fair value on a recurring
basis. We value treasury securities, government sponsored entity securities, and some
agency securities under Level 1, and collateralized mortgage obligations and some agency
securities under Level 2. At September 30, 2010, we established values for available for
sale investment securities as follows (000s);
 Total Fair Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3September 30, 2010
    
    
    Inputs
    
    
    Inputs
    
    
    InputsInvestment securities available for sale
    
    $
    24,113
    
    
    $
    3,135
    
    
    $
    20,978
    
    
    $
    
 Our valuation methodologies may produce a fair value calculation that may not be indicative
of net realizable value or reflective of future fair values. While management believes our
methodologies are appropriate and consistent with other market participants, the use of
different methodologies or assumptions to determine the fair value of certain financial
instruments could result in a different estimate of fair value. Furthermore, we have not
comprehensively revalued the fair value amounts since the presentation dates, and therefore,
estimates of fair value after the balance sheet date may differ significantly from the above
presented amounts.We use the following methodologies for estimating fair values of financial instruments that
we do not measure on a recurring basis. The estimated fair values of financial instruments
equal the carrying value of the instruments except as noted.Time Deposits-The fair value of time deposits in other banks is an estimate determined by
discounting future cash flows using current rates offered for deposits of similar remaining
maturities.Investment Securities-We base the fair values of investment securities upon quoted market
prices or dealer quotes.Loans-We estimate the fair value of loans by discounting future cash flows using current
rates for which we would make similar loans to borrowers with similar credit histories. We
then adjust this calculated amount for any impairment.Interest bearing deposits-The fair value of demand deposits and savings accounts is the
amount payable on demand. We estimate the fair value of fixed maturity certificates of
deposit using the rates currently offered for deposits of similar remaining maturities.Long and short term borrowings-The fair value of long and short term fixed rate borrowings
is estimated by discounting the value of contractual cash flows using rates currently
offered for advances with similar terms and remaining maturities.Loan Commitments, Standby and Commercial Letters of Credit-Lending commitments have variable
interest rates and escape clauses if the customers credit quality deteriorates.
Therefore, the fair value of these items is insignificant and we have not included it in the
following table.
 13




---



##### 



8.
    
    FAIR VALUE MEASUREMENTS (Continued)
 September 30, 2010
    
    December 31, 2009Carrying
    
    Fair
    
    Carrying
    
    Fairamount
    
    value
    
    amount
    
    valueFinancial assetsTime deposits
    
    $
    7,894,859
    
    
    $
    7,911,366
    
    
    $
    15,031,102
    
    
    $
    15,491,899Investment securities
    
    
    47,641,080
    
    
    
    48,286,918
    
    
    
    33,819,455
    
    
    
    34,089,713Loans
    
    
    296,634,058
    
    
    
    299,646,603
    
    
    
    265,008,669
    
    
    
    269,907,318Financial liabilitiesInterest bearing deposits
    
    
    276,859,497
    
    
    
    278,146,941
    
    
    $
    245,464,373
    
    
    $
    247,456,675Short term borrowings
    
    
    13,947,355
    
    
    
    13,965,558
    
    
    
    16,149,939
    
    
    
    16,297,360Long term borrowings
    
    
    16,393,239
    
    
    
    17,018,884
    
    
    
    16,454,067
    
    
    
    17,261,757
 We measure certain financial assets and financial liabilities at fair value on a
non-recurring basis. These assets and liabilities are subject to fair value adjustments in
certain circumstances such as when there is evidence of impairment. We did not have any
financial assets or liabilities measured at fair value on a non-recurring basis during the
nine months ended September 30, 2010 or year ended December 31, 2009.We also measure certain non-financial assets such as other real estate owned and repossessed
or foreclosed property at fair value on a non-recurring basis. Generally, we estimate the
fair value of these items using Level 2 inputs based on observable market data or Level 3
inputs based on discounting criteria. At September 30, 2010, other real estate owned
measured at fair value using Level 2 valuation inputs was $823,169 and we did not have any repossessed property.
 9.
    
    ACCOUNTING STANDARDS UPDATESAccounting Standards Updates (ASU) No. 2009-16, Transfers and Servicing (Topic-
860)-Accounting for Transfers of Financial Assets amends prior accounting guidance to
enhance reporting about transfers of financial assets, including securitizations, and where
companies have continuing exposure to the risks related to transferred financial assets.
ASU 2009-16 also requires additional disclosures about all continuing involvement with
transferred financial assets including information about gains and losses resulting from
transfers during the period. The provisions of ASU 2009-16 became effective on January 1,
2010 and did not have a significant impact on our consolidated results of operations or
financial position.ASU No. 2009-17, Consolidations (Topic 810)-Improvements to Financial Reporting by
Enterprises Involved with Variable Interest Entities amends prior guidance to change how a
company determines when an entity that is sufficiently capitalized or is not controlled
through voting (or similar rights) should be consolidated. The determination of whether a
company is required to consolidate an entity is based on, among other things, an entitys
purpose and design and a companys ability to direct the activities of the entity that most
significantly impact the entitys economic performance. ASU 2009-17 requires additional
disclosures about the reporting entitys involvement with variable interest entities and any
significant changes in risk exposure due to that involvement as well as its affect on the
entitys financial statements. As further discussed below, ASU No. 2010-10, Consolidations
(Topic 810), deferred the effective date of ASU 2009-17 for a reporting entitys interests
in investment companies. The provisions of ASU 2009-17 became effective on January 1, 2010
and they did not have a material impact on our consolidated results of operations or
financial position.
 14




---



##### 



9.
    
