Old Line Bancshares 10Q 2008 Q1 Quarterly report

FORM 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-50345

Old Line Bancshares, Inc.

(Exact name of registrant as specified in its charter)


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)

Registrant’s telephone number, including area code: (301) 430-2500

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesþ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filero	Accelerated filero	Non-accelerated filero	Smaller reporting companyþ
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yeso Noþ

As of April 25, 2008, the registrant had 3,907,450 shares of common stock outstanding.

Part I. Financial Information

Item 1. Financial Statements

Old Line Bancshares, Inc. & Subsidiary
Consolidated Balance Sheets


	March 31,		December 31,
	2008		2007
	(Unaudited)

Assets
Cash and due from banks	$	4,394,513	$	3,172,089
Federal funds sold		16,260,451		9,822,079

Total cash and cash equivalents		20,654,964		12,994,168
Time deposits in other banks		2,000,000		2,000,000
Investment securities available for sale		6,003,112		9,393,356
Investment securities held to maturity		9,543,082		2,301,591
Loans, less allowance for loan losses		203,221,267		201,941,667
Restricted equity securities at cost		2,126,550		2,080,250
Investment in real estate LLC		818,967		805,971
Bank premises and equipment		4,484,744		4,207,395
Accrued interest receivable		975,295		918,078
Deferred income taxes		140,309		161,940
Bank owned life insurance		7,851,470		7,769,290
Other assets		751,252		637,570

	$	258,571,012	$	245,211,276


Liabilities and Stockholders’ Equity

Deposits
Noninterest-bearing	$	34,739,228	$	35,141,289
Interest-bearing		152,032,664		142,670,944

Total deposits		186,771,892		177,812,233
Short-term borrowings		21,836,844		16,347,096
Long-term borrowings		15,000,000		15,000,000
Accrued interest payable		578,253		693,868
Income tax payable		78,416		238,226
Other liabilities		644,484		488,599

		224,909,889		210,580,022


Stockholders’ equity
Common stock, par value $.01 per share; authorized 15,000,000 shares; issued and outstanding 3,907,450 in 2008, and 4,075,849 in 2007		39,074		40,758
Additional paid-in capital		29,126,022		30,465,013
Retained earnings		4,478,645		4,155,232

		33,643,741		34,661,003
Accumulated other comprehensive income		17,382		(29,749	)

		33,661,123		34,631,254

	$	258,571,012	$	245,211,276

The accompanying notes are an integral part of these consolidated financial statements

Old Line Bancshares, Inc. & Subsidiary
Consolidated Statements of Income
(Unaudited)


	Three Months Ended
	March 31,
	2008		2007

Interest revenue
Loans, including fees	$	3,503,684	$	2,880,557
U.S. Treasury securities		22,487		31,575
U.S. government agency securities		25,532		80,360
Mortgage backed securities		18,059		13,915
Municipal securities		24,917		26,978
Federal funds sold		126,378		373,465
Other		49,385		21,288

Total interest revenue		3,770,442		3,428,138


Interest expense
Deposits		1,334,837		1,360,514
Borrowed funds		206,072		106,244

Total interest expense		1,540,909		1,466,758


Net interest income		2,229,533		1,961,380

Provision for loan losses		38,400		56,000

Net interest income after provision for loan losses		2,191,133		1,905,380


Non-interest revenue
Service charges on deposit accounts		72,952		70,920
Marine division broker origination fees		—		77,674
Earnings on bank owned life insurance		91,603		67,350
Income on investment in real estate LLC		12,896		9,768
Other fees and commissions		54,987		40,195

Total non-interest revenue		232,438		265,907


Non-interest expense
Salaries		734,931		754,171
Employee benefits		269,453		284,814
Occupancy		279,922		210,438
Equipment		70,475		61,446
Data processing		61,252		59,440
Other operating		329,277		332,658

Total non-interest expense		1,745,310		1,702,967


Income before income taxes		678,261		468,320

Income taxes		233,428		140,778

Net income	$	444,833	$	327,542


Basic earnings per common share	$	0.11	$	0.08
Diluted earnings per common share	$	0.11	$	0.08

The accompanying notes are an integral part of these consolidated financial statements

Old Line Bancshares, Inc. & Subsidiary
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)


													Accumulated
							Additional						other
	Common stock						paid-in			Retained			comprehensive			Comprehensive
	Shares			Par value			capital			earnings			income			income


Balance, December 31, 2007		4,075,849.0		$	40,758		$	30,465,013		$	4,155,232		$	(29,749	)
Common stock repurchased		(168,399.0	)		(1,684	)		(1,383,870	)		—			—
Net income		—			—			—			444,833			—		$	444,833
Unrealized gain on securities available for sale, net of income taxes of $30,700		—			—			—			—			47,131			47,131

Comprehensive income																$	491,964

Stock based compensation awards		—			—			44,879			—			—
Cash dividend $0.03 per share		—			—			—			(121,420	)		—



Balance, March 31, 2008		3,907,450.0		$	39,074		$	29,126,022		$	4,478,645		$	17,382

Old Line Bancshares, Inc. & Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)


Three Months Ended March 31,	2008			2007


Cash flows from operating activities
Interest received	$	3,653,997		$	3,438,361
Fees and commissions received		137,262			193,552
Interest paid		(1,656,524	)		(1,324,928	)
Cash paid to suppliers and employees		(1,560,139	)		(1,980,236	)
Income taxes paid		(402,307	)		(344,670	)

		172,289			(17,921	)


Cash flows from investing activities
Purchase of investment securities
Held to maturity		(7,241,731	)		—
Available for sale		(2,000,000	)		—
Proceeds from disposal of investment securities
Available for sale at maturity or call		5,467,425			617,371
Loans made, net of principal collected		(1,257,882	)		(7,629,868	)
Purchase of equity securities		(46,300	)		(54,700	)
Investment in bank owned life insurance (BOLI)		—			(4,000,000	)
Investment in real estate LLC		(100	)		—
Purchase of premises, equipment and software		(375,337	)		(164,281	)
Proceeds from sale of premises and equipment		—			71,198

		(5,453,925	)		(11,160,280	)


Cash flows from financing activities
Net increase (decrease) in
Time deposits		7,064,240			10,848,786
Other deposits		1,895,418			(8,821,525	)
(Decrease) increase in short-term borrowings		5,489,748			210,587
Proceeds from stock options exercised, including tax benefit		—			6,250
Repurchase of common stock		(1,385,554	)		—
Dividends paid		(121,420	)		(127,639	)

		12,942,432			2,116,459


Net increase (decrease) in cash and cash equivalents		7,660,796			(9,061,742	)

Cash and cash equivalents at beginning of year		12,994,168			39,628,195

Cash and cash equivalents at end of year	$	20,654,964		$	30,566,453

Old Line Bancshares, Inc. & Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)


Three Months Ended March 31,	2008			2007


Reconciliation of net income to net cash provided (used) by operating activities
Net income	$	444,833		$	327,542

Adjustments to reconcile net income to net cash provided (used) by operating activities

Depreciation and amortization		97,644			85,656
Provision for loan losses		38,400			56,000
Loss on sale of equipment		—			(12,190	)
Change in deferred loan fees net of costs		(60,118	)		(17,127	)
Amortization of premiums and discounts		890			1,029
Deferred income taxes		(9,069	)		(22,956	)
Stock based compensation awards		44,879			83,193
(Income) loss from investment in real estate LLC		(12,896	)		(9,768	)
Increase (decrease) in
Accrued interest payable		(115,615	)		141,830
Other liabilities		(3,925	)		(277,689	)
Decrease (increase) in
Accrued interest receivable		(57,217	)		26,321
Bank owned life insurance		(82,180	)		(62,587	)
Other assets		(113,337	)		(337,175	)

	$	172,289		$	(17,921	)

Old Line Bancshares, Inc. & Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)

1.		SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

		*Organization and Description of Business*-Old Line Bancshares, Inc. was incorporated under the laws of the State of Maryland on April 11, 2003 to serve as the holding company of Old Line Bank. The primary business of Old Line Bancshares, Inc. is to own all of the capital stock of Old Line Bank. Old Line Bancshares, Inc. also has an approximately $819,000 investment in a real estate investment limited liability company named Pointer Ridge Office Investment, LLC (“Pointer Ridge”).

		Old Line Bank is a full service commercial bank operating in the suburban Maryland (Washington, D.C. suburbs) counties of Prince George’s, Anne Arundel, Charles and northern St. Mary’s. Old Line Bank offers deposit services and loans to individuals, small businesses, associations and government entities. Other services include direct deposit of payroll and social security checks, automatic drafts from accounts, automated teller machine services, cash management services, safe deposit boxes, money orders and travelers cheques. Old Line Bank also offers credit card services and on-line account access with bill payer service.

		*Basis of Presentation and Consolidation*-The accompanying consolidated financial statements include the activity of Old Line Bancshares, Inc. and its wholly owned subsidiary, Old Line Bank. We have eliminated all significant intercompany transactions and balances.

		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, 2007 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, Inc.’s Form 10-K for the year ended December 31, 2007. 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, Inc. conform to accounting principles generally accepted in the United States of America.

2.		INVESTMENT SECURITIES

		As Old Line Bancshares purchases securities, management determines if we should classify the securities as held to maturity, available for sale or trading. We record the securities which management has the intent and ability to hold to maturity at amortized cost which is cost adjusted for amortization of premiums and accretion of discounts to maturity. We classify securities which we may sell before maturity as available for sale and carry these securities at fair value with unrealized gains and losses included in stockholders’ equity on an after tax basis. Management has not identified any investment securities as trading.

