R
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
|
EXCHANGE ACT OF 1934
|
|
For the quarterly period ended September 30, 2011
|
£
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
|
EXCHANGE ACT OF 1934
|
Maryland
|
20-0154352
|
|
(State or other jurisdiction
|
(I.R.S. Employer
|
|
of incorporation or organization)
|
Identification No.)
|
1525 Pointer Ridge Place
|
20716
|
|
Bowie, Maryland
|
(Zip Code)
|
|
(Address of principal executive offices)
|
Old Line Bancshares, Inc. & Subsidiaries
|
||||||||
Consolidated Balance Sheets
|
||||||||
September 30,
2011
|
December 31,
2010
|
|||||||
(Unaudited)
|
||||||||
Assets
|
||||||||
Cash and due from banks
|
$ | 44,591,494 | $ | 14,325,266 | ||||
Interest bearing accounts
|
14,157 | 109,170 | ||||||
Federal funds sold
|
720,898 | 180,536 | ||||||
Total cash and cash equivalents
|
45,326,549 | 14,614,972 | ||||||
Time deposits in other banks
|
- | 297,000 | ||||||
Investment securities available for sale
|
158,503,556 | 33,049,795 | ||||||
Investment securities held to maturity
|
- | 21,736,469 | ||||||
Loans, less allowance for loan losses
|
515,738,796 | 299,606,430 | ||||||
Equity securities at cost
|
4,051,482 | 2,562,750 | ||||||
Premises and equipment
|
22,748,048 | 16,867,561 | ||||||
Accrued interest receivable
|
2,349,748 | 1,252,970 | ||||||
Prepaid income taxes
|
162,043 | 189,523 | ||||||
Deferred income taxes
|
6,353,633 | 265,551 | ||||||
Bank owned life insurance
|
16,298,382 | 8,703,175 | ||||||
Prepaid pension
|
1,315,642 | - | ||||||
Other real estate owned
|
4,126,434 | 1,153,039 | ||||||
Goodwill
|
141,723 | - | ||||||
Core deposit intangible
|
4,613,568 | - | ||||||
Other assets
|
4,255,685 | 1,610,715 | ||||||
Total assets
|
$ | 785,985,289 | $ | 401,909,950 | ||||
Liabilities and Stockholders' Equity
|
||||||||
Deposits
|
||||||||
Non-interest bearing
|
$ | 176,167,359 | $ | 67,494,744 | ||||
Interest bearing
|
487,824,952 | 273,032,442 | ||||||
Total deposits
|
663,992,311 | 340,527,186 | ||||||
Short term borrowings
|
32,605,607 | 5,669,332 | ||||||
Long term borrowings
|
16,307,146 | 16,371,947 | ||||||
Accrued interest payable
|
392,340 | 434,656 | ||||||
Accrued pension
|
4,554,285 | 673,048 | ||||||
Other liabilities
|
1,867,752 | 575,031 | ||||||
Total liabilities
|
719,719,441 | 364,251,200 | ||||||
Stockholders' equity
|
||||||||
Common stock, par value $0.01 per share; authorized 15,000,000 shares;
|
||||||||
issued and outstanding 6,809,594 in 2011 and 3,891,705 in 2010
|
68,096 | 38,917 | ||||||
Additional paid-in capital
|
53,421,825 | 29,206,617 | ||||||
Retained earnings
|
10,399,491 | 7,535,268 | ||||||
Accumulated other comprehensive income
|
1,898,327 | 272,956 | ||||||
Total Old Line Bancshares, Inc. stockholders' equity
|
65,787,739 | 37,053,758 | ||||||
Non-controlling interest
|
478,109 | 604,992 | ||||||
Total stockholders' equity
|
66,265,848 | 37,658,750 | ||||||
Total liabilities and stockholders' equity
|
$ | 785,985,289 | $ | 401,909,950 |
Old Line Bancshares, Inc. & Subsidiaries
|
||||||||||||||||
Consolidated Statements of Income
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Interest revenue
|
||||||||||||||||
Loans, including fees
|
$ | 8,573,052 | $ | 4,260,382 | $ | 20,510,217 | $ | 12,259,381 | ||||||||
U.S. Treasury securities
|
2,413 | - | 4,820 | - | ||||||||||||
U.S. government agency securities
|
111,428 | 42,133 | 231,056 | 132,830 | ||||||||||||
Mortgage backed securities
|
782,903 | 373,619 | 1,924,401 | 1,047,096 | ||||||||||||
Municipal securities
|
221,272 | 19,699 | 464,083 | 60,059 | ||||||||||||
Federal funds sold
|
994 | 2,656 | 5,159 | 4,842 | ||||||||||||
Other
|
45,042 | 60,707 | 119,202 | 218,920 | ||||||||||||
Total interest revenue
|
9,737,104 | 4,759,196 | 23,258,938 | 13,723,128 | ||||||||||||
Interest expense
|
||||||||||||||||
Deposits
|
1,175,773 | 985,950 | 3,243,461 | 2,960,315 | ||||||||||||
Borrowed funds
|
216,756 | 248,292 | 612,465 | 803,025 | ||||||||||||
Total interest expense
|
1,392,529 | 1,234,242 | 3,855,926 | 3,763,340 | ||||||||||||
Net interest income
|
8,344,575 | 3,524,954 | 19,403,012 | 9,959,788 | ||||||||||||
Provision for loan losses
|
800,000 | 200,000 | 1,000,000 | 440,000 | ||||||||||||
Net interest income after provision for loan losses
|
7,544,575 | 3,324,954 | 18,403,012 | 9,519,788 | ||||||||||||
Non-interest revenue
|
||||||||||||||||
Service charges on deposit accounts
|
380,065 | 78,247 | 859,300 | 231,478 | ||||||||||||
Gains on sales or calls of investment securities
|
72,252 | - | 112,811 | - | ||||||||||||
Permanent impairment on equity securities
|
- | - | (122,500 | ) | - | |||||||||||
Earnings on bank owned life insurance
|
356,281 | 83,963 | 557,669 | 254,071 | ||||||||||||
Gains on sales of other real estate owned
|
45,595 | 48,580 | ||||||||||||||
Gains (losses) on disposal of assets
|
8,995 | - | (5,160 | ) | - | |||||||||||
Other fees and commissions
|
152,613 | 141,036 | 407,312 | 381,639 | ||||||||||||
Total non-interest revenue
|
1,015,801 | 303,246 | 1,858,012 | 867,188 | ||||||||||||
Non-interest expense
|
||||||||||||||||
Salaries
|
2,248,065 | 1,263,368 | 5,559,074 | 3,559,727 | ||||||||||||
Employee benefits
|
782,443 | 319,550 | 1,945,879 | 987,488 | ||||||||||||
Occupancy
|
746,356 | 330,752 | 1,799,276 | 983,209 | ||||||||||||
Equipment
|
170,254 | 105,342 | 434,629 | 311,370 | ||||||||||||
Data processing
|
232,530 | 126,412 | 595,612 | 325,912 | ||||||||||||
FDIC insurance and State of Maryland assessments
|
143,680 | 130,595 | 462,496 | 361,263 | ||||||||||||
Merger and integration
|
77,880 | 187,125 | 545,154 | 187,125 | ||||||||||||
Core deposit premium
|
194,674 | - | 389,349 | - | ||||||||||||
Other operating
|
1,557,284 | 605,068 | 3,514,313 | 1,656,814 | ||||||||||||
Total non-interest expense
|
6,153,166 | 3,068,212 | 15,245,782 | 8,372,908 | ||||||||||||
Income before income taxes
|
2,407,210 | 559,988 | 5,015,242 | 2,014,068 | ||||||||||||
Income taxes
|
737,405 | 265,299 | 1,729,005 | 765,431 | ||||||||||||
Net income
|
1,669,805 | 294,689 | 3,286,237 | 1,248,637 | ||||||||||||
Less: Net income (loss) attributable to the noncontrolling interest
|
(37,688 | ) | (17,876 | ) | (126,883 | ) | (58,559 | ) | ||||||||
Net income available to common stockholders
|
$ | 1,707,493 | $ | 312,565 | $ | 3,413,120 | $ | 1,307,196 | ||||||||
Basic earnings per common share
|
$ | 0.25 | $ | 0.08 | $ | 0.56 | $ | 0.34 | ||||||||
Diluted earnings per common share
|
$ | 0.25 | $ | 0.08 | $ | 0.56 | $ | 0.34 | ||||||||
Dividend per common share
|
$ | 0.03 | $ | 0.03 | $ | 0.09 | $ | 0.09 |
Old Line Bancshares, Inc. & Subsidiaries
|
||||||||||||||||||||||||||||
Consolidated Statement of Changes in Stockholders' Equity
|
||||||||||||||||||||||||||||
Nine Months Ended September 30, 2011
|
||||||||||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||||||
Additional
paid-in
capital
|
Accumulated other comprehensive income
|
|||||||||||||||||||||||||||
Common stock
|
Retained
earnings
|
Comprehensive
income
|
Non-controlling
Interest
|
|||||||||||||||||||||||||
Shares
|
Par value
|
|||||||||||||||||||||||||||
Balance, December 31, 2010
|
3,891,705 | $ | 38,917 | $ | 29,206,617 | $ | 7,535,268 | $ | 272,956 | $ | 604,992 | |||||||||||||||||
Net income attributable
to Old Line Bancshares, Inc.
|
- | - | - | 3,413,120 | - | $ | 3,413,120 | - | ||||||||||||||||||||
Unrealized gain on
|
||||||||||||||||||||||||||||
securities available for sale,
|
||||||||||||||||||||||||||||
net of income tax benefit of $1,534,408
|
- | - | - | - | 1,625,371 | 1,625,371 | - | |||||||||||||||||||||
Comprehensive income
|
- | - | - | - | - | $ | 5,038,491 | - | ||||||||||||||||||||
Acquisition Maryland Bankcorp, Inc.
|
2,132,231 | 21,322 | 17,784,355 | - | - | - | ||||||||||||||||||||||
Net income attributable
to non-controlling interest
|
- | - | - | - | - | (126,883 | ) | |||||||||||||||||||||
Stock based compensation awards
|
- | - | 106,118 | - | - | - | ||||||||||||||||||||||
Restricted stock issued
|
8,786 | 88 | (88 | ) | - | - | - | |||||||||||||||||||||
Private placement-common stock
|
776,872 | 7,769 | 6,324,823 | - | - | - | ||||||||||||||||||||||
Common stock cash dividend
$0.09 per share
|
- | - | - | (548,897 | ) | - | - | |||||||||||||||||||||
Balance, September 30, 2011
|
6,809,594 | $ | 68,096 | $ | 53,421,825 | $ | 10,399,491 | $ | 1,898,327 | $ | 478,109 |
Old Line Bancshares, Inc. & Subsidiaries
|
||||||||
Consolidated Statements of Cash Flows
|
||||||||
(Unaudited)
|
||||||||
Nine Months Ended September 30,
|
2011
|
2010
|
||||||
Cash flows from operating activities
|
||||||||
Interest received
|
$ | 23,621,865 | $ | 13,694,364 | ||||
Fees and commissions received
|
1,654,345 | 654,326 | ||||||
Interest paid
|
(3,959,024 | ) | (3,820,867 | ) | ||||
Cash paid to suppliers and employees
|
(12,842,458 | ) | (6,924,009 | ) | ||||
Income taxes paid
|
(226,596 | ) | (1,003,071 | ) | ||||
8,248,132 | 2,600,743 | |||||||
Cash flows from investing activities
|
||||||||
Cash and cash equivalents of acquired bank
|
41,967,182 | - | ||||||
Net change in time deposits in other banks
|
297,000 | 7,136,243 | ||||||
Purchase of investment securities
|
||||||||
Held to maturity
|
- | (20,316,548 | ) | |||||
Available for sale
|
(57,888,014 | ) | (3,140,625 | ) | ||||
Proceeds from disposal of investment securities
|
||||||||
Held to maturity at maturity or call
|
- | 2,819,165 | ||||||
Held to maturity sold
|
514,079 | - | ||||||
Available for sale at maturity or call
|
11,182,450 | 6,940,703 | ||||||
Available for sale sold
|
17,383,871 | - | ||||||
Loans made, net of principal collected
|
(27,224,201 | ) | (32,859,969 | ) | ||||
Proceeds from sale of other real estate owned
|
77,171 | - | ||||||
Investment in improvements other real estate owned
|
(53,245 | ) | ||||||
Redemption (Purchase) of equity securities
|
208,952 | 334,299 | ||||||
Purchase of premises, equipment and software
|
(2,199,933 | ) | (321,485 | ) | ||||
(15,734,688 | ) | (39,408,217 | ) | |||||
Cash flows from financing activities
|
||||||||
Net increase (decrease) in
|
||||||||
Time deposits
|
(28,084,844 | ) | 5,800,014 | |||||
Other deposits
|
54,043,969 | 48,966,663 | ||||||
Increase in short term borrowings
|
7,542,275 | (2,202,584 | ) | |||||
Decrease in long term borrowings
|
(64,801 | ) | (60,828 | ) | ||||
Acquisition cash consideration
|
(1,022,161 | ) | - | |||||
Private placement - common stock
|
6,332,592 | - | ||||||
Cash dividends paid-common stock
|
(548,897 | ) | (349,200 | ) | ||||
Distributions to minority members
|
- | (11,362 | ) | |||||
38,198,133 | 52,142,703 | |||||||
Net increase (decrease) in cash and cash equivalents
|
30,711,577 | 15,335,229 | ||||||
Cash and cash equivalents at beginning of period
|
14,614,972 | 11,436,587 | ||||||
Cash and cash equivalents at end of period
|
$ | 45,326,549 | $ | 26,771,816 |
Old Line Bancshares, Inc. & Subsidiaries
|
||||||||
Consolidated Statements of Cash Flows
|
||||||||
(Unaudited)
|
||||||||
Nine Months Ended September 30,
|
2011
|
2010
|
||||||
Reconciliation of net income to net cash
|
||||||||
provided by operating activities
|
||||||||
Net income
|
$ | 3,286,237 | $ | 1,248,637 | ||||
Adjustments to reconcile net income to net
|
||||||||
cash provided by operating activities
|
||||||||
Depreciation and amortization
|
771,372 | 605,671 | ||||||
Provision for loan losses
|
1,000,000 | 440,000 | ||||||
Change in deferred loan fees net of costs
|
(196,415 | ) | (28,589 | ) | ||||
Gains on sales or calls of securities
|
(112,811 | ) | - | |||||
Amortization of premiums and discounts
|
527,132 | 186,553 | ||||||
Permanent impairment on equity securities
|
122,500 | - | ||||||
Gain on other real estate owned
|
(48,580 | ) | ||||||
Gain on sale of fixed assets
|
5,160 | - | ||||||
Amortization of intangible
|
389,349 | - | ||||||
Deferred income taxes
|
243,900 | (61,772 | ) | |||||
Stock based compensation awards
|
106,118 | 92,175 | ||||||
Increase (decrease) in
|
||||||||
Accrued interest payable
|
(103,098 | ) | (57,527 | ) | ||||
Income tax payable
|
- | (175,543 | ) | |||||
Other liabilities
|
(246,024 | ) | 555,225 | |||||
Decrease (increase) in
|
||||||||
Accrued interest receivable
|
32,210 | (186,728 | ) | |||||
Bank owned life insurance
|
(90,856 | ) | (212,862 | ) | ||||
Prepaid pension
|
550,847 | - | ||||||
Prepaid income taxes
|
1,258,509 | (325 | ) | |||||
Other assets
|
752,582 | 195,828 | ||||||
$ | 8,248,132 | $ | 2,600,743 |
Old Line Bancshares, Inc. & Subsidiaries
|
||||||||
Consolidated Statements of Cash Flows
|
||||||||
(Unaudited)
|
||||||||
Nine months ended September 30,
|
2011
|
2010
|
||||||
Supplemental Disclosure:
|
||||||||
Loans transferred to other real estate owned
|
$ | 1,114,290 | $ | 823,169 | ||||
Fair value of assets and liabilities from acquisition:
|
||||||||
Cash
|
$ | 41,967,182 | $ | - | ||||
Investments
|
71,434,005 | - | ||||||
Loans
|
190,826,040 | - | ||||||
Restricted stock
|
1,575,184 | - | ||||||
Premises and equipment
|
4,457,086 | - | ||||||
Accrued interest
|
1,128,988 | - | ||||||
Prepaid assets
|
1,231,029 | - | ||||||
Deferred tax
|
7,865,514 | - | ||||||
Bank owned life insurance
|
7,504,351 | |||||||
Prepaid pension costs
|
1,315,642 | - | ||||||
Other real estate owned
|
1,834,451 | - | ||||||
Core deposit intangible
|
5,002,917 | - | ||||||
Other assets
|
3,397,552 | - | ||||||
Deposits
|
(297,506,000 | ) | - | |||||
Short term borrowings
|
(19,394,000 | ) | - | |||||
Accrued interest payable
|
(60,782 | ) | - | |||||
Accrued pension acquired
|
(3,330,390 | ) | - | |||||
Other liabilities
|
(1,563,745 | ) | - | |||||
Purchase price in excess of net assets acquired
|
$ | 141,723 | $ | - |
|
1.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
ACQUISITION OF MARYLAND BANKCORP, INC.