    ACCOUNTING STANDARDS UPDATES (Continued)ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820)-Improving Disclosures
About Fair Value Measurements requires expanded disclosures related to fair value
measurements including (i)
    the amounts of significant transfers of assets or liabilities between Levels 1 and 2 of the
fair value hierarchy and the reasons for the transfers, (ii) the reasons for transfers of
assets or liabilities in or out of Level 3 of the fair value hierarchy, with significant
transfers disclosed separately, (iii) the policy for determining when transfers between the
levels of the fair value hierarchy are recognized and (iv) for recurring fair value
measurements of assets and liabilities in Level 3 of the fair value hierarchy, a gross
presentation of information about purchases, sales, issuances and settlements. ASU 2010-06
further clarifies that (i) companies should provide fair value measurement disclosures for
each class of assets and liabilities (rather than major category), which would generally be
a subset of assets or liabilities within a line item in the statement of financial position
and (ii) companies should provide disclosures about the valuation techniques and inputs used
to measure fair value for both recurring and non-recurring fair value measurements for each
class of assets and liabilities included in Levels 2 and 3 of the fair value hierarchy. ASU
No. 2010-06 requires the disclosures related to the gross presentation of purchases, sales,
issuances and settlements of assets and liabilities included in Level 3 of the fair value
hierarchy beginning January 1, 2011. The remaining disclosure requirements and
clarifications made by ASU 2010-06 became effective on January 1, 2010. See Note 8-Fair
Value Measurements.ASU No. 2010-10, Consolidations (Topic 810)-Amendments for Certain Investment Funds defers
the effective date of the amendments to the consolidation requirements made by ASU 2009-17
to a companys interest in an entity (i) that has all of the attributes of an investment
company, as specified under ASC Topic 946, Financial Services-Investment Companies, or
(ii) for which it is industry practice to apply measurement principles of financial
reporting that are consistent with those in ASC Topic 946. As a result of the deferral,
companies are not required to apply the ASU 2009-17 amendments to the Subtopic 810-10
consolidation requirements to its interest in an entity that meets the criteria to qualify
for the deferral. ASU 2010-10 also clarifies that any interest held by a related party
should be treated as though it is an entitys own interest when evaluating the criteria for
determining whether such interest represents a variable interest. ASU 2010-10 also
clarifies that companies should not use a quantitative calculation as the sole basis for
evaluating whether a decision makers or service providers fee is variable interest. The
provisions of ASU 2010-10 became effective as of January 1, 2010 and did not have a material
impact on our consolidated results of operations or financial position.ASU No. 2010-11, Derivatives and Hedging (Topic 815)-Scope Exception Related to Embedded
Credit Derivatives clarifies that the only form of an embedded credit derivative that is
exempt from the embedded derivative bifurcation requirement are those that relate to the
subordination of one financial instrument to another. Entities that have contracts
containing an embedded credit derivative feature in a form other than subordination may need
to separately account for the embedded credit derivative feature. The provisions of ASU
2010-11 became effective on July 1, 2010 and did not have a material impact on our
consolidated results of operations or financial position.ASU No. 2010-20 Receivables (Topic 310)-Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses requires entities to provide disclosures
designed to facilitate financial statement users evaluation of (i) the nature of credit
risk inherent in the entitys portfolio of financing receivables, (ii) how that risk is
analyzed and assessed in arriving at the allowance for credit losses and (iii) the changes
and reasons for those changes in the allowance for credit losses. Disclosures must be
disaggregated by portfolio segment, the level at which an entity develops and documents a
systemic method for determining its allowance for credit losses, and class of financing
receivable, which is generally a disaggregation of portfolio segment. The required
disclosures include, among other things, a carry forward of the allowance for credit losses
as well as information about modified, impaired, non-accrual and past due loans and credit
quality indicators. ASU 2010-2 will become effective for financial statements as of
December 31, 2010 as it relates to disclosures required as of the end of the reporting
period. Disclosures that relate to activity during a reporting period will be required for
financial statements that include periods beginning on or after January 2011.
 15




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##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction
  Overview
   Summary of Recent Performance and Other Activities
   
    
    On September 1, 2010, we announced that we had executed a merger agreement that
provided for the acquisition of Maryland Bankcorp.
    
    We placed three additional loans on non-accrual status, foreclosed on two
properties that secured non-accrual loans and charged off one non-accrual loan.
    
    At September 30, 2010, we had loans to three borrowers in non-accrual status
with total balances due of $3.0 million (0.73% of total assets) compared to three
borrowers with total balances due of $1.6 million (0.44%) at December 31, 2009.
    
    In the third quarter, we charged off one unsecured non-accrual loan in the
amount of $137,151.
    
    In the third quarter, we also received a deed in lieu of foreclosure on the
property that secured a non-accrual loan. The loan balance was approximately
$947,000 higher than the current appraised value of the property. Therefore, we
charged off $947,000 of the loan balance and recorded the remaining value of
$600,000 in other real estate owned.
    
    At third quarter end, we had one other loan past due between 30 and 89 days in
the amount of approximately $83,000. Subsequent to quarter end, the borrower
submitted the payment due.
    
    We decreased the provision for loan losses by $320,000 from $760,000 to
$440,000.
 16




---



##### 




    
    The loan portfolio grew $31.6 million or 11.92%.
    
    Total deposits grew $54.8 million or 19.14%.
    
    We maintained liquidity and by all regulatory measures remained well
capitalized.
    
    We recognized a loss on our investment in Pointer Ridge of approximately
$97,599.
    
    Andre J. Gingles was appointed to our Board of Directors.
    
    Our Greenbelt lending team that we hired in December 2009 was a significant
contributor to our loan and deposit growth.
  Three months ended September 30,(Dollars in thousands)2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeNet income available to common stockholders
    
    $
    313
    
    
    $
    227
    
    
    $
    86
    
    
    
    37.89
    %Interest revenue
    
    
    4,759
    
    
    
    4,392
    
    
    
    367
    
    
    
    8.36Interest expense
    
    
    1,234
    
    
    
    1,406
    
    
    
    (172
    )
    
    
    (12.23
    )Net interest income after provision
for loan losses
    
    
    3,325
    
    
    
    2,777
    
    
    
    548
    
    
    
    19.73Non-interest revenue
    
    
    303
    
    
    
    368
    
    
    
    (65
    )
    
    
    (17.66
    )Non-interest expense
    
    
    3,068
    
    
    
    2,384
    
    
    
    684
    
    
    
    28.69Average total loans
    
    
    292,831
    
    
    
    260,563
    
    
    
    32,268
    
    
    
    12.38Average interest earning assets
    
    
    362,678
    
    
    
    309,189
    
    
    
    53,489
    
    
    
    17.30Average total interest bearing deposits
    
    
    273,879
    
    
    
    226,719
    
    
    
    47,160
    
    
    
    20.80Average non-interest bearing deposits
    
    
    55,552
    
    
    