		We record gains and losses on the sale of securities on the trade date and determine these gains or losses using the specific identification method. We amortize premiums and accrete discounts using the interest method.

3.		INCOME TAXES

		The provision for income taxes includes taxes payable for the current year and deferred income taxes. We determine deferred tax assets and liabilities based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which we expect the differences to reverse. We allocate tax expense and tax benefits to the Bank and Bancshares based on their proportional share of taxable income.

Old Line Bancshares, Inc. & Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)

4.		EARNINGS PER SHARE

		We determine basic earnings per common share by dividing net income by the weighted average number of shares of common stock outstanding giving retroactive effect to the stock dividends.

		We calculate diluted earnings per share by including the average dilutive common stock equivalents outstanding during the period. Dilutive common equivalent shares consist of stock options, calculated using the treasury stock method.


	Three Months Ended
	March 31,
	2008		2007

Weighted average number of shares		4,034,126		4,254,359
Dilutive average number of shares		3,121		14,923

5.		STOCK-BASED COMPENSATION

		We account for employee stock options under the fair value method of accounting using a Black-Scholes valuation model to measure stock-based compensation expense at the date of grant. In the first quarter of 2006, we adopted Statement of Financial Accounting Standards (SFAS) 123R,Share-Based Payment, under the modified prospective method. Statement 123R requires companies to recognize compensation expense related to stock-based compensation awards in their income statements over the period during which an individual is required to provide service in exchange for such award. For the three months ended March 31, 2008 and 2007, we recorded stock-based compensation expense of $44,879 and $83,193, respectively.

		Under SFAS 123R, a company may only recognize tax benefits for options that ordinarily will result in a tax deduction when the grant is exercised (non-qualified options). There were no non-qualified options included in the expense calculation during the three months ended March 31, 2008. For the three months ended March 31, 2007, we recognized an $11,887 tax benefit associated with the portion of the expense that was related to the issuance of non-qualified options.

		We have two stock option plans under which we may issue options, the 2001 Incentive Stock Option Plan, as amended, and the 2004 Equity Incentive Plan. Our Compensation Committee administers the stock option plans. As the plans outline, the Compensation Committee approves stock option grants to directors and employees, determines the number of shares, the type of option, the option price, the term (not to exceed 10 years from the date of issuance) and the vesting period of options issued. The Compensation Committee has approved and we have issued grants with options vesting immediately as well as over periods of two, three and five years. We recognize the compensation expense associated with these grants over their respective vesting period. At March 31, 2008, there was $126,858 of total unrecognized compensation cost related to nonvested stock options that we expect to realize over the next 4.5 years. As of March 31, 2008, there were 130,180 shares remaining available for future issuance under the stock option plans.

		Directors and officers did not exercise any options during the three month period ended March 31, 2008. The intrinsic value of the 900 options that directors and officers exercised during the quarter ended March 31, 2007 was $5,184.

Old Line Bancshares, Inc. & Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)

5.		STOCK-BASED COMPENSATION (Continued)

		A summary of the stock option activity during the three month period follows:


	March 31,
	2008					2007
				Weighted					Weighted
	Number			average		Number			average
	of shares			exercise price		of shares			exercise price

Outstanding, beginning of period		216,920		$	9.37		182,820		$	8.91
Options granted		37,300			7.75		35,200			10.48
Options exercised		—			—		(900	)		4.72
Option forfeited		(10,000	)		11.00		—			—

Outstanding, end of period		244,220		$	9.06		217,120		$	9.18

Information related to options as of March 31, 2008 follows:


		Outstanding options						Exercisable options
				Weighted		Weighted				Weighted
		Number		average		average		Number		average
Exercise		of shares at		remaining		exercise		of shares at		exercise
price	March 31, 2008			term		price		March 31, 2008		price
$3.33-$4.17			11,700		2.75	$	3.44		11,700	$	3.44
$4.18-$5.00			21,600		3.71		4.65		21,600		4.65
$5.01-$10.00			83,920		7.92		8.85		59,054		9.32
$10.01-$11.31			127,000		8.08		10.46		95,800		10.45

			244,220		7.39	$	9.06		188,154	$	8.99

Intrinsic value of outstanding options where the market value exceeds the exercise price				$	142,085
Intrinsic value of exercisable options where the market value exceeds the exercise price				$	47,684

6.		RETIREMENT PLAN

		Eligible employees participate in a profit sharing plan that qualifies under Section 401(k) of the Internal Revenue Code. The plan allows for elective employee deferrals and Old Line Bank makes matching contributions of up to 4% of employee eligible compensation. Our contributions to the plan, included in employee benefit expenses, were $32,114, and $33,299, for the three months ended March 31, 2008 and 2007, 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 three month periods ended March 31, 2008 and 2007 were $29,811 and $25,492, respectively.

7.		ASSETS MEASURED AT FAIR VALUE ON A CONTINUING BASIS

		On January 1, 2008, we adopted Statement of Financing Accounting Standards No. 157,Fair Value Measurements. Old Line Bank values investment securities classified as available for sale at fair value. The fair value hierarchy established in SFAS 157, 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 U.S. Treasury securities under Level 1, and municipal, debt securities, and equity investments under Level 2 and agency securities under Level 3. At March 31, 2008, we established values for available for sale investment securities as follows:


	Total		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Invesment securities available for sale		6,003,112		501,094		4,997,568		504,450

8.		RECENT ACCOUNTING STANDARDS

		The following are recent accounting pronouncements approved by the Financial Accounting Standards Board (FASB). These Statements will not have any material impact on the financial statements of Bancshares or the Bank.

		In December 2007, the FASB issued SFAS No. 160 (revised 2007),Noncontrolling Interests in Consolidated Financial Statements.SFAS 160 amends Accounting Research Bulletin 51, Consolidated Financial Statements, to establish accounting and reporting standards for noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It also clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 also changes the way the consolidated income statement is presented by requiring consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated income statement of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. SFAS 160 is effective at the beginning of the company’s first fiscal year after December 15, 2008. We do not expect that SFAS 160 will have a material impact on our consolidated results of operations or financial position.

		In December 2007, the FASB issued SFAS No. 141 (revised 2007),Business Combinations. SFAS No. 141(R) will significantly change the accounting for business combinations in a number of areas, including the treatment of contingent consideration, contingencies, acquisition costs, in-process research and development costs and restructuring costs. Additionally, under SFAS No. 141(R), changes in deferred tax asset valuation allowances and acquired income uncertainties in a business combination after the measurement period will impact income tax expense. The provisions of this standard are effective beginning January 1, 2009. We do not expect that SFAS No. 141(R) will have a material impact on our consolidated results of operations or financial position.

		FASB Statement No. 161,Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133,requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financing reporting. The use and complexity of derivative instruments and hedging activities have increased significantly over the past several years. Constituents have expressed concerns that the existing disclosure requirements in FASB Statement No. 133,Accounting for Derivative Instruments Hedging Activities,do not provide adequate information about how derivative and hedging activities affect an entity’s financial position, financial performance, and cash flows. This Statements is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. We do not expect SFAS No. 161 will have a material impact on our consolidated results of operations or financial position.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Some of the matters discussed below include forward-looking statements. Forward-looking statements often use words such as “believe,” “expect,” “plan,” “may,” “will,” “should,” “project,” “contemplate,” “anticipate,” “forecast,” “intend” or other words of similar meaning. You can also identify them by the fact that they do not relate strictly to historical or current facts. Our actual results and the actual outcome of our expectations and strategies could be different from those anticipated or estimated for the reasons discussed below and under the heading “Information Regarding Forward Looking Statements.”

Overview

Old Line Bancshares, Inc. was incorporated under the laws of the State of Maryland on April 11, 2003 to serve as the holding company of Old Line Bank.

Our primary business is to own all of the capital stock of Old Line Bank. We also have an approximately $819,000 investment in a real estate investment limited liability company named Pointer Ridge Office Investment, LLC (“Pointer Ridge”). We own 50% of Pointer Ridge. Frank Lucente, one of our directors and a director of Old Line Bank, controls 25% of Pointer Ridge and controls the manager of Pointer Ridge. The purpose of Pointer Ridge is to acquire, own, hold for profit, sell, assign, transfer, operate, lease, develop, mortgage, refinance, pledge and otherwise deal with real property located at the intersection of Pointer Ridge Road and Route 301 in Bowie, Maryland. Pointer Ridge owns a commercial office building containing approximately 40,000 square feet and leases this space to tenants. We lease approximately 50% of this building for our main office and operate a branch of Old Line Bank from this address.

Summary of Recent Performance and Other Activities

We are pleased to report sound financial performance for the first quarter of 2008. Net income was $444,833 or $0.11 per basic and diluted common share for the three month period ending March 31, 2008. This was $117,291 or 35.81% higher than net income of $327,542 or $0.08 per basic and diluted common share for the same period in 2007.

During the first quarter of 2008, the following events occurred.

	•		We opened our 7^th branch location in College Park, Maryland.

	•		The loan portfolio grew $1.3 million (0.64%).

	•		We maintained asset quality.

	•		Total deposits grew $8.9 million (5.06%).

	•		Total assets grew $13.4 million (5.46%).

	•		We repurchased 168,399 shares of our common stock at an average price of $8.23 per share.