|
Cash and cash equivalents
|
$ | 41,967 | ||
Investment securities
|
71,434 | |||
Loans
|
190,826 | |||
Restricted equity securities
|
1,575 | |||
Premises and equipment
|
4,457 | |||
Accrued interest receivable
|
1,129 | |||
Prepaid taxes
|
1,231 | |||
Deferred income taxes
|
7,866 | |||
Bank owned life insurance
|
7,504 | |||
Prepaid pension costs
|
1,317 | |||
Other real estate owned
|
1,836 | |||
Other assets
|
3,403 | |||
Deposits
|
(297,506 | ) | ||
Short term borrowings
|
(19,394 | ) | ||
Deferred compensation
|
(3,330 | ) | ||
Accrued expenses & liabilities
|
(1,624 | ) | ||
Net tangible assets acquired
|
12,691 | |||
Definite lived intangible assets acquired
|
5,003 | |||
Goodwill
|
141 | |||
Net intangible assets acquired
|
5,144 | |||
Cash consideration
|
1,000 | |||
Total purchase price
|
$ | 18,835 |
2.
|
ACQUISITION OF MARYLAND BANKCORP, INC. (Continued)
|
|
Pro Forma Results
|
|
The following schedule includes consolidated statements of income data for the unaudited pro forma results for the periods ended September 30, 2011 and 2010 as if the MB&T acquisition had occurred as of the beginning of the periods presented.
|
Nine Months Ended
September 30,
|
||||||||
2011
|
2010
|
|||||||
Net interest income
|
$ | 19,403 | $ | 21,461 | ||||
Other non-interest revenue
|
1,858 | 2,997 | ||||||
Total revenue
|
21,261 | 24,458 | ||||||
Provision expense
|
1,000 | 3,589 | ||||||
Other non-interest expense
|
14,750 | 19,559 | ||||||
Income before income taxes
|
5,511 | 1,310 | ||||||
Income tax expense
|
1,875 | 498 | ||||||
Net income
|
$ | 3,636 | $ | 812 | ||||
Basic earnings per share
|
0.52 | 0.14 | ||||||
Diluted earnings per share
|
0.52 | 0.14 |
September 30, 2011
|
Amortized
cost
|
Gross
unrealized
gains
|
Gross
unrealized
losses
|
Estimated
fair value
|
||||||||||||
Available for sale
|
||||||||||||||||
U. S. treasury
|
$ | 1,247,433 | $ | 9,817 | $ | - | $ | 1,257,250 | ||||||||
U.S. government agency
|
24,140,268 | 189,983 | (1,500 | ) | 24,328,751 | |||||||||||
Municipal securities
|
24,521,774 | 1,131,171 | (17 | ) | 25,652,928 | |||||||||||
Mortgage backed
|
104,253,329 | 3,070,016 | (58,718 | ) | 107,264,627 | |||||||||||
$ | 154,162,804 | $ | 4,400,987 | $ | (60,235 | ) | $ | 158,503,556 | ||||||||
December 31, 2010
|
||||||||||||||||
Available for sale
|
||||||||||||||||
U.S. government agency
|
$ | 3,716,858 | $ | 90,881 | $ | (3,942 | ) | $ | 3,803,797 | |||||||
Municipal securities
|
1,302,630 | 24,746 | (169 | ) | 1,327,207 | |||||||||||
Mortgage backed
|
27,579,549 | 519,919 | (180,677 | ) | 27,918,791 | |||||||||||
$ | 32,599,037 | $ | 635,546 | $ | (184,788 | ) | $ | 33,049,795 | ||||||||
Held to maturity
|
||||||||||||||||
Municipal securities
|
$ | 983,783 | $ | 11,569 | $ | (39,568 | ) | $ | 955,784 | |||||||
Mortgage-backed
|
20,752,686 | 290,747 | (33,636 | ) | 21,009,797 | |||||||||||
$ | 21,736,469 | $ | 302,316 | $ | (73,204 | ) | $ | 21,965,581 |
September 30, 2011
|
Fair
value
|
Unrealized
losses
|
||||||
Unrealized losses less than 12 months
|
||||||||
U.S. treasury
|
$ | - | $ | - | ||||
U.S. government agency
|
1,498,500 | (1,500 | ) | |||||
Municipal securities
|
829,983 | (17 | ) | |||||
Mortgage backed
|
13,429,307 | (58,718 | ) | |||||
Total unrealized losses less than 12 months
|
15,757,790 | (60,235 | ) | |||||
Unrealized losses greater than 12 months
|
||||||||
U.S. treasury
|
- | - | ||||||
U.S. government agency
|
- | - | ||||||
Municipal securities
|
- | - | ||||||
Mortgage backed
|
- | - | ||||||
Total unrealized losses greater than 12 months
|
- | - | ||||||
Total unrealized losses
|
||||||||
U.S. treasury
|
- | - | ||||||
U.S. government agency
|
1,498,500 | (1,500 | ) | |||||
Municipal securities
|
829,983 | (17 | ) | |||||
Mortgage backed
|
13,429,307 | (58,718 | ) | |||||
Total unrealized losses
|
$ | 15,757,790 | $ | (60,235 | ) |
|
3.
|
INVESTMENT SECURITIES (Continued)
|
Available for Sale
|
||||||||
September 30, 2011
|
Amortized
cost
|
Fair
value
|
||||||
Maturing
|
||||||||
Within one year
|
$ | 2,262,827 | $ | 2,306,490 | ||||
Over one to five years
|
15,640,469 | 15,799,109 | ||||||
Over five to ten years
|
31,268,594 | 32,257,143 | ||||||
Over ten years
|
104,990,914 | 108,140,814 | ||||||
$ | 154,162,804 | $ | 158,503,556 | |||||
Pledged securities
|
$ | 32,092,583 | $ | 32,915,358 |
Pointer Ridge Office Investment, LLC
Balance Sheets
|
September 30,
2011 |
December 31,
2010
|
||||||||||||||
Current assets
|
$ | 463,074 | $ | 758,257 | ||||||||||||
Non-current assets
|
7,136,784 | 7,252,413 | ||||||||||||||
Liabilities
|
6,324,903 | 6,397,360 | ||||||||||||||
Equity
|
1,274,955 | 1,613,310 | ||||||||||||||
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Statements of Income
|
||||||||||||||||
Revenue
|
$ | 187,285 | $ | 215,704 | $ | 576,407 | $ | 612,900 | ||||||||
Expenses
|
287,788 | 263,374 | 914,763 | 769,058 | ||||||||||||
Net income (loss)
|
$ | (100,503 | ) | $ | (47,670 | ) | $ | (338,356 | ) | $ | (156,158 | ) |
5.
|
INCOME TAXES
|
6.
|
LOANS
|
September 30,
2011
|
December 31,
2010
|
|||||||
Real estate
|
||||||||
Commercial
|
$ | 264,964,445 | $ | 153,526,907 | ||||
Construction
|
44,089,479 | 24,377,690 | ||||||
Residential
|
96,987,284 | 27,081,399 | ||||||
Commercial
|
97,639,226 | 83,523,056 | ||||||
Consumer
|
14,402,166 | 13,079,878 | ||||||
518,082,600 | 301,588,930 | |||||||
Allowance for loan losses
|
(3,026,195 | ) | (2,468,476 | ) | ||||
Deferred loan costs, net
|
682,391 | 485,976 | ||||||
$ | 515,738,796 | $ | 299,606,430 |
6.
|
LOANS (Continued)
|
6.
|
LOANS (Continued)
|
6.
|
LOANS (Continued)
|
Non-Accrual and Past Due Loans and Troubled Debt Restructurings
|
||||||||||||||||||||||||
September 30, 2011
|
||||||||||||||||||||||||
Legacy
|
Acquired
|
|||||||||||||||||||||||
# of Borrowers
|
Account Balance
|
Interest Not Accrued
|
# of Borrowers
|
Account Balance
|
Interest Not Accrued
|
|||||||||||||||||||
Real Estate
|
||||||||||||||||||||||||
Commercial
|
- | $ | - | $ | - | 8 | $ | 1,521,485 | $ | 155,853 | ||||||||||||||
Construction
|
1 | 1,169,337 | 184,603 | 2 | 1,715,000 | 583,528 | ||||||||||||||||||
Residential
|
- | - | - | 2 | 973,890 | 106,607 | ||||||||||||||||||
Commercial
|
- | - | - | 2 | 44,157 | 28,680 | ||||||||||||||||||
Consumer
|
- | - | - | - | - | - | ||||||||||||||||||
Total non-performing loans
|
1 | $ | 1,169,337 | $ | 184,603 | 14 | $ | 4,254,532 | $ | 874,668 | ||||||||||||||
Accruing past due loans:
|
||||||||||||||||||||||||
30-89 days past due
|
2 | $ | 307,060 | 17 | $ | 954,756 | ||||||||||||||||||
90 or more days past due
|
- | - | 5 | 1,387,948 | ||||||||||||||||||||
Total accruing past due loans
|
2 | $ | 307,060 | 22 | $ | 2,342,704 | ||||||||||||||||||
Accruing Troubled Debt
Restructurings
|
||||||||||||||||||||||||
Real Estate
|
2 | $ | 4,755,017 | - | $ | - | ||||||||||||||||||
Consumer
|
1 | 145,018 | 2 | 154,194 | ||||||||||||||||||||
Total Accruing Troubled Debt
Restructurings
|
3 | $ | 4,900,035 | 2 | $ | 154,194 |
6.
|
LOANS (Continued)
|
Non-Accrual and Past Due Loans
|
||||||||||||||||||||||||
December 31, 2010
|
||||||||||||||||||||||||
Legacy
|
Acquired
|
|||||||||||||||||||||||
# of Borrowers
|
Account Balance
|
Interest Not Accrued
|
# of Borrowers
|
Account Balance
|
Interest Not Accrued
|
|||||||||||||||||||
Real Estate
|
||||||||||||||||||||||||
Commercial
|
$ | - | $ | - | $ | - | $ | - | ||||||||||||||||
Construction
|
2 | 2,426,608 | 314,804 | - | - | |||||||||||||||||||
Residential
|
- | - | - | - | ||||||||||||||||||||
Commercial
|
- | - | - | - | ||||||||||||||||||||
Consumer
|
1 | 284,011 | 3,728 | - | - | |||||||||||||||||||
Total non-performing loans
|
3 | $ | 2,710,619 | $ | 318,532 | - | $ | - | $ | - | ||||||||||||||
Accruing past due loans:
|
||||||||||||||||||||||||
30-89 days past due
|
$ | - | $ | - | ||||||||||||||||||||
90 or more days past due
|
- | - | ||||||||||||||||||||||
Total accruing past due loans
|
- | $ | - | - | $ | - | ||||||||||||||||||
Accruing Troubled Debt
Restructurings
|
||||||||||||||||||||||||
Real Estate
|
1 | $ | 499,122 | $ | - | |||||||||||||||||||
Consumer
|
1 | 145,018 | - | |||||||||||||||||||||
Total Accruing Troubled Debt
Restructurings
|
2 | $ | 644,140 | - | $ | - |
6.
|
LOANS (Continued)
|
|
o
|
Risk rating 1 (Highest Quality) is normally assigned to investment grade risks, meaning that level of risk is associated with entities having access (or capable of access) to the public capital markets and the loan underwriting in question conforms to the standards of institutional credit providers. We also include in this category loans with a perfected security interest in U.S. government securities, investment grade government sponsored entities’ bonds, investment grade municipal bonds, insured savings accounts, and insured certificates of deposits drawn on high quality financial institutions.
|
|
o
|
Risk rating 2 (Good Quality) is normally assigned to a loan with a sound primary and secondary source of repayment. The borrower may have access to alternative sources of financing. This loan carries a normal level of risk, with minimal loss exposure. The borrower has the ability to perform according to the terms of the credit facility. Cash flow coverage is greater than 1.25:1 but may be vulnerable to more rapid deterioration than the higher quality loans. We may also include loans secured by high quality traded stocks, lower grade municipal bonds and uninsured certificates of deposit.