    39,760
    
    
    
    15,792
    
    
    
    39.72Net interest margin (1)
    
    
    3.90
    %
    
    
    3.89
    %Return on average equity
    
    
    3.39
    %
    
    
    5.37
    %Basic earnings per common share
    
    $
    0.08
    
    
    $
    0.06
    
    
    $
    0.02
    
    
    
    33.33Diluted earnings per common share
    
    
    0.08
    
    
    
    0.06
    
    
    
    0.02
    
    
    
    33.33
 
 (1)
    
    See Reconciliation of Non-GAAP Measures 17




---



##### 



Nine months ended September 30,(Dollars in thousands)2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeNet income available to common stockholders
    
    $
    1,307
    
    
    $
    1,084
    
    
    $
    223
    
    
    
    20.57
    %Interest revenue
    
    
    13,723
    
    
    
    12,721
    
    
    
    1,002
    
    
    
    7.88Interest expense
    
    
    3,763
    
    
    
    4,272
    
    
    
    (509
    )
    
    
    (11.91
    )Net interest income after provision
for loan losses
    
    
    9,520
    
    
    
    7,690
    
    
    
    1,830
    
    
    
    23.80Non-interest revenue
    
    
    867
    
    
    
    1,507
    
    
    
    (640
    )
    
    
    (42.47
    )Non-interest expense
    
    
    8,373
    
    
    
    6,718
    
    
    
    1,655
    
    
    
    24.64Average total loans
    
    
    280,523
    
    
    
    251,428
    
    
    
    29,095
    
    
    
    11.57Average interest earning assets
    
    
    351,169
    
    
    
    302,587
    
    
    
    48,582
    
    
    
    16.06Average total interest bearing deposits
    
    
    258,025
    
    
    
    214,289
    
    
    
    43,736
    
    
    
    20.41Average non-interest bearing deposits
    
    
    51,586
    
    
    
    38,451
    
    
    
    13,135
    
    
    
    34.16Net interest margin (1)
    
    
    3.84
    %
    
    
    3.77
    %Return on average equity
    
    
    4.83
    %
    
    
    5.22
    %Basic earnings per common share
    
    $
    0.34
    
    
    $
    0.28
    
    
    $
    0.06
    
    
    
    21.43Diluted earnings per common share
    
    
    0.34
    
    
    
    0.28
    
    
    
    0.06
    
    
    
    21.43
 
 (1)
    
    See Reconciliation of Non-GAAP Measures Growth Strategy
  st
   18




---



##### 



Other Opportunities
  st
  Repayment of Troubled Asset Relief Program (TARP) Investment
    19




---



##### 



Results of Operations
 Net Interest Income
  Three months ended September 30, 2010 compared to three months ended September 30, 2009
      
 20




---



##### 



Average Balances, Interest and YieldsThree Months Ended September 30,
    
    2010

    


    2009Average
    
    
    
    
    
    
    
    
    
    
    Averagebalance
    
    
    Interest
    
    
    Yield
    
    
    balance
    
    
    Interest
    
    
    YieldAssets:Federal funds sold(1)
    
    $
    3,169,347
    
    
    $
    2,657
    
    
    
    0.33
    %
    
    $
    434,238
    
    
    $
    233
    
    
    
    0.21
    %Interest bearing deposits
    
    
    17,563,292
    
    
    
    43,979
    
    
    
    0.99
    
    
    
    10,513,525
    
    
    
    48,522
    
    
    
    1.83Investment securities(1)(2)U.S. government agency
    
    
    5,223,912
    
    
    
    44,562
    
    
    
    3.38
    
    
    
    7,568,260
    
    
    
    80,034
    
    
    
    4.20Mortgage backed securities
    
    
    41,442,021
    
    
    
    373,619
    
    
    
    3.58
    
    
    
    25,968,160
    
    
    
    276,302
    
    
    
    4.22Municipal securities
    
    
    2,309,832
    
    
    
    29,134
    
    
    
    5.00
    
    
    
    2,455,492
    
    
    
    31,323
    
    
    
    5.06Other
    
    
    2,522,421
    
    
    
    16,977
    
    
    
    2.67
    
    
    
    3,976,513
    
    
    
    18,047
    
    
    
    1.80Total investment securities
    
    
    51,498,186
    
    
    
    464,292
    
    
    
    3.58
    
    
    
    39,968,425
    
    
    
    405,706
    
    
    
    4.03Loans: (1) (3)Commercial
    
    
    80,732,917
    
    
    
    1,102,357
    
    
    
    5.42
    
    
    
    75,254,258
    
    
    
    1,063,052
    
    
    
    5.60Mortgage
    
    
    198,135,067
    
    
    
    2,993,170
    
    
    
    5.99
    
    
    
    169,750,186
    
    
    
    2,707,705
    
    
    
    6.33Consumer
    
    
    13,963,419
    
    
    
    193,706
    
    
    
    5.50
    
    
    
    15,558,258
    
    
    
    211,507
    
    
    
    5.39Total loans
    
    
    292,831,403
    
    
    
    4,289,233
    
    
    
    5.81
    
    
    
    260,562,702
    
    
    
    3,982,264
    
    
    
    6.06Allowance for loan losses
    
    
    2,383,989
    
    
    
    
    
    
    
    
    
    
    
    2,290,316
    
    
    
    
    
    
    
    Total loans, net of allowance
    
    
    290,447,414
    
    
    
    4,289,233
    
    
    
    5.86
    
    
    
    258,272,386
    
    
    
    3,982,264
    
    
    
    6.12Total interest earning assets(1)
    
    
    362,678,239
    
    
    
    4,800,161
    
    
    
    5.25
    
    
    
    309,188,574
    
    
    
    4,436,725
    
    
    
    5.69Non-interest bearing cash
    
    
    9,382,943
    
    
    
    
    
    
    
    
    
    
    
    7,567,129Premises and equipment
    
    
    17,126,259
    
    
    
    
    
    
    
    
    
    
    
    14,717,765Other assets
    
    
    12,453,680
    
    
    
    
    
    
    
    
    
    
    
    10,094,330Total assets
    
    $
    401,641,121
    
    
    
    
    
    
    
    
    