We believe that it was an accomplishment to increase earnings, grow the loan portfolio and maintain credit quality despite the challenging economic environment and the uncertainties faced by our industry. The following summarizes the highlights of our financial performance for the three month period ended March 31, 2008 compared to the three month period ended March 31, 2007 (figures in the table may not match those discussed in the balance of this section due to rounding).


	Three months ended March 31,
	(Dollars in thousands)
	2008			2007			$Change			% Change
Net income	$	445		$	328		$	117			35.67	%
Interest revenue		3,770			3,428			342			9.98
Interest expense		1,541			1,467			74			5.04
Net interest income after provision for loan losses		2,191			1,905			286			15.01
Non-interest revenue		232			266			(34	)		(12.78	)
Non-interest expense		1,745			1,703			42			2.47
Average total loans		204,787			157,495			47,292			30.03
Average interest earning assets		234,486			203,180			31,306			15.41
Average total interest-bearing deposits		148,424			136,339			12,085			8.86
Average noninterest-bearing deposits		35,307			36,007			(700	)		(1.94	)
Net interest Margin⁽¹⁾		3.84	%		3.97	%
Return on average equity		5.13	%		3.78	%
Basic earnings per common share	$	0.11		$	0.08		$	0.03			37.50
Diluted earnings per common share		0.11			0.08			0.03			37.50


(1)		See “Reconciliation of Non-GAAP Measures”

Growth Strategy

We have based our strategic plan on the premise of enhancing stockholder value and growth through branching and operating profits. Our short-term goals include maintaining credit quality, creating an attractive branch network, expanding fee income, generating extensions of core banking services and using technology to maximize stockholder value.

We believe a natural evolution of a community-focused bank like Old Line Bank is to expand the delivery channels via the branch network. We plan to expand in Prince George’s County and Anne Arundel County, Maryland and may expand in Charles County and contiguous northern and western counties, such as Montgomery County and Howard County, Maryland.

In February 2008, we opened a branch in College Park (Prince George’s County), Maryland at 9658 Baltimore Avenue, College Park, Maryland. This branch is in the same building as the loan production office that houses our team of loan officers. We hired the Branch Manager and staff for this location in February 2008.

As part of our expansion efforts, in July 2004, Old Line Bank executed a lease and applied to regulatory authorities to open a branch at 1641 State Route 3 North, Crofton, Maryland in Anne Arundel County. We anticipated that construction of the building in which we plan to locate the branch would begin during the second or third quarter of 2006 and we expected to open the branch in the first quarter of 2007. However, the owner of the property was unable to complete the requirements contained in the lease and begin construction of the branch. Construction of this location began in 2007. We expect to open this branch during the fourth quarter of 2008 or the first quarter of 2009.

In July 2007, we identified a site for a second branch location in Bowie, Maryland. Currently, the landlord is preparing a pad site. Assuming the landlord completes the preparation of the pad site and meets all of the conditions of the lease, we plan to lease the pad site and construct a branch. The pad site is located in the Fairwood Office Park in Bowie, Maryland. We anticipate we will open this branch during the 3^rd or 4^th quarter of 2008.

We plan to open an additional branch in Annapolis, Anne Arundel County in 2008. We have identified a potential site for this branch and are currently in negotiations with the landlord regarding the lease.

As expected, the operations of the Greenbelt branch that we opened in June 2007 and the opening of the College Park branch in February 2008 were the primary reasons for a $69,484 or 33.02% increase in occupancy expense and a $9,029 or 14.69% increase in equipments costs during the three month period. Because of the new branches, we anticipate salaries and benefits expenses and other operating expenses will increase. We anticipate that, over time, income generated from the branches will offset any increase in expenses.

Expansion of Commercial, Construction and Commercial Real Estate Lending

We hired a new Vice President of Commercial Lending for our Waldorf office and a new Senior Vice President of Commercial Lending to service the Anne Arundel County market during 2007. We also hired a Senior Vice President of Commercial Lending, in August 2006, who resigned in February 2008.

As we expected, the increase in personnel during 2007 and the staffing for the new College Park and Greenbelt branches caused an increase in salary and benefit expenses in the first quarter of 2008 compared to the first quarter of 2007. This increase was offset by the termination of the employees that worked in the marine division that we closed at the end of the third quarter of 2007.

As a result of the new branches and lending personnel, we anticipate the bank will experience continued improvement in loan and deposit growth during 2008 and beyond. We anticipate that after establishment of the Bowie, Annapolis and Crofton branches outlined above that we will slow down the rate of branch expansion, although should we identify new branch locations that will support our long term growth plans we may open additional branches.

Other Opportunities

We use the Internet and technology to augment our growth plans. Currently, we offer our customers image technology, telephone banking and Internet banking with on-line account access and bill payer service. In the fourth quarter of 2007, we began offering selected commercial customers the ability to remotely capture their deposits and electronically transmit them to us. We anticipate that this service will modestly increase equipment cost, reduce courier fees, and positively impact deposit growth. We will continue to evaluate cost effective ways that technology can enhance our management, products and services.

We plan to take advantage of strategic opportunities presented to us via mergers occurring in our marketplace. For example, we may purchase branches that other banks close or lease branch space from other banks or hire additional loan officers. We currently have no specific plans to acquire existing financial institutions or branches thereof or to hire additional loan officers.

Results of Operations

Net Interest Income

Net interest income is the difference between income on interest earning assets and the cost of funds supporting those assets. Earning assets are comprised primarily of loans, investments, and federal funds sold; interest-bearing deposits and other borrowings make up the cost of funds. Noninterest-bearing deposits and capital are also funding sources. Changes in the volume and mix of earning assets and funding sources along with changes in associated interest rates determine changes in net interest income.

Three months ended March 31, 2008 compared to three months ended March 31, 2007

Net interest income after provision for loan losses for the three months ended March 31, 2008 increased $285,753 or 15.00% to $2.2 million from $1.9 million for the same period in 2007. The increase was primarily attributable to an increase in total average interest earning assets.

Interest revenue increased from $3.4 million for the three months ended March 31, 2007 to $3.8 million for the same period in 2008. As discussed below and outlined in detail in the Rate/Volume Analysis, these changes were the result of substantial increases in interest earning assets primarily caused by a $47.3 million increase in average total loans. The growth in average total loans was attributable to the business development efforts of the entire Old Line Bank lending team and directors and the expansion of our branch network. We believe that the expansion of our branch network provides us with increased name recognition and new opportunities that contributed to our growth. Interest expense for all interest-bearing liabilities amounted to $1.5 million for the three months ended March 31, 2008 and 2007.

Our net interest margin was 3.84% for the three months ended March 31, 2008, as compared to 3.97% for the three months ended March 31, 2007. The 13 basis point decrease in the net interest margin is the result of several components. The yield on average interest earning assets decreased 42 basis points during the period primarily because of the recent and rapid 300 basis point rate reduction in the federal funds interest rate that the Federal Reserve implemented. We partially offset these rate reductions through growth in the loan portfolio. As a result of this growth, there were a higher percentage of funds invested in higher yielding commercial and mortgage loans during the period. In the prior year, these funds were invested in federal funds and lower yielding investments.

The 65 basis point reduction in the cost of interest-bearing liabilities that occurred as a result of re-pricing of interest bearing accounts to current market interest rates and maturities of and subsequent re-pricing of time deposits offset the decrease in yield on interest earning assets and improved our net interest spread. However, because of an increase in the percentage of average balances maintained in interest-bearing deposits relative to total deposits, the net interest margin declined.

Because of increased recognition in the Prince George’s County market, the new loan officers in Charles and Anne Arundel Counties, the addition of the College Park and Greenbelt branches and with continued growth in deposits, we anticipate that we will continue to grow earning assets during the remainder of 2008. Provided that the Federal Reserve does not continue to implement rapid federal funds decreases, we believe that the anticipated growth in earning assets, the change in the composition of earning assets as more funds are deployed to loans and the relatively low cost of funds will result in an increase in our net interest income and modest improvement in the net interest margin during the remainder of 2008, although there is no assurance that this will be the case.

The following table illustrates average balances of total interest earning assets and total interest-bearing liabilities for the periods indicated, showing the average distribution of assets, liabilities, stockholders’ equity and related income, expense and corresponding weighted average yields and rates. The average balances used in this table and other statistical data were calculated using average daily balances.