|
|
o
|
Risk rating 3 (Acceptable Quality) is normally assigned when the borrower is a reasonable credit risk and demonstrates the ability to repay the debt from normal business operations. Risk factors may include reliability of margins and cash flows, liquidity, dependence on a single product or industry, cyclical trends, depth of management, or limited access to alternative financing sources. Historic financial information may indicate erratic performance, but current trends are positive. Quality of financial information is adequate, but is not as detailed and sophisticated as information found on higher graded loans. If adverse circumstances arise, the impact on the borrower may be significant. We classify many small business loans in this category unless deterioration occurs or we believe the loan requires additional monitoring, such as construction loans, asset based (accounts receivable/inventory) loans, and Small Business Administration (SBA) loans.
|
|
o
|
Risk rating 4 (Pass/Watch) loans exhibit all the characteristics of a loan graded as a “3” with the exception that there is a greater than normal concern that an external factor may impact the viability of the borrower at some later date; or that the Bank is uncertain because of the lack of financial information available. We will generally grant this risk rating to credits that require additional monitoring such as construction loans, SBA loans and other loans deemed in need of additional monitoring.
|
|
o
|
Risk rating 5 (Special Mention) is assigned to loans in need of close monitoring. These are defined as classified assets. Loans generally in this category may have either inadequate information, lack sufficient cash flow or some other problem that requires close scrutiny. The current worth and debt service capacity of the borrower or of any pledged collateral are insufficient to ensure repayment of the loan. These risk ratings may also apply to an improving credit previously criticized but some risk factors remain. All loans in this classification or below should have an action plan.
|
|
o
|
Risk rating 6 (Substandard) is assigned to loans where there is insufficient debt service capacity. These obligations, even if appropriately protected by collateral value, have well defined weaknesses related to adverse financial, managerial, economic, market, or political conditions that have clearly jeopardized repayment of principal and interest as originally intended. There is also the possibility that the Bank will sustain some future loss if the weaknesses are not corrected. Clear loss potential, however, does not have to exist in any individual loan we may classify as substandard.
|
|
o
|
Risk rating 7 (Doubtful) corresponds to the doubtful asset categories defined by regulatory authorities. A loan classified as doubtful has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full improbable. The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors that may work to strengthening of the asset we have deferred its classification as loss until we may determine a more exact status and estimation of the potential loss.
|
|
o
|
Risk rating 8 (Loss) is assigned to charged off loans. We consider assets classified as loss as uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has no recovery value, but that it is not practical to defer writing off the worthless assets, even though partial recoveries may occur in the future. We charge off assets in this category. We consider suggestions from our external loan review firm and bank examiners when determining which loans to charge off. We automatically charge off consumer loan accounts based on regulatory requirements.
|
September 30, 2011
|
December 31, 2010
|
|||||||||||||||
Account
Balance
|
Allocation
of
Allowance for
Loan Losses
|
Account
Balance
|
Allocation
of
Allowance for
Loan Losses
|
|||||||||||||
Risk Rating
|
||||||||||||||||
Pass (1-4)
|
$ | 492,896,371 | $ | 2,720,527 | $ | 281,901,972 | $ | 1,529,356 | ||||||||
Special Mention (5)
|
11,373,599 | 215,668 | 13,777,303 | 489,120 | ||||||||||||
Substandard (6)
|
13,812,630 | 90,000 | 5,909,655 | 450,000 | ||||||||||||
Doubtful (7)
|
- | - | - | - | ||||||||||||
Loss (8)
|
- | - | - | - | ||||||||||||
Total
|
$ | 518,082,600 | $ | 3,026,195 | $ | 301,588,930 | $ | 2,468,476 |
September 30, 2011
|
Real
Estate
|
Commercial
|
Boats
|
Other
Consumer
|
Total
|
|||||||||||||||
Beginning balance
|
$ | 1,748,122 | $ | 417,198 | $ | 294,723 | $ | 8,433 | $ | 2,468,476 | ||||||||||
Provision for loan losses
|
95,418 | 616,246 | 158,703 | 129,633 | 1,000,000 | |||||||||||||||
Recoveries
|
11,254 | 50,225 | - | 45,731 | 107,210 | |||||||||||||||
1,854,794 | 1,083,669 | 453,426 | 183,797 | 3,575,686 | ||||||||||||||||
Loans charged off
|
- | (446,980 | ) | (47,261 | ) | (55,250 | ) | (549,491 | ) | |||||||||||
Ending Balance
|
$ | 1,854,794 | $ | 636,689 | $ | 406,165 | $ | 128,547 | $ | 3,026,195 | ||||||||||
Amount allocated to:
|
||||||||||||||||||||
Loans individually evaluated
for impairment with specific
allocation
|
$ | 175,118 | $ | - | $ | 70,000 | $ | - | $ | 245,118 | ||||||||||
Loans collectively evaluated
for impairment
|
1,679,676 | 636,689 | 336,165 | 128,547 | 2,781,077 | |||||||||||||||
Ending balance
|
$ | 1,854,794 | $ | 636,689 | $ | 406,165 | $ | 128,547 | $ | 3,026,195 | ||||||||||
December 31, 2010
|
Real
Estate
|
Commercial
|
Boats
|
Other
Consumer
|
Total
|
|||||||||||||||
Beginning balance
|
$ | 1,845,126 | $ | 544,854 | $ | 81,417 | $ | 10,319 | $ | 2,481,716 | ||||||||||
Provision for loan losses
|
857,818 | 9,495 | 213,306 | 1,381 | 1,082,000 | |||||||||||||||
Recoveries
|
3,650 | - | - | 927 | 4,577 | |||||||||||||||
2,706,594 | 554,349 | 294,723 | 12,627 | 3,568,293 | ||||||||||||||||
Loans charged off
|
(958,472 | ) | (137,151 | ) | - | (4,194 | ) | (1,099,817 | ) | |||||||||||
Ending Balance
|
$ | 1,748,122 | $ | 417,198 | $ | 294,723 | $ | 8,433 | $ | 2,468,476 | ||||||||||
Amount allocated to:
|
||||||||||||||||||||
Loans individually evaluated
for impairment with specific
allocation
|
$ | 450,000 | $ | - | $ | - | $ | - | $ | 450,000 | ||||||||||
Loans collectively evaluated
for impairment
|
1,298,122 | 417,198 | 294,723 | 8,433 | 2,018,476 | |||||||||||||||
Ending balance
|
$ | 1,748,122 | $ | 417,198 | $ | 294,723 | $ | 8,433 | $ | 2,468,476 |
6.
|
Loans (Continued)
|
September 30, 2011
|
Real
Estate
|
Commercial
|
Boats
|
Other
Consumer
|
Total
|
|||||||||||||||
Loans individually evaluated
for impairment with
specific reserve
|
$ | 5,924,353 | $ | - | $ | 299,212 | $ | - | 6,223,565 | |||||||||||
Loans individually evaluated
for impairment without
specific reserve
|
8,702,061 | 3,442,108 | - | - | 12,144,169 | |||||||||||||||
Loans collectively evaluated
for impairment
|
391,414,794 | 94,197,118 | 9,036,494 | 5,066,460 | 499,714,866 | |||||||||||||||
Ending balance
|
$ | 406,041,208 | $ | 97,639,226 | $ | 9,335,706 | $ | 5,066,460 | $ | 518,082,600 | ||||||||||
December 31, 2010
|
Real
Estate
|
Commercial
|
Boats
|
Other
Consumer
|
Total
|
|||||||||||||||
Loans individually evaluated
for impairment with
specific reserve
|
$ | 1,616,317 | $ | - | $ | - | $ | - | 1,616,317 | |||||||||||
Loans individually evaluated
for impairment without
specific reserve
|
2,273,029 | 2,020,309 | - | - | 4,293,338 | |||||||||||||||
Loans collectively evaluated
for impairment
|
201,096,650 | 81,502,747 | 11,621,392 | 1,458,486 | 295,679,275 | |||||||||||||||
Ending balance
|
$ | 204,985,996 | $ | 83,523,056 | $ | 11,621,392 | $ | 1,458,486 | $ | 301,588,930 |
7.
|
EARNINGS PER COMMON SHARE
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Weighted average number of shares
|
6,809,594 | 3,880,005 | 6,024,660 | 3,880,005 | ||||||||||||
Dilutive average number of shares
|
24,990 | 24,011 | 32,293 | 19,154 |
8.
|
STOCK BASED COMPENSATION
|
September 30,
|
||||||||||||||||
2011
|
2010
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Number
|
average
|
Number
|
average
|
|||||||||||||
of shares
|
exercise price
|
of shares
|
exercise price
|
|||||||||||||
Outstanding, beginning of period
|
310,151 | $ | 8.60 | 299,270 | $ | 8.50 | ||||||||||
Options granted
|
23,280 | 7.82 | 22,581 | 7.13 | ||||||||||||
Options forfeited
|
- | - | - | - | ||||||||||||
Outstanding, end of period
|
333,431 | $ | 8.54 | 321,851 | $ | 8.41 |
8.
|
STOCK BASED COMPENSATION (Continued)
|
Outstanding options
|
Exercisable options
|
|||||||||||||||||||
Exercise
price
|
Number
of shares at
September 30, 2011
|
Weighted
average
remaining
term
|
Weighted
average
exercise
price
|
Number
of shares at
September 30, 2011
|
Weighted
average
exercise
price
|
|||||||||||||||
$4.39-$5.00
|
18,000 | 0.80 | $ | 4.69 | 18,000 | $ | 4.69 | |||||||||||||
$5.01-$7.64
|
85,231 | 7.59 | 6.52 | 77,704 | 6.46 | |||||||||||||||
$7.65-$8.65
|
60,580 | 7.49 | 7.78 | 47,769 | 7.76 | |||||||||||||||
$8.66-$10.00
|
46,620 | 2.89 | 9.74 | 46,620 | 9.74 | |||||||||||||||
$10.01-$11.31
|
123,000 | 4.56 | 10.43 | 121,000 | 10.42 | |||||||||||||||
333,431 | 5.43 | $ | 8.54 | 311,093 | $ | 8.59 | ||||||||||||||
Intrinsic value of outstanding options
|
$ | 71,645 | ||||||||||||||||||
Intrinsic value of exercisable options
|
$ | 71,645 |
September 30,
|
September 30,
|
|||||||||||||||
2011
|
2010
|
|||||||||||||||
Number
|
Weighted
|
Number
|
Weighted
|
|||||||||||||
of shares
|
average
|
of shares
|
average
|
|||||||||||||
grant date
fair value
|
grant date
fair value
|
|||||||||||||||
fair value
|
fair value
|
|||||||||||||||
Nonvested, beginning of period
|
17,641 | $ | 7.13 | - | $ | - | ||||||||||
Restricted stock granted
|
8,786 | 7.82 | 17,641 | 7.13 | ||||||||||||
Restricted stock vested
|
8,279 | 7.13 | - | - | ||||||||||||
Restricted stock forfeited
|
- | - | - | - | ||||||||||||
Nonvested, end of period
|
18,148 | $ | 7.46 | 17,641 | $ | 7.13 | ||||||||||
Total fair value of shares vested
|
$ | 59,029 | - | - | - | |||||||||||
Intrinsic value of outstanding restricted
stock awards
|
$ | 180,497 | $ | 143,421 | ||||||||||||
Intrinsic value of vested restricted
stock awards
|
$ | 56,546 | $ | - |
|
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, 2011, we established values for available for sale investment securities as follows (000’s);
|
Total Fair Value
September 30, 2011
|
Level 1
Inputs
|
Level 2
Inputs
|
Level 3
Inputs
|
|||||||||||||
Investment securities available for sale
|
$ | 158,504 | $ | 24,121 | $ | 134,383 | $ | - |
Other Real Estate Owned
|
||||||||||||
Legacy
|
Acquired
|
Total
|
||||||||||
Beginning balance
|
$ | 1,153,039 | $ | - | $ | 1,153,039 | ||||||
Beginning acquired
|
- | 1,834,451 | 1,834,451 | |||||||||
Transferred in
|
825,290 | 289,000 | 1,114,290 | |||||||||
Investment in improvements
|
- | 53,245 | 53,245 | |||||||||
Sales
|
(5,591 | ) | (23,000 | ) | (28,591 | ) | ||||||
Total end of period
|
$ | 1,972,738 | $ | 2,153,696 | $ | 4,126,434 |
|
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.
|
September 30, 2011
|
December 31, 2010
|
|||||||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
amount
|
value
|
amount
|
value
|
|||||||||||||
Financial assets
|
||||||||||||||||
Time deposits
|
$ | - | $ | - | $ | 297,000 | $ | 297,482 | ||||||||
Investment securities
|
158,503,556 | 158,503,556 | 54,786,264 | 55,015,376 | ||||||||||||
Loans
|
515,783,796 | 548,048,016 | 299,606,430 | 301,862,245 | ||||||||||||
Financial liabilities
|
||||||||||||||||
Interest bearing deposits
|
487,824,952 | 489,224,849 | $ | 273,032,442 | $ | 274,003,958 | ||||||||||
Short term borrowings
|
32,605,607 | 32,605,607 | 5,669,332 | 5,669,332 | ||||||||||||
Long term borrowings
|
16,307,146 | 19,027,818 | 16,371,947 | 10,618,094 |
|
·
|
On September 1, 2010, we announced that we had executed a merger agreement that provided for the acquisition of Maryland Bankcorp, Inc. The merger became effective April 1, 2011.
|
|
·
|
Average total loans grew approximately $156.1 million or 55.65% for the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010, primarily as a result of our acquisition of Maryland Bankcorp.
|
|
·
|
Average non-interest bearing deposits grew $72.3 million (140.15%) for the nine months ended September 30, 2011 relative to the same period in 2010, primarily as a result of our acquisition of Maryland Bankcorp.
|
|
·
|
At September 30, 2011, we had one legacy loan (i.e. a loan in our portfolio prior to the acquisition of Maryland Bankcorp) on non-accrual status in the amount of $1.2 million.
|
|
·
|
At September 30, 2011, we had 23 acquired loans (loans acquired from MB&T pursuant to the merger) on non-accrual status totaling $4.3 million compared to 28 acquired non-accrual loans totaling $5.4 million at June 30, 2011.
|
|
·
|
At third quarter end 2011, we had two accruing legacy loans past due between 30 and 89 days in the amount of $307,060.