    
    $
    341,567,798Liabilities and Stockholders Equity:Interest bearing depositsSavings
    
    $
    8,942,236
    
    
    
    7,723
    
    
    
    0.34
    
    
    $
    7,058,391
    
    
    
    6,611
    
    
    
    0.37Money market and NOW
    
    
    59,392,839
    
    
    
    135,468
    
    
    
    0.90
    
    
    
    34,630,956
    
    
    
    47,773
    
    
    
    0.55Other time deposits
    
    
    205,543,927
    
    
    
    842,759
    
    
    
    1.63
    
    
    
    185,029,565
    
    
    
    1,098,982
    
    
    
    2.36Total interest bearing deposits
    
    
    273,879,002
    
    
    
    985,950
    
    
    
    1.43
    
    
    
    226,718,912
    
    
    
    1,153,366
    
    
    
    2.02Borrowed funds
    
    
    33,415,351
    
    
    
    248,292
    
    
    
    2.95
    
    
    
    35,187,194
    
    
    
    252,263
    
    
    
    2.84Total interest bearing liabilities
    
    
    307,294,353
    
    
    
    1,234,242
    
    
    
    1.59
    
    
    
    261,906,106
    
    
    
    1,405,629
    
    
    
    2.13Non-interest bearing deposits
    
    
    55,552,085
    
    
    
    
    
    
    
    
    
    
    
    39,760,199362,846,438
    
    
    
    
    
    
    
    
    
    
    
    301,666,305Other liabilities
    
    
    1,575,711
    
    
    
    
    
    
    
    
    
    
    
    1,721,983Non-controlling interest
    
    
    628,126
    
    
    
    
    
    
    
    
    
    
    
    700,862Stockholders equity
    
    
    36,590,846
    
    
    
    
    
    
    
    
    
    
    
    37,478,648Total liabilities and stockholders equity
    
    $
    401,641,121
    
    
    
    
    
    
    
    
    
    
    $
    341,567,798Net interest spread(1)
    
    
    
    
    
    
    
    
    
    
    3.66
    
    
    
    
    
    
    
    
    
    
    
    3.56Net interest income and
Net interest margin(1)
    
    
    
    
    
    $
    3,565,919
    
    
    
    3.90
    %
    
    
    
    
    
    $
    3,031,096
    
    
    
    3.89
    %
 
 (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 September 30, 2010 and 2009 were $4,157,490 and $1,623,984,
respectively. 
 21




---



##### 



Nine months ended September 30, 2010 compared to nine months ended September 30,
2009
     22




---



##### 



Average Balances, Interest and YieldsNine Months Ended September 30,
    
    2010
    
    
    2009Average
    
    
    
    
    
    
    
    
    
    
    Averagebalance
    
    
    Interest
    
    
    Yield
    
    
    balance
    
    
    Interest
    
    
    YieldAssets:Federal
funds sold(1)
    
    $
    2,283,849
    
    
    $
    4,843
    
    
    
    0.28
    %
    
    $
    531,620
    
    
    $
    974
    
    
    
    0.24
    %Interest bearing deposits
    
    
    22,581,649
    
    
    
    165,310
    
    
    
    0.98
    
    
    
    13,636,155
    
    
    
    191,634
    
    
    
    1.88Investment securities(1)(2)U.S. Treasury
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,899
    
    
    
    7,647
    
    
    
    4.07U.S. government agency
    
    
    6,288,382
    
    
    
    140,487
    
    
    
    2.99
    
    
    
    8,825,257
    
    
    
    278,014
    
    
    
    4.21Mortgage backed securities
    
    
    36,911,796
    
    
    
    1,047,096
    
    
    
    3.79
    
    
    
    24,684,708
    
    
    
    800,666
    
    
    
    4.34Municipal securities
    
    
    2,373,576
    
    
    
    87,929
    
    
    
    4.95
    
    
    
    2,568,238
    
    
    
    96,414
    
    
    
    5.02Other
    
    
    2,692,301
    
    
    
    54,273
    
    
    
    2.70
    
    
    
    2,899,569
    
    
    
    49,965
    
    
    
    2.30Total investment securities
    
    
    48,266,055
    
    
    
    1,329,785
    
    
    
    3.68
    
    
    
    39,228,671
    
    
    
    1,232,706
    
    
    
    4.20Loans: (1) (3)Commercial
    
    
    76,838,797
    
    
    
    3,166,333
    
    
    
    5.51
    
    
    
    69,573,990
    
    
    
    3,106,287
    
    
    
    5.97Mortgage
    
    
    189,322,040
    
    
    
    8,585,283
    
    
    
    6.06
    
    
    
    166,344,728
    
    
    
    7,627,432
    
    
    
    6.13Consumer
    
    
    14,362,349
    
    
    
    592,240
    
    
    
    5.51
    
    
    
    15,508,917
    
    
    
    646,997
    
    
    
    5.58Total loans
    
    
    280,523,186
    
    
    
    12,343,856
    
    
    
    5.88
    
    
    
    251,427,635
    
    
    
    11,380,716
    
    
    
    6.05Allowance for loan losses
    
    
    2,485,503
    
    
    
    
    
    
    
   
    
    
    
   2,237,045
    
    
    
   Total loans, net of allowance
    
    
    278,037,683
    
    
    
    12,343,856
    
    
    
    5.94
    
    
    
    249,190,590
    
    
    
    11,380,716
    
    
    
    6.11Total interest earning assets(1)
    
    
    351,169,236
    
    
    
    13,843,794
    
    
    
    5.27
    
    
    
    302,587,036
    
    
    
    12,806,030
    
    
    
    5.66Non-interest bearing cash
    
    
    8,952,613
    
    
    
    
    
    
    
    
    
    
    
    7,242,201Premises and equipment
    
    
    17,185,259
    
    
    
    
    
    
    
    
    
    
    
    13,820,618Other assets
    
    
    12,300,672
    
    
    
    
    
    
    
    
    
    
    
    10,078,923Total assets
    
    $
    389,607,780
    
    
    
    
    
    
    
    
    
    
    $
    333,728,778Liabilities and Stockholders Equity:Interest bearing depositsSavings
    
    $
    8,170,909
    
    
    
    21,561
    
    
    
    0.35
    
    
    $
    6,750,524
    
    
    