	Average Balances, Interest and Yields
Three Months Ended March 31,	2008							2007
	Average							Average
	balance		Interest		Yield			balance		Interest		Yield

Assets:
Federal funds sold⁽¹⁾	$	16,712,451	$	129,193		3.10	%	$	28,855,433	$	384,204		5.40	%
Time deposits in other banks		2,000,000		20,266		4.06			—		—
Investment securities⁽¹⁾⁽²⁾
U.S. Treasury		2,769,346		23,783		3.44			4,000,075		33,104		3.36
U.S. government agency		3,065,740		27,004		3.53			8,086,801		84,252		4.23
Mortgage backed securities		1,675,894		18,059		4.32			1,419,727		13,915		3.97
Municipal securities		3,005,390		36,248		4.84			3,228,974		39,296		4.94
Other		2,080,657		30,041		5.79			1,467,479		21,685		5.99


Total investment securities		12,597,027		135,135		4.30			18,203,056		192,252		4.28


Loans:⁽³⁾
Commercial		55,896,847		1,053,762		7.56			39,188,677		823,733		8.52
Mortgage		130,781,054		2,210,937		6.78			96,741,333		1,787,379		7.49
Installment		18,109,472		238,985		5.29			21,565,294		269,445		5.07

Total loans		204,787,373		3,503,684		6.86			157,495,304		2,880,557		7.42

Allowance for loan losses		1,610,509		—					1,374,075		—


Total loans, net of allowance		203,176,864		3,503,684		6.92			156,121,229		2,880,557		7.48

Total interest earning assets⁽¹⁾		234,486,342		3,788,278		6.48			203,179,718		3,457,013		6.90

Non-interest bearing cash		3,844,427							3,839,335
Premises and equipment		4,195,720							4,081,213
Other assets		10,775,269							8,409,822

Total assets⁽¹⁾	$	253,301,758						$	219,510,088


Liabilities and Stockholders’ Equity:
Interest bearing deposits
Savings	$	6,245,038		11,561		0.74		$	9,064,901		15,009		0.67
Money market and NOW		34,283,999		111,404		1.30			23,620,827		116,425		2.00
Other time deposits		107,894,604		1,211,872		4.51			103,653,622		1,229,080		4.81


Total interest-bearing deposits		148,423,641		1,334,837		3.61			136,339,350		1,360,514		4.05
Borrowed funds		33,306,846		206,072		2.48			10,674,695		106,244		4.04


Total interest-bearing liabilities		181,730,487		1,540,909		3.40			147,014,045		1,466,758		4.05


Noninterest-bearing deposits		35,307,109							36,007,396

		217,037,596							183,021,441
Other liabilities		1,479,612							1,347,673
Stockholders’ equity		34,784,550							35,140,974


Total liabilities and stockholders’ equity	$	253,301,758						$	219,510,088

Net interest spread⁽¹⁾						3.08							2.85

Net interest income andNet interest margin⁽¹⁾			$	2,247,369		3.84	%			$	1,990,255		3.97	%


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 securities. 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 periods ended March 31, 2008 and 2007 were $1,061,145 and $49,176, respectively.

The following table describes the impact on our interest income and expense resulting from changes in average balances and average rates for the periods indicated. We have allocated the change in interest revenue, interest expense and net interest income due to both volume and rate proportionately to the rate and volume variances.


	Three months Ended March 31,
	2008 compared to 2007
	Variance due to:
	Total			Rate			Volume
Interest earning assets:
Federal funds sold⁽¹⁾	$	(255,011	)	$	(204,598	)	$	(50,413	)
Time deposits in other banks		20,266			—			20,266
Investment Securities⁽¹⁾
U.S. Treasury		(9,321	)		2,880			(12,201	)
U.S. Government agency		(57,248	)		(29,436	)		(27,812	)
Mortgage backed securities		4,144			2,735			1,409
Municipal securities		(3,048	)		(1,630	)		(1,418	)
Other		8,356			(2,434	)		10,790
Loans:
Commercial		230,029			(247,413	)		477,442
Mortgage		423,558			(441,104	)		864,662
Installment		(30,460	)		29,992			(60,452	)

Total interest revenue⁽¹⁾		331,265			(891,008	)		1,222,273


Interest-bearing liabilities
Savings		(3,448	)		3,458			(6,906	)
Money market and NOW		(5,021	)		(84,103	)		79,082
Other time deposits		(17,208	)		(102,369	)		85,161
Borrowed funds		99,828			(149,936	)		249,764

Total interest expense		74,151			(332,950	)		407,101


Net interest income⁽¹⁾	$	257,114		$	(558,058	)	$	815,172


(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.”

Provision for Loan Losses

Originating loans involves a degree of risk that credit losses will occur in varying amounts according to, among other factors, the type of loans being made, the credit-worthiness of the borrowers over the term of the loans, the quality of the collateral for the loan, if any, as well as general economic conditions. We charge the provision for loan losses to earnings to maintain the total allowance for loan losses at a level considered by management to represent its best estimate of the losses known and inherent in the portfolio that are both probable and reasonable to estimate, based on, among other factors, prior loss experience, volume and type of lending conducted, estimated value of any underlying collateral, economic conditions (particularly as such conditions relate to Old Line Bank’s market area), regulatory guidance, peer statistics, management’s judgment, past due loans in the loan portfolio, loan charge off experience and concentrations of risk (if any). We charge losses on loans against the allowance when we believe that collection of loan principal is unlikely. We add back recoveries on loans previously charged to the allowance.

The provision for loan losses was $38,400 for the three months ended March 31, 2008, as compared to $56,000 for the three months ended March 31, 2007, a decrease of $17,600 or 31.43%. After completing the analysis outlined below, during the three month period ended March 31, 2008, we decreased the provision for loan losses primarily because there was a minimal 0.63% growth in the loan portfolio from December 31, 2007 to March 31, 2008 and imminent resolution of the $1.1 million in non-performing assets in the loan portfolio discussed in the Asset Quality section below. We have not experienced any change in the quality of the loans in the portfolio and we have no loans, other than the two non-performing assets, past due more than 30 days. We believe that most of our clients, even those that directly or indirectly serve the real estate industry, remain financially strong. Based on our analysis, there is not any justification for an increased provision at this time.

We review the adequacy of the allowance for loan losses at least quarterly. Our review includes evaluation of impaired loans as required by SFAS No. 114,Accounting by Creditors for Impairment of a Loan, and SFAS No. 118,Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosure.Also incorporated in determining the adequacy of the allowance is guidance contained in the Securities and Exchange Commission’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, mortgage loans (commercial real estate, residential real estate and real estate construction) and commercial loans. We apply loss ratios to each category of loan other than commercial loans (including letters of credit and unused commitments). We further divide commercial 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 loan collateral separately and assign loss amounts based upon the evaluation.

We determine loss ratios for installment and other consumer loans (other than boat loans), boat loans and mortgage loans (commercial real estate, residential real estate and real estate construction) 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 to each loan at inception, with a risk rating of one having the least amount of risk and a risk rating of eight having the greatest amount of risk. For commercial loans of less than $250,000, we may review the risk rating annually based on, among other things, the borrower’s financial condition, cash flow and ongoing financial viability; the collateral securing the loan; the borrower’s industry; and payment history. We review the risk rating for all commercial loans in excess of $250,000 at least annually. We evaluate loans with a risk rating of five or greater separately and assign loss amounts based upon the evaluation. For loans with risk ratings between one and four, we determine loss ratios based upon a review of prior 18 months delinquency trends, the three year loss ratio, peer group loss ratios and industry standards.

We also identify and make any necessary allocation adjustments for any specific concentrations of credit in a loan category that in management’s estimation increase the risk inherent in the category. If necessary, we will also make an adjustment within one or more loan categories for economic considerations in our market area that may impact the quality of the loans in the category. For all periods presented, there were no specific adjustments made for concentrations of credit or economic considerations. We consider qualitative or environmental factors that are likely to cause estimated credit losses associated with our existing portfolio to differ from historical loss experience. These factors include, but are not limited to, changes in lending policies and procedures, changes in the nature and volume of the loan portfolio, changes in the experience, ability and depth of lending management and the effect of other external factors such as economic factors, competition and legal and regulatory requirements on the level of estimated credit losses in our existing portfolio.

In the event that our review of the adequacy of the allowance results in any unallocated amounts, we reallocate such amounts to our loan categories based on the percentage that each category represents to total gross loans. We have risk management practices designed to ensure timely identification of changes in loan risk profiles. However, undetected losses inherently exist within the portfolio. We believe that the allocation of the unallocated portion of the reserve in the manner described above is appropriate.

We will not create a separate valuation allowance unless we consider a loan impaired under SFAS No. 114 and SFAS No. 118. At March 31, 2008, we had two non-accrual loans totaling $1.1 million. We have not designated a specific allowance for either of these non-accrual loans. We have no other loans past due 30 days or more. We also do not have any substantive loans comprised of sub-prime mortgages.

Our policies require a review of assets on a regular basis, and we believe that we appropriately classify loans as well as other assets if warranted. We believe that we use the best information available to make a determination with respect to the allowance for loan losses, recognizing that the determination is inherently subjective and that future adjustments may be necessary depending upon, among other factors, a change in economic conditions of specific borrowers or generally in the economy, and new information that becomes available to us. However, there are no assurances that the allowance for loan losses will be sufficient to absorb losses on non-performing assets, or that the allowance will be sufficient to cover losses on non-performing assets in the future.

The allowance for loan losses represents 0.79% of gross loans at March 31, 2008 and 0.78% at December 31, 2007. We have no exposure to foreign countries or foreign borrowers. Based on our analysis and the satisfactory historical performance of the loan portfolio, we believe this allowance appropriately reflects the inherent risk of loss in our portfolio.