|
|
·
|
At September 30, 2011, we had 22 accruing acquired loans totaling $2.3 million past due between 30 and 89 days compared to 32 accruing acquired loans totaling $2.5 million at June 30, 2011.
|
|
·
|
We ended the third quarter with a book value of $9.66 per common share and a tangible book value of $8.96 per common share.
|
|
·
|
We maintained liquidity and by all regulatory measures remained “well capitalized”.
|
|
·
|
We increased the provision for loan losses by $600,000 and $560,000 during the three and nine month periods ended September 30, 2011, respectively, compared to September 30, 2010.
|
|
·
|
As a result of the provision discussed above, and net charge offs for the nine month period of $442,281, the allowance for loan losses increased to $3.0 million at September 30, 2011 from $2.5 million at December 31, 2010.
|
Three months ended September 30,
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||
2011
|
2010
|
$ Change
|
% Change
|
|||||||||||||
Net income available to common stockholders
|
$ | 1,707 | $ | 313 | $ | 1,394 | 445.37 | % | ||||||||
Interest revenue
|
9,737 | 4,759 | 4,978 | 104.60 | ||||||||||||
Interest expense
|
1,393 | 1,234 | 159 | 12.88 | ||||||||||||
Net interest income after provision
for loan losses
|
7,545 | 3,325 | 4,220 | 126.92 | ||||||||||||
Non-interest revenue
|
1,016 | 303 | 713 | 235.31 | ||||||||||||
Non-interest expense
|
6,153 | 3,068 | 3,085 | 100.55 | ||||||||||||
Average total loans
|
507,472 | 292,831 | 214,641 | 73.30 | ||||||||||||
Average interest earning assets
|
674,069 | 362,678 | 311,391 | 85.86 | ||||||||||||
Average total interest bearing deposits
|
486,889 | 273,879 | 213,010 | 77.78 | ||||||||||||
Average non-interest bearing deposits
|
162,479 | 55,552 | 106,927 | 192.48 | ||||||||||||
Net interest margin (1)
|
5.01 | % | 3.90 | % | ||||||||||||
Return on average equity
|
11.02 | % | 3.39 | % | ||||||||||||
Basic earnings per common share
|
$ | 0.25 | $ | 0.08 | $ | 0.17 | 212.50 | |||||||||
Diluted earnings per common share
|
0.25 | 0.08 | 0.17 | 212.50 |
Nine months ended September 30,
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||
2011
|
2010
|
$ Change
|
% Change
|
|||||||||||||
Net income available to common stockholders
|
$ | 3,413 | $ | 1,307 | $ | 2,106 | 161.13 | % | ||||||||
Interest revenue
|
23,259 | 13,723 | 9,536 | 69.49 | ||||||||||||
Interest expense
|
3,856 | 3,763 | 93 | 2.47 | ||||||||||||
Net interest income after provision
for loan losses
|
18,403 | 9,520 | 8,883 | 93.31 | ||||||||||||
Non-interest revenue
|
1,858 | 867 | 991 | 114.30 | ||||||||||||
Non-interest expense
|
15,246 | 8,373 | 6,873 | 82.09 | ||||||||||||
Average total loans
|
436,629 | 280,523 | 156,106 | 55.65 | ||||||||||||
Average interest earning assets
|
566,912 | 351,169 | 215,743 | 61.44 | ||||||||||||
Average total interest bearing deposits
|
414,114 | 258,025 | 156,089 | 60.49 | ||||||||||||
Average non-interest bearing deposits
|
123,886 | 51,586 | 72,300 | 140.15 | ||||||||||||
Net interest margin (1)
|
4.66 | % | 3.84 | % | ||||||||||||
Return on average equity
|
8.25 | % | 4.83 | % | ||||||||||||
Basic earnings per common share
|
$ | 0.56 | $ | 0.34 | $ | 0.22 | 64.71 | |||||||||
Diluted earnings per common share
|
0.56 | 0.34 | 0.22 | 64.71 |
Three Months Ended
September 30, 2011
|
||||||||
Fair Value
Accretion
Dollars
|
% Impact on
Net Interest
Margin
|
|||||||
Commercial loans
|
$ | 60,855 | 0.01 | % | ||||
Mortgage loans
|
1,042,789 | 0.15 | % | |||||
Consumer loans
|
1,226 | 0.00 | % | |||||
Interest bearing deposits
|
108,469 | 0.02 | % | |||||
Total Fair Value Accretion
|
$ | 1,213,339 | 0.18 | % |
|
Average Balances, Interest and Yields
|
||||||||||||||||||||||||
Three Months Ended September 30,
|
2011
|
2010
|
||||||||||||||||||||||
Average
|
Average
|
|||||||||||||||||||||||
balance
|
Interest
|
Yield
|
balance
|
Interest
|
Yield
|
|||||||||||||||||||
Assets:
|
||||||||||||||||||||||||
Federal funds sold(1)
|
$ | 4,334,556 | $ | 994 | 0.09 | % | $ | 3,169,347 | $ | 2,657 | 0.33 | % | ||||||||||||
Interest bearing deposits
|
14,238,260 | 11,237 | 0.31 | 17,563,292 | 43,979 | 0.99 | ||||||||||||||||||
Investment securities(1)(2)
|
||||||||||||||||||||||||
U.S. treasury
|
1,247,141 | 2,552 | 0.81 | - | - | |||||||||||||||||||
U.S. government agency
|
22,611,220 | 117,850 | 2.07 | 5,223,912 | 44,562 | 3.38 | ||||||||||||||||||
Mortgage backed securities
|
100,121,572 | 782,903 | 3.10 | 41,442,021 | 373,619 | 3.58 | ||||||||||||||||||
Municipal securities
|
22,537,921 | 330,861 | 5.82 | 2,309,832 | 29,134 | 5.00 | ||||||||||||||||||
Other
|
3,818,831 | 34,517 | 3.59 | 2,522,421 | 16,977 | 2.67 | ||||||||||||||||||
Total investment securities
|
150,336,685 | 1,268,683 | 3.35 | 51,498,186 | 464,292 | 3.58 | ||||||||||||||||||
Loans: (1) (3)
|
||||||||||||||||||||||||
Commercial
|
98,799,462 | 1,376,251 | 5.53 | 80,732,917 | 1,102,357 | 5.42 | ||||||||||||||||||
Mortgage
|
393,694,344 | 7,030,619 | 7.08 | 198,135,067 | 2,993,170 | 5.99 | ||||||||||||||||||
Consumer
|
14,978,369 | 224,455 | 5.95 | 13,963,419 | 193,706 | 5.50 | ||||||||||||||||||
Total loans
|
507,472,175 | 8,631,325 | 6.75 | 292,831,403 | 4,289,233 | 5.81 | ||||||||||||||||||
Allowance for loan losses
|
2,313,027 | - | 2,383,989 | - | ||||||||||||||||||||
Total loans, net of allowance
|
505,159,148 | 8,631,325 | 6.78 | 290,447,414 | 4,289,233 | 5.86 | ||||||||||||||||||
Total interest earning assets(1)
|
674,068,649 | 9,912,239 | 5.83 | 362,678,239 | 4,800,161 | 5.25 | ||||||||||||||||||
Non-interest bearing cash
|
29,110,472 | 9,382,943 | ||||||||||||||||||||||
Premises and equipment
|
22,634,871 | 17,126,259 | ||||||||||||||||||||||
Other assets
|
40,019,636 | 12,453,680 | ||||||||||||||||||||||
Total assets
|
$ | 765,833,628 | $ | 401,641,121 | ||||||||||||||||||||
Liabilities and Stockholders' Equity:
|
||||||||||||||||||||||||
Interest bearing deposits
|
||||||||||||||||||||||||
Savings
|
$ | 60,972,112 | 50,076 | 0.33 | $ | 8,942,236 | 7,723 | 0.34 | ||||||||||||||||
Money market and NOW
|
117,322,326 | 161,479 | 0.55 | 59,392,839 | 135,468 | 0.90 | ||||||||||||||||||
Other time deposits
|
308,594,165 | 964,218 | 1.24 | 205,543,927 | 842,759 | 1.63 | ||||||||||||||||||
Total interest bearing deposits
|
486,888,603 | 1,175,773 | 0.96 | 273,879,002 | 985,950 | 1.43 | ||||||||||||||||||
Borrowed funds
|
48,302,618 | 216,756 | 1.78 | 33,415,351 | 248,292 | 2.95 | ||||||||||||||||||
Total interest bearing liabilities
|
535,191,221 | 1,392,529 | 1.03 | 307,294,353 | 1,234,242 | 1.59 | ||||||||||||||||||
Non-interest bearing deposits
|
162,479,123 | 55,552,085 | ||||||||||||||||||||||
697,670,344 | 362,846,438 | |||||||||||||||||||||||
Other liabilities
|
6,192,632 | 1,575,711 | ||||||||||||||||||||||
Non-controlling interest
|
484,851 | 628,126 | ||||||||||||||||||||||
Stockholders' equity
|
61,485,801 | 36,590,846 | ||||||||||||||||||||||
Total liabilities and stockholders' equity
|
$ | 765,833,628 | $ | 401,641,121 | ||||||||||||||||||||
Net interest spread(1)
|
4.80 | 3.66 | ||||||||||||||||||||||
Net interest income and
Net interest margin(1)
|
$ | 8,519,710 | 5.01 | % | $ | 3,565,919 | 3.90 | % |
(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, 2011 and 2010 were $5,793,393 and $4,157,490, respectively.
|
Nine Months Ended
September 30, 2011
|
||||||||
Fair Value
Accretion
Dollars
|
% Impact on
Net Interest
Margin
|
|||||||
Commercial loans
|
$ | 5,901 | 0.00 | % | ||||
Mortgage loans
|
1,394,888 | 0.25 | % | |||||
Consumer loans
|
2,101 | 0.00 | % | |||||
Interest bearing deposits
|
235,991 | 0.04 | % | |||||
Total Fair Value Accretion
|
$ | 1,638,881 | 0.29 | % |
Average Balances, Interest and Yields
|
||||||||||||||||||||||||
Nine Months Ended September 30,
|
2011
|
2010
|
||||||||||||||||||||||
Average
|
Average
|
|||||||||||||||||||||||
balance
|
Interest
|
Yield
|
balance
|
Interest
|
Yield
|
|||||||||||||||||||
Assets:
|
||||||||||||||||||||||||
Federal funds sold(1)
|
$ | 4,613,246 | $ | 5,160 | 0.15 | % | $ | 2,283,849 | $ | 4,843 | 0.28 | % | ||||||||||||
Interest bearing deposits
|
12,805,854 | 30,876 | 0.32 | 22,581,649 | 165,310 | 0.98 | ||||||||||||||||||
Investment securities(1)(2)
|
||||||||||||||||||||||||
U.S. treasury
|
851,924 | 5,102 | 0.80 | - | - | |||||||||||||||||||
U.S. government agency
|
14,727,598 | 244,374 | 2.22 | 6,288,382 | 140,487 | 2.99 | ||||||||||||||||||
Mortgage backed securities
|
80,436,339 | 1,924,401 | 3.20 | 36,911,796 | 1,047,096 | 3.79 | ||||||||||||||||||
Municipal securities
|
15,916,429 | 697,963 | 5.86 | 2,373,576 | 87,929 | 4.95 | ||||||||||||||||||
Other
|
3,253,041 | 90,511 | 3.72 | 2,692,301 | 54,273 | 2.70 | ||||||||||||||||||
Total investment securities
|
115,185,331 | 2,962,351 | 3.44 | 48,266,055 | 1,329,785 | 3.68 | ||||||||||||||||||
Loans: (1) (3)
|
||||||||||||||||||||||||
Commercial
|
95,338,358 | 3,802,025 | 5.33 | 76,838,797 | 3,166,333 | 5.51 | ||||||||||||||||||
Mortgage
|
326,448,900 | 16,152,486 | 6.62 | 189,322,040 | 8,585,283 | 6.06 | ||||||||||||||||||
Consumer
|
14,841,625 | 671,582 | 6.05 | 14,362,349 | 592,240 | 5.51 | ||||||||||||||||||
Total loans
|
436,628,883 | 20,626,093 | 6.32 | 280,523,186 | 12,343,856 | 5.88 | ||||||||||||||||||
Allowance for loan losses
|
2,320,835 | - | 2,485,503 | - | ||||||||||||||||||||
Total loans, net of allowance
|
434,308,048 | 20,626,093 | 6.35 | 278,037,683 | 12,343,856 | 5.94 | ||||||||||||||||||
Total interest earning assets(1)
|
566,912,479 | 23,624,480 | 5.57 | 351,169,236 | 13,843,794 | 5.27 | ||||||||||||||||||
Non-interest bearing cash
|
22,886,823 | 8,952,613 | ||||||||||||||||||||||
Premises and equipment
|
20,264,015 | 17,185,259 | ||||||||||||||||||||||
Other assets
|
30,461,153 | 12,300,672 | ||||||||||||||||||||||
Total assets
|
$ | 640,524,470 | $ | 389,607,780 | ||||||||||||||||||||
Liabilities and Stockholders' Equity:
|
||||||||||||||||||||||||
Interest bearing deposits
|
||||||||||||||||||||||||
Savings
|
$ | 44,019,844 | 105,093 | 0.32 | $ | 8,170,909 | 21,561 | 0.35 | ||||||||||||||||
Money market and NOW
|
100,818,430 | 466,910 | 0.62 | 50,695,217 | 325,472 | 0.86 | ||||||||||||||||||
Other time deposits
|
269,275,797 | 2,671,458 | 1.33 | 199,158,747 | 2,613,282 | 1.75 | ||||||||||||||||||
Total interest bearing deposits
|
414,114,071 | 3,243,461 | 1.05 | 258,024,873 | 2,960,315 | 1.53 | ||||||||||||||||||
Borrowed funds
|
41,685,261 | 612,465 | 1.96 | 41,651,147 | 803,025 | 2.58 | ||||||||||||||||||
Total interest bearing liabilities
|
455,799,332 | 3,855,926 | 1.13 | 299,676,020 | 3,763,340 | 1.68 | ||||||||||||||||||
Non-interest bearing deposits
|
123,885,807 | 51,586,292 | ||||||||||||||||||||||
579,685,139 | 351,262,312 | |||||||||||||||||||||||
Other liabilities
|
4,971,706 | 1,592,766 | ||||||||||||||||||||||
Non-controlling interest
|
536,006 | 651,017 | ||||||||||||||||||||||
Stockholders' equity
|
55,331,619 | 36,164,685 | ||||||||||||||||||||||
Total liabilities and stockholders' equity
|
$ | 640,524,470 | $ | 389,670,780 | ||||||||||||||||||||
Net interest spread(1)
|
4.44 | 3.59 | ||||||||||||||||||||||
Net interest income and
Net interest margin(1)
|
$ | 19,768,554 | 4.66 | % | $ | 10,080,454 | 3.84 | % |
(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, 2011 and 2010 were $2,033,017 and $3,103,083, respectively.