    18,925
    
    
    
    0.37Money market and NOW
    
    
    50,695,217
    
    
    
    325,472
    
    
    
    0.86
    
    
    
    33,234,630
    
    
    
    117,407
    
    
    
    0.47Other time deposits
    
    
    199,158,747
    
    
    
    2,613,282
    
    
    
    1.75
    
    
    
    174,303,932
    
    
    
    3,363,289
    
    
    
    2.58Total interest bearing deposits
    
    
    258,024,873
    
    
    
    2,960,315
    
    
    
    1.53
    
    
    
    214,289,086
    
    
    
    3,499,621
    
    
    
    2.18Borrowed funds
    
    
    41,651,147
    
    
    
    803,025
    
    
    
    2.58
    
    
    
    38,421,693
    
    
    
    772,037
    
    
    
    2.69Total interest bearing liabilities
    
    
    299,676,020
    
    
    
    3,763,340
    
    
    
    1.68
    
    
    
    252,710,779
    
    
    
    4,271,658
    
    
    
    2.26Non-interest bearing deposits
    
    
    51,586,292
    
    
    
    
    
    
    
    
    
    
    
    38,450,973351,262,312
    
    
    
    
    
    
    
    
    
    
    
    291,161,752Other liabilities
    
    
    1,529,766
    
    
    
    
    
    
    
    
    
    
    
    1,641,626Non-controlling interest
    
    
    651,017
    
    
    
    
    
    
    
    
    
    
    
    691,255Stockholders equity
    
    
    36,164,685
    
    
    
    
    
    
    
    
    
    
    
    40,234,145Total liabilities and stockholders equity
    
    $
    389,607,780
    
    
    
    
    
    
    
    
    
    
    $
    333,728,778Net interest spread(1)
    
    
    
    
    
    
    
    
    
    
    3.59
    
    
    
    
    
    
    
    
    
    
    
    3.40Net interest income and
Net interest margin(1)
    
    
    
    
    
    $
    10,080,454
    
    
    
    3.84
    %
    
    
    
    
    
    $
    8,534,372
    
    
    
    3.77
    %
 
 (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 nine month periods
ended September 30, 2010 and 2009 were $3,103,083 and $1,584,801,
respectively. 23




---



##### 



Rate/Volume Variance Analysis
 Three months Ended September 30,2010 compared to 2009Variance due to:Total
    
    
    Rate
    
    
    VolumeInterest earning assets:Federal funds sold(1)
    
    $
    2,424
    
    
    $
    634
    
    
    $
    1,790Time deposits in other banks
    
    
    (4,543
    )
    
    
    (50,833
    )
    
    
    46,290Investment Securities(1)U.S. government agency
    
    
    (35,472
    )
    
    
    (25,268
    )
    
    
    (10,204
    )Mortgage backed securities
    
    
    97,317
    
    
    
    (116,938
    )
    
    
    214,255Municipal securities
    
    
    (2,189
    )
    
    
    (939
    )
    
    
    (1,250
    )Other
    
    
    (1,070
    )
    
    
    10,185
    
    
    
    (11,255
    )Loans:(1)Commercial
    
    
    39,305
    
    
    
    (74,529
    )
    
    
    113,834Mortgage
    
    
    285,465
    
    
    
    (345,218
    )
    
    
    630,683Consumer
    
    
    (17,801
    )
    
    
    11,290
    
    
    
    (29,091
    )Total interest revenue (1)
    
    
    363,436
    
    
    
    (591,616
    )
    
    
    955,052Interest bearing liabilitiesSavings
    
    
    1,112
    
    
    
    (1,297
    )
    
    
    2,409Money market and NOW
    
    
    87,695
    
    
    
    68,736
    
    
    
    18,959Other time deposits
    
    
    (256,223
    )
    
    
    (458,535
    )
    
    
    202,312Borrowed funds
    
    
    (3,971
    )
    
    
    15,898
    
    
    
    (19,869
    )Total interest expense
    
    
    (171,387
    )
    
    
    (375,198
    )
    
    
    203,811Net interest income(1)
    
    $
    534,823
    
    
    $
    (216,418
    )
    
    $
    751,241
 
 (1)
    
    Interest revenue is presented on a fully taxable
equivalent (FTE) basis. 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. 24




---



##### 



Rate/Volume Variance Analysis
 Nine months Ended September 30,2010 compared to 2009Variance due to:Total
    
    
    Rate
    
    
    VolumeInterest earning assets:Federal funds sold(1)
    
    $
    3,869
    
    
    $
    232
    
    
    $
    3,637Time deposits in other banks
    
    
    (26,324
    )
    
    
    (137,219
    )
    
    
    110,895Investment Securities(1)U.S. Treasury
    
    
    (7,647
    )
    
    
    
    
    
    
    (7,647
    )U.S. government agency
    
    
    (137,527
    )
    
    
    (79,070
    )
    
    
    (58,457
    )Mortgage backed securities
    
    
    246,430
    
    
    
    (138,285
    )
    
    
    384,715Municipal securities
    
    
    (8,485
    )
    
    
    (1,604
    )
    
    
    (6,881
    )Other
    
    
    4,308
    
    
    
    8,710
    
    
    
    (4,402
    )Loans:(1)Commercial
    
    
    60,046
    
    
    
    (292,327
    )
    
    
    352,373Mortgage
    
    
    957,851
    
    
    
    (110,845
    )
    
    
    1,068,696Consumer
    
    
    (54,757
    )
    
    
    (9,466
    )
    
    
    (45,291
    )Total interest revenue (1)
    
    
    1,037,764
    
    
    
    (759,874
    )
    
    
    1,797,638Interest bearing liabilitiesSavings
    
    
    2,636
    
    
    
    (1,449
    )
    
    
    4,085Money market and NOW
    
    
    208,065
    
    
    
    140,513
    
    
    
    67,552Other time deposits
    
    
    (750,007
    )
    
    
    (1,281,894
    )
    
    
    531,887Borrowed funds
    
    
    30,988
    
    
    
    (38,715
    )
    
    
    69,703Total interest expense
    
    
    (508,318
    )
    
    
    (1,181,545
    )
    
    
    673,227Net interest income(1)
    