The following table provides an analysis of the allowance for loan losses for the periods indicated:


	Three Months Ended						Year Ended
	March 31,						December 31,
	2008			2007			2007


Balance, beginning of period	$	1,586,737		$	1,280,396		$	1,280,396
Provision for loan losses		38,400			56,000			318,000


Chargeoffs:
Commercial		—			—			(6,064	)
Installment		—			(4,979	)		(6,085	)

Total chargeoffs		—			(4,979	)		(12,149	)
Recoveries:
Installment		159			184			490

Total recoveries		159			184			490

Net (chargeoffs) recoveries		159			(4,795	)		(11,659	)

Balance, end of period	$	1,625,296		$	1,331,601		$	1,586,737


Allowance for loan losses to gross loans		0.79	%		0.84	%		0.78	%
Ratio of net-chargeoffs during period to average loans outstanding during period		0.000	%		0.003	%		0.007	%

The following table provides a breakdown of the allowance for loan losses:

Allocation of Allowance for Loan Losses


	March 31,										December 31,
	2008					2007					2007
			% of Loans					% of Loans					% of Loans
			in Each					in Each					in Each
	Amount		Category			Amount		Category			Amount		Category
Installment & others	$	10,563		0.40	%	$	9,092		1.48	%	$	10,236		0.45	%
Boat		101,557		8.09			155,244		12.10			106,405		8.66
Mortgage		1,108,791		63.86			841,365		61.33			1,080,897		63.57
Commercial		404,385		27.65			325,900		25.09			389,199		27.32


Total	$	1,625,296		100.00	%	$	1,331,601		100.00	%	$	1,586,737		100.00	%

Non-interest Revenue

Three months ended March 31, 2008 compared to three months ended March 31, 2007

Non-interest revenue totaled $232,438 for the three months ended March 31, 2008, a decrease of $33,469 or 12.59% from the 2007 amount of $265,907. Non-interest revenue for the three months ended March 31, 2008 and March 31, 2007 included fee income from service charges on deposit accounts, earnings on bank owned life insurance, income from our investment in real estate LLC (Pointer Ridge) and other fees and commissions. For the period ended March 31, 2007, non-interest revenue also included broker origination fees from the marine division.

The following table outlines the changes in non-interest revenue for the three month periods.


	March 31,		March 31,
	2008		2007		$ Change			% Change
Service charges on deposit accounts	$	72,952	$	70,920	$	2,032			2.87	%
Marine division broker origination fees		—		77,674		(77,674	)		(100.00	)
Earnings on bank owned life insurance		91,603		67,350		24,253			36.01
Income (loss) on investment in real estate LLC		12,896		9,768		3,128			32.02
Other fees and commissions		54,987		40,195		14,792			36.80

Total non-interest revenue	$	232,438	$	265,907	$	(33,469	)		(12.59)	%

Service charges on deposit accounts increased due to increases in the number of customers and the services they used. There were no fees earned from marine division broker origination fees during the quarter ended March 31, 2008 because late in the third quarter of 2007, we closed this division. Earnings on bank owned life insurance increased primarily because we invested an additional $4 million in February 2007. Therefore, we had an additional thirty days in earnings on the BOLI during the three months ended March 31, 2008. Pointer Ridge was fully leased during the 1^st quarter of 2008 and had vacancies during the 1^st quarter of 2007. As a result of this and rental increases, income on investment in real estate LLC was higher in the 1^st quarter of 2008 than the comparable period of 2007. Other fees and commissions increased $14,792 primarily because in April 2007 we started leasing the Waldorf office space that we vacated in July 2006.

Because of the new lenders we have hired and the new College Park and Greenbelt branches that we have opened, we expect that customer relationships will continue to grow during the remainder of 2008. We anticipate this growth will cause an increase in service charges on deposit accounts. As a result of our decision to cease operations in the marine division, we will not have any fee income from the marine division in 2008. We believe the demand in the commercial real estate market will remain stable and we will have an additional number of opportunities to provide financing of these facilities. Therefore, other loan fees which are included in other fees and commissions should remain constant. We expect our earnings on bank owned life insurance will remain stable during the remainder of 2008. We anticipate the income from Pointer Ridge will remain stable during the remainder of the year and will produce moderate earnings.

Non-interest Expense

Three months ended March 31, 2008 compared to three months ended March 31, 2007

Non-interest expense remained relatively stable for the three months ended March 31, 2008 at $1.7 million compared to the same period in 2007. The following chart outlines the changes in non-interest expenses for the period.


	March 31,		March 31,
	2008		2007		$ Change			%Change
Salaries	$	734,931	$	754,171	$	(19,240	)		(2.55)	%
Employee benefits		269,453		284,814		(15,361	)		(5.39	)
Occupancy		279,922		210,438		69,484			33.02
Equipment		70,475		61,446		9,029			14.69
Data processing		61,252		59,440		1,812			3.05
Other operating		329,277		332,658		(3,381	)		(1.02	)

Total non-interest expenses	$	1,745,310	$	1,702,967	$	42,343			2.49	%

Salary and benefit expenses decreased primarily because we closed the marine division late in the third quarter of 2007 and terminated the employees associated with it and stock based compensation expense decreased from $83,193 in 2007 to $44,879 for the same period in 2008. The stock based compensation expense decreased because the Board of Directors did not receive any vested options in the first quarter of 2008 and they received 10,000 vested options during the first quarter of 2007. These reductions were partially offset by the costs associated with the new personnel hired for the Greenbelt and College Park branches and the new loan officers hired in April and September of 2007.

Occupancy expense increased because of the opening of the new Greenbelt branch in June 2007 and the new College Park branch in February 2008. Data processing increased because of the new locations and new services provided by our data processor. Other operating expenses decreased primarily because there were no origination costs derived from the marine division during the period.

For the remainder of 2008, we anticipate non-interest expenses will increase. We will incur increased rent expense related to the new Greenbelt and College Park location and increased operational expenses associated with these branches as well as costs associated with the additional branches we expect to open during 2008. The stock based compensation expense will decline during the remainder of the year.

Income Taxes

Three months ended March 31, 2008 compared to three months ended March 31, 2007

Income tax expense was $233,428 (34.42% of pre-tax income) for the three months ended March 31, 2008 as compared to $140,778 (30.06% of pre-tax income) for the same period in 2007. The increase in the effective tax rate is primarily due to a decrease in interest on tax exempt securities as a percent of pre-tax income during the period.

Net Income

Three months ended March 31, 2008 compared to three months ended March 31, 2007

Net income was $444,833 or $0.11 per basic and diluted common share for the three month period ending March 31, 2008 compared to net income of $327,542 or $0.08 per basic and diluted common share for the same period in 2007. The increase in net income was the result of a $285,753 increase in net interest income after provision for loan losses and a $42,343 reduction in non-interest expense partially offset by a $33,469 decrease in non-interest revenue and a $92,650 increase in income taxes for the period compared to the same period in 2007. Earnings per common share increased on a basic and diluted basis because of higher earnings in 2008 and because the average number of common shares decreased by 214,773 common shares from 4,254,359 in 2007 to 4,034,126 in 2008 because we repurchased 354,359 shares of common stock since inception of the Stock Repurchase Program in December 2007. We repurchased 168,399 shares of common stock during the quarter ended March 31, 2008.

Analysis of Financial Condition

Investment Securities

Our portfolio consists primarily of U.S. Treasury securities, U.S. government agency securities, securities issued by states, counties and municipalities, mortgage-backed securities, and certain equity securities, including Federal Reserve Bank stock, Federal Home Loan Bank stock, Maryland Financial Bank stock and Atlantic Central Bankers Bank stock. The portfolio provides a source of liquidity, collateral for repurchase agreements as well as a means of diversifying our earning asset portfolio. While we generally intend to hold the investment securities until maturity, we classify a significant portion of the investment securities as available for sale. We account for investment securities so classified at fair value and report the unrealized appreciation and depreciation as a separate component of stockholders’ equity, net of income tax effects. We account for investment securities classified in the held to maturity category at amortized cost. We invest in securities for the yield they produce and not to profit from trading the securities. There are no trading securities in the portfolio.

The investment securities at March 31, 2008 amounted to $15.5 million, an increase of $3.8 million, or 32.93%, from the December 31, 2007 amount of $11.7 million. Available for sale investment securities decreased to $6.0 million at March 31, 2008 from $9.4 million at December 31, 2007. The decrease in the available for sale investment securities occurred because some of these assets matured and we purchased federal funds, investment securities held to maturity, or deployed the proceeds into loans. Held to maturity securities at March 31, 2008 increased to $9.5 million from the $2.3 million balance on December 31, 2007 because we purchased new securities during the period. The fair value of available for sale securities included net unrealized gains of $28,704 at March 31, 2008 (reflected as unrealized gains of $17,382 in stockholders’ equity after deferred taxes) as compared to net unrealized losses of $49,127 ($29,749 net of taxes) as of December 31, 2007. In general, the increase in fair value was a result of the maturity of securities, declining interest rates and a shortening of the remaining term until maturity. As required under SFAS No. 115, we have evaluated securities with unrealized losses for an extended period of time and determined that these losses are temporary because, at this point in time, we expect to hold them until maturity. As the maturity date moves closer and/or interest rates decline, the unrealized losses in the portfolio will decline or dissipate.

Investment in real estate LLC

As discussed above, Old Line Bancshares has a 50% ownership or $818,967 investment in Pointer Ridge, a real estate investment limited liability company. In July 2006, we moved our main office facility from Waldorf, Maryland to the building owned by Pointer Ridge at 1525 Pointer Ridge Place, Bowie, Maryland in Prince George’s County and established a branch in this facility.

Frank Lucente, a director of Old Line Bancshares, Inc. and Old Line Bank, controls 25% of Pointer Ridge and controls the manager of Pointer Ridge. On June 6, 2006, we executed leases for 2,557 square feet on the 1^st floor of the building for a new branch office, 5,449 square feet on the 3^rd floor and 11,053 square feet on the 4^th floor of this building for our new headquarters. The leases which commenced on July 1, 2006, are for thirteen years, with two, five-year renewal options. The leases are full service leases and payment terms include the cost of taxes, insurance and maintenance with basic monthly payments of $41,967 and 3% annual increases in base rents plus adjustment for increased taxes, insurances and maintenance.