|
Rate/Volume Variance Analysis
|
||||||||||||
Three months Ended September 30,
|
||||||||||||
2011 compared to 2010
|
||||||||||||
Variance due to:
|
||||||||||||
Total
|
Rate
|
Volume
|
||||||||||
Interest earning assets:
|
|
|||||||||||
Federal funds sold(1)
|
$ | (1,663 | ) | $ | (3,209 | ) | $ | 1,546 | ||||
Interest bearing deposits
|
(32,742 | ) | (30,609 | ) | (2,133 | ) | ||||||
Investment Securities(1)
|
||||||||||||
U.S. treasury
|
2,552 | - | 2,552 | |||||||||
U.S. government agency
|
73,288 | (70,757 | ) | 144,045 | ||||||||
Mortgage backed securities
|
409,284 | (175,797 | ) | 585,081 | ||||||||
Municipal securities
|
301,727 | 20,854 | 280,873 | |||||||||
Other
|
17,540 | 12,731 | 4,809 | |||||||||
Loans:(1)
|
||||||||||||
Commercial
|
273,894 | 72,137 | 201,757 | |||||||||
Mortgage
|
4,037,449 | 1,706,478 | 2,330,971 | |||||||||
Consumer
|
30,749 | 25,032 | 5,717 | |||||||||
Total interest revenue (1)
|
5,112,078 | 1,556,860 | 3,555,218 | |||||||||
Interest bearing liabilities
|
||||||||||||
Savings
|
42,353 | (1,538 | ) | 43,891 | ||||||||
Money market and NOW
|
26,011 | (147,073 | ) | 173,084 | ||||||||
Other time deposits
|
121,459 | (472,592 | ) | 594,051 | ||||||||
Borrowed funds
|
(31,536 | ) | (196,938 | ) | 165,402 | |||||||
Total interest expense
|
158,287 | (818,141 | ) | 976,428 | ||||||||
Net interest income(1)
|
$ | 4,953,791 | $ | 2,375,001 | $ | 2,578,790 |
(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.”
|
Rate/Volume Variance Analysis
|
||||||||||||
Nine months Ended September 30,
|
||||||||||||
2011 compared to 2010
|
||||||||||||
Variance due to:
|
||||||||||||
Total
|
Rate
|
Volume
|
||||||||||
Interest earning assets:
|
|
|||||||||||
Federal funds sold(1)
|
$ | 317 | $ | (3,657 | ) | $ | 3,974 | |||||
Interest bearing deposits
|
(134,434 | ) | (90,662 | ) | (43,772 | ) | ||||||
Investment Securities(1)
|
||||||||||||
U.S. treasury
|
5,102 | - | 5,102 | |||||||||
U.S. government agency
|
103,887 | (55,736 | ) | 159,623 | ||||||||
Mortgage backed securities
|
877,305 | (240,094 | ) | 1,117,399 | ||||||||
Municipal securities
|
610,034 | 25,182 | 584,852 | |||||||||
Other
|
36,238 | 25,706 | 10,532 | |||||||||
Loans:(1)
|
||||||||||||
Commercial
|
635,692 | (134,959 | ) | 770,651 | ||||||||
Mortgage
|
7,567,203 | 1,089,489 | 6,477,714 | |||||||||
Consumer
|
79,342 | 63,151 | 16,191 | |||||||||
Total interest revenue (1)
|
9,780,686 | 678,420 | 9,102,266 | |||||||||
Interest bearing liabilities
|
||||||||||||
Savings
|
83,532 | (2,981 | ) | 86,513 | ||||||||
Money market and NOW
|
141,438 | (137,432 | ) | 278,870 | ||||||||
Other time deposits
|
58,176 | (856,885 | ) | 915,061 | ||||||||
Borrowed funds
|
(190,560 | ) | (191,383 | ) | 823 | |||||||
Total interest expense
|
92,586 | (1,188,681 | ) | 1,281,267 | ||||||||
Net interest income(1)
|
$ | 9,688,100 | $ | 1,867,101 | $ | 7,820,999 |
(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.”
|
Allowance for Loan Losses
|
||||||||||||||||||||
Three Months Ended
|
Nine Months Ended
|
Year Ended
|
||||||||||||||||||
September 30,
|
September 30,
|
December 31,
|
||||||||||||||||||
|
2011
|
2010
|
2011
|
2010
|
2010
|
|||||||||||||||
Balance, beginning of period
|
$ | 2,239,457 | $ | 2,712,929 | $ | 2,468,476 | $ | 2,481,716 | $ | 2,481,716 | ||||||||||
Provision for loan losses
|
800,000 | 200,000 | 1,000,000 | 440,000 | 1,082,000 | |||||||||||||||
Chargeoffs legacy:
|
||||||||||||||||||||
Commercial
|
- | (137,151 | ) | - | (137,151 | ) | (137,151 | ) | ||||||||||||
Mortgage
|
- | (946,739 | ) | (446,980 | ) | (958,472 | ) | (958,472 | ) | |||||||||||
Consumer
|
(4,200 | ) | (2,971 | ) | (51,461 | ) | (4,194 | ) | (4,194 | ) | ||||||||||
Total chargeoffs legacy
|
(4,200 | ) | (1,086,861 | ) | (498,441 | ) | (1,099,817 | ) | (1,099,817 | ) | ||||||||||
Chargeoffs acquired:
|
||||||||||||||||||||
Commercial
|
- | - | - | - | - | |||||||||||||||
Mortgage
|
- | - | - | - | - | |||||||||||||||
Consumer
|
(43,865 | ) | - | (51,050 | ) | - | - | |||||||||||||
Total chargeoffs acquired
|
(43,865 | ) | - | (51,050 | ) | - | - | |||||||||||||
Total chargeoffs
|
(48,065 | ) | (1,086,861 | ) | (549,491 | ) | (1,099,817 | ) | (1,099,817 | ) | ||||||||||
Recoveries legacy:
|
||||||||||||||||||||
Commercial
|
- | - | - | - | - | |||||||||||||||
Mortgage
|
- | - | - | 3,650 | 3,650 | |||||||||||||||
Consumer
|
60 | 204 | 265 | 723 | 927 | |||||||||||||||
Total recoveries legacy
|
60 | 204 | 265 | 4,373 | 4,577 | |||||||||||||||
Recoveries acquired:
|
||||||||||||||||||||
Commercial
|
2,983 | - | 50,225 | - | - | |||||||||||||||
Mortgage
|
10,133 | - | 11,254 | - | - | |||||||||||||||
Consumer
|
21,627 | - | 45,466 | - | - | |||||||||||||||
Total recoveries acquired
|
34,743 | - | 106,945 | - | - | |||||||||||||||
Total recoveries
|
34,803 | 204 | 107,210 | 4,373 | 4,577 | |||||||||||||||
Total net (chargeoffs) recoveries
|
(13,262 | ) | (1,086,657 | ) | (442,281 | ) | (1,095,444 | ) | (1,095,240 | ) | ||||||||||
Balance, end of period
|
$ | 3,026,195 | $ | 1,826,272 | $ | 3,026,195 | $ | 1,826,272 | $ | 2,468,476 | ||||||||||
Ratio of allowance for loan losses to:
|
||||||||||||||||||||
Total gross loans
|
0.58 | % | 0.61 | % | 0.58 | % | 0.61 | % | 0.82 | % | ||||||||||
Non-accrual legacy loans
|
191.52 | % | 61.29 | % | 191.52 | % | 61.29 | % | 91.07 | % | ||||||||||
Ratio of net-chargeoffs during period to
|
||||||||||||||||||||
average total loans during period
|
0.003 | % | 0.371 | % | 0.085 | % | 0.391 | % | 0.384 | % |
Allocation of Allowance for Loan Losses
|
||||||||||||||||||||||||
September 30,
|
December 31,
|
|||||||||||||||||||||||
2011
|
2010
|
2010
|
||||||||||||||||||||||
Amount
|
% of Loans
in Each
Category
|
Amount
|
% of Loans
in Each
Category
|
Amount
|
% of Loans
in Each
Category
|
|||||||||||||||||||
Consumer & others
|
$ | 128,547 | 2.76 | % | $ | 8,267 | 0.47 | % | $ | 8,433 | 0.48 | % | ||||||||||||
Boat
|
406,165 | 0.02 | 153,479 | 3.96 | 294,723 | 3.86 | ||||||||||||||||||
Mortgage
|
1,854,794 | 78.37 | 1,235,001 | 67.63 | 1,748,122 | 67.97 | ||||||||||||||||||
Commercial
|
636,689 | 18.85 | 429,525 | 27.94 | 417,198 | 27.69 | ||||||||||||||||||
Total
|
$ | 3,026,195 | 100.00 | % | $ | 1,826,272 | 100.00 | % | $ | 2,468,476 | 100.00 | % |
September 30,
2011
|
September 30, 2010
|
$ Change
|
% Change
|
|||||||||||||
Service charges on deposit accounts
|
$ | 380,065 | $ | 78,247 | $ | 301,818 | 385.72 | % | ||||||||
Gains on sales or calls of investment securities
|
72,252 | - | 72,252 | |||||||||||||
Earnings on bank owned life insurance
|
356,281 | 83,963 | 272,318 | 324.33 | ||||||||||||
Gains on sales of other real estate owned
|
45,595 | - | 45,595 | |||||||||||||
Pointer Ridge rent and other revenue
|
45,611 | 78,126 | (32,515 | ) | (41.62 | ) | ||||||||||
Gains (losses) on disposal of assets
|
8,995 | - | 8,995 | |||||||||||||
Other fees and commissions
|
107,002 | 62,910 | 44,092 | 70.09 | ||||||||||||
Total non-interest revenue
|
$ | 1,015,801 | $ | 303,246 | $ | 712,555 | 234.98 | % |
September 30,
2011
|
September 30,
2010
|
$ Change
|
% Change
|
|||||||||||||
Service charges on deposit accounts
|
$ | 859,300 | $ | 231,478 | $ | 627,822 | 271.22 | % | ||||||||
Gain on sales of investment securities
|
112,811 | - | 112,811 | |||||||||||||
Permanent impairment on equity securities
|
(122,500 | ) | - | (122,500 | ) | |||||||||||
Earnings on bank owned life insurance
|
557,669 | 254,071 | 303,598 | 119.49 | ||||||||||||
Gains on sales of other real estate owned
|
48,580 | - | 48,580 | |||||||||||||
Pointer Ridge rent and other revenue
|
159,551 | 206,825 | (47,274 | ) | (22.86 | ) | ||||||||||
Gain (loss) on disposal of assets
|
(5,160 | ) | - | (5,160 | ) | |||||||||||
Other fees and commissions
|
247,761 | 174,814 | 72,947 | 41.73 | ||||||||||||
Total non-interest revenue
|
$ | 1,858,012 | $ | 867,188 | $ | 990,824 | 114.26 | % |
September 30,
2011
|
September 30,
2010
|
$ Change
|
% Change
|
|||||||||||||
Salaries
|
$ | 2,248,065 | $ | 1,263,368 | $ | 984,697 | 77.94 | % | ||||||||
Employee benefits
|
782,443 | 319,550 | 462,893 | 144.86 | ||||||||||||
Occupancy
|
746,356 | 330,752 | 415,604 | 125.65 | ||||||||||||
Equipment
|
170,254 | 105,342 | 64,912 | 61.62 | ||||||||||||
Data processing
|
232,530 | 126,412 | 106,118 | 83.95 | ||||||||||||
Pointer Ridge other operating
|
134,526 | 111,791 | 22,735 | 20.34 | ||||||||||||
FDIC insurance and
State of Maryland assessments
|
143,680 | 130,595 | 13,085 | 10.02 | ||||||||||||
Merger and integration
|
77,880 | 187,125 | (109,245 | ) | (58.38 | ) | ||||||||||
Core deposit premium
|
194,674 | - | 194,674 | |||||||||||||
Other operating
|
1,422,758 | 493,277 | 929,481 | 188.43 | ||||||||||||
Total non-interest expenses
|
$ | 6,153,166 | $ | 3,068,212 | $ | 3,084,954 | 100.55 | % |
September 30,
2011
|
September 30,
2010
|
$ Change
|
% Change
|
|||||||||||||
Salaries
|
$ | 5,559,074 | $ | 3,559,727 | $ | 1,999,347 | 56.17 | % | ||||||||
Employee benefits
|
1,945,879 | 987,488 | 958,391 | 97.05 | ||||||||||||
Occupancy
|
1,799,276 | 983,209 | 816,067 | 83.00 | ||||||||||||
Equipment
|
434,629 | 311,370 | 123,259 | 39.59 | ||||||||||||
Data processing
|
595,612 | 325,912 | 269,700 | 82.75 | ||||||||||||
Pointer Ridge other operating
|
465,208 | 314,191 | 151,017 | 48.07 | ||||||||||||
FDIC insurance and
State of Maryland assessments
|
462,496 | 361,263 | 101,233 | 28.02 | ||||||||||||
Merger and integration
|
545,154 | 187,125 | 358,029 | 191.33 | ||||||||||||
Core deposit premium
|
389,349 | - | 389,349 | |||||||||||||
Other operating
|
3,049,105 | 1,342,623 | 1,706,482 | 127.10 | ||||||||||||
Total non-interest expenses
|
$ | 15,245,782 | $ | 8,372,908 | $ | 6,872,874 | 82.08 | % |
Loan Portfolio
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||
September 30,
2011
|
December 31,
2010
|
|||||||||||||||
Real Estate
|
||||||||||||||||
Commercial
|
$ | 264,965 | 51.14 | % | $ | 153,527 | 50.91 | % | ||||||||
Construction
|
44,090 | 8.51 | 24,378 | 8.08 | ||||||||||||
Residential
|
96,987 | 18.72 | 27,081 | 8.98 | ||||||||||||
Commercial
|
97,639 | 18.85 | 83,523 | 27.69 | ||||||||||||
Consumer
|
14,402 | 2.78 | 13,080 | 4.34 | ||||||||||||
518,083 | 100.00 | % | 301,589 | 100.00 | % | |||||||||||
Allowance for loan losses
|
(3,026 | ) | (2,469 | ) | ||||||||||||
Deferred loan costs, net
|
682 | 486 | ||||||||||||||
$ | 515,739 | $ | 299,606 |
Loans With Interest Paid From Loan Advances
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||
September 30,
2011
|
December 31,
2010
|
|||||||||||||||
# of
Borrowers
|
# of
Borrowers
|
|||||||||||||||
Hotels
|
1 | $ | 1,170 | 1 | $ | 979 | ||||||||||
Single family acquisition & development
|
1 | 1,405 | 1 | 2,336 | ||||||||||||
2 | $ | 2,575 | 2 | $ | 3,315 |
Non-Accrual Loans
September 30, 2011
(000's)
|
||||||||||||||||||||
Legacy Loans
|
Acquired Loans
|
Total
|
||||||||||||||||||
# of
Borrowers
|
Loan
Balance
|
# of
Borrowers
|
Loan
Balance
|
Loan
Balance
|
||||||||||||||||
Beginning Balance December 31, 2010
|
3 | $ | 2,711 | - | $ | - | $ | 2,711 | ||||||||||||
Acquired April 1, 2011
|
- | - | 18 | 5,357 | 5,357 | |||||||||||||||
Transferred In
|
- | - | - | - | - | |||||||||||||||
Payments received
|
- | - | (3 | ) | (1,052 | ) | (1,052 | ) | ||||||||||||
Repossessed
|
(1 | ) | (237 | ) | - | - | (237 | ) | ||||||||||||
Charged off
|
- | (495 | ) | - | - | (495 | ) | |||||||||||||
Transferred to other real estate owned
|
(1 | ) | (810 | ) | (1 | ) | (50 | ) | (860 | ) | ||||||||||
Ending balance non-accrual loans
|
1 | $ | 1,169 | 14 | $ | 4,255 | $ | 5,424 |
Non-Performing Assets
|
||||||||||||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||||||
September 30, 2011
|
||||||||||||||||||||||||||||
Legacy
|
Acquired
|
Total
|
||||||||||||||||||||||||||
# of Borrowers
|
Account Balance
|
Interest Not Accrued
|
# of Borrowers
|
Account Balance
|
Interest Not Accrued
|
Account
Balance
|
||||||||||||||||||||||
Real Estate
|
||||||||||||||||||||||||||||
Commercial
|
$ | - | $ | - | 8 | $ | 1,521 | $ | 1,013 | $ | 1,521 | |||||||||||||||||
Construction
|
1 | 1,169 | 185 | 2 | 1,715 | 294 | 2,884 | |||||||||||||||||||||
Residential
|
- | - | 2 | 974 | 111 | 974 | ||||||||||||||||||||||
Commercial
|
- | - | 2 | 44 | 33 | 44 | ||||||||||||||||||||||
Consumer
|
- | - | - | - | - | - | ||||||||||||||||||||||
Total non-performing loans
|
1 | 1,169 | 185 | 14 | 4,254 | 1,451 | 5,423 | |||||||||||||||||||||
Repossessions
|
1 | 237 | - | - | 237 | |||||||||||||||||||||||
Other real estate owned
|
3 | 1,972 | 8 | 2,154 | 4,126 | |||||||||||||||||||||||
Total non-performing assets