    $
    1,546,082
    
    
    $
    421,671
    
    
    $
    1,124,411
 
 (1)
    
    Interest revenue is presented on a fully taxable
equivalent (FTE) basis. 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. 25




---



##### 



Provision for Loan Losses
    Receivables Contingencies Loan Loss Allowance Methodology
and Documentation,
  26




---



##### 



Loan Portfolio
   27




---



##### 



Allowance for Loan Losses
 Nine Months Ended
    
    
    Year EndedSeptember 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2009Balance, beginning of period
    
    $
    2,481,716
    
    
    $
    1,983,751
    
    
    $
    1,983,751Provision for loan losses
    
    
    440,000
    
    
    
    760,000
    
    
    
    900,000Chargeoffs:Commercial
    
    
    (137,151
    )
    
    
    
    
    
    
    Mortgage
    
    
    (958,472
    )
    
    
    (344,825
    )
    
    
    (344,825
    )Consumer
    
    
    (4,194
    )
    
    
    (50,240
    )
    
    
    (57,210
    )Total chargeoffs
    
    
    (1,099,817
    )
    
    
    (395,065
    )
    
    
    (402,035
    )Recoveries:Mortgage
    
    
    3,650
    
    
    
    
    
    
    
    Consumer
    
    
    723
    
    
    
    
    
    
    
    Total recoveries
    
    
    4,373
    
    
    
    
    
    
    
    Net (chargeoffs) recoveries
    
    
    (1,095,444
    )
    
    
    (395,065
    )
    
    
    (402,035
    )Balance, end of period
    
    $
    1,826,272
    
    
    $
    2,348,686
    
    
    $
    2,481,716Ratio of allowance for loan losses to:Total gross loans
    
    
    0.61
    %
    
    
    0.89
    %
    
    
    0.93
    %Non-accrual loans
    
    
    61.29
    %
    
    
    148.41
    %
    
    
    156.43
    %Ratio of net-chargeoffs during period to
average total loans during period
    
    
    0.391
    %
    
    
    0.157
    %
    
    
    0.158
    %
 28




---



##### 



Allocation of Allowance
for Loan LossesSeptember 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2009% of Loans
    
    
    
    
    
    % of Loans
    
    
    
    
    
    % of Loansin Each
    
    
    
    
    
    in Each
    
    
    
    
    
    in EachAmount
    
    Category
    
    Amount
    
    Category
    
    Amount
    
    CategoryConsumer & others
    
    $
    8,267
    
    
    
    0.47
    %
    
    $
    9,331
    
    
    
    0.53
    %
    
    $
    10,319
    
    
    
    0.57
    %Boat
    
    
    153,479
    
    
    
    3.96
    
    
    
    81,292
    
    
    
    5.09
    
    
    
    81,417
    
    
    
    4.91Mortgage
    
    
    1,235,001
    
    
    
    67.63
    
    
    
    1,540,845
    
    
    
    65.61
    
    
    
    1,845,126
    
    
    
    66.74Commercial
    
    
    429,525
    
    
    
    27.94
    
    
    
    717,218
    
    
    
    28.77
    
    
    
    544,854
    
    
    
    27.78Total
    
    $
    1,826,272
    
    
    
    100.00
    %
    
    $
    2,348,686
    
    
    
    100.00
    %
    
    $
    2,481,716
    
    
    
    100.00
    %
 Non-interest Revenue
 Three months ended September 30, 2010 compared to three months ended September 30,
2009
   September 30,
    
    
    September 30,2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeService charges on deposit accounts
    
    $
    78,247
    
    
    $
    80,641
    
    
    $
    (2,394
    )
    
    
    (2.97
    )%Gain on sales of investment securities
    
    
    
    
    
    
    634
    
    
    
    (634
    )
    
    
    (100.00
    )Earnings on bank owned life insurance
    
    
    83,963
    
    
    
    95,322
    
    
    
    (11,359
    )
    
    
    (11.92
    )Pointer Ridge rent and other revenue
    
    
    78,126
    
    
    
    151,209
    
    
    
    (73,083
    )
    
    
    (48.33
    )Gain (loss) on disposal of assets
    
    
    
    
    
    
    (4,803
    )
    
    
    4,803
    
    
    
    100.00Other fees and commissions
    
    
    62,910
    
    
    
    45,405
    
    
    
    17,505
    
    
    
    38.55Total non-interest revenue
    
    $
    303,246
    
    
    $
    368,408
    
    
    $
    (65,162
    )
    
    
    (17.69
    )%
 29




---



##### 



Nine months ended September 30, 2010 compared to nine months ended September 30, 2009
   September 30,
    
    
    September 30,2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeService charges on deposit accounts
    
    $
    231,478
    
    
    $
    225,495
    
    
    $
    5,983
    
    
    
    2.65
    %Gain on sales of investment securitites
    
    
    
    
    
    
    158,551
    
    
    
    (158,551
    )
    
    
    (100.00
    )Earnings on bank owned life insurance
    
    
    254,071
    
    
    
    282,937
    
    
    
    (28,866
    )
    
    
    (10.20
    )Pointer Ridge rent and other revenue
    
    
    206,825
    
    
    
    639,310
    
    
    
    (432,485
    )
    
    
    (67.65
    )Gain (loss) on disposal of assets
    
    
    
    
    
    
    (4,803
    )
    
    
    4,803
    
    
    
    (100.00
    )Other fees and commissions
    
    
    174,814
    
    
    
    205,518
    
    
    
    (30,704
    )
    
    
    (14.94
    )Total non-interest revenue
    
    $
    867,188
    
    
    $
    1,507,008
    
    
    $
    (639,820
    )
    
    
    (42.46
    )%
  30




---



##### 



Non-interest Expense
 Three months ended September 30, 2010 compared to three months ended September 30, 2009
  September 30,
    
    
    September 30,2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeSalaries
    
    $
    1,263,368
    
    
    $
    1,075,572
    
    
    $
    187,796
    
    
    
    17.46
    %Employee benefits
    
    
    319,550
    
    
    
    242,778
    
    
    
    76,772
    
    
    
    31.62Occupancy
    
    
    330,752
    
    
    
    306,871
    
    
    
    23,881
    
    
    
    7.78Equipment
    
    
    105,342
    
    
    