Loan Portfolio

Loans secured by real estate or luxury boats comprise the majority of the loan portfolio. Old Line Bank’s loan customers are generally located in the greater Washington, D.C. metropolitan area.

The loan portfolio, net of allowance, unearned fees and origination costs, increased $1.3 million or 0.64% to $203.2 million at March 31, 2008 from $201.9 million at December 31, 2007. Commercial business loans increased by $1.0 million (1.85%), commercial real estate loans (generally owner-occupied) increased by $337,000 (0.35%), residential real estate loans (generally home equity and fixed rate home improvement loans) decreased by $543,000 (4.84%), real estate construction loans (primarily commercial real estate construction) increased by $1.6 million (7.32%) and installment loans decreased by $1.2 million (6.30%) from their respective balances at December 31, 2007.

During the first quarter of 2008, we received approximately $9 million in loan payoffs that negatively impacted our loan growth for the period. These payoffs were primarily attributable to a significant slowdown in the real estate market. In spite of these payoffs, we experienced nominal growth in the loan portfolio. We saw loan and deposit growth generated from our entire team of lenders, branch personnel and board of directors. We anticipate the entire team will continue to focus their efforts on business development during the remainder of 2008 and continue to grow the loan portfolio.

The following table summarizes the composition of the loan portfolio by dollar amount and percentages:


	Loan Portfolio
	(Dollars in thousands)
	March 31,					December 31,
	2008					2007
Real Estate
Commercial	$	96,355		47.13	%	$	96,018		47.26	%
Construction		23,508		11.50			21,905		10.78
Residential		10,684		5.23			11,227		5.53
Commercial		56,540		27.65			55,513		27.32
Installment		17,361		8.49			18,528		9.11

		204,448		100.00	%		203,191		100.00	%

Allowance for loan losses		(1,625	)				(1,586	)
Deferred loan costs, net		398					337

	$	203,221				$	201,942

Asset Quality

Management performs reviews of all delinquent loans and directs relationship officers to work with customers to resolve potential credit issues in a timely manner. Management generally classifies loans as non-accrual when it does not expect collection of full principal and interest under the original terms of the loan or payment of principal or interest has become 90 days past due. Classifying a loan as non-accrual results in our no longer accruing interest on such loan and reversing 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 loans only when received. At March 31, 2008 and December 31, 2007, we had two loans totaling $1.1 million that were 90 days past due and were classified as non-accrual. The foreclosure process on one of these loans in the amount of $127,000 was completed in January 2008. We anticipate we will receive payment in full (including costs) during the second quarter of 2008. The borrower on the second loan in the amount of $934,144 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%. During the first quarter, the borrower began remitting payments and advised us that the borrower will make all past due interest and principal current prior to March 31, 2009. We do not expect to incur any losses on this loan. As of March 31, 2008, the interest not accrued on these loans was $33,695 none of which was included in net income for the quarter ended March 31, 2008. Other than the loans outlined above there were no loans 30 days or more past due as of March 31, 2008 and only one loan in the amount of approximately $6,000 was more than 30 days past due as of December 31, 2007.

We classify any property acquired as a result of foreclosure on a mortgage loan as “real estate owned” and record it at the lower of the unpaid principal balance or fair value at the date of acquisition and subsequently carry the loan at the lower of cost or net realizable value. We charge any required write-down of the loan to its net realizable value against the allowance for loan losses at the time of foreclosure. We charge to expense any subsequent adjustments to net realizable value. Upon foreclosure, Old Line Bank generally requires an appraisal of the property and, thereafter, appraisals of the property on at least an annual basis and external inspections on at least a quarterly basis. As of March 31, 2008 and December 31, 2007, we held no real estate acquired as a result of foreclosure.

We apply the provisions of Statement of Financial Accounting Standards No. 114 (“SFAS No. 114”),Accounting by Creditors for Impairment of a Loan,as amended by Statement of Financial Accounting Standards No. 118 (“SFAS No. 118”),Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosure.SFAS No. 114 and SFAS No. 118 require that impaired loans, which consist of all modified loans and other loans for which collection of all contractual principal and interest is not probable, be measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. If the measure of the impaired loan is less than the recorded investment in the loan, we recognize impairment through a valuation allowance and corresponding provision for loan losses. Old Line Bank considers consumer loans as homogenous loans and thus does not apply the SFAS No. 114 impairment test to these loans. We write off impaired loans when collection of the loan is doubtful.

As of March 31, 2008 and December 31, 2007, we had no impaired or restructured loans.

Bank owned life insurance

We increased our investment in Bank Owned Life Insurance (“BOLI”) in February 2007 by

$4.0 million. In June 2005, we purchased $3.3 million of BOLI on the lives of our executive officers, Messrs. Cornelsen and Burnett and Ms. Rush. With the new investment made in February 2007, we increased the insurance on Messrs. Cornelsen and Burnett and expanded the coverage of the insurance policies to insure the lives of several other officers of Old Line Bank. We anticipate the earnings on these policies will pay for our employee benefit expenses as well as our obligations under our Salary Continuation Agreements and Supplemental Life Insurance Agreements that we entered into with our executive officers in January 2006. The additional $4 million investment caused increased earnings, during the first three months of 2008 and the cash surrender value of the insurance policies increased by $82,180. There were no post retirement death benefits associated with the BOLI policies.

Deposits

We seek deposits within our market area by paying competitive interest rates, offering high quality customer service and using technology to deliver deposit services effectively.

At March 31, 2008, the deposit portfolio had grown to $186.8 million, a $9.0 million or 5.06% increase over the December 31, 2007 level of $177.8 million. Noninterest-bearing deposits declined $402,000 during the period to $34.7 million from $35.1 million primarily due to a decline in balances in commercial checking accounts that was primarily caused by the decline in the real estate market and the transfer of funds to interest-bearing accounts. Interest-bearing deposits grew $9.3 million to $152.0 million from $142.7 million. The majority of the growth in interest-bearing deposits was in money market accounts and certificates of deposit. Money market accounts grew from $33.9 million at December 31, 2007 to $36.3 million at March 31, 2008. Certificates of deposit grew $7.1 million or 6.95% to $109.2 million from $102.1 million. The growth in these deposits was offset by a $100,000 decline in savings accounts. Certificates of deposit and money market accounts grew due to new customer relationships, new deposits from existing customers, and the transfer of funds from savings accounts.

In the first quarter of 2006, we began acquiring brokered certificates of deposit through the Promontory Interfinancial Network. Through this deposit matching network and its certificate of deposit account registry service (CDARS), we obtained the ability to offer our customers access to FDIC-insured deposit products in aggregate amounts exceeding current insurance limits. When we place funds through CDARS on behalf of a customer, we receive matching deposits through the network. At March 31, 2008, we had $15.7 million in CDARS compared to $13.5 million at December 31, 2007. At March 31, 2008 and December 31, 2007, we had an additional $5 million in brokered certificates of deposit.

During the three months ended March 31, 2008, we saw growth in total deposits because of the opening of the Greenbelt branch in June 2007, the opening of the College Park branch in February 2008 and the successful business development efforts of our branch staff, lending personnel and Board of Directors. During the period, our new and existing customers looked for higher yields. This coupled with the continued slow down in real estate settlements caused a lower level of balances on deposit in noninterest-bearing accounts. We expect the balances in noninterest-bearing accounts will improve during the remainder of the year.

Borrowings

Old Line Bank has available lines of credit, including overnight federal funds and repurchase agreements from its correspondent banks totaling $33.3 million as of March 31, 2008. Old Line Bank has an additional secured line of credit from the Federal Home Loan Bank of Atlanta (FHLB) that totaled $72.9 million at March 31, 2008 and $71.1 million at December 31, 2007. As a condition of obtaining the line of credit from the FHLB, the FHLB requires that Old Line Bank purchase shares of capital stock in the FHLB. Prior to allowing Old Line Bank to borrow under the line of credit, the FHLB also requires that Old Line Bank provide collateral to support borrowings. Therefore, at March 31, 2008 we have provided collateral to support up to $38.9 million of borrowings. Of this, we had borrowed $15 million at March 31, 2008 and December 31, 2007.

Short-term borrowings consisted of short-term promissory notes issued to Old Line Bank’s customers. Old Line Bank offers its commercial customers an enhancement to the basic noninterest-bearing demand deposit account. This service electronically sweeps excess funds from the customer’s account into an interest-bearing Master Note with Old Line Bank. These Master Notes re-price daily and have maturities of 270 days or less. At March 31, 2008, Old Line Bank had $21.8 million outstanding in these short term promissory notes with an average interest rate of 1.75%. At December 31, 2007, Old Line Bank had $16.3 million outstanding with an average interest rate of 2.53%.

At March 31, 2008 and December 31, 2007, Old Line Bank had three advances in the amount of $5.0 million each, from the FHLB totaling $15.0 million. On November 24, 2007, Old Line Bank borrowed $5.0 million with an interest rate of 3.66%. Interest is due on the 23^rd day of each February, May, August and November, commencing on February 23, 2008. On November 23, 2008, or any interest payment date thereafter, the FHLB has the option to convert the interest rate on this advance from a fixed rate to a three (3) month London Interbank Offer Rate (LIBOR) based variable rate. Old Line Bank must repay this advance in full on November 23, 2010.