|
5 | $ | 3,378 | 22 | $ | 6,408 | $ | 9,786 | ||||||||||||||||||||
Non-performing assets as a percentage of total assets
|
0.43 | % | 0.82 | % | 1.25 | % | ||||||||||||||||||||||
Non-performing loans as a percentage of gross loans
|
0.23 | % | 0.82 | % | 1.05 | % | ||||||||||||||||||||||
Accruing past due loans:
|
||||||||||||||||||||||||||||
30-89 days past due
|
2 | $ | 307 | 17 | $ | 955 | $ | 1,262 | ||||||||||||||||||||
90 or more days past due
|
- | 5 | 1,388 | 1,388 | ||||||||||||||||||||||||
Total accruing past due loans
|
2 | $ | 307 | 22 | $ | 2,343 | $ | 2,650 | ||||||||||||||||||||
Ratio of accruing gross past due loans to total loans:
|
||||||||||||||||||||||||||||
30-89 days past due
|
0.09 | % | 0.55 | % | 0.24 | % | ||||||||||||||||||||||
90 or more days past due
|
0.00 | % | 0.80 | % | 0.27 | % | ||||||||||||||||||||||
Total accruing past due loans
|
0.09 | % | 1.35 | % | 0.51 | % |
Non-Performing Assets and Past Due Loans
|
||||||||||||
Legacy
|
||||||||||||
(Dollars in thousands)
|
||||||||||||
December 31, 2010
|
||||||||||||
# |
Balance
|
Interest Not Accrued
|
||||||||||
Real Estate
|
||||||||||||
Commercial
|
2 | $ | 2,427 | $ | 315 | |||||||
Construction
|
- | - | - | |||||||||
Residential
|
- | - | - | |||||||||
Commercial
|
- | - | - | |||||||||
Consumer
|
1 | 284 | 4 | |||||||||
Other real estate owned
|
2 | 1,153 | - | |||||||||
Total non-performing assets
|
5 | $ | 3,864 | $ | 319 | |||||||
Non-performing assets as
a percentage of total assets
|
0.96 |
%
|
||||||||||
Non-performing loans as
a percentage of total gross loans
|
0.90 | % | ||||||||||
Accruing past due loans:
|
||||||||||||
30-89 days past due
|
- | - | ||||||||||
90 or more days past due
|
- | - | ||||||||||
Total accruing past due loans
|
- | $ | - | |||||||||
Ratio of accruing past due
loans to total loans:
|
||||||||||||
30-89 days past due
|
- | % | ||||||||||
90 or more days past due
|
- | |||||||||||
Total accruing past due loans
|
- | % |
Other Real Estate Owned
|
||||||||||||
Legacy
|
Acquired
|
Total
|
||||||||||
Beginning balance
|
$ | 1,153,039 | $ | - | $ | 1,153,039 | ||||||
Acquired April 1, 2011
|
- | 1,834,451 | 1,834,451 | |||||||||
Transferred in
|
825,290 | 289,000 | 1,114,290 | |||||||||
Investment in improvements
|
- | 53,245 | 53,245 | |||||||||
Sales
|
(5,591 | ) | (23,000 | ) | (28,591 | ) | ||||||
Total end of period
|
$ | 1,972,738 | $ | 2,153,696 | $ | 4,126,434 |
September 30,
2011
|
December 31,
2010
|
$ Change
|
% Change
|
|||||||||||||
Certificates of deposit
|
$ | 313,701 | 192,530 | $ | 121,171 | 62.94 | % | |||||||||
Interest bearing checking
|
114,487 | 70,998 | 43,489 | 61.25 | % | |||||||||||
Savings
|
59,637 | 9,504 | 50,133 | 527.49 | % | |||||||||||
Total
|
$ | 487,825 | $ | 273,032 | $ | 214,793 | 78.670 | % |
|
The following table outlines our borrowings as of September 30, 2011 and December 31, 2010.
|
Borrowings
|
||||||||||||||||
September 30,
2011
|
December 31,
2010
|
|||||||||||||||
Amount
|
Rate
|
Amount
|
Rate
|
|||||||||||||
Short term promissory notes
|
$ | 10,190,607 | 0.30 | % | $ | 5,669,332 | 0.50 | % | ||||||||
Repurchase agreements
|
22,415,000 | 0.50 | % | - | ||||||||||||
Total short term borrowings
|
32,605,607 | 5,669,332 | ||||||||||||||
FHLB advance due Dec. 2012
|
5,000,000 | 3.36 | % | 5,000,000 | 3.36 | % | ||||||||||
FHLB advance due Dec. 2012
|
5,000,000 | 3.12 | % | 5,000,000 | 3.12 | % | ||||||||||
Senior note, fixed at 6.28%
|
6,307,146 | 6.28 | % | 6,371,947 | 6.28 | % | ||||||||||
Total long term borrowings
|
$ | 16,307,146 | $ | 16,371,947 |
September 30,
2011
|
December 31,
2010
|
|||||||
(Dollars in thousands)
|
||||||||
Commitments to extend credit and available credit lines:
|
||||||||
Commercial
|
$ | 42,103 | $ | 34,485 | ||||
Real estate-undisbursed development and construction
|
23,888 | 11,512 | ||||||
Consumer
|
12,881 | 7,256 | ||||||
$ | 78,872 | $ | 53,253 | |||||
Standby letters of credit
|
$ | 8,299 | $ | 7,901 |
Net Interest
Income
|
Yield
|
Net
Interest
Spread
|
||||||||||
GAAP net interest income
|
$ | 8,344,575 | 4.91 | % | 4.70 | % | ||||||
Tax equivalent adjustment
|
||||||||||||
Federal funds sold
|
- | - | - | |||||||||
Investment securities
|
116,863 | 0.07 | 0.07 | |||||||||
Loans
|
58,273 | 0.03 | 0.03 | |||||||||
Total tax equivalent adjustment
|
175,136 | 0.10 | 0.10 | |||||||||
Tax equivalent interest yield
|
$ | 8,519,711 | 5.01 | % | 4.80 | % |
Net Interest
Income
|
Yield
|
Net
Interest
Spread
|
||||||||||
GAAP net interest income
|
$ | 3,524,954 | 3.86 | % | 3.62 | % | ||||||
Tax equivalent adjustment
|
||||||||||||
Federal funds sold
|
1 | 0.00 | 0.00 | |||||||||
Investment securities
|
12,113 | 0.01 | 0.01 | |||||||||
Loans
|
28,851 | 0.03 | 0.03 | |||||||||
Total tax equivalent adjustment
|
40,965 | 0.04 | 0.04 | |||||||||
Tax equivalent interest yield
|
$ | 3,565,919 | 3.90 | % | 3.66 | % |
Net Interest
Income
|
Yield
|
Net
Interest
Spread
|
||||||||||
GAAP net interest income
|
$ | 19,403,012 | 4.58 | % | 4.36 | % | ||||||
Tax equivalent adjustment
|
||||||||||||
Federal funds sold
|
- | - | - | |||||||||
Investment securities
|
249,666 | 0.05 | 0.05 | |||||||||
Loans
|
115,876 | 0.03 | 0.03 | |||||||||
Total tax equivalent adjustment
|
365,542 | 0.08 | 0.08 | |||||||||
Tax equivalent interest yield
|
$ | 19,768,554 | 4.66 | % | 4.44 | % |
Net Interest
Income
|
Yield
|
Net
Interest
Spread
|
||||||||||
GAAP net interest income
|
$ | 9,959,788 | 3.79 | % | 3.54 | % | ||||||
Tax equivalent adjustment
|
||||||||||||
Federal funds sold
|
1 | - | - | |||||||||
Investment securities
|
36,190 | 0.02 | 0.02 | |||||||||
Loans
|
84,475 | 0.03 | 0.03 | |||||||||
Total tax equivalent adjustment
|
120,666 | 0.05 | 0.05 | |||||||||
Tax equivalent interest yield
|
$ | 10,080,454 | 3.84 | % | 3.59 | % |
|
Rule 13a-14(a) Certification of Chief Executive Officer
|
|
Rule 13a-14(a) Certification of Chief Financial Officer
|
|
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
|
|
101
|
Interactive Data Files pursuant to Rule 405 of Regulation S-T.*
|
|
*Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
|
Old Line Bancshares, Inc.
|
|||
Date: November 10, 2011
|
By:
|
/s/ James W. Cornelsen
|
|
James W. Cornelsen,
President and Chief Executive Officer
|
|||
(Principal Executive Officer)
|
|||
Date: November 10, 2011
|
By:
|
/s/ Christine M. Rush
|
|
Christine M. Rush,
Executive Vice President and Chief Financial Officer
|
|||
(Principal Accounting and Financial Officer)
|
|||
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Old Line Bancshares, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 10, 2011
|
By: /s/ James W. Cornelsen
|
Name: James W. Cornelsen
|
|
Title: President and
|
|
Chief Executive Officer
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Old Line Bancshares, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 10, 2011
|
By: /s/ Christine M. Rush
|
Name: Christine M. Rush
|
|
Title: Executive Vice President and
|
|
Chief Financial Officer
|
Consolidated Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2011 | Dec. 31, 2010 |
---|---|---|
Consolidated Balance Sheets [Abstract] | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 15,000,000 | 15,000,000 |
Common stock, shares issued | 6,809,594 | 3,891,705 |
Common stock, shares outstanding | 6,809,594 | 3,891,705 |
Consolidated Statements Of Income (USD $) | 3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Interest revenue | ||||
Loans, including fees | $ 8,573,052 | $ 4,260,382 | $ 20,510,217 | $ 12,259,381 |
U.S. Treasury securities | 2,413 | 4,820 | ||
U.S. government agency securities | 111,428 | 42,133 | 231,056 | 132,830 |
Mortgage backed securities | 782,903 | 373,619 | 1,924,401 | 1,047,096 |
Municipal securities | 221,272 | 19,699 | 464,083 | 60,059 |
Federal funds sold | 994 | 2,656 | 5,159 | 4,842 |
Other | 45,042 | 60,707 | 119,202 | 218,920 |
Total interest revenue | 9,737,104 | 4,759,196 | 23,258,938 | 13,723,128 |
Interest expense | ||||
Deposits | 1,175,773 | 985,950 | 3,243,461 | 2,960,315 |
Borrowed funds | 216,756 | 248,292 | 612,465 | 803,025 |
Total interest expense | 1,392,529 | 1,234,242 | 3,855,926 | 3,763,340 |
Net interest income | 8,344,575 | 3,524,954 | 19,403,012 | 9,959,788 |
Provision for loan losses | 800,000 | 200,000 | 1,000,000 | 440,000 |
Net interest income after provision for loan losses | 7,544,575 | 3,324,954 | 18,403,012 | 9,519,788 |
Non-interest revenue | ||||
Service charges on deposit accounts | 380,065 | 78,247 | 859,300 | 231,478 |
Gains on sales or calls of investment securities | 72,252 | 112,811 | ||
Permanent impairment on equity securities | (122,500) | |||
Earnings on bank owned life insurance | 356,281 | 83,963 | 557,669 | 254,071 |
Gains on sales of other real estate owned | 45,595 | 48,580 | ||
Gains (losses) on disposal of assets | 8,995 | (5,160) | ||
Other fees and commissions | 152,613 | 141,036 | 407,312 | 381,639 |
Total non-interest revenue | 1,015,801 | 303,246 | 1,858,012 | 867,188 |
Non-interest expense | ||||
Salaries | 2,248,065 | 1,263,368 | 5,559,074 | 3,559,727 |
Employee benefits | 782,443 | 319,550 | 1,945,879 | 987,488 |
Occupancy | 746,356 | 330,752 | 1,799,276 | 983,209 |
Equipment | 170,254 | 105,342 | 434,629 | 311,370 |
Data processing | 232,530 | 126,412 | 595,612 | 325,912 |
FDIC insurance and State of Maryland assessments | 143,680 | 130,595 | 462,496 | 361,263 |
Merger and integration | 77,880 | 187,125 | 545,154 | 187,125 |
Core deposit premium | 194,674 | 389,349 | ||
Other operating | 1,557,284 | 605,068 | 3,514,313 | 1,656,814 |
Total non-interest expense | 6,153,166 | 3,068,212 | 15,245,782 | 8,372,908 |
Income before income taxes | 2,407,210 | 559,988 | 5,015,242 | 2,014,068 |
Income taxes | 737,405 | 265,299 | 1,729,005 | 765,431 |
Net income | 1,669,805 | 294,689 | 3,286,237 | 1,248,637 |
Less: Net income (loss) attributable to the noncontrolling interest | (37,688) | (17,876) | (126,883) | (58,559) |
Net income available to common stockholders | $ 1,707,493 | $ 312,565 | $ 3,413,120 | $ 1,307,196 |
Basic earnings per common share | $ 0.25 | $ 0.08 | $ 0.56 | $ 0.34 |
Diluted earnings per common share | $ 0.25 | $ 0.08 | $ 0.56 | $ 0.34 |
Dividend per common share | $ 0.03 | $ 0.03 | $ 0.09 | $ 0.09 |
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Document And Entity Information | 9 Months Ended | |
---|---|---|
Sep. 30, 2011 | Oct. 30, 2011 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2011 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2011 | |
Entity Registrant Name | OLD LINE BANCSHARES INC | |
Entity Central Index Key | 0001253317 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 6,809,594 |
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Income Taxes | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Income Taxes [Abstract] | |
Income Taxes | 5. 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. As a result of the acquisition of MB&T we recorded a $9.0 million deferred tax asset. We have recorded a $1.2 million valuation allowance against deferred tax assets as management believes that it is possible that we will not realize all of the deferred tax assets. We allocate tax expense and tax benefits to Old Line Bank and Old Line Bancshares based on their proportional share of taxable income. |
Fair Value Measurements | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Measurements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | 10. FAIR VALUE MEASUREMENTS On 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 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, 2011, we established values for available for sale investment securities as follows (000's);
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 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. As of September 30, 2011 and December 31, 2010, we estimated the fair value of foreclosed assets using Level 2 inputs to be $4,126,434 and $1,153,039, respectively. We determined these Level 2 inputs from the expected sales value derived from appraisals of the real estate that we obtained from an outside third party during the preceding twelve months, offers to purchase or internal evaluations of appraisals. As a result of the acquisition of Maryland Bankcorp, we have segmented the other real estate owned into two components, real estate obtained as a result of loans originated by Old Line Bank (legacy) and other real estate acquired from MB&T or obtained as a result of loans originated by MB&T (acquired). The following outlines the transactions in other real estate owned during the period (000's).