    96,004
    
    
    
    9,338
    
    
    
    9.73Data processing
    
    
    126,412
    
    
    
    90,821
    
    
    
    35,591
    
    
    
    39.19Pointer Ridge other operating
    
    
    111,791
    
    
    
    168,322
    
    
    
    (56,531
    )
    
    
    (33.59
    )FDIC insurance and
State of Maryland assessments
    
    
    130,595
    
    
    
    100,590
    
    
    
    30,005
    
    
    
    29.83Merger Expense
    
    
    187,125
    
    
    
    
    
    
    
    187,125
    
    
    
    100.00Other operating
    
    
    493,277
    
    
    
    303,153
    
    
    
    190,124
    
    
    
    62.72Total non-interest expenses
    
    $
    3,068,212
    
    
    $
    2,384,111
    
    
    $
    684,101
    
    
    
    28.69
    %
  Nine months ended September 30, 2010 compared to nine months ended September 30, 2009
  September 30,
    
    
    September 30,2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeSalaries
    
    $
    3,559,727
    
    
    $
    2,851,559
    
    
    $
    708,168
    
    
    
    24.83
    %Employee benefits
    
    
    987,488
    
    
    
    760,624
    
    
    
    226,864
    
    
    
    29.83Occupancy
    
    
    983,209
    
    
    
    773,177
    
    
    
    210,032
    
    
    
    27.16Equipment
    
    
    311,370
    
    
    
    258,398
    
    
    
    52,972
    
    
    
    20.50Data processing
    
    
    325,912
    
    
    
    247,812
    
    
    
    78,100
    
    
    
    31.52Pointer Ridge other operating
    
    
    314,191
    
    
    
    320,440
    
    
    
    (6,249
    )
    
    
    (1.95
    )FDIC insurance and
State of Maryland assessments
    
    
    361,263
    
    
    
    442,892
    
    
    
    (81,629
    )
    
    
    (18.43
    )Merger Expense
    
    
    187,125
    
    
    
    
    
    
    
    187,125
    
    
    
    100.00Other operating
    
    
    1,342,623
    
    
    
    1,063,587
    
    
    
    279,036
    
    
    
    26.24Total non-interest expenses
    
    $
    8,372,908
    
    
    $
    6,718,489
    
    
    $
    1,654,419
    
    
    
    24.62
    %
  31




---



##### 



Income Taxes
 Three months ended September 30, 2010 compared to three months ended September 30,
2009
  Nine months ended September 30, 2010 compared to nine months ended September 30, 2009
  Net Income Available to Common Stockholders
 Three months ended September 30, 2010 compared to three months ended September 30,
2009
  32




---



##### 



Nine months ended September 30, 2010 compared to nine months ended September 30, 2009
  Analysis of Financial Condition
 Investment Securities
   33




---



##### 



Loan Portfolio
    Loan Portfolio
 September 30,
    
    
    December 31,2010
    
    
    2009Real EstateCommercial
    
    $
    152,929
    
    
    
    51.32
    %
    
    $
    124,002
    
    
    
    46.44
    %Construction
    
    
    22,104
    
    
    
    7.42
    
    
    
    30,872
    
    
    
    11.56Residential
    
    
    26,477
    
    
    
    8.89
    
    
    
    23,350
    
    
    
    8.74Commercial
    
    
    83,243
    
    
    
    27.94
    
    
    
    74,175
    
    
    
    27.78Consumer
    
    
    13,210
    
    
    
    4.43
    
    
    
    14,622
    
    
    
    5.48297,963
    
    
    
    100.00
    %
    
    
    267,021
    
    
    
    100.00
    %Allowance for loan losses
    
    
    (1,827
    )
    
    
    
    
    
    
    (2,481)Deferred loan costs, net
    
    
    498
    
    
    
    
    
    
    
    469$
    296,634
    
    
    
    
    
    
    $
    265,009
 34




---



##### 



Asset Quality
   Loans With Interest Paid From Loan Advances
 September 30,
    
    
    December 31,2010
    
    
    2009# of
    
    
    
    
    
    # ofBorrowers
    
    
    (000s
    )
    
    Borrowers
    
    
    (000s
    )Hotels
    
    
    1
    
    
    $
    967
    
    
    
    1
    
    
    $
    1,741Single family acquisition & development
    
    
    1
    
    
    
    2,406
    
    
    
    2
    
    
    
    4,0282
    
    
    $
    3,373
    
    
    
    3
    
    
    $
    5,769
     # of
    
    
    LoanBorrowers
    
    
    BalanceBeginning Balance
    
    
    3
    
    
    $
    1,586Added to non-accrual
    
    
    
    
    
    
    3,301Charged-off
    
    
    
    
    
    
    (1,084
    )Transferred to other real estate owned
    
    
    
    
    
    
    (823
    )Ending balance non-accrual loans
    
    
    3
    
    
    $
    2,980
  35




---



##### 



Receivables Contingencies
 36




---



##### 



Non-Performing Assets and Past Due Loans
 September 30, 2010
    
    
    December 31, 2009Interest Not
    
    
    
    
    
    
    
    
    
    Interest Not#
    
    
    Balance
    
    Accrued
    
    
    #
    
    
    Balance
    
    AccruedReal EstateCommercial
    
    
    3
    
    
    $
    2,980
    
    
    $
    302
    
    
    
    3
    
    
    $
    1,586
    
    
    $
    191Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Residential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other real estate owned
    
    
    2
    
    
    
    823
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total non-performing assets
    
    
    5
    
    
    $
    3,803
    
    
    $
    302
    
    
    
    3
    
    
    $
    1,586
    
    
    $
    191Non-performing assets as
a percentage of total assets
    
    
    
    
    
    
    0.92
    %
    
    
    
    
    
    
    
    
    
    
    0.44
    %Non-performing loans as
a percentage of total gross loans
    
    
    
    
    
    
    1.00
    %
    
    
    
    
    
    
    
    
    
    
    0.59
    %Accruing past due loans:30-89 days past due
    
    
    1
    
    
    $
    83
    
    
    
    
    
    
    
    2
    
    
    
    58190 or more days past due
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total accruing past due loans
    
    
    1
    
    
    $
    83
    
    
    
    
    