On December 12, 2007, Old Line Bank borrowed another $5.0 million from the FHLB. The interest rate on this advance is 3.3575% and interest is payable on the 12^th day of each March, June, September and December, commencing on March 12, 2008. On December 12, 2008, or any interest payment date thereafter, the FHLB has the option to convert the interest rate on this advance to a fixed rate three (3) month LIBOR. The maturity date on this advance is December 12, 2012.

On December 19, 2007, Old Line Bank borrowed an additional $5.0 million from the FHLB. The interest rate on this borrowing is 3.119% and is payable on the 19^th day of each month. On January 22, 2008 or any interest payment date thereafter, the FHLB has the option to convert the interest rate on this advance from a fixed rate to a one (1) month LIBOR based variable rate. This borrowing matures on December 19, 2012.

Interest Rate Sensitivity Analysis and Interest Rate Risk Management

A principal objective of Old Line Bank’s asset/liability management policy is to minimize exposure to changes in interest rates by an ongoing review of the maturity and re-pricing of interest-earning assets and interest-bearing liabilities. The Asset and Liability Committee of the Board of Directors oversees this review.

The Asset and Liability Committee establishes policies to control interest rate sensitivity. Interest rate sensitivity is the volatility of a bank’s earnings resulting from movements in market interest rates. Management monitors rate sensitivity in order to reduce vulnerability to interest rate fluctuations while maintaining adequate capital levels and acceptable levels of liquidity. Monthly financial reports supply management with information to evaluate and manage rate sensitivity and adherence to policy. Old Line Bank’s asset/liability policy’s goal is to manage assets and liabilities in a manner that stabilizes net interest income and net economic value within a broad range of interest rate environments. Management makes adjustments to the mix of assets and liabilities periodically in an effort to achieve dependable, steady growth in net interest income regardless of the behavior of interest rates in general.

As part of the interest rate risk sensitivity analysis, the Asset and Liability Committee examines the extent to which Old Line Bank’s assets and liabilities are interest rate sensitive and monitors the interest rate sensitivity gap. An interest rate sensitive asset or liability is one that, within a defined time period, either matures or experiences an interest rate change in line with general market rates. The interest rate sensitivity gap is the difference between interest-earning assets and interest-bearing liabilities scheduled to mature or re-price within such time period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities. A gap is considered negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. During a period of rising interest rates, a negative gap would tend to adversely affect net interest income, while a positive gap would tend to result in an increase in net interest income. During a period of declining interest rates, a negative gap would tend to result in an increase in net interest income, while a positive gap would tend to adversely affect net interest income. If re-pricing of assets and liabilities were equally flexible and moved concurrently, the impact of any increase or decrease in interest rates on net interest income would be minimal.

Old Line Bank currently has a negative gap over the short term, which suggests that the net yield on interest earning assets may decrease during periods of rising interest rates. However, a simple interest rate “gap” analysis by itself may not be an accurate indicator of how changes in interest rates will affect net interest income. Changes in interest rates may not uniformly affect income associated with interest-earning assets and costs associated with interest-bearing liabilities. In addition, the magnitude and duration of changes in interest rates may have a significant impact on net interest income. Although certain assets and liabilities may have similar maturities or periods of re-pricing, they may react in different degrees to changes in market interest rates. Interest rates on certain types of assets and liabilities fluctuate in advance of changes in general market interest rates, while interest rates on other types may lag behind changes in general market rates. In the event of a change in interest rates, prepayment and early withdrawal levels also could deviate significantly from those assumed in calculating the interest-rate gap. The ability of many borrowers to service their debts also may decrease in the event of an interest rate increase.

Liquidity

Our overall asset/liability strategy takes into account our need to maintain adequate liquidity to fund asset growth and deposit runoff. Our management monitors the liquidity position daily in conjunction with Federal Reserve guidelines. We have credit lines unsecured and secured available from several correspondent banks totaling $24.8 million. Additionally, we may borrow funds from the Federal Home Loan Bank of Atlanta. We can use these credit facilities in conjunction with the normal deposit strategies, which include pricing changes to increase deposits as necessary. We can also sell or pledge available for sale investment securities to create additional liquidity. From time to time we may sell or participate out loans to create additional liquidity as required. Additional sources of liquidity include funds held in time deposits and cash from the investment and loan portfolios.

Our immediate sources of liquidity are cash and due from banks and federal funds sold. On March 31, 2008, we had $4.4 million in cash and due from banks, and $16.3 million in federal funds sold and overnight investments. As of December 31, 2007, we had $3.2 million in cash and due from banks, and $9.8 million in federal funds sold and other overnight investments. As we continue to deploy these proceeds into loans, we anticipate these balances will decline.

Old Line Bank has sufficient liquidity to meet its loan commitments as well as fluctuations in deposits. We usually retain maturing certificates of deposit as we offer competitive rates on certificates of deposit. Management is not aware of any demands, trends, commitments, or events that would result in Old Line Bank’s inability to meet anticipated or unexpected liquidity needs.

Capital

Our stockholders’ equity amounted to $33.7 million at March 31, 2008 and $34.6 million at December 31, 2007. We are considered “well capitalized” under the risk-based capital guidelines adopted by the Federal Reserve. Stockholders’ equity decreased during the three month period because of the $1.4 million cost for stock repurchases during the period and the $121,420 dividend paid in March 2008. These items were partially offset by net income of $444,833, plus the $44,879 adjustment for stock based compensation awards, and the $47,131 unrealized gain in available for sale securities.

Contractual Obligations, Commitments, Contingent Liabilities, and Off-balance Sheet Arrangements

Old Line Bancshares, Inc. is a party to financial instruments with off-balance sheet risk in the normal course of business. These financial instruments primarily include commitments to extend credit, lines of credit and standby letters of credit. Old Line Bancshares, Inc. uses these financial instruments to meet the financing needs of its customers. These financial instruments involve, to varying degrees, elements of credit, interest rate, and liquidity risk. These commitments do not represent unusual risks and management does not anticipate any losses which would have a material effect on Old Line Bancshares, Inc. Old Line Bancshares, Inc. also has operating lease obligations.

Old Line Bancshares, Inc’s guaranty obligation made in connection with Pointer Ridge’s mortgage loan, outlined below, also creates off-balance sheet risk, as further described below.

Outstanding loan commitments and lines and letters of credit at March 31, 2008 and December 31, 2007, are as follows:


	March 31,		December 31,
	2008		2007
	(Dollars in thousands)
Commitments to extend credit and available credit lines:
Commercial	$	21,508	$	16,398
Real estate-undisbursed development and construction		32,476		35,966
Real estate-undisbursed home equity lines of credit		5,580		5,250

	$	59,564	$	57,614


Standby letters of credit	$	1,743	$	1,634

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Old Line Bancshares, Inc. generally requires collateral to support financial instruments with credit risk on the same basis as it does for on-balance sheet instruments. The collateral is based on management’s credit evaluation of the counter party. Commitments generally have interest rates fixed at current market rates, expiration dates or other termination clauses and may require payment of a fee. Available credit lines represent the unused portion of lines of credit previously extended and available to the customer so long as there is no violation of any contractual condition. These lines generally have variable interest rates. Since many of the commitments are expected to expire without being drawn upon, and since it is unlikely that customers will draw upon their lines of credit in full at any time, the total commitment amount or line of credit amount does not necessarily represent future cash requirements. We evaluate each customer’s credit-worthiness on a case-by-case basis. We are not aware of any loss that we would incur by funding our commitments or lines of credit.

Commitments for real estate development and construction, which totaled $32.5 million, or 54.53% of the $59.6 million of outstanding commitments, are generally short-term and turn over rapidly with principal repayment from permanent financing arrangements upon completion of construction or from sales of the properties financed.

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Our exposure to credit loss in the event of nonperformance by the customer is the contract amount of the commitment. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

On August 25, 2006, Pointer Ridge entered into a loan agreement with an unrelated bank, pursuant to which the bank agreed to make a mortgage loan to Pointer Ridge in a principal amount of $6.6 million to finance the commercial office building at 1525 Pointer Ridge Place, Bowie, Maryland. We lease approximately half of this building for our main office and operate a branch of Old Line Bank from this address. Old Line Bancshares, Inc. has a 50% ownership in Pointer Ridge and we record this investment on the equity method.

The Amended Promissory Note provides that the loan will accrue interest from the date of the Amended Promissory Note through September 5, 2016 at a rate of 6.28% (“Initial Term Interest Rate”). After September 5, 2016, the interest rate will adjust to the greater of (i) the Initial Term Interest Rate plus 200 basis points or (ii) the Treasury Rate (as defined in the Amended Promissory Note) plus 200 basis points.

Payments on the Amended Promissory Note began October 5, 2006. For the first 12 months, Pointer Ridge paid to the lender an installment of interest only. Commencing with the 13^th payment and continuing until August 5, 2036, Pointer Ridge pays equal monthly payments of principal and interest based on a 30-year amortization. There is a prepayment penalty if Pointer Ridge prepays the loan prior to September 5, 2016. At March 31, 2008, Pointer Ridge had borrowed $6.6 million under the Amended Promissory Note.