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.
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, 2011 or year ended December 31, 2010. |
Summary Of Significant Accounting Policies | 9 Months Ended |
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Sep. 30, 2011 | |
Summary Of Significant Accounting Policies [Abstract] | |
Summary Of Significant Accounting Policies | 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 (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 Anne Arundel, Calvert, Charles, Prince George's, 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 interests 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, 2010 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, 2010. 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. Reclassifications-We have made certain reclassifications to the 2010 financial presentation to conform to the 2011 presentation. Subsequent Events-We evaluated subsequent events after September 30, 2011 through November 4, 2011, the date this report was available to be issued. No significant subsequent events were identified which would affect the presentation of the financial statements. |
Earnings Per Common Share | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Common Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
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.
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Stock Based Compensation | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Stock Based Compensation | 8. 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, 2011 and 2010, we recorded stock-based compensation expense of $106,118 and $92,175 respectively. For the three months ended September 30, 2011 and 2010, we recorded stock-based compensation expense of $31,302 and $25,923, respectively. We only recognize tax benefits for options that ordinarily will result in a tax deduction when the grant is exercised (non-qualified options). For the nine months ended September 30, 2011, we recognized a $15,097 tax benefit associated with the portion of the expense that was related to the issuance of non-qualified options. There were no non-qualified options included in the expense calculation for the three months ended September 30, 2011 and 2010 or the nine months ended September 30, 2010. We have two 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 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, 2011, there was $107,129 of total unrecognized compensation cost related to non-vested stock options and restricted stock awards that we expect to realize over the next 2.25 years. As of September 30, 2011, there were 258,028 shares remaining available for future issuance under the equity incentive plans. Directors and officers did not exercise any options during the nine month period ended September 30, 2011 or 2010.
Information related to options as of September 30, 2011 follows:
During the nine months ended September 30, 2011 and 2010, we granted 8,786 and 17,641 restricted common stock awards, respectively. We did not grant any restricted common stock awards during the three month periods ended September 30, 2011 or 2010. The following table provides a summary of the restricted stock awards during the nine month periods and their vesting schedule.
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Loans | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Loans [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans | 6. LOANS Major classifications of loans are as follows:
Credit policies and Administration We have adopted a comprehensive lending policy, which includes stringent underwriting standards for all types of loans. We have designed our underwriting standards to promote a complete banking relationship rather than a transactional relationship. In an effort to manage risk, prior to funding, the loan committee consisting of the Executive Officers and seven members of the Board of Directors must approve by a majority vote all credit decisions in excess of a lending officer's lending authority. Management believes that it employs experienced lending officers, secures appropriate collateral and carefully monitors the financial condition of its borrowers and loan concentrations. In addition to the internal business processes employed in the credit administration area, the Bank retains an outside independent firm to review the loan portfolio. This firm performs a detailed annual review and an interim update. We use the results of the firm's report to validate our internal ratings and we review the commentary on specific loans and on our loan administration activities in order to improve our operations. Commercial real estate lending entails significant risks. Risks inherent in managing our commercial real estate portfolio relate to sudden or gradual drops in property values as well as changes in the economic climate that may detrimentally impact the borrower's ability to repay. We attempt to mitigate these risks by carefully underwriting these loans. We also generally require the personal or corporate guarantee(s) of the owners and/or occupant(s) of the property. For loans of this type in excess of $250,000, we monitor the financial condition and operating performance of the borrower through a review of annual tax returns and updated financial statements. In addition, we meet with the borrower and/or perform site visits as required. Many of the loans acquired do not comply with underwriting standards that we maintain. Accordingly, during our due diligence process, we evaluated these loans using our underwriting standards and discounted the book value of these loans. This discounted book value was subsequently incorporated into our initial purchase price. Management tracks all loans secured by commercial real estate. With the exception of loans to the hospitality industry, the properties secured by commercial real estate are diverse in terms of type. This diversity helps to reduce our exposure to economic events that affect any single market or industry. As a general rule, we avoid financing single purpose properties unless other underwriting factors are present to help mitigate the risk. We do have a concentration in the hospitality industry. At September 30, 2011 and December 31, 2010, we had approximately $48.6 million and $38.5 million, respectively, of commercial real estate loans to the hospitality industry. An individual review of these loans indicates that they generally have a low loan to value, more than acceptable existing or projected cash flow, are to experienced operators and are generally dispersed throughout the region. Real Estate Construction Loans This segment of our portfolio consists of funds advanced for construction of single family residences, multi-family housing and commercial buildings. These loans generally have short durations, meaning maturities typically of nine months or less. Residential houses, multi-family dwellings and commercial buildings under construction and the underlying land for which the loan was obtained secure the construction loans. All of these loans are concentrated in our primary market area. Construction lending also entails significant risk. These risks involve larger loan balances concentrated with single borrowers with funds advanced upon the security of the land or the project under construction. An appraisal of the property estimates the value of the project prior to completion of construction. Thus, it is more difficult to accurately evaluate the total loan funds required to complete a project and related loan to value ratios. To mitigate the risks, we generally limit loan amounts to 80% of appraised values and obtain first lien positions on the property. We generally only offer real estate construction financing to experienced builders, commercial entities or individuals who have demonstrated the ability to obtain a permanent loan "take-out." We also perform a complete analysis of the borrower and the project under construction. This analysis includes a review of the cost to construct, the borrower's ability to obtain a permanent "take-out", the cash flow available to support the debt payments and construction costs in excess of loan proceeds, and the value of the collateral. During construction, we advance funds on these loans on a percentage of completion basis. We inspect each project as needed prior to advancing funds during the term of the construction loan. Residential Real Estate Loans We offer a variety of consumer oriented residential real estate loans including home equity lines of credit, home improvement loans and first or second mortgages on investment properties. Our residential loan portfolio consists of a diverse client base. Although most of these loans are in our primary market area, the diversity of the individual loans in the portfolio reduces our potential risk. Usually, we secure our residential real estate loans with a security interest in the borrower's primary or secondary residence with a loan to value not exceeding 85%. Our initial underwriting includes an analysis of the borrower's debt/income ratio which generally may not exceed 40%, collateral value, length of employment and prior credit history. We do not originate any subprime residential real estate loans. Commercial Business Lending Our commercial business lending consists of lines of credit, revolving credit facilities, accounts receivable financing, term loans, equipment loans, SBA loans, standby letters of credit and unsecured loans. We originate commercial business loans for any business purpose including the financing of leasehold improvements and equipment, the carrying of accounts receivable, general working capital, and acquisition activities. We have a diverse client base and we do not have a concentration of these types of loans in any specific industry segment. We generally secure commercial business loans with accounts receivable, equipment, deeds of trust and other collateral such as marketable securities, cash value of life insurance and time deposits at Old Line Bank. Commercial business loans generally depend on the success of the business for repayment. They may also involve high average balances, increased difficulty monitoring and a high risk of default. To help manage this risk, we typically limit these loans to proven businesses and we generally obtain appropriate collateral and personal guarantees from the borrower's principal owners and monitor the financial condition of the business. For loans in excess of $250,000, monitoring generally includes a review of the borrower's annual tax returns and updated financial statements. Consumer Installment Lending We offer various types of secured and unsecured consumer loans. We make consumer loans for personal, family or household purposes as a convenience to our customer base. However, these loans are not a focus of our lending activities. As a general guideline, a consumer's total debt service should not exceed 40% of his or her gross income. The underwriting standards for consumer loans include a determination of the applicant's payment history on other debts and an assessment of his or her ability to meet existing obligations and payments on the proposed loan. Consumer loans are risky because they are unsecured or rapidly depreciating assets secure these loans. Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance because of the greater likelihood of damage, loss or depreciation. Consumer loan collections depend on the borrower's continuing financial stability. If a borrower suffers personal financial difficulties, the consumer may not repay the loan. Also, various federal and state laws, including bankruptcy and insolvency laws, may limit the amount we can recover on such loans. Concentrations of Credit Most of our lending activity occurs within the state of Maryland within the suburban Washington D.C. market area in Anne Arundel, Calvert, Charles, Prince George's and St. Mary's counties. The majority of our loan portfolio consists of commercial real estate loans and commercial and industrial loans. As of September 30, 2011 and December 31, 2010, the only industry in which we had a concentration of loans was the hospitality industry, as previously mentioned. Non-Accrual and Past Due Loans As a result of the acquisition of Maryland Bankcorp, we have segmented the portfolio into two components, loans originated by Old Line Bank (legacy) and loans acquired from MB&T (acquired). We consider all loans past due if the borrower has not paid the required principal and interest payments when due under the original or modified terms of the promissory note or payment of principal or interest has become 90 days past due. When we classify a loan as non-accrual, we no longer accrue interest on such loan and we reverse any interest previously accrued but not collected. We will generally restore a non-accrual loan to accrual status when the borrower brings delinquent principal and interest payments current and we expect to collect future monthly principal and interest payments. We recognize interest on non-accrual legacy loans only when received. We originally recorded acquired non-accrual loans at fair value upon acquisition. We expect to fully collect the carrying value of these loans. Therefore, as provided for under ASC 310-30, we recognize interest income on acquired non-accrual loans through the accretion of the difference between the carrying value of these loans and expected cash flows. We consider a loan a troubled debt restructuring when we conclude that both of the following conditions exist: the restructuring constitutes a concession and the debtor is experiencing financial difficulties. The table below presents a breakdown of the non-performing loans and accruing past due loans at September 30, 2011 and December 31, 2010, respectively.