    
    
    2
    
    
    $
    581Ratio of accruing past due
loans to total loans:30-89 days past due
    
    
    
    
    
    
    0.0279
    %
    
    
    
    
    
    
    
    
    
    
    0.22
    %90 or more days past due
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total accruing past due loans
    
    
    
    
    
    
    0.0279
    %
    
    
    
    
    
    
    
    
    
    
    0.22
    %
 37




---



##### 



Bank owned life insurance
  Deposits
    Borrowings
  38




---



##### 



rd
 th
 th
  Interest Rate Sensitivity Analysis and Interest Rate Risk Management
    39




---



##### 



Liquidity
     40




---



##### 



Capital
  Contractual Obligations, Commitments, Contingent Liabilities, and Off-balance Sheet Arrangements
   September 30,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)Commitments to extend credit and available credit lines:Commercial
    
    $
    36,405
    
    
    $
    21,153Real estate-undisbursed development and construction
    
    
    14,689
    
    
    
    14,573Consumer
    
    
    7,642
    
    
    
    9,015$
    58,736
    
    
    $
    44,741Standby letters of credit
    
    $
    6,471
    
    
    $
    3,883
   41




---



##### 



Reconciliation of Non-GAAP Measures
  Three months ended September 30, 2010
 NetNet Interest
    
    
    
    
    
    
    InterestIncome
    
    
    Yield
    
    
    SpreadGAAP net interest income
    
    $
    3,524,954
    
    
    
    3.86
    %
    
    
    3.62
    %Tax equivalent adjustmentFederal funds sold
    
    
    1
    
    
    
    0.00
    
    
    
    0.00Investment securities
    
    
    12,113
    
    
    
    0.01
    
    
    
    0.01Loans
    
    
    28,851
    
    
    
    0.03
    
    
    
    0.03Total tax equivalent adjustment
    
    
    40,965
    
    
    
    0.04
    
    
    
    0.04Tax equivalent interest yield
    
    $
    3,565,919
    
    
    
    3.90
    %
    
    
    3.66
    %
 Three months ended September 30, 2009
 NetNet Interest
    
    
    
    
    
    
    InterestIncome
    
    
    Yield
    
    
    SpreadGAAP net interest income
    
    $
    2,986,489
    
    
    
    3.83
    %
    
    
    3.51
    %Tax equivalent adjustmentFederal funds sold
    
    
    
    
    
    
    
    
    
    
    Investment securities
    
    
    15,085
    
    
    
    0.04
    
    
    
    0.03Loans
    
    
    29,522
    
    
    
    0.02
    
    
    
    0.02Total tax equivalent adjustment
    
    
    44,607
    
    
    
    0.06
    
    
    
    0.05Tax equivalent interest yield
    
    $
    3,031,096
    
    
    
    3.89
    %
    
    
    3.56
    %
 42




---



##### 



Nine months ended September 30, 2010
 NetNet Interest
    
    
    
    
    
    
    InterestIncome
    
    
    Yield
    
    
    SpreadGAAP net interest income
    
    $
    9,959,788
    
    
    
    3.79
    %
    
    
    3.54
    %Tax equivalent adjustment
    
    
    
    
    
    
    
    
    
    
    Federal funds sold
    
    
    1
    
    
    
    0.00
    
    
    
    0.00Investment securities
    
    
    36,190
    
    
    
    0.02
    
    
    
    0.02Loans
    
    
    84,475
    
    
    
    0.03
    
    
    
    0.03Total tax equivalent adjustment
    
    
    120,666
    
    
    
    0.05
    
    
    
    0.05Tax equivalent interest yield
    
    $
    10,080,454
    
    
    
    3.84
    %
    
    
    3.59
    %
 Nine months ended September 30, 2009
 NetNet Interest
    
    
    
    
    
    
    InterestIncome
    
    
    Yield
    
    
    SpreadGAAP net interest income
    
    $
    8,449,742
    
    
    
    3.73
    %
    
    
    3.36
    %Tax equivalent adjustmentFederal funds sold
    
    
    
    
    
    
    
    
    
    
    Investment securities
    
    
    47,385
    
    
    
    0.02
    
    
    
    0.02Loans
    
    
    37,245
    
    
    
    0.02
    
    
    
    0.02Total tax equivalent adjustment
    
    
    84,630
    
    
    
    0.04
    
    
    
    0.04Tax equivalent interest yield
    
    $
    8,534,372
    
    
    
    3.77
    %
    
    
    3.40
    %
 43




---



##### 



Impact of Inflation and Changing Prices
   Application of Critical Accounting Policies
     44




---



##### 



Information Regarding Forward-Looking Statements
    45




---



##### 



Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
  Item 4.
    
    Controls and Procedures
   PART II-OTHER INFORMATION
 Item 1.
    
    Legal Proceedings
  Item 1A.
    
    Risk Factors
  Failure to complete the merger with Maryland Bankcorp could negatively impact our stock price
and future businesses and financial results.
 
    
    Old Line Bancshares may be required, under certain circumstances, to pay Maryland
Bankcorp a termination fee of $750,000 under the merger agreement;
    
    Old Line Bancshares will pay certain costs relating to the merger, whether or not
the merger is completed, such as legal, accounting, financial advisor and printing
fees; and
    
    Matters relating to the merger may require substantial commitments of time and
resources by Old Line Bancshares management that they could have otherwise devoted to
other opportunities that may have been beneficial to Old Line Bancshares as an
independent company.
  46




---



##### 



We may fail to realize all of the anticipated benefits of the merger
  The recently enacted Dodd-Frank Act may adversely impact our results of operations, liquidity
or financial condition.
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  Item 3.
    
    Defaults Upon Senior Securities
  Item 4.
    
    (Removed and Reserved)
 Item 5. Other Information
 None
 Item 6.
    
    Exhibits
 31.1
    
    Rule 13a-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a) Certification of Chief Financial Officer32
    
    Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
 47




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SIGNATURES
  Old Line Bancshares, Inc.Date: November 10, 2010
    By:
    /s/ James W. CornelsenJames W. Cornelsen,President and Chief Executive Officer
(Principal Executive Officer)Date: November 10, 2010
    By:
    /s/ Christine M. RushChristine M. Rush,Executive Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer) 48