On August 25, 2006, Old Line executed a new Guaranty Agreement with the lender that was effective upon Pointer Ridge’s execution of the Amended Promissory Note and Amended Deed of Trust. Pursuant to the terms of the guaranty, Old Line has guaranteed the payment to the lender of up to 50% of the loan amount plus any costs incurred by the lender resulting from any acts, omissions or alleged acts or omissions arising out of or relating to: (1) the misapplication or misappropriation by Pointer Ridge of any or all money collected, paid or received; (2) rents, issues, profits and revenues of all or any portion of the property located at 1525 Pointer Ridge Place, Bowie, Maryland (the “Security Property”) received or applicable to a period after the occurrence of any Event of Default which are not applied to pay, first (a) real estate taxes and other charges which, if unpaid, could result in liens superior to that of the Amended Deed of Trust and (b) premiums on insurance policies required under the loan documents, and, second, the other ordinary and necessary expenses of owning and operating the Security Property; (3) waste committed on the Security Property or damage to the Security Property as a result of intentional misconduct or gross negligence or the removal of all or any portion of the Security Property in violation of the terms of the loan documents; (4) fraud or material misrepresentation or failure to disclose a material fact; (5) the filing of any petition for bankruptcy; or (6) Pointer Ridge’s failure to maintain its status as a single purpose entity as required by the loan documents.

We do not believe that we will incur any obligations under the guaranty. If we were to become obligated under the guaranty, we do not believe that it would have any material effect on our liquidity or capital resources.

Reconciliation of Non-GAAP Measures

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

Three months ended March 31, 2008


													Net
	Federal Funds			Investment			Interest			Net Interest			Interest
	Sold			Securities			Earning Assets			Income			Spread
GAAP interest income	$	126,378		$	120,114		$	3,770,442		$	2,229,533
Tax equivalent adjustment		2,815			15,021			17,836			17,836

Tax equivalent interest income	$	129,193		$	135,135		$	3,788,278		$	2,247,369


GAAP interest yield		3.03	%		3.82	%		6.45	%		3.81	%		3.05	%
Taxable equivalent adjustment		0.07	%		0.48	%		0.03	%		0.03	%		0.03	%

Tax equivalent interest yield		3.10	%		4.30	%		6.48	%		3.84	%		3.08	%

Three months ended March 31, 2007


													Net
	Federal Funds			Investment			Interest			Net Interest			Interest
	Sold			Securities			Earning Assets			Income			Spread
GAAP interest income	$	373,465		$	174,116		$	3,428,138		$	1,961,380
Tax equivalent adjustment		10,739			18,136			28,875			28,875

Tax equivalent interest income	$	384,204		$	192,252		$	3,457,013		$	1,990,255


GAAP interest yield		5.25	%		3.88	%		6.84	%		3.91	%		2.79	%
Taxable equivalent adjustment		0.15	%		0.40	%		0.06	%		0.06	%		0.06	%

Tax equivalent interest yield		5.40	%		4.28	%		6.90	%		3.97	%		2.85	%

Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation.

Unlike industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution’s performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the price of goods and services, and may frequently reflect government policy initiatives or economic factors not measured by price index. As discussed above, we strive to manage our interest sensitive assets and liabilities in order to offset the effects of rate changes and inflation.

Application of Critical Accounting Policies

We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America and follow general practices within the industry in which we operate. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. We base these estimates, assumptions, and judgments on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. We base the fair values and the information used to record valuation adjustments for certain assets and liabilities on quoted market prices or from information other third-party sources provide, when available.

Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the determination of the provision for loan losses as the accounting area that requires the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available.

Management has significant discretion in making the judgments inherent in the determination of the provision and allowance for loan losses, including in connection with the valuation of collateral and the financial condition of the borrower, and in establishing loss ratios and risk ratings. The establishment of allowance factors is a continuing exercise and allowance factors may change over time, resulting in an increase or decrease in the amount of the provision or allowance based upon the same volume and classification of loans.

Changes in allowance factors or in management’s interpretation of those factors will have a direct impact on the amount of the provision, and a corresponding effect on income and assets. Also, errors in management’s perception and assessment of the allowance factors could result in the allowance not being adequate to cover losses in the portfolio, and may result in additional provisions or charge-offs, which would adversely affect income and capital. For additional information regarding the allowance for loan losses, see “Provision for Loan Losses”.

Information Regarding Forward-Looking Statements

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We may also include forward-looking statements in other statements that we make. All statements that are not descriptions of historical facts are forward-looking statements. Forward-looking statements often use words such as “believe,” “expect,” “plan,” “may,” “will,” “should,” “project,” “contemplate,” “anticipate,” “forecast,” “intend” or other words of similar meaning. You can also identify them by the fact that they do not relate strictly to historical or current facts.

The statements presented herein with respect to, among other things, Old Line Bancshares, Inc.’s plans, objectives, expectations and intentions, including statements regarding revenue and expenses, changes in various revenue components, earnings/income, sources of liquidity, the allowance for loan losses, expected loan, deposit and asset growth, changes in the composition of earnings assets, costs of funds, commercial real estate demand and related financing opportunities, payment of non-performing loans, interest rate sensitivity, improvement in our net interest margin, market risk, financial and other goals and plans, expansion of services and use of technology, the expected income from new branches offsetting related expenses, the impact of remote deposit capture on expenses and deposit growth, expected openings of new branches, earnings on BOLI, and customer growth are forward looking. Old Line Bancshares, Inc. bases these statements on our beliefs, assumptions and on information available to us as of the date of this filing, which involves risks and uncertainties. These risks and uncertainties include, among others those discussed in this report; the ability of Old Line Bancshares, Inc. to retain key personnel; the ability of Old Line Bancshares, Inc. to successfully implement its growth and expansion strategy; risk of loan losses; that the allowance for loan losses may not be sufficient; that changes in interest rates and monetary policy could adversely affect Old Line Bancshares, Inc.; that changes in regulatory requirements and/or restrictive banking legislation may adversely affect Old Line Bancshares, Inc.; that the market value of investments could negatively impact stockholders’ equity; risks associated with Old Line Bancshares, Inc.’s lending limit; increased expenses due to stock benefit plans; expenses associated with operating as a public company; potential conflicts of interest associated with the interest in Pointer Ridge; and changes in economic, competitive, governmental, regulatory, technological and other factors which may affect Old Line Bancshares, Inc. specifically or the banking industry generally. For a more complete discussion of some of these risks and uncertainties see “Factors Affecting Future Results” in Old Line Bancshares, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2007.

Old Line Bancshares, Inc.’s actual results and the actual outcome of our expectations and strategies could differ materially from those anticipated or estimated because of these risks and uncertainties and you should not put undue reliance on any forward-looking statements. All forward-looking statements speak only as of the date of this filing, and Old Line Bancshares, Inc. undertakes no obligation to update the forward-looking statements to reflect factual assumptions, circumstances or events that have changed after we have made the forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the exposure to economic loss that arises from changes in the values of certain financial instruments. Due to the nature of our operations, only interest rate risk is significant to our consolidated results of operations or financial position. For information regarding our Quantitative and Qualitative Disclosure about Market Risk, see “Interest Rate Sensitivity Analysis and Interest Rate Risk Management” in Part I, Item 2 of this Form 10-Q.

Item 4. Controls and Procedures

As of the end of the period covered by this quarterly report on Form 10-Q, Old Line Bancshares, Inc.’s Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of Old Line Bancshares, Inc.’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based upon that evaluation, Old Line Bancshares, Inc.’s Chief Executive Officer and Chief Financial Officer concluded that Old Line Bancshares, Inc.’s disclosure controls and procedures are effective as of March 31, 2008. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by Old Line Bancshares, Inc. in the reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

In addition, there were no changes in Old Line Bancshares, Inc.’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended March 31, 2008, that have materially affected, or are reasonably likely to materially affect, Old Line Bancshares, Inc.’s internal control over financial reporting.

PART II-OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

There have been no material changes in the risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2007.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

We announced on August 17, 2007 that our board of directors had authorized our repurchase of up to 300,000 shares of our common stock. On March 12, 2008, we announced that the board of directors had authorized the repurchase of an additional 100,000 shares of our common stock. The following table outlines the purchases we made of our shares of common stock during the first quarter ended March 31, 2008.

Total Number

Maximum Number

Shares Purchased

of Shares That

May

Total Number

Part of Publicly

Yet Be Purchased

Average Price

Announced Plan

Under the Plan or

Date

Shares Purchased

Paid Per Share(1)

or Program

Programs

December 31, 2007

114,050

January 1-31, 2008

20,155

8.05

20,155

93,895

February 1-29, 2008

5,863

8.05

5,863

88,032

Repurchase Program Increase-3/12/08

188,032

March 1-31, 2008

142,381

8.26

142,381

45,651

Total First Quarter

168,399

8.23

168,399

45,651


1)		Includes commissions and fees.

At March 31, 2008, there are 45,651 shares of common stock that we may yet repurchase as part of our publicly announced plan.

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Exhibits


31.1		Rule 13a-14(a) Certification of Chief Executive Officer

31.2		Rule 13a-14(a) Certification of Chief Financial Officer

32		Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Old Line Bancshares, Inc.
Date: May 12, 2008	By:	/s/ James W. Cornelsen
		James W. Cornelsen,
		President and Chief Executive Officer (Principal Executive Officer)



Date: May 12, 2008	By:	/s/ Christine M. Rush
		Christine M. Rush,
		Executive Vice President and Chief Financial Officer (Principal Accounting and Financial Officer)

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	8th grade Good

Old Line Bancshares (OLBK) 10-Q2008 Q1 Quarterly report

Content analysis