Non-accrual legacy loans There was one non-accrual legacy loan at September 30, 2011 that had a balance of $1,169,337 and is a residential land acquisition and development loan secured by real estate and described below. At September 30, 2011, the non-accrued interest on this loan was $184,603, none of which was included in interest income. The borrower and guarantor on this loan have filed bankruptcy. During the 1st quarter of 2011, we charged $446,980 to the allowance for loan losses and reduced the balance on this loan from $1,616,317 to $1,169,337. We have an additional $65,000 of the allowance for loan losses specifically allocated to this loan. We had identified a potential buyer for this note who had agreed to purchase it at a price slightly lower than the current carrying value. In October of 2011, the prospective purchaser of the promissory note rescinded his offer. We expect to proceed with foreclosure on the property that secures the promissory note. At December 31, 2010, we had three legacy loans totaling $2,710,619 past due and classified as non-accrual. The first loan in the amount of $810,291 is the same loan that we previously reported in our December 31, 2008 and December 31, 2009 financial statements. The borrower on this loan filed for bankruptcy protection in November 2007. A commercial real estate property secures this loan. The loan to value at inception of this loan was 80%. A recent appraisal on the property indicates that the collateral is sufficient for full repayment and we have not designated a specific allowance for this non-accrual loan. At December 31, 2010, we had obtained a "lift stay" on the property and were awaiting ratification of foreclosure. We received this ratification in January 2011 and transferred this property to other real estate owned during the 1st quarter of 2011. At December 31, 2010, the non-accrued interest on this loan was $212,934. The second loan in the amount of $1,616,317 is the residential acquisition and development loan secured by real estate discussed above. We have received an appraisal that indicates the current value of the collateral that secures this loan is insufficient for repayment. At December 31, 2010, we considered this loan impaired and had allocated $450,000 of the allowance for loan losses to this loan. At December 31, 2010, the interest not accrued on this loan was $101,867. The third loan at December 31, 2010 was a luxury boat loan in the amount of $284,011. The borrower on this loan has also filed bankruptcy. At December 31, 2010, the interest not accrued on this loan was $3,728. During the 1st quarter of 2011, we repossessed the boat, charged $47,261 to the allowance for loan losses and recorded the remaining balance of $236,750 as repossessed property in other assets. Acquired impaired loans Loans acquired in an acquisition are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan and lease losses. In determining the estimated fair value of these loans, we considered a number of factors including the remaining life of the acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral, net present value of cash flows we expect to receive, among others. As required, we accounted for these acquired loans in accordance with guidance for certain loans acquired in a transfer, when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the acquirer will not collect all contractually required principal and interest payments. The difference between contractually required payments and cash flows we expect to collect is the non-accretable difference. Subsequent negative differences to the expected cash flows will generally result in an increase in the non-accretable difference which would decrease interest income. Subsequent collection of payments on these loans will cause an increase in cash flows that will result in a reduction to the non-accretable difference, which would increase interest income. As a result of collection of payments, for the three and nine months ended September 30, 2011, we recorded $1,180,447 and $1,722,929 in interest income. Non-accrual acquired loans At September 30, 2011, we had 24 non-accrual acquired loans to 14 borrowers totaling $4,254,532. As outlined above, at acquisition, we marked these loans to fair value and carry no related allowance for loan losses. Credit Quality Indicators We review the adequacy of the allowance for loan losses at least quarterly. Our review includes evaluation of impaired loans as required by ASC Topic 310 Receivables, and ASC Topic 450 Contingencies. Also, incorporated in determining the adequacy of the allowance is guidance contained in the SEC's SAB No. 102, Loan Loss Allowance Methodology and Documentation; the Federal Financial Institutions Examination Council's Policy Statement on Allowance for Loan and Lease Losses Methodologies and Documentation for Banks and Savings Institutions, and the Interagency Policy Statement on the Allowance for Loan and Lease Losses provided by the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration and Office of Thrift Supervision. We base the evaluation of the adequacy of the allowance for loan losses upon loan categories. We categorize loans as installment and other consumer loans (other than boat loans), boat loans, real estate loans and commercial loans. We further divide commercial and real estate loans by risk rating and apply loss ratios by risk rating, to determine estimated loss amounts. We evaluate delinquent loans and loans for which management has knowledge about possible credit problems of the borrower or knowledge of problems with collateral separately and assign loss amounts based upon the evaluation. We determine loss ratios for installment and other consumer loans based upon a review of prior 18 months delinquency trends for the category, the three year loss ratio for the category, peer group loss ratios and industry standards. With respect to commercial loans, management assigns a risk rating of one through eight as follows: o Risk rating 1 (Highest Quality) is normally assigned to investment grade risks, meaning that level of risk is associated with entities having access (or capable of access) to the public capital markets and the loan underwriting in question conforms to the standards of institutional credit providers. We also include in this category loans with a perfected security interest in U.S. government securities, investment grade government sponsored entities' bonds, investment grade municipal bonds, insured savings accounts, and insured certificates of deposits drawn on high quality financial institutions. o Risk rating 2 (Good Quality) is normally assigned to a loan with a sound primary and secondary source of repayment. The borrower may have access to alternative sources of financing. This loan carries a normal level of risk, with minimal loss exposure. The borrower has the ability to perform according to the terms of the credit facility. Cash flow coverage is greater than 1.25:1 but may be vulnerable to more rapid deterioration than the higher quality loans. We may also include loans secured by high quality traded stocks, lower grade municipal bonds and uninsured certificates of deposit. Characteristics of such credits should include: (a) sound primary and secondary repayment sources; (b) strong debt capacity and coverage; (c) good management in all key positions. A credit secured by a properly margined portfolio of marketable securities, but with some portfolio concentration, also would qualify for this risk rating. Additionally, individuals with significant liquidity, low leverage and a defined source of repayment would fall within this risk rating. o Risk rating 3 (Acceptable Quality) is normally assigned when the borrower is a reasonable credit risk and demonstrates the ability to repay the debt from normal business operations. Risk factors may include reliability of margins and cash flows, liquidity, dependence on a single product or industry, cyclical trends, depth of management, or limited access to alternative financing sources. Historic financial information may indicate erratic performance, but current trends are positive. Quality of financial information is adequate, but is not as detailed and sophisticated as information found on higher graded loans. If adverse circumstances arise, the impact on the borrower may be significant. We classify many small business loans in this category unless deterioration occurs or we believe the loan requires additional monitoring, such as construction loans, asset based (accounts receivable/inventory) loans, and Small Business Administration (SBA) loans. o Risk rating 4 (Pass/Watch) loans exhibit all the characteristics of a loan graded as a "3" with the exception that there is a greater than normal concern that an external factor may impact the viability of the borrower at some later date; or that the Bank is uncertain because of the lack of financial information available. We will generally grant this risk rating to credits that require additional monitoring such as construction loans, SBA loans and other loans deemed in need of additional monitoring. o Risk rating 5 (Special Mention) is assigned to loans in need of close monitoring. These are defined as classified assets. Loans generally in this category may have either inadequate information, lack sufficient cash flow or some other problem that requires close scrutiny. The current worth and debt service capacity of the borrower or of any pledged collateral are insufficient to ensure repayment of the loan. These risk ratings may also apply to an improving credit previously criticized but some risk factors remain. All loans in this classification or below should have an action plan. o Risk rating 6 (Substandard) is assigned to loans where there is insufficient debt service capacity. These obligations, even if appropriately protected by collateral value, have well defined weaknesses related to adverse financial, managerial, economic, market, or political conditions that have clearly jeopardized repayment of principal and interest as originally intended. There is also the possibility that the Bank will sustain some future loss if the weaknesses are not corrected. Clear loss potential, however, does not have to exist in any individual loan we may classify as substandard. o Risk rating 7 (Doubtful) corresponds to the doubtful asset categories defined by regulatory authorities. A loan classified as doubtful has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full improbable. The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors that may work to strengthening of the asset we have deferred its classification as loss until we may determine a more exact status and estimation of the potential loss. o Risk rating 8 (Loss) is assigned to charged off loans. We consider assets classified as loss as uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has no recovery value, but that it is not practical to defer writing off the worthless assets, even though partial recoveries may occur in the future. We charge off assets in this category. We consider suggestions from our external loan review firm and bank examiners when determining which loans to charge off. We automatically charge off consumer loan accounts based on regulatory requirements. The following table outlines the allocation of allowance for loan losses by risk rating.
The following table details activity in the allowance for loan losses by portfolio segment for the periods ended September 30, 2011 and December 31, 2010. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
Our recorded investment in loans as of September 30, 2011 and December 31, 2010 related to each balance in the allowance for possible loan losses by portfolio segment and disaggregated on the basis of our impairment methodology was as follows:
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Consolidated Statement Of Changes In Stockholders' Equity (Parenthetical) (USD $) | 9 Months Ended |
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Sep. 30, 2011 | |
Consolidated Statement Of Changes In Stockholders' Equity [Abstract] | |
Unrealized gain on securities available for sale, income tax benefit | $ 1,534,408 |
Common stock cash dividend, per share | $ 0.09 |
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Acquisition Of Maryland Bankcorp, Inc. [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition Of Maryland Bankcorp, Inc. | 2. ACQUISITION OF MARYLAND BANKCORP, INC. On April 1, 2011, Old Line Bancshares acquired Maryland Bankcorp, Inc. (Maryland Bankcorp) the parent company of Maryland Bank & Trust Company, N.A. (MB&T). We converted each share of common stock of Maryland Bankcorp into the right to receive, at the holder's election, $29.11 in cash or 3.4826 shares of Old Line Bancshares' common stock. We paid cash for any fractional shares of Old Line Bancshares' common stock and an aggregate cash consideration of $1.0 million. The total merger consideration was $18.8 million. In connection with the acquisition, MB&T was merged with and into Old Line Bank, with Old Line Bank the surviving bank. As required by the acquisition method of accounting, we have adjusted the acquired assets and liabilities of Maryland Bankcorp to their estimated fair value on the date of acquisition and added them to those of Old Line Bancshares. Based on management's preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, which we have based on estimates and assumptions that are subject to change, we have allocated the preliminary purchase price for Maryland Bankcorp as follows (in thousands):
Prior to the end of the measurement period, if information becomes available which indicates the purchase price allocations require adjustments, we will include such adjustments in the purchase price allocation retrospectively. Of the total estimated purchase price, we have allocated an estimate of $12.7 million to net tangible assets acquired and we have allocated $5.0 million to the core deposit intangible which is a definite lived intangible asset. We have allocated the remaining purchase price to goodwill. We will amortize the core deposit intangible on an accelerated basis over its estimated useful life of 18 years. We will evaluate goodwill annually for impairment. The following schedule includes consolidated statements of income data for the unaudited pro forma results for the periods ended September 30, 2011 and 2010 as if the MB&T acquisition had occurred as of the beginning of the periods presented.
We have not included any provision for loan losses during the period for loans acquired from MB&T. In accordance with accounting for business combinations, we included the credit losses evident in the loans in the determination of the fair value of loans at the date of acquisition and eliminated the allowance for loan losses maintained by MB&T at acquisition date. We have presented the pro forma financial information for illustrative purposes only and it is not necessarily indicative of the financial results of the combined companies if we had actually completed the acquisition at the beginning of the periods presented, nor does it indicate future results for any other interim or full year period. Pro forma basic and diluted earnings per common share were calculated using Old Line Bancshares' actual weighted average shares outstanding for the periods presented, plus the incremental shares issued, assuming the acquisition occurred at the beginning of the periods presented. |
Investment Securities | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Investment Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Securities | 3. 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. During the 2nd quarter of 2011, Old Line Bank sold $488,457 in investments that we previously classified as held to maturity. We recognized a gain of $25,622 on the sale of this security. As required, all securities held at that time and previously classified as held to maturity were reclassified as available for sale. 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.
As of September 30, 2011, securities with unrealized losses segregated by length of impairment were as follows:
We consider all unrealized losses on securities as of September 30, 2011 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, 2011, 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 or call of securities. In the three and nine month periods ended September 30, 2011, we recorded gross realized gains of $72,251 and $112,811, respectively, from the sale or call of securities. Contractual maturities and pledged securities at September 30, 2011 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.
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Accounting Standards Updates | 9 Months Ended |
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Sep. 30, 2011 | |
Accounting Standards Updates [Abstract] | |
Accounting Standards Updates | 11. ACCOUNTING STANDARDS UPDATES Accounting 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. 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 Notes 2 Acquisition of Maryland Bankcorp, Inc. and 10-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 became 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 are required for financial statements that include periods beginning on or after January 1, 2011 and did not have a material impact on our consolidated results of operations or financial position. ASU No. 2010-28 "When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (Topic 350)" modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For these reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating impairment may exist. This update became effective for the interim and annual reporting periods beginning after December 15, 2010 and did not have a material impact on our consolidated results of operations or financial position. ASU No. 2010-29 "Business Combinations (Topic 805) Disclosure of Supplementary Pro Forma Information for Business Combinations" contains amendments that specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. ASU 2010-29 also expands supplemental pro forma disclosures under Topic 350 to include a description of the nature and amount of material, non-recurring pro forma adjustments directly attributable to the business combination included in reported pro forma revenue and earnings. ASU 2010-29 became effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. See Note 2 for the impact on our consolidated financial statements or results of operations. ASU No. 2011-02 "A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring" amends FASB ASC 310-40 "Troubled Debt Restructurings by Creditors". The amendments specify that in evaluating whether a restructuring constitutes a troubled debt restructuring, a creditor must separately conclude that both of the following conditions exist: the restructuring constitutes a concession and the debtor is experiencing financial difficulties. The amendments clarify the guidance on these points and give examples of both conditions. This update became effective for interim or annual reporting periods beginning on or after June 15, 2011. We have included the required disclosures in Note 6. ASU No. 2011-03 "Reconsideration of Effective Control for Repurchase Agreements" amends FASB ASC 860-10, "Transfers and Servicing-Overall". The amendments remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial asset on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. This update becomes effective for interim and annual reporting periods beginning on or after December 15, 2011. We are currently evaluating the impact of adopting the new guidance on our results of operations or financial position. ASU No. 2011-04 "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS" amends FASB ASC 820 "Fair Value Measurement". The amendments will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards ("IFRS"). Among the many areas affected by this update are the concept of highest and best use, the fair value of an instrument included in stockholders' equity and disclosures about fair value measurement, particularly disclosures about fair value measurements categorized within Level 3 of the fair value hierarchy. This update becomes effective for the interim and annual reporting periods beginning after December 15, 2011. We are currently evaluating the impact of adopting the new guidance on our results of operations or financial position. ASU No. 2011-05 "Presentation of Comprehensive Income" amends FASB ASC 220 "Comprehensive Income". The amendments in this update eliminate the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. An entity will have the option to present the total comprehensive income as part of the statement of changes in stockholders' equity. An entity will have the option to present the total comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. An entity will be required to present the face of financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income. This update becomes effective for interim and annual reporting periods beginning after December 15, 2011. We are currently evaluating the impact of adopting the new guidance on our results of operations or financial position. |
Pointer Ridge Office Investment, LLC | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Pointer Ridge Office Investment, LLC [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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.
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Retirement And Pension Plans | 9 Months Ended |
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Sep. 30, 2011 | |
Retirement And Pension Plans [Abstract] | |
Retirement And Pension Plans | 9. RETIREMENT AND PENSION PLANS Eligible employees, including those who joined us as part of the MB&T acquisition, 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, 2011 and 2010 were $218,991 and $120,598, respectively. Old line Bank's contribution to the plan for the three months ended September 30, 2011 and 2010 were $84,060 and $41,648, 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, 2011 and 2010 were $131,345 and $163,086, respectively. The SERP expense for the three month periods ended September 30, 2011 and 2010 were $38,605 and $60,410, respectively. The SERPs are non-qualified defined benefit pension plans that we have not funded. MB&T also offered SERP to selected officers and we have assumed that liability at acquisition and all subsequent expenses. MB&T had an employee pension plan that was frozen on June 9, 2003 and no additional benefits accrued subsequent to that date. This plan had excess assets over liabilities at acquisition date of $1,315,642 and we recorded this amount as an asset on our balance sheet on the acquisition date. We also recorded the loss on plan investments of $730,215 in accumulated comprehensive income. Effective August 1, 2011, we have notified all participants in the plan that we will terminate this plan. We are currently in the process of liquidating the plan assets and expect to distribute the funds received from these liquidations to participants prior to December 5, 2011. Until we have liquidated all plan assets, we are unable to predict any income or loss that may occur as a result of the termination. However, at this time, we do not expect to incur any significant expenses with the termination of the plan. |